Can an Organization’s Post Bid Conduct Invalidate an Otherwise Well Drafted RFP Disclaimer Clause?

Concept

An organization’s conduct following the submission of bids can indeed invalidate an otherwise meticulously drafted Request for Proposal (RFP) disclaimer clause. The central issue resides in the legal framework governing the tendering process, particularly the distinction between the procedural contract, known as “Contract A,” and the ultimate performance contract, “Contract B.” When an organization issues an RFP, it is extending an invitation to treat. A bidder’s submission of a compliant proposal in response to this invitation can form Contract A, a binding agreement to follow the rules laid out in the RFP.

This initial contract governs the relationship between the owner and each bidder during the evaluation phase. The disclaimer, or privilege clause, is a term within this Contract A, designed to afford the organization significant discretion, such as the right to accept or reject any proposal and to annul the process without liability.

The integrity of this framework, however, hinges on the purchasing organization’s adherence to its own rules. The enforceability of the disclaimer clause is contingent upon the organization acting in good faith and fairness toward all proponents. Should the organization’s post-bid conduct deviate from the terms of the RFP ▴ for instance, by entering into undisclosed negotiations with one bidder, altering evaluation criteria after submissions are received, or awarding the final contract (Contract B) to a non-compliant bidder ▴ it may be found to have breached the implied duties of fairness and good faith inherent in Contract A. Such a breach can render the disclaimer clause ineffective, as courts have determined that an organization cannot rely on the protections of a contract that it has fundamentally violated.

The submission of a compliant bid in response to an RFP can create a preliminary contract, Contract A, which imposes a duty of fairness on the issuing organization.

The Formation of Contract A

The concept of “Contract A” was established in Canadian law through the Supreme Court of Canada’s decision in R. v. Ron Engineering & Construction (Eastern) Ltd. (1981). This ruling transformed the legal understanding of the tendering process.

Prior to this decision, a bid was considered merely an offer that could be withdrawn at any time before acceptance. The Ron Engineering case established that the submission of a compliant tender in response to an invitation creates a unilateral contract ▴ Contract A. The principal terms of Contract A are the rules of the tender outlined in the RFP document itself. This includes the evaluation criteria, deadlines, and any disclaimer clauses. The primary obligation for the bidder under Contract A is the irrevocability of their bid for a specified period, while the organization issuing the RFP is obligated to treat all compliant bidders fairly and in good faith.

The existence of Contract A is what gives legal weight to the procurement process. It ensures that bidders can rely on the stated rules and that the competition is conducted on a level playing field. If an RFP is structured to avoid the formation of Contract A, it may be treated as a simple invitation for expressions of interest, with fewer legal obligations attached. However, courts will look at the substance of the document and the intentions of the parties, and have identified several factors indicative of an intent to form Contract A, such as the irrevocability of bids, solicitation from a select group of parties, and the specification of detailed evaluation criteria.

The Role of the Disclaimer Clause

A disclaimer, or privilege clause, is a provision within an RFP that seeks to limit the issuing organization’s liabilities. These clauses typically state that the RFP is not an offer to contract, that the organization is not bound to accept the lowest or any bid, and that it reserves the right to cancel the process at any time. The purpose of these clauses is to provide the organization with maximum flexibility and to protect it from claims for damages, such as lost profits, from unsuccessful bidders. In essence, it is an attempt to contract out of the obligations that would otherwise be implied by the formation of Contract A.

While these clauses are powerful, they are not absolute. Their enforceability is predicated on the organization upholding its end of the bargain under Contract A, specifically the duty of fairness. An organization cannot use a disclaimer clause as a shield to engage in unfair practices.

The courts have consistently held that the duty to act in good faith is a cornerstone of the tendering process. Post-bid conduct that undermines this duty can be seen as a fundamental breach of Contract A, thereby preventing the organization from relying on the disclaimer clause for protection.

Strategy

The strategic management of a procurement process extends far beyond the drafting of the initial RFP document. An organization’s post-bid conduct is a critical determinant of legal risk. A strategy that relies solely on the strength of a disclaimer clause while ignoring the procedural obligations of Contract A is fundamentally flawed. The core strategic imperative is to maintain the integrity of the bidding process as defined in the RFP.

Any deviation from this path, particularly after bids have been submitted, introduces significant legal vulnerability. The central strategic failure occurs when an organization’s actions create a new, unstated set of rules that preference one bidder over others, effectively breaching the duty of fairness owed to all compliant participants.

For example, engaging in post-bid negotiations on substantive terms with a single bidder, while other bidders are held to their submitted prices, is a classic example of unfair treatment. Similarly, applying hidden or unstated evaluation criteria to disqualify a bid or elevate another is a direct violation of the principle that all bidders must be judged by the same transparent standards. In Rapiscan Systems Inc. v. Canada, the court invalidated a contract award because the procuring authority, CATSA, relied on hidden technical standards to reject a bid, even though the RFP was structured to avoid forming a traditional Contract A. This case illustrates that even outside the formal Contract A/B framework, public bodies have a duty of procedural fairness that can be enforced through judicial review.

Strategic risk in procurement is magnified when post-bid actions contradict the established rules of the RFP, undermining the principle of fair and equal treatment.

