Supreme Court

SUPREME COURT OF Nova Scotia

Citation: C.F. Construction Ltd. v. Town of Westville, 2018 NSSC 123

Date: 20180523

Docket:  Pic No.  443737

Registry: Pictou

Between:

 

C.F. Construction Limited, a body corporate

 

Applicant

 

v.

 

 

Town of Westville

Respondent

 

 

 

Judge:	The Honourable Justice Glen G. McDougall
Heard:	September 11, 12 and 13, 2017, in Pictou, Nova Scotia
Written Decision:	May 23, 2018
Counsel:	Julie MacPhee and Donn Fraser, for the Applicant Dennis James and Kim Pochini, for the Respondent

 

By the Court:

Background

[1]              In September 2014, the Town of Westville (“the Town”) issued a tender call for bids for a sanitary sewer system upgrade (the “Westville Project”).  Four companies submitted bids with prices ranging from $572,000 to $1,132,000.  Although C.F. Construction Limited (“C.F.”) submitted the lowest bid price, the Town awarded the contract to S.W. Weeks Construction Limited (“S.W. Weeks”). 

[2]              C.F. says it submitted a compliant bid and the Town breached its contractual obligation when it awarded the contract to the second-lowest bidder.  C.F. seeks damages for breach of contract in the amount of the profit it would have earned on the contract and on a change order to replace a leaking storm sewer pipe. 

[3]              The Town says that although C.F.’s bid appeared compliant on its face, Paul Jensen, C.F.’s lead estimator for the project, subsequently disclosed that C.F.’s bid price included the cost of a cast-in-place concrete wet well, not the pre-cast concrete wet well specified in the tender documents.  According to the Town, this information meant C.F.’s bid was non-compliant and the Town had no choice but to reject it.  In the alternative, the Town submits that C.F. would not have been awarded the change order. 

The Evidence

From Tender Call to Bid Submission

[4]              The parties generally agree on the facts leading up to the close of bids on October 9, 2014.  On September 6, 2014, the Town issued a tender call for the Westville Project.  PDI Engineering Group Inc. (“PDI”), represented by Oliver Browning, PMP, P.Eng., was retained by the Town to produce the tender documents, manage the tender, and evaluate the bids.

[5]              The Westville Project involved the replacement of a pressure sewer line and a sewage pumping station.  The pumping station (or “lift station”) contained a wet well to store the sewage until it was discharged into the pressure system. 

[6]              The tender documents called for a pre-cast concrete wet well structure.  Pre-cast concrete is produced by curing concrete in a mold, transporting the product to the construction site, and lifting it into place.  An alternative is cast-in-place concrete, where standard concrete is poured into site-specific forms and cured on site.  Cast-in-place is also referred to as “pour-in-place”. 

[7]              On September 11, 2014, there was a mandatory site meeting for potential bidders.  Representatives from four companies attended the meeting, including Doug Guthro, C.F.’s pipe foreman. 

[8]              The tender documents for the Westville Project stated that addenda could be issued during the bidding period and that all addenda would become part of the contract documents.  Bidder requests for clarification were required to be in writing and any reply would be sent to all potential bidders in the form of an addendum.  Verbal clarifications were not binding unless confirmed by written addenda.  On September 23, 2014, Oliver Browning sent Addendum No. 1 to all potential bidders by email.  This addendum extended the bid submission deadline from September 26 to October 3.  On October 1, Mr. Browning sent all potential bidders Addendum No. 2.  This lengthy addendum outlined the requirements for the pumping station, including the pre-cast concrete wet well, and further extended the deadline for the submission of bids to October 9. 

[9]              On October 6, 2014, Mr. Jensen emailed Mr. Browning about a potential issue with the property owner adjacent to the existing pumping station:

Hi Oliver.  The property owner adjacent the existing pumping station has been getting upset when we visit the site, claiming we are on her property.  What will be done about this issue to ensure that the installation of the new station may proceed without conflict?  Looking at the plan, it would appear that an excavation that deep will require excavation into her property.  Please advise. Thank you.

[10]         Later that day, Mr. Jensen sent a further email, this time in relation to the cost of relocating overhead power lines.  After the mandatory site meeting, Doug Guthro informed Mr. Jensen that he had noticed overhead power lines and a utility pole at the site.  Mr. Jensen was concerned that the power lines would interfere with installation of the pre-cast structure.  After visiting the site, he consulted with a representative at a local crane company who advised that the overhead lines and utility pole would have to be moved to give the crane sufficient clearance to install the pre-cast wet well.  Mr. Jensen emailed Mr. Browning to inform him of the issue and to ask whether the owner or the contractor would be responsible for the cost of moving the lines and pole:

Hi Oliver.  I had a crane company look at placing the precast lift station.  They inform me that due to the location of the new station, they can’t get enough clearance from the overhead power lines.  Their quote to me is contingent on relocating the pole and lines.  Would this be a cost to the contractor or to the owner? 

[11]         On October 7, 2014, Mr. Browning sent Addendum No. 3 to all potential bidders by email.  This addendum clarified that all costs associated with the relocation of existing infrastructure to facilitate the installation of the new sanitary lift station were the responsibility of the contractor.  It also stated that the Town would make the necessary arrangements with local property owners to facilitate the work but the contractor would be responsible for cooperating with local property owners throughout the project. 

[12]         On October 9, 2014, four companies bid on the Westville Project.  C.F.’s bid price was $572,000.  S.W. Weeks was the second-lowest bidder at $674,000.  The remaining two bids were priced at $845,000 and $1,132,000.  The Town admits that when the bids were opened, C.F.’s bid appeared compliant on its face.

[13]         On October 15, 2014, Oliver Browning and Paul Jensen spoke on the telephone. The Town relies on Mr. Browning’s recollection of what Mr. Jensen said during this conversation as proof that C.F.’s bid was non-compliant. Mr. Jensen, on the other hand, recalls the conversation very differently.  

The Telephone Call – The Town’s Version

[14]         According to Mr. Browning, he evaluated each of the bids received by the Town in response to the tender call.  He immediately noted that C.F.’s bid price was “significantly lower than the other three bidders.”  On October 15, 2014, he called Paul Jensen to review C.F.’s bid submission.  Mr. Browning outlined his recollection of the call in his affidavit:

22.  On October 15, 2014, I spoke by telephone with Paul Jensen to review their Bid Submission as is standard practice for myself and our office for all tenders.  The purpose and intent of such phone calls is to ensure that nothing was left out of the bid price of the lowest bidder; ensure everything is in accordance to what is specified; and ensure that the Bidder is comfortable with their Bid Price and the scope of work. We discussed a number of items around the project specifications. …

23.  During our telephone conversation of October 15, 2014, I understood from Mr. Jensen’s comments that C.F. Construction’s bid intended the construction of a square, cast-in-place concrete wet well structure for the new pumping station instead of the precast concrete wet well structure that was specified within the Bid Documents.  I further understood from Mr. Jensen’s comments that Mr. Jensen was aware that this was not in compliance with the terms of the Bid Documents, but that C.F. Construction intended to attempt to negotiate this as a “change” after award of the contract.

…

26.  I also understood from my conversation with Mr. Jensen that the square cast-in-place concrete wet well structure that was included in their bid still needed to be designed, and that this step had not yet occurred.

[15]         Mr. Browning took notes during the call.  The notes indicate that Mr. Browning asked Mr. Jensen for information on a number of issues regarding C.F.’s tender submission, including the quantity of asphalt to be removed and reinstated, and how C.F. intended to keep the existing sewer system in service throughout the work.  Mr. Jensen told Mr. Browning that he would get back to him with that information.  On the critical issue of the wet well structure, Mr. Browning’s notes indicate:

* says they priced a square cast-in-place wet well and not a round pre-cast wet well as specified

→  he said they were going to ask for this change following award…but said they “…could still construct it [as] a pre-cast wet well…but would have to negotiate with Shaw…” …only after he was questioned why.

Note:  - a cast-in-place concrete wet well would likely be much more expensive if done to Code since walls and base must be thicker than pre-cast sections … for it to be less would be insufficient.

- nothing provided to detail the wet well they propose to provide (not even designed yet…)

→  told him the cast-in-place wet well would have to be engineered and to our approval if we were going to accept it (said they would get it designed)

→  said they would have to relocate the existing nearby utility pole to install a pre-cast wet well with a crane (??)

•         …no they wouldn’t!!

[16]         Mr. Browning agreed on cross-examination that Mr. Jensen never said C.F. would not build a pre-cast concrete wet well.  He testified that when he informed Mr. Jensen that the Town might not be able to accept C.F.’s bid, Mr. Jensen “back-pedaled” and said, “Well, we can probably still use a pre-cast concrete wet well.”  Mr. Browning conceded that his notes do not include the word “probably”, nor do they indicate that he told Mr. Jensen that C.F.’s bid might be rejected for non-compliance.

[17]         On October 15, 2014, after speaking with Mr. Jensen, Mr. Browning called Kelly Rice, the Town’s Chief Administrative Officer, and explained what he had learned from his conversation with Mr. Jensen.  His handwritten notes taken during and immediately following the telephone conversation with Ms. Rice state:

•         explained our concerns to her regarding possible non-compliance with C.F. Construction … told her we are still confirming

→ she advised that the Town wants to award this Friday (she’s going on vacation)

•         told her that we’re waiting on some info from CF Const.

•         she advised that if they are non-compliant, and they don’t provide info by Friday to change that, to award to the second lowest bidder because the Town needs this project started ASAP.

[18]         According to Kelly Rice, Oliver Browning told her that C.F.’s bid was potentially non-compliant because C.F. had priced a cast-in-place wet well rather than a pre-cast.  She asked Mr. Browning whether cast-in-place was a reasonable alternative to pre-cast and he replied that he needed further information from Mr. Jensen to answer that question.  She told Mr. Browning that “if C.F. did not provide information which indicated their bid was compliant, that he should move forward to award the contract to the lowest compliant bidder”.  When asked what information C.F. could have given her to satisfy the Town that the bid was compliant, she testified that C.F. would have had to either: (1) confirm that its bid price had, in fact, included a pre-cast wet well, or (2) provide sufficient information about the cast-in-place option for the Town to determine whether it was a suitable alternative.  Ms. Rice said that if the Town considered the cast-in-place to be a reasonable alternative, it might have issued a post-closing addendum extending the tender so that the other bidders could make a further bid submission based on the cast-in-place option.  Ms. Rice agreed that if Mr. Jensen had indeed told Mr. Browning that C.F. had priced the bid using a cast-in-place but that they were willing to do the pre-cast wet well for the same bid price, she would have accepted the bid. 

 

The Telephone Call – C.F.’s Version

[19]         Paul Jensen agrees that a number of issues were discussed on the call with Mr. Browning but he recalls the wet well portion of the conversation very differently.  He summarized his recollection in the following paragraphs of his affidavit:

49.  At the time of our October 15, 2014 discussion, I indicated to Oliver Browning that I knew the requirement for the Westville Project was [a] pre-cast structure but I asked him if he would entertain the idea of a pour-in-place structure.

50.  It is not uncommon during a project to suggest options to help facilitate the work.

51.  I indicated to him that the overhead wires and/or utility pole at the Project Site could cause issues with a crane and installing the pre-cast structure.

52.  Oliver Browning indicated to me that engineer drawings would be required for a pour-in-place structure for the Westville Project if it was to be an option.

53.  I replied to the effect that I would ‘get the ball rolling’ with an engineer.

54.  Oliver Browning replied to the effect that I should hold off on consulting with an engineer about a pour-in-place structure at this point, because he was not certain if that would be a consideration for the Westville Project.  He informed me that he needed to look into it further.

…

56.  At no time during my conversation with Oliver Browning on October 15, 2015 [sic] did he rebut my presumption that the electrical wires and/or a utility pole would have to be moved if a pre-cast structure was to be installed at the Project Site .

57.  It was my understanding that Oliver Browning and the Town of Westville were not seriously considering the pour-in-place structure alternative for the Westville Project.  Following my discussion with Oliver Browning, I expected to receive further communication from him that only a pre-cast structure would be accepted.

[20]         According to Mr. Jensen, he had always known that the tender documents required a pre-cast concrete wet well and he prepared C.F.’s bid on that basis.  After reviewing the specifications, he obtained quotes from various subcontractors and suppliers to assist him in calculating the bid.  On October 6, 2014, Mr. Jensen obtained a quote from Shaw Precast Solutions for a pre-cast concrete wet well and a quote from A.W. Leil Cranes & Equipment (“Leil’s”) for the cost of placing the pre-cast structure.  The Leil’s invoice included a notation that “Hydro Lines to be repositioned prior to arriving on site”.  Mr. Jensen’s handwritten calculations for the “Lift Station” portion of C.F.’s bid allocated $5,000 for the crane to install the pre-cast wet well and $10,000 for relocation of the overhead power lines and utility pole.  Mr. Jensen denied telling Mr. Browning that he had priced the C.F. bid for a cast-in-place structure rather than the specified pre-cast structure. 

The Contract is awarded to S.W. Weeks

[21]         After speaking with Kelly Rice on October 15, 2014, Oliver Browning was aware that the Town wanted to award the contract on Friday, October 17, 2014.  On October 16 at 9:50 am, he sent the following email to Paul Jensen:

Good morning Paul,

Further to our discussions yesterday regarding the Westville Sanitary Sewer Upgrades – Phase 3 tender, please provide us with the following information regarding your tender submission:

▪  Quantity (square meters) of asphalt to be removed / reinstated that was included in your Bid Price.

▪  The methodology for maintaining the existing sanitary sewer system in service throughout the Work.

In addition, you advised that the Bid Price submitted does not include the supply and installation of the pre-cast concrete wet well as specified in the Bid Documents, but rather a cast-in-place, square wet well.  Please provide us with details regarding this cast-in-place wet well that is included in your Bid Price including, but not necessarily limited to:

▪  Wall heights and thicknesses.

▪  Base and top thickness.

▪  Quantity and extent of reinforcing (rebar).

▪  Concrete strength.

▪  Overall dimensions.

Also, what pipe material was priced for use in your Bid Price; PVC as specified or HDPE as specified?

The sooner that we can get these responses, the sooner the project can be awarded.

Thanks!

[22]         Mr. Browning testified that when he sent this email, he was reasonably certain that C.F.’s bid was non-compliant, but he was still gathering information to confirm that his preliminary view was correct.   He agreed that if Mr. Jensen had replied to the email and told him that he had misunderstood their conversation and that C.F.’s bid price did, in fact, include the specified pre-cast concrete wet well, he would have concluded that C.F.’s bid was compliant. 

[23]         Paul Jensen said that when he received the email, he did not interpret it to mean that Mr. Browning believed C.F.’s bid was based on a cast-in-place structure.  He testified that he did not fully appreciate the significance of the middle portion of the email until it was pointed out to him at discovery.  Mr. Jensen said he focused on the questions Mr. Browning asked about a cast-in-place wet well and interpreted them to mean that the Town was now open to the possibility of making a change after the award.  He then turned his attention to compiling the information necessary for an engineer to prepare the design and drawings.  He said he did not think there was any urgency to the request because any change from a pre-cast wet well to a cast-in-place would not be made until after the award.  He said the information Mr. Browning requested would take time to obtain, and he intended to respond to him within a few days.

[24]         Having not received a reply to his email by 4:00 pm, Oliver Browning called and left a voicemail for Paul Jensen.  He wrote a note on a printout of his earlier email that stated:

Voicemail follow-up

Oct. 16/14

~4pm

o    advised that we need the information ASAP to finalize/award tomorrow.

•         No response as of Oct. 17 at noon!!

[25]         On October 17, 2014, Mr. Browning sent a letter to Kelly Rice advising the Town of PDI’s opinion that the tender from C.F. was non-compliant with the bid documents and might not be capable of acceptance.  He also advised that PDI recommended that the Town refer the matter to its solicitor for verification of the applicable law.  That afternoon, Mr. Browning was informed that the Town had decided to disqualify C.F.’s bid and award the contract to S.W. Weeks, the second-lowest bidder. 

[26]         Later that day, C.F. received a letter from Oliver Browning indicating that the C.F. bid was disqualified due to non-compliance with the tender documents.  Upon reviewing the letter, Paul Jensen telephoned Mr. Browning for clarification.  Mr. Jensen described the conversation in his affidavit:

65.  On or about October 17, 2014, following receipt of the Denial Letter, I telephoned Oliver Browning because I was surprised at the denial.

66.  I asked him the reason why CF was deemed non-compliant and disqualified as a bidder for the Westville Project.

67.  Oliver Browning replied to the effect that I had not responded to his inquiries quickly enough.

68.  Oliver Browning also indicated to me to the effect that CF had bid the tender incorrectly and alleged to me that it was my intention to do a pour-in-place structure.  He also indicated that I had told him in our conversation on [October] 15, 2014 that I priced the CF Bid for a pour-in-place structure and not the specified pre-cast structure.  I had not told him this.

69.  I reiterated to Oliver Browning what had actually unfolded, namely that I had only asked if the idea of a pour-in-place structure would be entertained and that at no time did I imply that I would not complete the Westville Project as written in the CF Bid or the Tender Documents and Addendums.

70.  I indicated to Oliver Browning that he had initially told me to ‘hold off’ and that it would have taken some time to get an engineer’s drawings in order to respond to his inquiries to me.

71.  Oliver Browning asked me why I had not responded to his email inquiry of October 16, 2014 and I indicated to him that I was in the process of putting that information together before responding.

72 . I also indicated to Oliver Browning that it had been my impression that he would only accept a pre-cast structure and it was not until receipt of his October 16, 2014 email that I commenced the preparatory work to reach out to the engineer.

73.  Oliver Browning told me that the awarding of the tender for the Westville Project was a “done deal” and that I would have to talk to a representative from Westville for more information.

Oliver Browning summarized the discussion as follows:

43.  Also on October 17, 2014, I received a telephone call from Mr. Jensen.  It was my understanding he was calling because he had received the letter referenced above indicating that C.F. Construction was not the successful bidder.  In response to his inquiry, I advised him that C.F. Construction’s bid had been disqualified by the Town because I understood, based on our previous conversation on October 15^th, 2014, that C.F. Construction’s Bid contained the cost of an unspecified, square, cast-in-place concrete wet well structure, and not the specified pre-cast concrete wet-well structure as required by the Tender documents, for which approval had not been granted by the Town . …

44.  During this conversation, I reminded Mr. Jensen that the Bid Documents were clear that alternatives to the stated Specifications were required to be submitted for approval prior to the close of the Tender, otherwise it was not fair to all bidders.

45.  I understood from this conversation that Mr. Jensen was frustrated and/or disappointed about the disqualification.  I reiterated that PDI could not recommend, and the Town could not execute, an award of a tender where there was an item in the Bid Documents which was known to be financially significant and which differed from the Specifications within the Bid Documents. 

[27]         On November 5, 2014, Craig Fraser, the owner of C.F., made a written request pursuant to s. 17 of the Public Procurement Act, S.N.S. 2011, c. 12, for formal reasons for the disqualification of the C.F. bid and a debriefing session providing feedback on the tender evaluation.  The meeting was held on December 10, 2014, at the Westville Town Hall.   Craig Fraser, Mitchell Fraser, and Paul Jensen attended on behalf of C.F., while Kelly Rice, CAO, and Samuel Graham, Superintendent of Public Works & Water/Wastewater Services, attended on behalf of the Town.  Although Oliver Browning was not at the meeting, he gave Ms. Rice a copy of the notes he prepared in relation to his telephone conversations with Mr. Jensen and others. 

[28]         The affidavits of Craig Fraser and Paul Jensen both state the following in relation to the meeting:

During this December 10, 2014 meeting, Kelly D. Rice made statements to the effect of:

a.       She discussed the Tender Documents with Oliver Browning in preparation of the meeting;

b.      Oliver Browning had authority to speak for Westville during the tendering process;

c.       Oliver Browning indicated to her that CF would push for an alternate design for the Westville Project upon being awarded the tender;

d.      She did not believe CF intended to perform the Westville Project as per the Tender Documents;

e.       The usual practice of Westville is to accept the lowest bid on its construction tenders;

f.        CF was the lowest bid received on the Westville Project;

g.       The funding for the Westville Project had been approved for approximately three years and Westville was anxious to have it move forward;

h.       Following the tender closing date of October 9, 2014, she was leaving shortly for a vacation and this was an inopportune time to take a vacation; and

i.         In the future, Westville will handle similar issues as the CF Bid differently including that representatives from Westville will discuss in detail with all contractors before decisions are made as to the awarding of a tender.

On cross-examination, Mr. Fraser and Mr. Jensen agreed that Ms. Rice also told them that the C.F. bid was disqualified because of the communication between Mr. Jensen and Oliver Browning.  Neither was asked what they said to Ms. Rice during the meeting.

[29]         Kelly Rice and Samuel Graham differ in their accounts of the position taken by Paul Jensen during the meeting.  According to Ms. Rice, Craig Fraser maintained that C.F. had bid according to the specifications, but Mr. Jensen admitted that he had calculated C.F.’s bid based on a cast-in-place concrete wet well, intending to ask for the change once the contract was awarded.  Ms. Rice said that when she asked Mr. Jensen why he had bid that way, he responded that it was “how they stay competitive”.  Mr. Graham, on the other hand, testified that Mr. Jensen said he had bid according to the specifications.  He also testified, somewhat confusingly, that Mr. Jensen said he wanted to bid a cast-in-place because it is “how they are competitive”. 

Positions of the Parties

[30]         C.F.’s position is that its bid was compliant in all respects with the requirements of the instructions to bidders and the bid form, and that Contract “A” was created between C.F. and the Town at the time C.F. submitted its bid.  It says that C.F. calculated its bid price on the basis of a pre-cast concrete wet well, not a cast-in-place, and that Oliver Browning misunderstood Paul Jensen’s comments during the October 15, 2014, telephone call.  C.F. submits, however, that even if Mr. Jensen had told Mr. Browning that the wet well installation component of its bid price was based on a cast-in-place, the bid was still compliant with the tender requirements. 

[31]          The Town’s position is that Mr. Jensen’s admission that he priced the C.F. bid on the basis of a cast-in-place wet well meant that C.F.’s bid was not in compliance with the tender specifications and Contract A did not arise.  The Town says it had a duty to treat all bidders fairly and equally, and accepting C.F.’s bid in the face of information that rendered it non-compliant would have placed the Town in legal jeopardy with other bidders. 

General Principles

[32]         The Supreme Court of Canada has described the law that governs the tendering process on several occasions: see R. v. Ron Engineering & Construction (Eastern) Ltd., [1981] 1 S.C.R. 111, 1981 CarswellOnt 109; M.J.B. Enterprises Ltd. v. Defence Construction (1951), [1999] 1 S.C.R. 619, [1999] S.C.J. No. 17; Martel Building Ltd. v. Canada, [2002] 2 S.C.R. 860, [2002] S.C.J. No. 60; Double N Earthmovers Ltd. v. Edmonton (City), 2007 SCC 3, [2007] S.C.J. No. 3; and Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, [2010] S.C.J. No. 4.  The basic principles were summarized in Double N Earthmovers, where Charron J. (dissenting) wrote:

105     As Estey J. said in The Queen in right of Ontario v. Ron Engineering & Construction (Eastern) Ltd., at p. 121, the "integrity of the bidding system must be protected where under the law of contracts it is possible to do so". In order to protect the integrity of the tendering process, this Court has adopted a particular analysis of that process: Ron Engineering; M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd.; and Martel Building Ltd. v. Canada. This analysis is often referred to as the Contract A/Contract B analysis. According to this analysis, the tendering process is characterized by two contractual stages. At the first stage, the owner issues a tender, in response to which bidders submit bids. This creates a first contract - "Contract A" - between the owner and every compliant bidder. At the second stage, when the owner accepts a bid, a second contract - "Contract B" - is formed. This is the actual contract to supply the equipment or to perform the work that was the subject-matter of the tender. A bidder's bid thus constitutes both an acceptance and an offer. It constitutes an acceptance of the owner's offer to receive and consider tenders, and it simultaneously constitutes an offer to perform the tendered contract.

106     It is settled law that the terms of Contract A are set out in the tender documents and that, in addition, there may also be implied terms based on custom or usage or on the presumed intentions of the parties. An implied duty to accept only a compliant bid was recognized by this Court in M.J.B. Enterprises. Speaking for the Court, Iacobucci J. found that this implied term was necessary to give "business efficacy" to the tendering process, explaining as follows:

The rationale for the tendering process ... is to replace negotiation with competition. This competition entails certain risks for the appellant .... It appears obvious to me that exposing oneself to such risks makes little sense if the respondent is allowed, in effect, to circumscribe this process and accept a non-compliant bid. Therefore I find it reasonable, on the basis of the presumed intentions of the parties, to find an implied term that only a compliant bid would be accepted.

107     Likewise, in Martel, this Court held that an owner also had a duty to treat all bidders fairly and equally. As Iacobucci and Major JJ. said, "[i]mplying an obligation to treat all bidders fairly and equally is consistent with the goal of protecting and promoting the integrity of the bidding process, and benefits all participants involved" (para. 88). Such implication, they noted, "is necessary to give business efficacy to the tendering process" (para. 88).

                                                                                                   [Citations removed]

[33]         In Tercon, Cromwell J., for the majority, highlighted the importance of the integrity of the tendering process:

67     To begin, it is helpful to recall that in interpreting tendering contracts, the Court has been careful to consider the special commercial context of tendering. Effective tendering ultimately depends on the integrity and business efficacy of the tendering process: see, e. g., Martel, at para. 88; M.J.B., at para. 41; Double N Earthmovers Ltd., at para. 106. As Iacobucci and Major JJ. put it in Martel, at para. 116,"it is imperative that all bidders be treated on an equal footing ... Parties should at the very least be confident that their initial bids will not be skewed by some underlying advantage in the drafting of the call for tenders conferred upon only one potential bidder".

68     This factor is particularly weighty in the context of public procurement. In that context, in addition to the interests of the parties, there is the need for transparency for the public at large. This consideration is underlined by the statutory provisions which governed the tendering process in this case. Their purpose was to assure transparency and fairness in public tenders. As was said by Orsborn J. (as he then was) in Cahill (G. J.)& Co. (1979) Ltd. v. Newfoundland and Labrador (Minister of Municipal and Provincial Affairs), 2005 NLTD 129, 250 Nfld. & P.E.I.R. 145, at para. 35:

The owner -- in this case the government -- is in control of the tendering process and may define the parameters for a compliant bid and a compliant bidder. The corollary to this, of course, is that once the owner -- here the government -- sets the rules, it must itself play by those rules in assessing the bids and awarding the main contract.

 

69     One aspect that is generally seen as contributing to the integrity and business efficacy of the tendering process is the requirement that only compliant bids be considered. As noted earlier, such a requirement has often been implied because, as the Court said in M.J.B., it makes little sense to think that a bidder would comply with the bidding process if the owner could circumscribe it by accepting a non-compliant bid. …

                                                                                                      [Emphasis added]

These are the general principles that apply to the facts of this case.

Compliance

[34]         The Town urges the Court to begin its analysis by making a factual finding as to whether Paul Jensen, on behalf of C.F., told Oliver Browning that C.F.’s bid price included a cast-in-place concrete wet well.  The Town says that if the Court rejects Mr. Browning’s recollection of the conversation, it follows that the bid was compliant and C.F. should have been awarded the contract.  C.F. takes a different approach.  It says the law is clear that Contract A arises as soon as the bidder submits a bid that complies with the terms and conditions of the tender call.  For this reason, the post-closing conversation between Mr. Jensen and Mr. Browning is legally irrelevant to the compliance of C.F.’s bid.  C.F. says that it is only if the Court rejects this premise that it should consider the post-closing discussion.  Although I begin by determining what took place during the telephone call between Mr. Browning and Mr. Jensen, I am satisfied that the result would be the same under either approach. 

[35]         Paul Jensen was the primary estimator for C.F. for the Westville Project.  At the time the Town issued the tender call, Mr. Jensen had worked for C.F. for about eight years.  During that period, he prepared bid submissions for C.F. on more than fifty projects.  He also acted as C.F.'s project manager when it was the successful bidder.  According to Mr. Jensen, C.F. bid on and completed numerous projects like the Westville Project over the last thirty years.  I find that at the time he prepared C.F.’s bid for the Westville Project, Mr. Jensen was an experienced estimator who recognized the importance of adhering to tender specifications when submitting a bid. 

[36]         After reviewing the tender call for the Westville Project, Mr. Jensen was proactive in his preparation of the C.F. bid.  He contacted Oliver Browning on several occasions to obtain clarification and to identify potential problems.  The documentary evidence shows that on October 6, 2014, he obtained quotes from Shaw Precast Solutions for the specified pre-cast concrete wet well, and from Leil’s for the crane required to lift it into place.  On the same day, Mr. Jensen emailed Mr. Browning to alert him to the potential issue with the overhead power lines.  His handwritten calculations for the “Lift Station” portion of C.F.’s bid allocated $5,000 for the crane to install the pre-cast wet well and $10,000 for relocation of the overhead power lines and utility pole.  There is no evidence that Mr. Jensen ever designed a cast-in-place concrete wet well or took any other step to determine how much a cast-in-place structure would cost. The only rational inference is that Paul Jensen intended to acquire and install the pre-cast concrete wet well specified in the tender documents, and priced C.F.’s bid accordingly.  Having made that inference, I cannot accept that he told Mr. Browning that C.F.’s bid price included a cast-in-place wet well.  For him to have done so would defy all logic.  To be clear, I accept that Mr. Browning sincerely believes in the accuracy of his own recollection of the conversation with Mr. Jensen.  I find, however, that he misunderstood what Mr. Jensen communicated to him.

[37]         I find that Oliver Browning assumed that something was amiss with the C.F. bid from the moment he saw that it was substantially lower than the other three bids.  He was not aware that Craig Fraser had instructed Paul Jensen to “bid as low as possible and still make money”.  In my view, Mr. Browning’s belief that the tender was abnormally low likely led him to misinterpret Mr. Jensen’s comments. 

[38]         Mr. Browning’s evidence was that after he spoke with Mr. Jensen on October 15, 2014, he was reasonably certain that C.F.’s bid was non-compliant, but he wanted to do further research to confirm.  To that end, he reviewed several articles on public procurement.  These articles were disclosed by the Town and entered as exhibits in this proceeding.  One of the articles, entitled “Abnormally Low Tenders – Intelligent Procurement”, was heavily highlighted. 

[39]         The low nature of the C.F. bid was a critical factor in PDI’s advice to the Town.   In his letter to Kelly Rice of October 17, 2014, Mr. Browning wrote:

Our opinion of probable construction cost for this project is $655,000.00.  When the aforementioned contingency allowance is added to this, our total opinion of construction price is $730,000.00.   The Bid Price that is closest to our opinion of probable construction cost is $674,000.00 from S W Weeks Construction Ltd.  The low Bid Price submitted, $572,000 from C F Construction Ltd., appears to be excessively low in our opinion.  Also, their proposed project duration of 36 weeks is moderately long for the nature of the Work involved in this project. 

[40]         He noted that Mr. Jensen had disclosed that C.F.’s bid price included a price for a square, cast-in-place concrete wet well, and added:

Details of their unauthorized substitution of the lift station wet well construction and materials were not provided to us to even determine suitability and construction code compliance. 

[41]         After advising that the C.F. bid may be non-compliant, Mr. Browning speculated that C.F.’s bid price might include other unauthorized substitutions:

Also, based on their Bid Price appearing to be moderately low for the nature of this Work, we have concerns that there may be additional items that comprise their Bid Price that may also not conform to the Bid Documents. 

[42]         Upon considering Mr. Browning’s letter, the Town disqualified C.F.’s bid. On May 8, 2015, Kelly Rice received a letter from Donn Fraser, counsel for C.F., enclosing a notice of intended action or application.  In Ms. Rice’s reply of June 22, 2015, she wrote:

It is important to outline the circumstances that lead to the determination that CF Construction’s bid was non-compliant.

When the bids were received for the Westville Sanitary Sewer Systems Upgrades – Phase 3, it was clear that CF Construction Limited was substantially less than the other bidders. This raised a concern whether CF Construction’s bid was complete so the Town made inquiry as it was entitled to do. …

                                                                                                      [Emphasis added]

[43]         In Oliver Browning’s opinion, the Westville Project should have cost about $730,000.  C.F.’s bid price of $572,000 was substantially lower than both that estimate and the other bids.  Mr. Browning called Mr. Jensen assuming there was something wrong with the C.F. bid.  When Mr. Jensen raised the possibility of a cast-in-place wet well, Mr. Browning understood him to mean that the C.F. bid price was premised on the incorrect type of wet well.  Mr. Jensen’s remark that the cast-in-place had not even been designed yet, instead of exposing the misunderstanding, only confirmed to Mr. Browning that C.F.’s bid price was suspect.  This initial misunderstanding was compounded by Mr. Jensen’s misinterpretation of – and failure to answer – Mr. Browning’s email.  Receiving no response from Mr. Jensen, the Town unfairly disqualified C.F.’s compliant bid.   

