It is not uncommon that lawyers are asked to review signed contracts from clients after the lengthy tendering process has already been completed. But there are reasons why you may want to involve your lawyer much earlier on in the process and here are the reasons why:
What is the Tender/Procurement Process?
Tendering, also known as procurement or the tendering process, is a method used by condominium corporations, government agencies, and businesses to acquire goods, works or services from external suppliers or contractors. It is a formal and structured process that ensures transparency, fairness, and competition in the selection of suppliers or contractors.
The procurement is often, but not exclusively, carried out by the process of tendering as opposed to purchasing a service directly from a seller.
The tender/procurement process is a practice where buyers invite multiple sellers to submit offers for goods or services. The main goal is to have each seller compete with one another to submit the best bid. The tendering process entails specifying the requirements and requesting companies that may be interested to submit proposals for the specified work. The buyer, in this case, the condominium corporation, will then select the winning bid and enter into a specific contract with that company.
Section 39.1 of the Condominium Act, 1998, although not yet in force, provides that “a corporation shall not enter into a prescribed contract or transaction unless the procurement process and other contracts or arrangements that the corporation entered into in relation to the contract or transaction meet the prescribed requirements.” Once this section is in force and regulations setting out the prescribed contracts and requirements are in effect, condominium corporations will be legally required to engage in the tender/procurement process prior to entering into certain contracts.
Purpose of the Tender/Procurement Process
The primary goals of the tendering or procurement process are:
- to obtain the best value for money;
- to maintain integrity in the selection process; and
- to ensure that the chosen supplier or contractor meets the condominium corporation’s specific requirements and needs.
Identifying the Need
The board of directors, condominium manager, and project consultants (engineer etc.) need to identify the required work or service.
Contract A
The Supreme Court of Canada in a number of cases¹ has created a competitive legal procurement process. When a tender is issued (often referred to as an RFP) and a bidder submits a compliant bid, there is a process contract, known as “Contract A”, between the purchaser and each compliant bidder.
The terms outlined in Contract A are in the instructions to the bidders. These instructions are found in the Request for Proposal (“RFP”) or Invitation to Bid, prepared by the buyer/condominium corporation. Under Contract A, a condominium corporation has a duty to act in good faith and must treat each compliant bidder in a fair manner.
The use of Contract A is dependent on the language in the RFP and the intent of the parties. A compliant bidder treated unfairly may have recourse against a condominium corporation. In some instances, compliant bidders have sought legal recourse and were awarded their lost profits on contracts where they were not treated fairly during the tender process.
Contract B
“Contract B”, the performance contract, is the final step in the tender/procurement process. Contract B is the contract awarded to the winning bidder upon acceptance of that bid. Contract B is only formed between the condominium corporation and successful budder.
Key takeaways:
- It is common in the industry to formally tender material projects and contracts. While materiality is not always the same, boards and managers should be cognizant of industry norms.
- It takes time to fully and properly tender a project. In order to help facilitate a competitive process in which all necessary parties (including project consultants, engineers, designers, lawyers, managers, board members, bidders, etc. as the case may be) have an opportunity to contribute to the process, ample lead up time should be set aside. Objectives of tendering include accountability, transparency and competitive pricing. This process requires time to properly play itself out.
- Given the importance of the tender process and potential legal exposure arising from Contract A, condominium corporations should consult with their lawyers well in advance of issuing a tender/RFP. If a tender is issued and legal advice is only then sought, even if a bid is not yet selected, the condominium corporation may be very limited in terms of changes it can request based on legal advice. With the increase of tendered services and projects in condominiums, many condominiums are seeking legal input too late in the process. Legal advice should be provided at the outset.
- It is important that the Board is fully engaged and informed throughout the process. The Board should be able to review drafts well in advance of meetings and understand the process before it plays out. This again comes back to proper timing. If the Board is advised about the tender process and the underlying work/services required well in advance, it will be better informed, more engaged, and acting in a prudent and informed manner.
For a printable version of our Guide to Tendering Brochure, click here.
For a printable version of our Guide to Tendering Brochure, click here.
¹ The Queen (Ont.) v. Ron Engineering, 1981 CanLII 17 (SCC); M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., 1999 CanLII 677 (SCC), and Martel Building Ltd. v. Canada, 2000 SCC 60 (CanLII)