Comparative Post-Bid Conduct Scenarios

Understanding the boundary between permissible and impermissible post-bid conduct is vital. The following table illustrates common scenarios and their strategic implications for the validity of an RFP’s disclaimer clause.

The Doctrine of Fundamental Breach

The legal principle that often comes into play is related to the doctrine of fundamental breach. While the term has evolved, the underlying concept remains relevant ▴ a party that has committed a breach of contract that is so serious it deprives the other party of substantially the whole benefit of the contract cannot then rely on an exclusion or disclaimer clause to escape liability. In the tendering context, the duty of fairness is so central to Contract A that its breach can be considered fundamental. The Supreme Court of Canada’s decision in Tercon Contractors Ltd. v.

British Columbia (2010) provides a clear framework for this analysis. In that case, the province awarded the contract to an ineligible bidder. The court found this to be a fundamental breach of the tender contract (Contract A). Consequently, the province could not rely on its broadly worded liability disclaimer clause for protection against Tercon’s claim for lost profits.

The Tercon case established a three-part test for the enforceability of exclusion clauses:

1. Interpretation ▴ As a matter of interpretation, does the exclusion clause even apply to the circumstances of the breach?
2. Unconscionability ▴ If it applies, was the clause unconscionable at the time the contract was made?
3. Public Policy ▴ If the clause is valid and applicable, should the court nevertheless refuse to enforce it for reasons of public policy?

In Tercon, the court found that awarding the contract to an ineligible bidder was a breach that fell outside the intended scope of the exclusion clause, and that even if it did apply, enforcing it would be contrary to the public policy of ensuring a fair and transparent bidding process.

Execution

At the execution level, the invalidation of a disclaimer clause is almost always the result of a specific, identifiable action or series of actions by the procuring organization that contravenes the established rules of the RFP. The operational imperative for any organization running a competitive bidding process is to ensure that every action taken after the bid submission deadline is consistent with the duties of fairness and good faith. This requires rigorous internal controls, clear documentation of the evaluation process, and a disciplined approach to communication with bidders.

A critical failure point is the treatment of non-compliant bids. A bid that fails to meet a mandatory requirement of the RFP is, by definition, non-compliant and should be disqualified. The temptation to waive a mandatory requirement for an otherwise attractive bid is a common pitfall that can unravel the entire process. If an organization waives a mandatory requirement for one bidder, it must be prepared to do so for all.

This action fundamentally alters the basis of the competition and breaches the duty of fairness to those bidders who spent time and resources preparing a compliant submission. The organization’s post-bid conduct in this scenario effectively invalidates the rules it set out to enforce, and with them, the disclaimer clause that relies on those rules for its legitimacy.

Operational discipline in adhering to the published evaluation criteria is the most effective safeguard for an RFP’s disclaimer clause.

A Catalogue of Invalidating Conduct

The following table provides a granular look at specific post-bid actions and their potential legal consequences. This serves as an operational guide to the types of conduct that can lead to the invalidation of a disclaimer clause.

Mitigation and Best Practices

To preserve the enforceability of a disclaimer clause and the integrity of the procurement process, organizations must adopt a disciplined operational posture. Key practices include:

• Well-Defined RFPs ▴ Ensure that all mandatory requirements, evaluation criteria, and the rules of the process are clearly and unambiguously defined in the RFP document from the outset.
• Training for Evaluation Committees ▴ All individuals involved in the evaluation process must be trained on the legal framework of tendering, particularly the duties of fairness and good faith.
• Strict Adherence to Process ▴ The evaluation committee must follow the published rules meticulously. Any deviation should be carefully considered and documented, with legal advice sought where necessary.
• Documentation ▴ The entire evaluation process, including the scoring of each bid against the stated criteria, should be thoroughly documented. This creates a clear record that can be used to defend the integrity of the process if it is challenged.
• Controlled Communication ▴ A single point of contact should be established for all communications with bidders. This ensures that information is disseminated fairly and consistently.

Ultimately, the execution of a fair and defensible procurement process is not a matter of relying on a single clause in a document. It is a function of the organization’s commitment to procedural fairness throughout the entire lifecycle of the procurement. When post-bid conduct aligns with this commitment, the disclaimer clause is likely to be upheld. When it deviates, the clause offers little protection.

Reflection

The Systemic Integrity of Procurement

Reflecting on the potential for post-bid conduct to neutralize a disclaimer clause moves the focus from isolated legal provisions to the procurement process as an integrated system. A well-drafted RFP represents the system’s design, its intended state of operation. The disclaimer clause is a component within that design, engineered to manage risk and provide operational flexibility.

However, the system’s performance is ultimately determined by its execution, not merely its design. Post-bid conduct represents the real-world inputs and actions that test the system’s integrity.

When an organization’s actions deviate from the designed process ▴ by applying hidden criteria, engaging in bid shopping, or accepting non-compliant submissions ▴ it introduces a fatal inconsistency into the system. This conduct sends a signal that the documented rules are secondary to undisclosed preferences or ad-hoc decisions. In such a context, a court’s refusal to enforce a disclaimer clause is a logical outcome.

It is a recognition that the organization cannot simultaneously violate the system’s core principles of fairness and claim the protection of a component that depends on those principles for its legitimacy. Therefore, viewing procurement through this systemic lens reveals that the resilience of any single component, such as a disclaimer, is inextricably linked to the disciplined and fair operation of the entire process.