"Grey Areas in Procurement Evolution"
When a project closes and all bids exceed the owner’s budget, instead of following the well-established protocols developed by the industry and contained in the CCDC 23 and supported by architects, owners are trying some very unique, to be polite, methods of addressing the over budget issue.
The old method was to attempt post-tender addendums (PTAs) but the Design and Construction industry rejected these as a form of bid shopping, and in the majority of cases where it has been tried, OGCA members have refused to participate.
The reasons a project goes over budget can be many and varied but it all comes down to the information provided for the contractors to bid on. The disturbing number of Addendums being issued regularly on projects is a clear sign there is a problem with that information. When contractors must submit numerous RFIs, it is because there is a problem. That problem is a lack of accurate information, meaning if, at time of bid, these issues have not been resolved, then the GC must price the risk, and then we are all surprised that the bids come in over budget.
Correcting that issue has been the subject of numerous other articles by both OGCA and OAA, so I won’t repeat them. Instead, I want to focus on the new way to deal with this issue of bids exceeding the budgets.
In various forms, yet all similar, we are seeing owners attempting to have the bidders either singularly or in a group discuss their pricing and help redesign the project for no compensation or guarantee they will be awarded the project.
In one case, the bidder knew going in that the owner made no guarantee they would be awarded the project. Unfortunately, the GC thought this was a good idea so he and his key trades spent time and effort assisting the owner on what we sometimes call "value engineering," only to have the project cancelled, reissued at almost twice the original budget, with many of their recommendations and suggestions now incorporated into the project. Our member had enough of being taken advantage of and did not rebid the project.
We need to be very aware of these efforts to have us share our tender information or participate in redesigning or re-engineering a project. That is not our job and we certainly should not be doing this for free. This is the domain of architects and engineers, to whom I say, some of you have been going along with this nonsense. It’s time to step up and defend your area of practice and not let owners try to supplant you through this very questionable practice.
To be clear, we do not oppose the methods outlined in the CCDC 23 of which you are all aware, but these attempts, in our opinion, border on price fixing, competition violations and an attempt to access proprietary information of members.
When faced with this, you all know what to do ... call the OGCA immediately.
Back to Mr. Ackerley’s comments - speaking again of efforts to change the system by ignoring the basic tender practices established by Ron Engineeringand many other cases by using RFPs.
Under the standards that exist, owners calling for bidders to submit bids received a "legal offer." I don’t think I need to go into Contract A and B and the extensive contract law that governs our tendering system and works hard to ensure fairness for everyone. Perfect? No, but it works.
It is important to note as Mr. Ackerley points out, "The key thing that Contract A gives you is that bids are irrevocable, whereas proposals, in law are not."
The following key points are raised by Mr. Ackerley and contractors need to pay very close attention to what he has to say, and for that matter, owners need to consider the impact of using this system.
- "How do you move into a non-Contract A RFP process, which everybody seems to be doing, and yet behave as though you have a Contract A? They are mutually exclusive: you either do or don't have a contractual set of obligations."
- Contract A came into being to deal with the irrevocable bids being pulled, which (i) created a contractual framework for tendering, which (ii) created contractual duties of fairness and good faith on the owner, which (iii) led to lawsuits over breaches by the owner of its duties, which (iv) led owners to layer on protective measures using contractual clauses." "But now we're moving away to RFPs where there are no contracts, but owners still want protective measures."
- Owners have been increasingly using litigation bans, or exclusionary/reprisal clauses in procurement rules, to prohibit a company from bidding on future projects for a set period of time if that company currently or has previously been involved in litigation with the owner.
Contractors and subtrades need to make sure they understand this new world where the normal protections afforded under the established system may not exist. In an RFP, low bid does not necessarily mean anything as RFPs have an element of negotiation and the rules for the awarding of a project can be quite convoluted.
If in doubt, call the OGCA, or your lawyer, and make sure you know what you might be in for.