Bid Correction or $3.3 Million in Damages?

Test your knowledge of what a tendering organization can and cannot do with “arithmetic
errors” in bids, in this recent case from Ontario.

In July 2005, the Town of Newmarket issued an Invitation to Tender (ITT) for
construction of a recreational facility. It received four bids.

At the public opening, the names of the bidders and their “Unofficial Total Bid Prices”
were announced. The lowest total bid price (i.e., the stipulated total price plus GST) was
$35,524,000, from Maystar General Contractors Inc.

Following the opening, the Town’s staff and consultants examined the bids for
compliance and accuracy. Maystar’s bid was both compliant and accurate. However, they
discovered that the stipulated total price from the third-lowest bidder (Bondfield
Construction Company Ltd.) did not accord with its GST calculation or with its listed
total bid price. Both the GST calculation and the total bid price were in error.

The Town’s engineering consultant and project manager recommended that Newmarket
correct the “arithmetic errors” in both figures. The Town did so. As a result, Bondfield’s
bid became $35,310,564.96, making it the lowest bid. Based on an analysis of the
Bondfield bid with the tender documents and specifications, the consultants then
recommended to the Town that it award the contract to Bondfield.

Town staff and consultants discussed the bids at length and received a letter from
Bondfield, explaining that last-minute changes to the bid had been partly to blame for the
adding error. A special meeting of the Town Council also heard a deputation from
Maystar. In the end, the Council voted to award the contract to Bondfield.

Maystar sued, alleging that the Town had breached Contract A by, first, accepting a bid
not capable of acceptance because it contained an uncertain price. Second, by amending
Bondfield’s bid figures, and third, by essentially negotiating the tender with Bondfield
after bid opening, but before acceptance of the tender. Maystar asked for $3.3 million in
damages for lost profits.

Was the Town in breach of Contract A? What do you think the outcome of the
litigation will be, and why?