Responding to public tenders: beware of unbalanced unit prices

In its recent decision in Municipalité de Piedmont v. Uniroc Construction Inc.¹, the Quebec Court of Appeal ruled that a public sector client must reject a bid whose unit prices are unbalanced. At the same time, it reiterated that the principle of balance and equality between bidders must prevail. 

The facts 

The Municipality of Piedmont (“Piedmont”)  issued a public tender for a water main replacement. 

Piedmont’s tender documents required bidders to include, in their price schedule, a unit price for rock excavation based on a volume of 8,700 cubic metres, as estimated by professionals. These documents expressly prohibited bidders from “unbalancing” their bid. 

Uniroc Construction Inc. (“Uniroc”) considered that the volume to be excavated was overestimated by the professionals at Piedmont, and chose to submit a unit price that appeared to be significantly lower than market price. 

To make up for this difference—without affecting the overall bid value—Uniroc added roughly $100 to the price of other items in the schedule, for which payment was assured, unlike the excavation volume, which it considered to have been over-counted.² 

In other words, its bid price would not be higher, but it would have a better chance of receiving the full price, notwithstanding the credit that would otherwise accrue to the client should the actual volume of excavated rock be lower than the estimated volume in the tender documents. 

Although the bid submitted by Uniroc was the lowest, Piedmont rejected it, indicating that: 

• the unit price submitted for the excavation of the rock did not reflect the actual cost of the blasting and excavation required; and 
• the proposed cost of laying water mains exceeded the preliminary estimate. 

In short, Piedmont exposed the strategy: the bid was simply unbalanced. 

Unhappy with the outcome, Uniroc sued Piedmont and its professionals for loss of anticipated profit. 

The Superior Court found for the plaintiff, subject to an adjustment of the damages claimed. 

However, the Quebec Court of Appeal concluded that the trial judge had erred; as a result, it reversed the prior decision and found in favour of Piedmont. 

The Court of Appeal decision 

The Court reiterated that maintaining a balance between bidders is one of the guiding principles for the awarding of public contracts. 

To avoid having a bid systematically rejected by the client, all bidders must submit a compliant bid that is devoid of major irregularities, i.e. a deviation affecting the fundamental objectives and integrity of the tendering process, including the need for balance between bidders.³ Furthermore, the irregularity must not affect the price of the bid; it must not upset the balance between the bidders. 

The Court of Appeal concluded in this case that the proportionality of unit prices is an essential requirement that allows comparison between bids and affects price and equality between bidders. 

By submitting an excavation price of $1 per cubic meter, Uniroc was disrupting the balance with the other bidders. That bid should therefore be rejected, without any discretion on the part of Piedmont, despite there being a clause to that effect in the tender documents. 

Conclusion

Estimation during the bidding period remains an important strategic exercise for bidders. Nevertheless, to avoid rejection without discretion by the client, bidders must comply with the mandatory guidelines and constraints designed to uphold the principles of equality and equity. 

Professionals must be stricter in the analysis of bids and focus on the appropriateness of unit prices. They must determine whether or not they are reasonable, in line with the market, and more specifically, whether there is any tilting of the balance between bidders.