[44]         Even if I accepted Oliver Browning’s version of the conversation with Paul Jensen, however, I would still find that C.F.’s bid was compliant when it was submitted, thereby creating Contract A.  

[45]         In Winbridge Construction Ltd. v. Halifax Regional Water Commission, 2015 NSSC 275, 2015 CarswellNS 811, Warner J. adopted the following passage from Paul Emanuelli’s Government Procurement, 3d ed. (Markham: LexisNexis 2012) on the issue of compliance:

34     Emanuelli, in Government Procurement, at ch. 6, synthesizes thoroughly the governing principles respecting the duty to reject non-compliant tenders. He states:

As the Supreme Court of Canada noted in its November 2000 decision in Martel Building Ltd. v Canada, the implied duty to reject non-compliant tenders is one of the cornerstones of a formal bidding process:

            ...

The law is clear. In a formal binding bidding process, a purchaser is under a duty to reject non-compliant tenders.

Under the common law tendering regime, if a tender is non-compliant, the bidder is deemed to have failed to meet the basic requirements necessary to "accept" the purchaser's Contract A offer. Under this analysis, Contract A is never formed. The purchaser owes compliant bidders a duty to reject the non-compliant tender.

... While this duty may be simple to state in principle, it can be complicated to apply in practice.

                                                                                          [Emphasis added]

[46]         The test for compliance in the tendering process is "substantial" rather than strict.  “Substantial compliance requires that all material conditions of a tender, determined on an objective standard, be complied with”: Double N Earth Movers, at para. 109. 

[47]         In Ron Engineering, the issue before the Court was whether the owner was required to return the contractor’s tender deposit once being notified by the bidder after the close of bids that its lump sum bid price contained a substantial mathematical error.  The contractor’s bid price, which omitted its labour costs of $750,058, was the lowest of eight bids.  The contractor did not attempt to withdraw its bid, but instead maintained that because it gave notice of the error prior to the owner’s acceptance of its bid, the owner could not legally accept the bid and was required to return the tender deposit.  Estey J., for the Court, noted that the bidder’s mistake was not apparent on the face of the bid documents but instead required an explanation outside of the bid documents themselves: para. 7.  The Court held that Contract A came into being upon the submission by the contractor of a bid that met the terms and conditions of the tender call:

The test, in my respectful view, must be imposed at the time the tender is submitted and not at some later date after a demonstration by the tenderer of a calculation error.  Contract A (being the contract arising forthwith upon the submission of the tender) comes into being forthwith and without further formality upon the submission of the tender.  If the tenderer has committed an error in the calculation leading to the tender submitted with the tender deposit, and at least in those circumstances where at that moment the tender is capable of acceptance in law, the right of the parties under Contract A have thereupon crystallized.  The tender deposit, designed to ensure the performance of the obligations of the tenderer under Contract A, must therefore stand exposed to the risk of forfeiture upon the breach of those obligations by the tenderer.  Where the conduct of the tenderer might indeed expose him to other claims in damages by the owner, the tender deposit might well be the lesser pain to be suffered by reason of the error in the preparation of the tender. …

                                                                                                                               [Emphasis added]

[48]         In Double N Earthmovers, the majority held that there is no duty on an owner to investigate bids:

50     We do not think there is an implied duty requiring an owner to investigate to see if bidders will really do what they promised in their tender. We agree with Russell J.A.'s observation on behalf of the Court of Appeal, that:

To impose a duty on owners to investigate whether a bidder will comply with the terms of its bid would overwhelm and ultimately frustrate the tender process by creating unwelcome uncertainties. [para. 36]

51     The notion that an owner is expected to investigate bids falls well short of the necessary "obviousness" to form part of the presumed intentions of the "actual parties": M.J.B. Enterprises, at para. 29. There is no reason why the parties would expect an owner to investigate whether a bidder will comply, when each bidder is legally obliged to comply in the event its bid is accepted. Whether or not the bidder is, at the time of tender, capable of performing as promised is irrelevant in light of the bidder's legal obligation to do so once its bid is accepted.

  52     The duty of "fair[ness] and equality" was recognized in Martel in part because it was thought to be "consistent with the goal of protecting and promoting the integrity of the bidding process": para. 88 (emphasis added). Double N's focus instead is with the integrity of the bidders. The bidding process, by contrast, is fully protected by an obligation that all bids receive equal treatment. The best way to make sure that all bids receive the same treatment is for an owner to weigh bids on the basis of what is actually in the bid, not to weigh them on the basis of subsequently discovered information.

                                                                                               [Emphasis added]

[49]         In M.G. Logging & Sons Ltd. v. British Columbia, 2015 BCCA 526, [2015] B.C.J. No. 2869, the British Columbia Court of Appeal held that taking “post-bid conduct and views into account is inconsistent with the requirement that bid compliance is to be measured objectively at the time the bid is submitted”: para. 44.  The Court reiterated the point in True Construction Ltd. v. Kamloops (City), 2016 BCCA 173, 2016 CarswellBC 1073, when it stated, “The post-bid conduct and views of the parties should not be relied on in determining the compliance of the bid”: para. 24. 

[50]         C.F. says that its bid, when measured objectively at the time it was submitted, complied in all respects with the requirements of the instructions to bidders and the bid form for the Westville Project.  Clause 4 of the instructions to bidders provided:

4.         BID SUBMISSION

            4.1  Bid Ineligibility

.1      Bids that are unsigned, improperly signed or sealed, or contain arithmetical errors, will be rejected.

.2      Bid Forms and enclosures, including Section 00301 – Schedule A of Unit Prices, which are improperly prepared or contain alterations may result in the Bid being rejected.

.3      Failure to provide security deposit, bonding or insurance requirements may result in the Bid being rejected.

.4      Failure to attend the mandatory site meeting will result in the Bid being rejected.

            4.2  Submissions

.1      Bidders shall be solely responsible for the delivery of their Bids in the manner and time prescribed.

.2      Submit one (1) copy of the executed Bid on the forms provided, including one (1) copy of the completed Section 00301 – Schedule A of Unit Prices, signed and corporate sealed, together with the required security in a closed, opaque envelope, clearly identified with Bidder’s name, project name and Owner’s name on the outside.

.3      Bids shall be received at the office of the Owner, Town of Westville, 2042 Queen, Westville, Nova Scotia, B0K 2A0.

[51]         Clause 5 set out the necessary bid enclosures and other requirements:

5.         BID ENCLOSURES/REQUIREMENTS

            5.1  Security Deposit

.1      Bid Bonds: A bid bond or certified cheque or money order made payable to the Owner, in the amount of at least ten percent (10%) of the Tender Price shall accompany each Tender.

.2      Consent of Surety:

.1      Submit with the Bid, a “Consent of Surety” stating that the surety is willing to supply the Performance Bond and Labour and Material Payment Bond as required under Supplementary Conditions. 

.2      The accepted Bidder shall provide Performance Bond and Labour and Material Payment Bond stated in the Supplementary Conditions.

                         …

 

            5.2  Bid Signing

.1      The Bid shall be signed under seal by the Bidder.

                  …

.5      Incorporated company: Signature of duly authorized officer(s) and company seal affixed. 

                  …

           

5.3   Contingency Allowance

.1      The Bidder shall include in the tender price the sum of $75,000, to cover any extra work that may be authorized by written instruction from the Consultant.  The unexpended portion of this amount shall be credited to the Owner at the completion of the work. 

 

            5.4  Unit Prices

.1      Bidders shall indicate in the space provided on Section 00301 – Schedule A of Unit Prices unit prices that will be used for the evaluation of payment for items listed, if changes to the Work become necessary.

