Canada: Case Commentary - Owner Cannot Rely Upon Undisclosed Criteria in the Bidding Process

The Ontario Superior Court has again confirmed that an owner invoking a competitive tender process cannot rely upon undisclosed criteria in the awarding of a contract. In this case, the plaintiff and other general contractors had been invited to bid on the construction of a drug store. The owner had accepted a higher bid than that of the plaintiff and negotiated with the higher bidder to reach a price which was still marginally more than the plaintiff ’s bid. The plaintiff sued, claiming a breach of the bidding process. At trial, the representative of the owner admitted that they wanted a local contractor which was unionized and which who had done work for them in the past. These criteria had influenced their decision. Counsel for the plaintiff was able to convince the Court that the entire bidding process was essentially used by the owner to test and negotiate the price ultimately submitted by the contractor who was awarded the project (who met these criteria). The Court did not allow the owner to rely upon the usual clause giving the owner discretion not to accept the lowest bid because criteria had been utilized which were not disclosed in the bidding documents. The rejection of the plaintiff ’s bid in favour of another bid on the basis of undisclosed stipulations or preferences was a breach of the owner’s obligation to treat all bidders fairly. This was not excused by the operation of a clause stating that the lowest bid need not be accepted.

The owner also argued that the plaintiff was not entitled to its entire projected profit as representing its damages because it would have not have made that sum on the job due to a strike by drywallers and due to the discovery of abandoned gasoline tanks. While the Court accepted that it was entitled to look to the circumstances that arose during construction and the impact of those circumstances on profitability, the Court did not accept that the plaintiff would have been affected by the drywall strike since it used a different subcontractor and found that the abandoned gasoline tank would have resulted in extras that would not have affected the overall profitability of the project.

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