Contract Award to Second Lowest Bidder Results in Damage Award
Southside Construction (London) Ltd. v. 734133 Ontario Ltd

On July 15, 2005, the Ontario Superior Court of Justice released its decision in Southside Construction (London) Ltd. v. 734133 Ontario Ltd. The plaintiff was the low bidder on a project that was ultimately awarded to the second lowest bidder. The plaintiff argued that the defendant had acted upon criteria that were not disclosed in the tender documents when it awarded the contract to the second lowest bidder and that in doing so had breached its duty to treat all bidders fairly. The defendant relied on the privilege clause in the tender document which reserved the right to reject any bid without giving reasons and specifically provided that the lowest bid would not necessarily be accepted.

At trial, evidence showed that the defendant expected the general contractor and the sub-contractors on this project to be unionized, wanted a contractor from the Windsor area and preferred one that had done work for them in the past. None of this was reflected in the tender documents. As it turned out, the plaintiff met none of these requirements while the second lowest bidder satisfied them all.

The court, following the Supreme Court of Canada decision in Martel v. Canada, held that the rejection of the plaintiff's bid in favour of another on the basis of undisclosed stipulations or preferences was a breach of the owner’s obligation to treat all bidders fairly that was not excused by operation of the privilege clause.

The measure of damages was held to be the difference between the amount the plaintiff would have received had it been awarded the contract and the costs it incurred in performing the work if economically and skillfully done.