[52]         The bid form provided as follows:

1.         BID PRICE

Having examined the Bid Documents as listed in the Table of Contents and

                        Addenda No. ___ to No ___ inclusive,

as prepared by PDI Engineering Group Inc. (the Consultant), and having visited the project site, the undersigned hereby offer to enter into a Contract to perform the work required by the Bid Documents for the Contract Bid Price of:

                       

____________________________________________$_____________)_

   (Price must be written in words; include dollars and cents in figures)

 

Contract Bid Price includes the Contingency Allowance (Section 00 10 00 – Instructions to Bidders, Article 8) in the amount of                                       Seventy-five thousand dollars -----------------------xx/100    ($75,000)

[53]         Clause 2 of the bid form outlined the methods available to the Town for calculating the value of changes to the work.  Clause 3 required the bidder to make a series of declarations:

3.         DECLARATIONS

We hereby declare that:

a)      we agree to Substantially Perform the work of this project within ____ weeks after receiving notice of Contract award.

b)      this Bid Price is open to acceptance and is irrevocable for a period of forty (40) calendar days from the date of bid closing.

c)      in the event award is not made within fourteen (14) calendar days, our required date of Substantial Performance of the Work will be extended day for day of delay of award.

d)      if our submission is accepted, we will execute a completed agreement within ten (10) working days of notification of award and commence the work within ten (10) working days of executing the Agreement.

e)      we are in good standing with the Workers Compensation Board of Nova Scotia and the Construction Safety Association of Nova Scotia.

f)        should our submission be accepted, we shall obtain and provide all necessary bonding and insurance coverage as required by the Contract Documents.

g)      we agree that the Owner reserves the right to reject any or all tenders, not necessarily accept the low tender, to accept any tender which it may consider to be in its best interest or to waive formality, or informality or technicality in any tender.

[54]         C.F. submits, and the Town does not dispute, that C.F.’s bid met the terms and conditions of the instructions to bidders, and that C.F. properly completed the bid form.  C.F. says there was no requirement for a bidder to demonstrate how it priced individual components of the work in calculating its lump sum bid price, and the Town breached its duty of fairness by evaluating C.F.’s bid on the basis of this undisclosed criteria.  C.F. compares the situation with that in Force Construction Ltd. v. Nova Scotia (Attorney General), 2008 NSSC 327, [2008] N.S.J. No. 490, aff’d 2009 NSCA 96.  In Force Construction, the Department of Transportation and Public Works issued a call for public tenders for the renovation of the Art Gallery of Nova Scotia.  The instructions to bidders required the use of Visionwall windows.  Another section stated that alternatives to stipulated products would be considered by the consultant up to ten working days before bid closing.

[55]         In preparing its bid, Force Construction Ltd. obtained a quote for the supply of the Visionwall windows from Window World, a retailer which had supplied it with the windows in the past.  Force’s bid package indicated that Window World would supply the Visionwall windows.  Bids closed on December 4, 1997.  Out of the two bids received, Force’s bid was the lowest. 

[56]         After the close of bids, a project manager within the Department who had worked with Force in the past raised concerns about the company’s ability to perform.  Although the Department’s preliminary view was that Force’s bid should not be accepted, it held an internal meeting on the issue and determined that the problem on the earlier project had been with particular personnel, not with the company itself.  

[57]         On December 9, 1997, Department representatives and Michael Harvey, the project architect, met with Kelvin Bellefontaine, Force’s principal, and Ian Spence, its estimator and project manager.  Mr. Harvey expressed a concern about Force’s ability to supply the Visionwall windows.  Mr. Bellefontaine confirmed that the Visionwall windows would be supplied.  Mr. Harvey subsequently wrote to Mr. Spence, requesting confirmation that Force could supply the windows.  He indicated that Edward Bishop at Window World had requested an approval for an alternate manufacturer and that no alternatives would be considered.  Mr. Harvey asked for confirmation from Force by Friday, December 12.  Mr. Bellefontaine and Mr. Spence denied asking Mr. Bishop to request an alternate product.  Mr. Spence immediately wrote to Mr. Bishop to obtain confirmation that Window World could indeed obtain the Visionwall windows.  Mr. Bishop did not say he could not obtain the windows, but did indicate that he would have to obtain them outside the region due to issues with the local supplier. 

[58]         On December 12, 1997, Mr. Harvey recommended to the Department that Force’s bid should be accepted if it provided written confirmation respecting the supply of the windows.  In a meeting that day, Mr. Bellefontaine told the Department that Force did not yet have confirmation of its supply of Visionwall windows.  The deadline for confirmation was extended until December 15 at noon.  Several hours before the deadline, Mr. Bellefontaine received verbal confirmation from a local supplier that it would supply the windows from a source located outside the region.  Despite receiving notification from Mr. Bellefontaine at 12:09 pm that written confirmation would likely be obtained before the end of the day, the Department disqualified Force’s bid.  Force received written confirmation from the supplier at 4:11 pm.  Force brought an action against the Department, claiming that its bid was compliant and that the Department breached its contractual obligation by awarding the contract to the second-lowest bidder. 

[59]         Force argued that it only learned after the close of bids that the windows could not be obtained from Window World, and that by agreeing in its bid that it had arranged for the “continuous prosecution of the work” it assumed liability for any inability to perform. The Department argued that unless the supplier listed by Force in the bid documents intended to supply, or was able to supply, the specified Visionwall windows, the bid was non-compliant and the Department was obliged to reject it.  The Court held that the Department had breached the terms of Contract A, including its duty to treat all bidders fairly and equally:

43     I am satisfied that the Department breached the terms of Contract A by requiring the plaintiff to provide written confirmation from a supplier. This obligation was not imposed on the other bidder. The tender documents do not contemplate that the Department could impose such a requirement on a single bidder nor does it permit a contract to be awarded on the basis of an undisclosed term. The plaintiff was subject to a condition, imposed at the eleventh hour, to which the other bidder was not subject. The Department has not established that the plaintiff could not supply the required windows. At most the Department has demonstrated that the plaintiff was unable to provide certain additional assurances within the timeframe imposed by the Department. In fact, I am satisfied that the plaintiff would have been able to provide the windows just as Mr. Bellefontaine maintained it would and just as its bid indicated.

…

51     The plaintiff was not treated "fairly and equally" in the bidding process. It is clear from the evidence that there was at least some predisposition within the Department to deny the plaintiff the contract. At the same time, the relevant personnel in the Department had eventually accepted that the plaintiff should be awarded the contract having submitted a compliant bid that was also the lowest contract price. It was not open to the Department to go outside the terms of the tender and impose additional informational requirements on the plaintiff, which, in addition to being previously undisclosed, were not applied equally to all of the bidders.

[60]         C.F. submits that, like the Department in Force, the Town went outside of the terms of the tender documents and imposed undisclosed criteria on C.F. by requiring it to demonstrate how it priced one of the components of its bid price.  It says the Town further undermined the integrity of the tendering process by imposing an ambiguous, unrealistic deadline on C.F. without warning of the consequences of missing that deadline.

[61]         The Town agrees that C.F.’s bid met the terms and conditions of the instructions to bidders and that its bid form was compliant on its face.  It says, however, that once Mr. Jensen disclosed the information about the cast-in-place wet well, the Town was entitled to investigate further and disqualify the bid.  The Town relies on Rankin Construction, 2014 ONCA 636, 2014 CarswellOnt 12595, where the Ontario Court of Appeal upheld the trial judge’s finding that an owner is not prohibited from investigating allegations of non-compliance where such an investigation is not precluded by the tender documents:

27     In Double N Earthmovers Ltd. v. Edmonton (City), 2007 SCC 3, [2007] 1 S.C.R. 116, the Supreme Court found that the owner did not have an implied duty to investigate allegations of non-compliance by a rival bidder. The trial judge concluded that it does not follow from this holding that an owner does not have the right to investigate allegations of non-compliance, if not precluded from doing so by the tender documents. And here the tender documents did not preclude the MTO from conducting an investigation. At para. 39, the trial judge reasoned that:

[T]o require an owner to stay its hand and refrain from making enquiries in the face of information that it will be impossible for a bidder to fulfill a material requirement of its bid, and to award the contract to such a bidder, does not promote the integrity of the bidding process.

28     I agree with the trial judge that the tender documents do not preclude the MTO from conducting an investigation. They do not expressly provide that the MTO will not investigate any complaints, and I see no basis for implying such a term.

[62]         The Town submits that its ability at common law to investigate potential non-compliance is buttressed by the obligations placed upon public sector entities by s. 15 of the Public Procurement Act:

15 (1) Public sector entity procurement employees shall

(a) ensure their procurement activities are conducted according to policies, provincial and federal legislation, trade agreements and ethical business practices;

(b) encourage and support collaborative procurement amongst public sector entities;

(c) follow leading procurement practices;

(d) in good faith, conduct business with current and prospective suppliers and be fair in all business dealings;

(e) strive to obtain the best value for each expenditure;

(f) require suppliers provide accurate representations of goods, services and construction;

(g) encourage suppliers to consider sustainability in their product or service offerings;

(h) encourage the negotiation of an equitable and mutually acceptable settlement when a dispute arises; and

(i) request removal from a procurement process when a personal conflict of interest is perceived.

