What Is the “Contract A/Contract B” Theory in RFP Law?

Concept

The Bidding Process as a Dual Contract System

In the specialized domain of procurement law, the submission of a bid in response to a formal solicitation, such as a Request for Proposals (RFP) or a tender, initiates a distinct and binding legal relationship that precedes the final performance contract. This foundational principle, known as the “Contract A/Contract B” theory, establishes that the procurement process itself is governed by a standalone contract, which operates independently of the ultimate agreement to supply goods or services. This framework was established to preserve the integrity of the competitive bidding system, ensuring that all participants, both the entity soliciting bids (the owner) and the parties submitting them (the bidders), are bound by a consistent and equitable set of rules.

The genesis of this legal structure is the landmark Canadian Supreme Court case, R. v. Ron Engineering & Construction (Eastern) Ltd.. This ruling articulated that when an owner issues a call for tenders, it is making an offer to all potential bidders. The submission of a compliant bid constitutes acceptance of that offer, thereby forming “Contract A.” This initial contract governs the procedural aspects of the bidding process, including the irrevocability of bids for a specified period, the criteria for evaluation, and the obligation for the owner to treat all compliant bidders fairly.

The successful execution of this preliminary stage then leads to the formation of “Contract B,” which is the substantive construction or service contract awarded to the winning bidder. The two-contract analysis provides a robust legal architecture for the procurement process, transforming it from a mere invitation to negotiate into a structured, enforceable system.

The Contract A/Contract B framework bifurcates the procurement process into two distinct legal agreements ▴ a preliminary contract governing the bid itself and a subsequent contract for the actual work.

Contract a the Process Contract

Contract A comes into existence the moment a bidder submits a compliant proposal in response to a tender call. Its terms are defined by the documents issued by the owner, such as the Instructions to Bidders and the RFP itself. A primary term of Contract A is the irrevocability of the submitted bid, which prevents bidders from withdrawing their offers after the submission deadline, thereby protecting the owner from last-minute changes that could disrupt the evaluation process.

This contract also imposes a critical duty of fairness upon the owner, obligating them to evaluate all compliant bids based on the criteria explicitly or implicitly outlined in the procurement documents. Any deviation from these established rules, such as considering undisclosed preferences or engaging in “bid shopping” to leverage a low bid against another bidder, constitutes a breach of Contract A.

Contract B the Performance Contract

Contract B is the traditional contract that most people envision when they think of a procurement award. It is the agreement to perform the specified work or provide the requested goods or services in exchange for payment. This contract is formed only when the owner formally accepts the successful bidder’s proposal and awards them the project. The terms of Contract B are typically detailed in the draft agreement included with the original RFP documents.

While Contract A governs the integrity of the selection process, Contract B governs the execution of the project itself. The distinction is critical; a dispute over the fairness of the evaluation process would be litigated under the terms of Contract A, while a dispute over the quality of work performed would fall under Contract B.

Strategy

Navigating the Contractual Matrix

The Contract A/Contract B framework introduces a layer of legal complexity into the procurement process that demands strategic consideration from both owners and bidders. For owners, the primary objective is to design a procurement process that is fair, transparent, and defensible, while retaining the necessary flexibility to select the proposal that offers the best overall value. For bidders, the focus is on submitting a compliant and competitive proposal while understanding their rights under Contract A and holding the owner accountable to a fair process. The strategic approach to navigating this dual-contract system depends heavily on which side of the transaction one sits.

An owner’s strategy often centers on the careful drafting of the RFP documents. The language used can determine whether a binding Contract A is formed at all. For instance, an RFP that is structured more as an invitation to negotiate, with ambiguous terms and a clear statement that no contract will be formed until a definitive agreement is signed, may avoid the creation of a Contract A. Conversely, a formal tender with detailed specifications, clear evaluation criteria, and a requirement for bid security is almost certain to create a Contract A. Bidders, on their part, must meticulously analyze the RFP documents to understand the nature of the legal relationship they are entering into. This includes identifying any “privilege clauses” that grant the owner broad discretion or “exclusion clauses” that attempt to limit the owner’s liability for breaches of fairness.

Strategic success within the Contract A/Contract B paradigm requires owners to draft procurement documents with precision and bidders to analyze them with diligence.

Strategic Considerations for Owners and Bidders

The following table outlines the key strategic considerations for both owners and bidders within the Contract A/Contract B framework:

The Duty of Fairness an Implied Obligation

A central pillar of the Contract A/Contract B theory is the implied duty of fairness and good faith that is incumbent upon the owner. Courts have consistently held that even with a broad privilege clause (e.g. “the lowest or any tender not necessarily accepted”), an owner cannot act capriciously. They must treat all compliant bidders fairly and equally. This duty includes, but is not limited to:

• Rejecting non-compliant bids. An owner who accepts a bid that fails to meet the mandatory requirements of the RFP breaches their duty of fairness to all other compliant bidders.
• Adhering to disclosed evaluation criteria. The owner must evaluate bids based on the criteria and weighting published in the RFP. Relying on a “hidden agenda” or undisclosed preferences is a breach of Contract A.
• Avoiding bid shopping. An owner cannot use the price of one bidder to pressure another bidder into lowering their price. This practice undermines the integrity of the competitive process.

For bidders, understanding these implied duties is crucial. If an owner breaches the duty of fairness, a bidder who would have had a substantial chance of winning the contract may be able to sue for damages, which are typically calculated as the profits they would have earned had they been awarded Contract B.

