CASE COMMENT – THE TERCON DECISION
ROUND ONE – THE TRIAL DECISION
In 2006, the British Columbia Supreme Court extended the obligations of an owner in calling for tenders. In Tercon Contractors Ltd. v. British Columbia (Transportation & Highways) the contractor asserted that the Court’s sanction was required to respect the integrity of the bidding process, especially for Public Works.
The Supreme Court awarded damages of approximately $3.3M to Tercon as a result of the Ministry of Transportation and Highway’s decision to accept a bid of a competing contractor for the construction of a 25 km section of highway over challenging terrain in the Nass Valley of British Columbia. At issue in the tender evaluation process was the province’s decision to allow a material change in the structure of the team advanced by the successful proponent following an initial qualification process.
In arriving at her conclusion, Dillon J. was critical of the process embarked upon by the Province. The Judge concluded that the Province had acted “egregiously” when it knew or should have known that the bid accepted was non-compliant.
When the decision was issued in the spring of 2006, all recognized that it represented an extension to the existing law for fair and equitable treatment of all tenderers.
The Province appealed the Judge’s decision and the matter proceeded to the Court of Appeal in the fall of 2007. A decision was rendered by the Court of Appeal on December 3, 2007.
ROUND TWO – THE APPEAL DECISION
On appeal, the parties raised all issues for consideration by the three member Court. However, the Court found it unnecessary to address the Judge’s conclusions on the “extension” of the principles of fairness in tender law by relying on an exclusion provision that was contained within the RFP documentation. The exclusion provision stated as follows:
Except as expressly and specifically permitted in these Instructions to Proponents, no Proponent shall have any claim for any compensation of any kind whatsoever, as a result of participating in this RFP, and by submitting a proposal each Proponent shall be deemed to have agreed that it has no claim.
(the “Exclusion Provision”)
The trial judge in Tercon had decided that the Exclusion Provision should not be enforced as it would lead to an unconscionable result in light of the conduct of the Province.
The Court of Appeal disagreed with this conclusion and gave the Exclusion Provision broad application. As a result, the contractor’s judgment for $3.3M has been struck down on appeal and no damages are owing to the contractor as a result of the tender of the road through the Nass Valley.
We have been advised that Tercon is seeking leave to appeal this decision to the Supreme Court of Canada.
CONCLUSION
The Court of Appeal decision is a victory for owners. Owners should consider including a Exclusion Provision in all tenders which provides the owner with immunity from claims that may be brought by those submitting tenders. It will be interesting to see if owners adopt provisions similar to those set out in the RFP in the Tercon case. By doing so, an owner may put itself in a position to sidestep the stringent requirements of tender law which are becoming increasingly complex and onerous.
As for contractors, it is important for a contractor to recognize that in submitting a tender in the face of an Exclusion Provision, the contractor may not be able to bring a claim for damages if the contractor has complaints with the tender process.
Written by former associate, Lyle Braaten.
