‘Contract A’ is being removed from some public tender processes and industry leaders are worried

The BC Construction Association (BCCA) issued a provincewide industry alert yesterday after “a growing list” of public owners, including municipalities, school districts, universities, and Crown corporations removed the Contract A stage from their procurement process.

“The removal of Contract A adds unnecessary uncertainty and risk that could increase project costs and impact the construction of critical infrastructure,” Rory Kulmala, CEO of the Vancouver Island Construction Association (VICA) tells Capital Daily.

Contract A focuses on the fairness of the bidding process, Kulmala said, while Contract B deals with the fulfillment of the project or service.

“Understanding both contracts is essential for ensuring a fair and legally sound procurement process and successful project execution,” he said.

The absence of a Contract A allows an owner to accept a non-compliant bid and eliminates a public owner's obligation to a duty of fairness to bidders.

What's more, the owner doesn't have to evaluate bids in accordance with the initial call for tenders.

BC Transit and Saanich on BCCA list

On the BCCA list of public owners with contracts in the CRD are BC Transit (2 projects), and the District of Saanich (3 projects). The BCAA warns that the absence of Contract A could result in bid shopping—squeezing a subcontractor to lower their price after a bid has been accepted and the contract awarded—a lack of transparency, and more bidders. The association encourages all bidders to seek legal advice and to advise their regional construction association of any irregularities they discover in the procurement process through the BCCA public-sector transparency tip line.

Under Canadian contract law, Contract A ensures fairness, openness, and transparency between owners and each bidder responding to a procurement call. Contract A typically includes terms and conditions such as deadlines, evaluation criteria, privilege clauses, and often the requirement for bid security. It is meant to protect the expectations and interests of all procurement process parties.

“Excluding these standardized contract risks undermines the crucial foundation of trust, collaboration, and accountability between public owners and stakeholders,” said Nicole Bryant, CEO of the Northern Regional Construction Association.

Traditionally, a tender offer was considered an invitation to contractors to make offers but was not a binding contract. That was, until R v. Ron Engineering.

The concept was introduced in 1981 by the Supreme Court of Canada, in R. v. Ron Engineering and Construction (Eastern) Ltd., a case decided by Supreme Court Justice Willard Estey. The decision outlines a fair way of buying construction services and discourages adversarial relationships among tender process participants. In this case, Ron Engineering wanted to withdraw a mistaken bid but the owner insisted on retaining the $150K tender deposit and the fight went all the way to the highest court in Canada.

“Before R. v. Ron Engineering, procurement was the Wild West, where bidders were subject to the misconduct of unscrupulous owners, who at times did not know where they stood legally with bidders,” said Michael Demers, legal counsel for BCCA.

While the terms of Contract A are outlined in tender packages, there was some leeway concerning rescinding a tender offer that had an obvious or gross mistake in it. Once an offer is accepted, the owner and the tenderer are then bound by Contract B, or a construction contract.

An owner who does not permit an obvious bidder error to be corrected may be sued by that bidder or the next lowest one if they do accept the—a no-win situation. The owner, in this case, would have to go to court to recover the difference in cost between the two bids. Because public owners have felt obliged and accountable to taxpayers, they have been prone to preserve an original bidding process and therefore often have ended up in court.

However, it also means that owners can take advantage of a mistaken bid that errs on the side of being too cheap and the contractor loses out.

Privilege clause also a concern

A second area of the BCAA’s concern in the removal of Contract A is the privilege clause, which allows owners to bypass the lowest bid and award contracts by preference. In preparing bids, contractors must be prepared to hold their pricing for a specified period and risk being bound by the terms of the construction contract. Contractors assume these risks without any certainty they’ll be awarded a construction contract but also with the expectation their bids will be taken seriously and treated fairly.

The BCAA has provided a growing list of public owners, municipalities, school districts, universities, and Crown corporations that have removed Contract A from their tender processes. They worry that In the absence of Contract A, general contractors, and trade contractors cannot assume they will be treated fairly and likely have little to no legal recourse if they’re not.

Chris Atchison, the BCAA president, called the removal of Contract A “the most significant violation of public-sector procurement processes that the construction industry has seen to date. It is a serious concern for industry associations and should be of equal concern to BC taxpayers.” He questions the wisdom of submitting bids to public entities who remove Contract A.

“When a public-sector owner willfully removes an obligation to act fairly in its dealings with you at the start of a project, you have to ask yourself: Do you really want to bid on that project and work with that government entity?”

Sidney Coles, Local Journalism Initiative Reporter, Capital Daily