How much freedom does a company or a municipality have to change the scope of a tender? What if you suddenly realize that there is a cheaper or quicker way to do the work? What are the perils of major scope changes – especially after tender closing? A recent case from Alberta – Thompson Bros. (Construction) Ltd. v. Wetaskiwin, [1997] A.J. No. 822 – provides the answers.
The City of Wetaskiwin was developing a park project with a lake. On October 1, 1996, the City called for tenders for the Urban Park lake excavation project. Tender bids were opened in public. The three lowest were Thompson Brothers ($481,913.23), Central Oilfield Services ($512,970.71), and El San Industries ($525,616.00).
On October 16, the Urban Park committee met and passed an internal motion that City Council approve the tender submitted by Thompson Brothers. The next City Council meeting was scheduled for October 26.
Prior to the October 26 meeting of City Council, City staff had a major brainwave. The staff reviewed internal reports that dealt with City requirements for approximately 40,000 cubic metres of clay at another project (the landfill site). The reports recommended that the clay excavated from the Urban Park lake project be used for the landfill site project.
As a result, two events took place at the City Council meeting on October 26. First, the motion to award the Urban Park lake contract to Thompson Brothers was deferred for two weeks. Then, senior staff recommended that the City seek separate tender bids for the excavation of the landfill site materials, and that the two contracts (lake excavation and landfill site) be awarded to the lowest cumulative bidder.
On October 30, City staff contacted the plaintiff (Thompson Brothers), and told them about the potential work hauling clay from the Urban Park lake project to the landfill site project. On November 2, the plaintiff was asked to provide a unit price per metre to excavate, haul, load and stockpile the clay at the landfill site. The plaintiff was not told that the City had decided to award the two contracts to the lowest cumulative bidder.
On November 4, prices for the landfill site work were received. Thompson Brothers quoted a price of $98,400.00 (unit price of $2.46 per metre), and Central gave a price of $64,800 (unit price of $1.62 per metre). As a result, Central was the lowest cumulative bidder on both tenders, by $2,542.50. On November 24, City Council approved the awarding of both contracts to Central. Thompson Brothers sued the City. The company argued that the City’s actions were unfair and compromised the integrity of the tendering process to such an extent as to breach Contract A. In its August 1997 judgment, the Alberta Court of Queen’s Bench agreed with the plaintiff and awarded damages in Thompson Bros. (Construction) Ltd. v.
Wetaskiwin, [1997] A.J. No. 822. First, Mr. Justice Murray commented that this “ … is another in the long line of cases involving an owner putting a construction job out to tender, tenders being submitted, and at the end of the day the low tender not being accepted.”
More importantly, the Court criticized the changes made by the City. Murray, J. said that “The contract awarded was not responsive to the tender process. Rather, it was for work of a different scope than that contemplated by the tender documentation. What the City did also amounted to a change or modification of the scope of the work after the close of tenders … By using the Plaintiff’s tender in this manner, the City gave Central a second chance to bid on the Lake project which was akin to a form of bid shopping and was unfair to the Plaintiff.”
The plaintiff received damages of $88,323.90 plus court costs. The damage award was based on the profits that the plaintiff lost by not being awarded the contract for the Urban Park lake project.
Reprinted from The Legal Edge Issue 19, May – June 1998
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