RFP or Tender: Supreme Court of Canada makes it difficult to determine the difference
December 6, 2011
The difference between a tender and a request for proposals (“RFP”) is important to both bidders and owners. Each party needs to know whether the terms of the construction contract are set in stone or subject to negotiation, because the request and the response will be much different if negotiation is permitted subsequent to the submission date. Unfortunately, in the 2010 decision Tercon Contractors Ltd. v. British Columbia (“Tercon”) the Supreme Court of Canada has made it more difficult to determine the difference. As a result, both bidders and owners are going to have to be very careful when responding to any “tender” or “RFP”. The Tercon case is well known for the Court’s refusal to enforce an exclusion clause; it is less well known for the Court’s comments regarding the nature of bid documents. In Tercon all bidders were required to respond to an RFP, which required bidders to accept an “alliance” agreement. However, bidders were also “… expected to enter into commercial negotiations … and undertake a value engineering process to identify construction savings ….” A number on contractors submitted proposals, including Brentwood Enterprises Ltd. (”Brentwood”) and Tercon. Brentwood’s total proposal price was $23,935,166 and Tercon’s was $26,083,623. The Province chose Brentwood as the preferred proponent, they entered into negotiations and Brentwood ultimately reduced its price by $359,000.00 to $23,650,000.
Although the Supreme Court found that the “classic” requirements for a tender were not present, it went on to find that bid or request documents do not have to “… define all of the duties and obligations” of the bidder and owner for a true tender contract to be formed. As a result, the Court held that a tender contract had been formed, Brentwood did not comply, Tercon should have been awarded the construction contract and was entitled to damages. The implications for the future are clear. All bidders and owners must carefully examine any bid or request to determine whether it is a tender or a RFP.
In no circumstances should reliance be placed solely on the label used nor whether some negotiation is permitted after the opening. If in doubt, either treat the request as if it is a tender, which will bind the successful party, or seek legal advice.
- Share with others
- Stay informed with our legal updates by subscribing.