The Town relies in particular on s. 15(f) which provides that public sectors shall require suppliers to provide accurate representations of goods, services, and construction.

[63]         The Town says the tender documents set out the only valid procedure for bidders to request alternatives to specified products before close of bids.  C.F. did not use this procedure to request that a cast-in-place wet well be deemed an approved equivalent to a pre-cast wet well.  The Town says that by submitting a bid priced to include an alternative product without prior approval, C.F. did not accept the terms of the Town’s Contract A offer, but rather submitted a counter-offer or a qualified bid.  In Winbridge, supra, Warner, J. described counter-offers and qualified bids as examples of contractual or formal non-compliance:

43     There are many types of non-compliance. As Emanuelli writes, they can be as varied as the compliance standards established by an owner in its tender documents. Emanuelli identifies three categories of non-compliance, which he emphasizes are simply useful reference points and are not water-tight compartments or exhaustive.

44     One type is contractual or formal non-compliance. This non-compliance arises most frequently where a bidder qualifies the bid, or effectively makes a counteroffer in response to a tender call. Where a bidder imposes conditions on a tender which effectively constitute a counter-offer, there is no meeting of the minds and no Contract A can be formed.

[64]         In Surespan Construction Ltd. v. The Government of Saskatchewan, 2017 SKQB 55, [2017] S.J. No. 82, the Ministry of Highways and Transportation put out an invitation to tender for the supply, fabrication, delivery, and erection of structural steel for a bridge.  Bids were submitted by two contractors: Surespan and Structal Bridges.  Both bids were significant highly than the Ministry’s estimates for the project. 

[65]         The Ministry’s invitation to tender contained a provision requiring the contractor to hold a Canadian Welding Bureau (“CWB”) Division 1 certification.  To be certified in Division 1, a contractor must employ a full-time, registered professional engineer responsible for welding-related activities.  Surespan was not certified to the requirements of Division 1 at the time it submitted its bid.  For Surespan to acquire Division 1 certification, it would have had to employ a full-time, qualified welding engineer, and then apply for and complete a certification process that would take six to eight weeks.  Although Surespan had its own fabrication facility, it intended to engage a subcontractor to carry out the supply, fabrication, and delivery portion of the project.  That intention was not disclosed in its bid. 

[66]         Bids closed on June 16, 2011.  On June 17, a Ministry representative contacted Surespan’s chief estimator, Bradley Gunnlaugson, to determine whether Surespan held the welding certification required by the tender documents.  Mr. Gunnlaugson replied that Surespan did not, but that whatever subcontractor it retained to do the steel fabrication would have the certification.  The Ministry did not initially consider whether this information meant that Surespan’s bid was non-compliant, and intended to award it the contract. 

[67]         On June 22, 2011, before the contract was awarded, a representative of Structal contacted the Ministry to express doubts that Surespan held the required CWB certification.  The Ministry placed the tender process on hold and again called Surespan to confirm that it was certified to the requirements of Division 1.  Mr. Gunnlaugson emailed the Ministry later that day, stating that Surespan intended to engage a subcontractor who held the required certification as the structural steel fabricator on the project.  On June 23, the Ministry requested that Surespan’s representative state “in writing” whether it held the prescribed welding certification.  On June 24, Mr. Gunnlaugson sent a further email, this time stating that Surespan would obtain the certification prior to the fabrication of any work related to the project. 

[68]         After reviewing the matter, legal counsel advised the Ministry that neither bid was capable of acceptance. Surespan was non-compliant with the provision requiring the CWB certification and Structal was non-compliant with another provision specifying certain occupational health and safety requirements.  The Ministry rejected both bids, cancelled the tender, and retendered the work as two separate projects.  Surespan brought an action against the Ministry, arguing that its bid was compliant or, in the alternative, that any non-compliance was not material, and that Contract A was formed upon submission of its bid.  Surespan claimed damages for its lost profit.  The Ministry applied for summary judgment dismissing Surespan’s claim, and Surespan responded with its own application for summary judgment for damages arising from the breach of Contract A. 

[69]         After hearing evidence from Mr. Gunnlaugson that the Court deemed “self-serving”, Ball J. was satisfied that Surespan submitted its bid knowing that it did not and could not comply with the certification requirement in the hope that it would be waived or revised by the Ministry: para. 74.  The Court was further satisfied that the certification provision “required Surespan to hold the prescribed welding certification as a requirement for submitting a compliant bid and as a qualification for receiving an award of Contract B”: para. 90.  The Court held that Surespan’s bid was a conditional or qualified bid:

91      I have found that Special Provision 2.1 required Surespan to hold the prescribed welding certification as a prerequisite for submitting a compliant bid (thereby forming Contract A) and receiving an award of Contract B. Surespan did not hold that certification when it submitted its bid or at any time thereafter. For that reason, its bid was not compliant with the Invitation to Tender. In addition, I find that Surespan's bid was non-compliant because it constituted a conditional or qualified bid. I will explain.

92      Special Provision 2.1 was stated to be "Further to General Provision 1200.3". General Provision 1200.3 stated:

            1200.3 CLARIFICATIONS

1200.3.1 At any time following the opening of Bids, the Minister reserves the right to seek clarification, explanation and/or supplemental information regarding the contents of any Bid for the purpose of determining whether the Minister should waive or correct any non-compliance or irregularity pursuant to Section 1200.1

1200.3.1.1 Information provided by the Bidder will become part of the Bid.

93      During the bid evaluation the Ministry sought clarification from Surespan with respect to whether it held the welding certification required by Special Provision 2.1. As we have seen, Surespan gave three responses. The first two proposed confining the requisite welding certification to a subcontractor who would perform fabrication work. Neither of those proposals were consistent with the wording of Special Provision 2.1.

94      The third response accepted that Special Provision 2.1 required Surespan to hold the requisite Division 1 welding certification, but it did not accept that it was required to do so as a requirement for receiving an award of Contract B. Instead, it advanced the proposition that Surespan "...shall be certified prior to the fabrication of any work related to the project."

95      All three of Surespan's responses contained a qualification or condition that became part of Surespan's bid pursuant to General Provision 1200.3.1.1. As such, all three constituted conditional or qualified bids.

[70]         Finally, the Court held that Surespan’s non-compliance was material, and therefore its bid was incapable of forming Contract A: para. 98.  The Town submits that C.F.’s bid was similarly non-compliant, because it was qualified by C.F.’s advice that it intended to use a cast-in-place wet well instead of the pre-cast wet well specified in the tender documents.

[71]         The Town also relies on M.J.B. Enterprises.  In that case, Defence Construction (1951) Limited sought tenders for the construction of a pump house, water distribution system, and the dismantling of a water tank on a Canadian Forces Base in Alberta.  Of the four tenders received, the contract was awarded to Sorochan, the lowest bidder.  The original specifications in the tender documents contemplated that bidders would provide a lump sum price for the construction of the pump house and demolition of the water tank, but would submit a per lineal metre price for construction of the water system.  There were three different types of material in which the water pipe could be laid, and with which the trenches for the pipe could be backfilled.  The site engineer would determine the type of material required at various parts of the distribution system.   Since the lineal costs for each type of fill varied widely, the specifications originally included a schedule of quantities that allowed the bidders to submit their bids on a basis which would make the final costs contingent upon the amount of the different fills required.   However, amendments to the tender documents deleted the schedule of quantities, which meant that bidders were required to submit only one price per lineal metre for the water distribution system regardless of the type of fill the engineer selected during construction.   Sorochan’s bid included a handwritten note stating:

Please note:

Unit prices per metre are based on native backfill (Type 3).  If Type 2 material is required from top of pipe zone to bottom of sub-base material for gravel or paved areas, add $60.00 per metre.

[72]         Despite complaints from other bidders that the note from Sorochan constituted a qualification that invalidated its bid, Defence Construction accepted Sorochan’s bid.  M.J.B. Enterprises, the second-lower bidder, brought an action for breach of Contract A.  Iacobucci J., for the Court, noted that Sorochan admitted its bid was non-compliant because it was based on different specifications:

53     Sorochan was only the lowest bidder because it failed to accept, and incorporate into its bid, the risk of knowing how much of Type 2, Type 3 and Type 4 fill would be required. As the Court of Appeal outlined, this risk was assigned to the contractor. Therefore Sorochan's bid was based upon different specifications. Indeed, it is conceded that the Sorochan bid was non-compliant. Therefore, in awarding the contract to Sorochan, the respondent breached its obligation to the appellant and the other tenderers that it would accept only a compliant tender.