Execution

The Operational Playbook

Executing a procurement process within the Contract A/Contract B framework requires a disciplined, systematic approach. The following playbook outlines the key operational steps for owners to ensure compliance and for bidders to protect their interests.

Phase 1 Procurement Design and Document Preparation

1. Define The Procurement Model. The owner must first decide whether to issue a formal tender, which will create a Contract A, or a more flexible Request for Proposals designed to facilitate negotiation. This decision will dictate the level of legal risk and the procedural rules that must be followed.
2. Draft The Solicitation Documents. This is the most critical phase. The documents must be drafted with precision, clearly outlining the scope of work, the mandatory submission requirements, the evaluation criteria and their relative weightings, and the terms of the proposed Contract B. Any privilege or exclusion clauses must be carefully worded.
3. Establish The Evaluation Team And Process. The owner should assemble an evaluation team before the RFP is issued and provide them with clear instructions on how to score the proposals based on the published criteria. A scoring matrix should be developed to ensure consistency.

Phase 2 the Bidding Period

1. Issue The Solicitation. The RFP is released to the market. All bidders must be given the same information and the same opportunity to ask questions.
2. Manage Communications. All questions from bidders should be submitted in writing and answered via a public addendum distributed to all bidders. This ensures that no bidder receives preferential information.
3. Bid Submission. Bidders must prepare and submit their proposals before the deadline. Utmost care must be taken to ensure the bid is fully compliant with all mandatory requirements set out in the RFP. A single non-compliant element can lead to disqualification.

Phase 3 Evaluation and Award

1. Compliance Review. Upon receiving the bids, the evaluation team’s first step is to conduct a compliance review to ensure that all mandatory requirements have been met. Any non-compliant bids should be set aside.
2. Scoring And Evaluation. The compliant bids are then scored against the pre-determined evaluation criteria. This process must be documented meticulously.
3. Selection And Award. The winning bidder is selected based on the evaluation scores. The owner then issues a formal award notice, which constitutes the acceptance of the offer and the formation of Contract B.
4. Debriefing. It is a best practice for owners to offer debriefings to unsuccessful bidders. This provides transparency and can help to avoid legal challenges.

Quantitative Modeling and Data Analysis

A structured and quantifiable evaluation process is essential to demonstrating fairness. The following table provides a simplified model of a bid evaluation matrix that could be used to defend an award decision.

In this model, although Bidder 2 offered a lower price (receiving a perfect score of 5), Bidder 1’s superior technical solution and experience resulted in a higher overall score. This documented, quantitative approach provides a strong defense against any claim that the evaluation was unfair or based on undisclosed criteria.

A defensible procurement award is built on a foundation of documented, quantitative, and consistent evaluation.

Predictive Scenario Analysis

Consider a hypothetical scenario ▴ The City of Metropolis issues a tender for the construction of a new bridge. The tender documents state that bids must be accompanied by a 10% bid bond and that the city will award the contract to the lowest compliant bidder. Two companies, Acme Bridge Builders and Apex Construction, submit bids.

Acme’s bid is for $10 million, while Apex’s bid is for $10.5 million. Both bids are compliant.

After the bids are opened, the City’s engineers review Acme’s proposal and realize that Acme has a reputation for being difficult to work with and has been involved in litigation on other projects. The City also has a long-standing positive relationship with Apex. Despite the clear language in the tender, the City decides to award the contract to Apex, citing their past experience and relationship. This is a clear breach of Contract A. The City has relied on an undisclosed criterion (past relationship) and has ignored the express term that the contract would be awarded to the lowest compliant bidder.

In this situation, Acme would have a strong legal case against the City. The remedy would likely be the lost profits that Acme would have earned on the $10 million contract. The City’s attempt to use its discretion has exposed it to significant legal and financial risk.

This scenario underscores the importance of adhering strictly to the rules established in the procurement documents. Had the City wished to consider factors other than price, it should have structured the procurement as a Request for Proposals with a clearly articulated and weighted evaluation plan that included criteria such as past performance and project management approach.

System Integration and Technological Architecture

Modern e-procurement systems can be architected to enforce the principles of the Contract A/Contract B framework, thereby reducing the risk of human error and creating a robust digital audit trail. A well-designed system would include modules for:

• Document Control. A central repository for all RFP documents, addenda, and communications, ensuring that all bidders have access to the same information at the same time.
• Automated Compliance Checking. The system can be configured to automatically check for the presence of mandatory documents and forms, flagging non-compliant submissions at the point of receipt.
• Secure Digital Bid Box. A system that prevents anyone from viewing the bids until after the official closing time, preserving the confidentiality and integrity of the process.
• Integrated Evaluation Module. A tool that allows evaluators to score bids against the pre-defined criteria directly within the system. The system can automatically calculate the weighted scores and rank the bidders, providing a transparent and auditable record of the evaluation process.

By integrating these features into a single platform, an organization can build a procurement architecture that not only streamlines the process but also embeds the legal principles of fairness and transparency into its operational workflow. This technological enforcement of the rules provides a powerful defense against potential legal challenges.

Reflection

A Framework for Procedural Integrity

The Contract A/Contract B theory provides more than a set of legal rules; it offers a coherent framework for thinking about procedural integrity. The dual-contract structure compels a level of discipline and foresight in the design of any competitive selection process. It forces a clear articulation of the rules of engagement before the competition begins, ensuring that the subsequent evaluation is a function of merit, not whim.

Understanding this legal architecture allows an organization to move beyond mere compliance and toward the design of procurement systems that are inherently fair, transparent, and, ultimately, more effective at delivering value. The principles underpinning this theory serve as a constant reminder that a fair process is the most direct path to a successful outcome.