Public Procurement: Can owners allow late bids? (3/3)

This is the third and final post in a series that provides an overview of how late bid submissions are handled under Canadian Law. The first post gave an overview of what is considered late and the second post covered how to handle bids that are late due to extenuating circumstances.

After reading the first two posts in this series, you may be wondering if there’s a way around this strict rule against accepting late bids. Can clever owners reserve a right to accept late bids as part of Contract A?

Owners seeking to reserve this right should proceed with caution. In Coco Paving (1990) Inc. v. Ontario (Transportation) 2009 ONCA 503, the bid was late due to a computer glitch (read the summary in the second post of this series). The plaintiff argued that the general privilege clause in the tender documents was sufficiently broad to allow the owner to accept late bids. The Court of Appeal rejected this argument, stating:

“in the absence of clear language … in the tender documents indicating that, in the discretion of the MTO a late bid or a substantially non-compliant bid may be accepted, [the tender] cannot be construed so as to permit the acceptance of a bid that is submitted late. This is particularly so where – as here – other compliant bids were received and where an expansive interpretation of the discretion afforded under [the tender] would result in the displacement of an otherwise compliance and likely successful bid. To hold otherwise would sanction unfairness in, and distort the level playing field contemplated by the MTO bidding process.”

While the Court’s commentary appears to open the door to privilege clauses that grant the owner permission to accept late bids, the timing of bid submissions is a procedural matter that, in Canadian tender law, has typically been subject to a strict compliance standard – meaning Courts have given owners very little wiggle room to accept late bids.

In addition to favouring a strict compliance standard, Courts tend to read privilege clauses narrowly or ignore them altogether where public policy considerations come into play, such as in the case of late bids. In Coco Paving the Court of Appeal explained the basis for this strict approach:

“Strong public policy considerations underlie these controlling principles. Confidence in the integrity of government bidding process is a matter of considerable public importance. …  The courts have therefore recognized that the timing of bid submissions in public tender processes is critical. Late bids can unfairly advantage the non-compliant bidder over the compliant bidders who met the bid submission requirements and erode the integrity of the bidding process.”

Although several decisions recognize the possibility of using a privilege clause to override an owner’s duty to reject a late bid[1], there are no cases involving the consideration of a clearly worded privilege clause expressly allowing the owner to accept late bids. Given the strong public policy considerations and the Courts’ readiness to ignore provisions that seek to override these public policy considerations,[2] there is always a risk that even the most carefully crafted privilege clause expressly permitting the acceptance of late bids would not be upheld.

For owners who still want to build in flexibility to accept late bids in their process contract, a privilege clause that has any chance at success should explicitly address circumstances where the owner may accept late bids. Owners using these clauses should, however, be aware that even the most carefully worded privilege clause may be deemed invalid.

Observations, Conclusions and Take-Away

Although it may not seem fair to reject bids that are seconds late or that are late through no fault of the bidder, Canadian courts have come down strong on an owner’s duty to reject these late bids.

The message to bidders is clear: bidders should expect to bear the risk of late bid submissions. Bidders are expected to submit their bids early to allow for potential delays due to causes beyond their control.

Owners wishing to reserve the right to accept late bids are expected to build in express rights to do so in their solicitation documents. Even then, there is uncertainty as to the Courts’ willingness to uphold such rights where to do so would offend public policy considerations.

As a general rule, the safest route for owners faced with a late bid submission is to reject it. However, a decision to do so should only be made after consulting with legal counsel.

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[1] See also NAC Constructors Ltd. v. Alberta Capital Region Wastewater Commission 2005 ABCA 401 at paragraph [6], citing Health Care Developers Inc. v. Newfoundland (1996), 136 D.L.R. (4th) at 609 and citing Double N Earthmovers v. Edmonton (City) [2005] A.J. No.221 ABCA 104.

[2] See Tercon Contractors Ltd. v. British Columbia [2010] S.C.J. No.4.