                                                                                                      [Emphasis added]

[73]         The Town submits that C.F.’s bid was similarly non-compliant and the Town had no choice but to reject it and award the contract to S.W. Weeks, the lowest compliant bidder. 

[74]         The authorities cited in support of the Town’s position are distinguishable from the present case.  In Surespan, the requirement that the contractor hold the prescribed welding certification was an express term of the tender documents, and therefore a term of Contract A.  Similarly, in M.J.B. Enterprises, a single price per lineal metre for the water distribution system was an express term of the tender documents.  It was not an express term of the Westville Project tender call that the bidder identify how it priced individual components of its lump sum price for the base scope of work.  Nor did the tender documents require the bidder to make a declaration as to how the bid was priced.  All that was required, as specified on the bid form, was that the bidder agreed to “enter into a Contract to perform the work required by the Bid documents for the Contract Bid Price of $______)”.  Unlike Sorochan in M.J.B. Enterprises, C.F. did not add anything to the bid form to qualify its lump sum price in any way.

[75]         The law is clear that compliance is to be measured objectively at the time the bid is submitted.  This approach safeguards the integrity of the bidding process by preventing bidders from escaping their obligations on the basis of a calculation error or other subsequently discovered information.  The C.F. bid, when measured objectively, was compliant with the terms of the tender call when it was submitted on October 9, 2014, and Contract A came into existence between the parties.  As soon as C.F. submitted its bid, it was legally obliged to perform the work required by the bid documents, including the provision and installation of a pre-cast concrete wet well, for $572,000, if the Town accepted its bid.  By disqualifying the C.F. bid on Mr. Browning’s understand of how C.F. priced an individual component of its lump sum bid price, the Town breached its duty to treat all bidders fairly and equally.   

Damages

[76]         “Where satisfied that, but for the owner’s breach of contract, the plaintiff would have been awarded Contract B, the courts have awarded the full profit that the plaintiff would have earned, had it been awarded Contract B”: Port Hawkesbury (Town) v. Borcherdt Concrete Products Ltd., 2008 NSCA 17, [2008] N.S.J. No. 60, at para. 65.  In this case, the Town admits that if the Court finds that C.F.’s bid was compliant, C.F. should have been awarded the contract for the original tender work.  There is no allegation that C.F. failed to mitigate its damages.  The parties disagree, however, on whether C.F. would have been awarded the work under the change order. 

[77]         Less than halfway through the work under the original tender, S.W. Weeks found that the trench they were excavating for the pressurized sewer pipe was filling with more water than anticipated.  Upon further investigation, it was determined that an old clay storm sewer pipe was leaking, leaching water from the storm sewer into the new trench.  Although Oliver Browning did not agree that the storm sewer pipe needed to be replaced immediately, he accepted that the easiest and least expensive way to replace the pipe would be to do the work while the area was already excavated.  He further accepted that the leaking pipe, if not replaced, “would compromise the end product”. 

[78]         In her supplemental affidavit, Kelly Rice stated that the Town decided to replace the clay pipe after obtaining an estimate from S.W. Weeks for the cost of the work.  S.W. Weeks performed the work under the change order for the amount of $275,000.  Like Oliver Browning, Ms. Rice took the position that replacement of the storm sewer pipe “was not essential to completion of the original Tender.”  She further stated in her affidavit:

20.  In the absence of reasonable negotiation, the Town would have explored other options to address the separate issue of the clay pipe, such as retendering the major component of the change order, i.e. replacement of the clay pipe.

21.  Accordingly, the Town takes the position that there is no loss to C.F. on the Change Order, as there was no guarantee this work would have been awarded to them even if they had been the successful bidder on the Tender.

22.  Even if the Town negotiated with C.F. as they did with Weeks, the Town would not have negotiated any higher a price with C.F. than they ultimately did with Weeks.

[79]         Ms. Rice agreed on cross-examination that the $75,000 contingency fee built into the original tender for the Westville Project was intended to be applied toward the cost of any change orders that arose during completion of the work.  She said the Town’s preference was to negotiate a change order with the contractor who was awarded the work rather than to issue a new tender.  On re-direct, Ms. Rice stated that the cost of the work was a factor in deciding whether to proceed with the change order.  She said that because the Town was using Build Canada funds for the project, she had to obtain confirmation from the Canada-Nova Scotia Infrastructure Secretariat that the work fit within the cost-sharing program’s parameters.  She also had to request additional funds because the project cost had exceeded the anticipated budget. 

[80]         Paul Jensen used the unit prices specified in Schedule “A” to C.F.’s bid to calculate a total price for the change order of $419,207.  The bid form, however, stipulated that the Town could use any of the following methods to determine the value of any changes to the work:

a)      by application of unit prices contained in Schedule “A” to the Bid Form.

b)      by estimate and acceptance of a lump sum

c)      by net cost and percentage basis.

[81]         C.F.’s position is that it should be awarded $419,207 for the change order. In the alternative, C.F. claims $361,764, the amount put forward by its expert, chartered business valuator Brian Keough, as the likely result of a fair and reasoned negotiation between the parties.  The Town says that it would not have paid $419,207 for C.F. to do the change order work.  Its expert, professional quantity surveyor Richard Murray, proposed a change order price of $350,884.  Mr. Murray arrived at his price by adding up the lowest unit prices from the four bids submitted for the Westville Project.  The difference between the two experts is $10,880. 

[82]         I find that the Town would have approached C.F. to do the change order work before issuing a separate tender.  I am satisfied, however, that it would not have agreed to pay unit prices.  The Town submits that I do not have the factual basis to find that the parties would have negotiated a compromise between the unit price of $419,207 and the $275,000 paid to S.W. Weeks.  I disagree.  In preparing C.F.’s bid, Craig Fraser directed Paul Jensen to “bid as low as possible and still make money”.  Mr. Fraser wanted to keep his employees working.  Furthermore, as the Town pointed out in its submissions, C.F. would still have made a healthy return if it had done the work for the same price as S.W. Weeks.  Accordingly, I find that C.F. would have been open to negotiating a price somewhere between the unit price and the price paid to S.W. Weeks. 

[83]         As to whether the Town would have been willing to negotiate, it is relevant that S.W. Weeks was paid $102,000 more for the work under the original tender than the Town would have paid C.F. if its bid had been accepted.  In fact, if the Town had paid C.F. $572,000 for the work under the original tender and $361,754 for the change order (as suggested by C.F.’s expert), it would have paid C.F. a total of $933,764 – $15,236 less than it paid S.W. Weeks ($674,000 + 275,000 = $949,000).  I find it more probable than not that the Town would have agreed to pay more to the contractor on-site for the change order if it had expended significantly less on the original tender work.  Moreover, if the Town had refused to negotiate with C.F., its only options would have been to bring in another contractor and risk immobilizing C.F.’s work under the original tender, or to wait until C.F. had completed its work and incur additional expense to re-excavate the area.    

[84]         Accordingly, I find that C.F. is entitled to its lost profit on the original tender and the change order.  The parties’ experts were only $10,880 apart in their opinions on the value of the change order and I am prepared to split the difference at $356,000.  The only remaining issue is whether C.F.’s corporate office overhead or “soft costs” should be deducted from C.F.’s profit.  In my view, to deduct C.F.’s overhead expenses from its lost profits (as advocated by the Town) would be inconsistent with the principle that C.F. should be placed in as good a position as if it had been awarded the contract.  The Town's disqualification of C.F.’s bid did not change C.F.’s overhead burden; it simply eliminated the Westville Project as a source of profits to offset those costs.

[85]         The Town’s position that C.F.’s overhead costs should be deducted is also inconsistent with the approach taken in other decisions of this Court: see for example, Maritime Excavators (1994) Ltd. v. Nova Scotia (Attorney General), (2000) 183 N.S.R. (2d) 236, [2000] N.S.J. No. 85.   

 

Conclusion

[86]         Having found that C.F. would have been awarded both the original contract and the change order, I calculate damages as follows:

          Projected combined revenue               $928,000

          Less total direct costs                         $509,255

          Projected gross profit                         $418,745

          Less contingency allowance                   $75,000

          Lost profit                                          $343,745 (plus HST)

[87]         If the parties are unable to reach agreement on prejudgment interest and costs, I will accept written submissions within 30 days of the release of this decision.

 

McDougall, J.