THE LAW—BY PHIL SYMMONDS
GOOD PROCESSES, GOOD OUTCOMES PROCUREMENT FLEXIBILITY AND DEFENSIBILITY NEGOTIATION SUCCESS Procurement of goods and services in Canada by way of tender and RFP is subject to a well-developed body of case law. In many cases it is also subject to international trade treaties to which Canada is a party. Canadian courts have adopted a Contract A/Contract B analysis when examining the rights of the parties in a call for tenders. Pursuant to this, a contract may arise between a purchaser and each bidder when the bidder submits its bid. This contract is referred to as “Contract A” and imposes obligations on both the purchaser and the bidder. Contract A is separate and distinct from the actual project contract or purchase agreement, referred to as “Contract B”, to be entered into between the purchaser and the winning bidder. A call for tenders typically gives rise to Contract A and a request for proposals will also in many, perhaps most, circumstances depending on the extent to which it’s negotiated and the burden placed on proponents. If Contract A is found to exist on bid submission, liability may flow from the breach of any express or implied term of Contract A by the purchaser. The express terms of Contract A will be the provisions in the bid document that pertain to the conduct of the parties through the procurement process. In determining whether there are any implied terms in Contract A, a court will look to custom and practice in the particular trade or industry and the presumed intentions of the parties. One such implied term that typically arises is an obligation on the part of the purchaser to treat all bids “fairly and equally”. This obligation requires that bidders receive equal treatment, that the winning bidder be selected according to the criteria set out in the bid request and not undisclosed criteria and that the criteria not be inconsistently applied between bidders. Barring an express 46 JUNE 2019
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term permitting otherwise, it is also an implied term that the purchaser will only accept compliant bids. UNDISCLOSED CRITERIA It is the use of undisclosed criteria that is the source of many of the lawsuits in the procurement space. Why does this happen? It does not occur as a rule because of bad intentions on the part of procuring authorities. It occurs because procuring authorities are not always satisfied with the outcomes of their processes and find themselves with unintended outcomes. It is not surprising that there is a desire to fix the problem after the fact. How can this be avoided? How can procuring authorities improve the probability of a successful outcome without sacrificing defensibility? There are several tactics procuring authorities should consider. First, mandatory requirements should be true must-haves. Other factors should be addressed in scoring or negotiation. Second, supplier engagement can significantly increase the likelihood of successful outcomes. These approaches are more common in some contexts than others but there is no reason why they should not become the norm and considered best practice. It should be observed that Contract A is generally thought to be engaged when the parties intend to initiate contractual relations. When that occurs will depend on the particular facts but in the paradigm case Contract A would not arise until a bid is submitted. A corollary of this is that there is greater latitude to engage in bidder dialogue before a bid is submitted. There are a variety of techniques to engage with bidders that procuring authorities may utilize: Bidder Q&A is a table stakes form of engagement with bidders,
but it is extremely useful to allow purchasers to clarify their requirements. It is only when bidders begin to grapple with an RFP that many of its problem areas are identified. Putting an RFP out for comment, in several drafts if possible, is a useful means of soliciting supplier input. In fact, it can be helpful for defensibility to sound bidders out on where they see issues and it allows procuring authorities to adjust to their market. Reviewing draft bids ensures bidders are on the right track with their submissions, although it requires bidders to do advance work, which in turn involves time and expense and imposes a burden on the procuring authority. Bidder conferences are a useful method of communicating information that is difficult to convey in dense RFP language and increases the likelihood that bidders understand the RFP and its requirements. Cure periods also provide bidders with feedback and an opportunity to address deficiencies in their bids. With each of these techniques, it is critical that they be exercised in compliance with the duty of fairness. Procuring authorities should govern themselves by the following principles: Bidders should have access to the same information and at the same time. All bidders should be given the opportunity to engage and on the same terms. Continuity is important; change in the middle of the game should be approached cautiously. Good process drives good outcomes. Process is not mere window dressing. It allows for better decisions and better outputs. SP
Phil Symmonds is partner at Torys LLP in Toronto.
“ Supplier engagement can significantly increase the likelihood of successful outcomes.”
SUPPLY PROFESSIONAL
2019-06-14 2:13 PM