Avoid Liability – Revise Your Tendering Documents Now!

What You Should Do Now
You should revise your RFP and tendering documents immediately to include the following clause:

Except as expressly and specifically permitted in these Instructions to [Proponents or Tenderers], no [Proponent or Tenderer] shall have any claim for any compensation of any kind whatsoever, as a result of participating in the [RFP or tender], and by submitting a [proposal or bid] each [proponent or tenderer] shall be deemed to have agreed that it has no claim.

You may include this clause as a separate part of your tender documentation under the heading NO CLAIM FOR COMPENSATION.

Why You Should Do This
We make this recommendation because the BC Court of Appeal has just recently reviewed and approved of this clause in the case of Tercon Contractors Ltd. v. British Columbia (Ministry of Transportation and Highways), December 3, 2007. The Court found this exclusion clause to be clear and unambiguous and to effectively bar any claim for compensation or damages.

In the Tercon case, the trial judge had found that the RFP process was in fact a tendering process. The trial judge held that Tercon’s bid was compliant, whereas the contractor who was awarded the contract by the Province had a non-compliant bid. The trial judge ordered the Province to pay 3.3 million dollars in damages to Tercon. On appeal, the BC Court of Appeal allowed the Province’s appeal and found it was not necessary to analyze whether the bids were compliant or non-compliant since the exclusion clause providing that no compensation would be allowed was a complete answer to Tercon’s lawsuit.

The Importance of This Decision
This case is extremely important as it appears to indicate that the highest Court in the province has finally realized that you, as the owner of a project, are entitled to define the rules of the tendering process in your contract documentation.

Just a few years ago, the justices on the BC Court of Appeal appeared to be split on the correctness of this proposition. In two different decisions in 2004, two different panels of the Court of Appeal reached contradictory conclusions on that very same issue. In Graham Industrial Services v. Greater Vancouver Water District and in Kinetic Construction Ltd. v. Regional District of Comox-Strathcona, the Court was asked to decide whether an owner could include a broadly worded discretion clause to allow it to accept bids which were non-compliant and which, without the discretion clause, would have been ineligible for the contract award. In answering the question whether the owner could define the rules for the tendering process in the contract documentation, the Court gave two different answers: in Graham, it did not allow the owner to exercise the discretion which it had reserved to itself and, several months later in the Kinetic case, it reached the opposite conclusion to permit the owner to do so.

Now in the Tercon decision, the Court of Appeal has agreed that owners can draft broadly worded clauses for their own protection. It will be up to the construction industry and not the judges of the courts to determine whether exclusion clauses, discretion clauses or any other clauses for the owner’s protection are acceptable to the industry. The Court stated:

The answer lies not in judicial intervention in commercial dealings like this but in the industry’s response to all-encompassing exclusion clauses. If the major contractors refuse to bid on highway jobs because of the damage to the tendering process, the Ministry’s approach may change. Or, the industry may be prepared to accept that the Ministry wants to avoid suits for contract A violations, and the contractors will continue to bid in the hope that the Ministry acts in good faith.

Guy McDannold

 

This article was published in Winter 2007/2008 and may be superseded by changes in the law at a later date. It is for general information only. Specific legal advice should be obtained from a qualified lawyer.