The BC Construction Association (“BCCA”) issues this Alert as a service to the members of the Regional Associations and industry at large to help educate them on the risks associated with changes in procurement. All opinions stated below are those of the BCCA and reflect the publicly-stated policies of BCCA.

This Industry Alert was drafted and reviewed with the assistance of legal counsel.

Issue

Some public sector owners have started writing their procurement documents, whether Request for Proposals (“RFPs”), Invitations To Tender (“ITT”) or Requests for Qualifications (“RFQ”), with terms that expressly avoid those owners having to act fairly. They are doing this by writing into their procurement documents clauses that remove “Contract A.”

In the opinion of BCCA, the removal of “Contract A” is the most significant violation of public sector procurement processes that the construction industry has seen to date. It means that those who work in the construction industry cannot proceed on the assumption that procurement is “business as usual” where “Contract A” is removed. With the removal of “Contract A”, combined with other poor or eroding procurement practices, the construction industry can no longer assume they are participating in fair, transparent and competitive procurement.

Each general contractor, subcontractor and supplier needs to understand the impact the removal of “Contract A” represents in order to make informed business decisions: deciding if pursuing these projects is worth the risk.

Background: What is “Contract A”?

Whether they realized it or not, for the last 40 years, owners, contractors and subcontractors all knew where they stood in procurement because of a court case called Ron Engineering. As a result of the actions of some owners now, that is no longer the case.

Since 1981, when the Supreme Court of Canada delivered its reasons for judgement in the Ron Engineering¹ case, courts across Canada have universally relied on the law of contract to protect the integrity of the procurement process.

Before Ron Engineering, procurement was chaotic, where bidders were subject to the misconduct of unscrupulous owners, and owners did not know their position with non-compliant bidders. All of that changed in Ron Engineering, where the Supreme Court of Canada established the existence of a bidding contract between the owner and compliant bidders, which it referred to as “Contract A”.²

Since Ron Engineering, courts across Canada have used the “Contract A” analysis to ensure that the procurement process was fair for everyone involved by setting “bidding rules” that needed to be followed and awarding monetary damages to both bidders and owners where the other party failed to play by those rules.

With the establishment of “Contract A,” the Owner generally has a duty to treat all bidders fairly and equally, which means they must review all qualifying bids and reject any that do not meet the stated requirements. This puts a big responsibility on owners involved in “Contract A” to be very careful in their actions and follow their own stated procurement requirements but also binds bidders to enter into the construction contract (“Contract B”) if they are selected in accordance with the procurement documents.

What Has Changed

A growing number of public owners in British Columbia³ are opting to disregard the concept of a bidding contract established by Ron Engineering and thus undermining the concept of protecting the integrity of the procurement process.

They are doing it by including in their Instructions to Bidders and RFPs language which says expressly that no “Contract A” will ever come into existence through the procurement process. The actual language used differs slightly between the owners,⁴ and may not stand out amongst the pages and pages of procurement material provided, but the effect of that language is shocking to those who believe the procurement process should be fair for everyone.

What It Means

Without “Contract A”, general contractors and subcontractors have no legal recourse for being treated unfairly and should not assume that they will be treated fairly. By removing “Contract A”, public sector owners do not have to follow their own procurement documents, a hallmark of “Contract A” and Ron Engineering.

Firms choosing to submit and to do business with these owners are faced with:

1. No Fairness – those public owners have no obligation to treat bidders fairly or consistently.
2. Bias – those public owners may award contracts based on secret preferences.
3. Bid Shopping – those owners may now disclose your bid to the other bidders, or to people who did not even bid in the first place, in an effort to get somebody to offer an even lower price to do the work.
4. What are the Rules? There aren’t any enforceable

With the removal of “Contract A”, there is no legal basis to rely on to hold those owners accountable for their actions, even those actions that would be considered unprincipled.

Construction firms cannot proceed on the assumption that it is “business as usual” with these public owners, and any others choosing to abandon “Contract A” and its inherent binding obligations.

Implications for Industry

The removal of “Contract A” results in additional significant issues, for which there is currently little legal precedent to offer guidance.

For example, removing “Contract A” could mean:

1. Submissions can be withdrawn at any time.
2. Submissions can be changed at any time.
3. Submissions can be qualified, resulting in an “apples” vs. “oranges” situation
4. There may be no obligation on trade subcontractors or suppliers to keep their prices firm.
5. There may be no binding bid security.
6. The underlying construction contract terms are open for negotiation, so that bidders could all be bidding on different terms and conditions for different scopes of work.

This is an Issue for Subcontractors too

When an owner removes “Contract A,” the bidding subcontractor is faced with the same risks described in this Industry Alert. This is not just an issue for general contractors. 

Recommendations

BCCA recommends individual firms proceeds with extreme caution in the face of this unprecedented legal landscape resulting from the removal of “Contract A.”

1. Ask yourself if you want to pursue and bid on a project with an owner who starts a project by removing an obligation to act fairly and with integrity in its dealings with you.
2. Read all the procurement documents carefully:
   • Do not assume they are the same as previously used by that Owner.
   • Understand the intent and consequences of all the procurement and contract terms.
3. Use the RFI process during procurement to question the intent of the Owner’s procurement process.
4. Contact BCCA and your regional construction association to signal a case of “Contract A” removal by using BCCA’s Public Sector Transparency Tip Line at https://bit.ly/BCCATipLine
5. Consider qualifying your bid as long as you know the risks associated with doing that and are prepared to accept the consequences.
6. Consult an experienced construction lawyer.
7. Consult with your surety and broker.

[1] The Queen (Ont.) v. Ron Engineering, [1981] 1 SCR 111

[2] To distinguish it from the actual construction contract, which the Supreme Court of Canada referred to as “Contract B”. Not particularly imaginative perhaps, but effective in distinguishing the two.
[3] This group includes several Municipalities, a Crown Corporation, a School District and an individual post-secondary institution.

[4] Schedule “A” to this Alert provides some actual examples of language being used by public owners engaged in in this behaviour.

Disclaimer

This Industry Alert is only the opinion of BCCA, and others may have a different opinion. Readers should not rely solely on the information in this Industry Alert in making business decisions. BCCA recommends and expects that before making decisions, firms will review the terms of the procurement and contract documents, seek independent legal advice, draw their own conclusions and make their own independent decisions.

Neither BCCA nor its employees, directors, officers or agents shall have any responsibility whatsoever for the distribution, completeness or accuracy of the information or opinions contained in this Alert. Anyone who acts based on the information contained in this Alert agrees that it does so at their own risk and will not hold BCCA nor its employees, directors, officers or agents liable for any loss resulting from that action.

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Schedule A

The BC Construction Association (BCCA) has issued a province-wide industry alert following the confirmation of cases of removal of “Contract A” from the procurement process by a growing list of public owners, including some municipalities, school districts, universities and crown corporations.

The below are actual examples of language used by public owners to avoid Contract “A.”

Examples of Language Used by Public Owners to Avoid “Contract A”

• City of Prince George: