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Avoiding surprises with RFIs
When do requests trigger the application of laws?
By Denis Chamberland
Requests for information (RFIs), requests for expressions of interests (RFEIs), requests for qualifications (RFQs), letters of inquiry (LIs). Regardless of the preferred terminology, in business terms, RFIs (our shorthand here for the lot of such requests) are designed to help the purchaser gauge and test the market for the resources being sought.
RFIs have been called market-research tools by some, implying that once the desired information has been received, the life of the RFI comes to a happy, natural end. If only things were that simple!
Research tool…and more
Research tools they may be, but in legal terms, RFIs can be much more than that. At law, the question is whether RFIs are competitive bid documents of the kind that trigger the application of laws, or whether they’re something different that do not trigger the application of the competitive bidding rules. Either one is acceptable, as long as the purchaser drafting the RFI understands the regime or set of rules it needs to live by. Surprises are rarely a good thing in this area.
If the purchaser is truly only seeking information from the market and isn’t looking to legally bind the respondents to the information they submitted, there probably will be no legal consequences, and the competitive bidding laws will not apply. But if the purchaser is looking to bind the respondents to the terms of their responses or if it uses the information received as the basis to award a contract, it’s more likely the competitive bidding framework will apply.
There is no hard-and-fast rule as to which is which. It all depends on the specific language of the RFI, taking into account and balancing all of the relevant considerations. Bear in mind that what the document is called will not be an important factor in the court’s mind. What matters is the intent of the purchaser to hold a competition for a contract, as reflected in the language of the document.
Bidding consequences
The difference between an RFI to which the competitive bidding rules apply and one to which they do not apply is Contract A. This is the unique innovation of the Supreme Court of Canada in the seminal 1981 case of The Queen v. Ron Engineering & Construction (Eastern) Ltd., a ruling that was designed to protect the integrity of the competitive bidding system by ending the arbitrary withdrawal of bids, and the related costs inflicted on issuers.
The case put forward the new concept that not one but two contracts are created in a competitive bidding situation. Bid Contract A, between the issuer of the tender document and each bidder, governs the competitive bidding process; Tender Contract B, between the issuer and the successful bidder, governs the project work itself. The bid contract arises when a compliant proposal is received by the issuer, with the result that both parties are bound by the rules and procedures stated in the tender documents.
Among the obligations arising from Contract A is the duty of the purchaser to fully disclose all of the relevant facts that the bidders will need to submit meaningful proposals. Since Contract A substitutes competition for negotiation, there will not be an opportunity to make ‘best and final offers’. The ‘first is the final offer,’ is a more accurate maxim here.
If selected, the bidder will be obligated to commit to following through with Contract B on the basis of its proposal representations. But if it turns out that full disclosure was not made by the purchaser and the bidder is prejudiced, the latter will be entitled to a remedy against the purchaser.
Another Contract A obligation requires that all of the bidders be treated fairly during the procurement process, which includes the requirement that the purchaser honour the terms of the RFI. This is not always as easy as it sounds. As any good procurement officer knows all too well, there can often be many valid reasons to adjust the scope of the proposed project during the tendering process.
No competition
One certain way to avoid the possibility of a dispute in respect of the underlying intent of an RFI is simply to avoid even the appearance of a competition and, where possible, to sole source the work or services involved. Of course, there is a trade-off. Whether best-value-for money is achieved on a sole sourcing is not always readily ascertainable, and therefore may not be politically feasible in some quarters.
Another way to avoid disputes is to be conscientious about the drafting of the RFI document, making sure that the legalities are beyond reproach. The specific language of the RFI will go far in helping to protect the interests of the purchaser. b2b
Denis Chamberland is vice-president with ABTS Global LP, and a partner with Aird & Berlis LLP in Toronto. He can be reached at (416) 865.3078 or at dchamberland@airdberlis.com.
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