What Is the “Implied Contract” in Public Procurement and How Does It Affect the Rfp Process?

Concept

The public procurement process, particularly the Request for Proposal (RFP), operates on a foundational legal principle that establishes a distinct, preliminary contractual relationship long before the final award. This initial pact, known in Canadian law as “Contract A,” materializes the moment a bidder submits a compliant proposal in response to an RFP. It functions as a binding agreement governing the conduct of the tender process itself, separate and apart from “Contract B,” which is the ultimate contract for the goods or services being procured.

This framework’s genesis lies in the need to ensure the integrity and irrevocability of bids, initially designed to prevent bidders from retracting offers after submission. Over time, its application has expanded significantly, embedding a series of implied duties into the procurement architecture that dictates the procedural obligations of both the purchasing entity and the bidders.

The Dual-Contract System Architecture

The procurement landscape is effectively governed by a two-tiered contractual structure. The issuance of an RFP is the invitation, and the submission of a compliant bid constitutes acceptance, forming Contract A. This initial contract is unilateral; its formation is contingent upon the bidder’s action of submitting a proposal. Once formed, it imposes a set of rules ▴ some explicit in the RFP documents, others implied by law ▴ that ensure a structured and equitable competition. These rules create a controlled environment where all participants operate under the same set of constraints and expectations.

The culmination of this process is the selection of a winning bidder and the formation of Contract B, the performance contract. This dual structure provides a formal mechanism for managing the competitive phase, establishing clear rights and responsibilities that uphold the integrity of the entire procurement cycle.

Contract a the Process Contract

Contract A is the procedural heart of the tendering process. It binds the bidder to its submitted proposal, making the bid irrevocable for a specified period. This irrevocability is a critical system component, providing the procuring entity with the stability needed to evaluate complex bids without the risk of bidders withdrawing their offers. In exchange for this commitment from the bidder, the law implies a set of reciprocal duties on the procuring entity.

These obligations are fundamental to the system’s function, creating an enforceable standard of conduct that protects the interests of all participants. The terms of Contract A are a combination of the explicit instructions within the RFP documents and the powerful implied duties imposed by common law, such as fairness and equality.

Contract B the Performance Contract

Contract B represents the successful outcome of the RFP process. It is the definitive agreement for the delivery of the specified goods or services between the procuring entity and the chosen supplier. Its formation signifies the conclusion of the competitive phase governed by Contract A. The terms of Contract B are those outlined in the RFP and finalized with the winning bidder. While Contract A governs the process of selection, Contract B governs the performance of the work.

Understanding this distinction is critical for navigating the procurement system, as the legal remedies and obligations differ substantially between the two. A breach of Contract A relates to procedural fairness and evaluation, while a breach of Contract B pertains to the fulfillment of the project’s deliverables.

Strategy

The existence of the implied Contract A fundamentally shapes the strategic considerations for both public sector entities issuing RFPs and the private sector organizations responding to them. It transforms the procurement process from a simple solicitation of offers into a regulated competition with significant legal stakes. The strategic imperative for procuring entities is to design and execute a process that is not only efficient but also fully compliant with the duties imposed by Contract A to mitigate legal risk. For bidders, the strategy involves submitting a perfectly compliant bid to secure the protections afforded by this implied contract, ensuring they are evaluated on a level playing field.

The implied duties of Contract A serve as the foundational rules of engagement, compelling a high degree of procedural integrity from the procuring entity.

Core Implied Duties and Strategic Implications

The courts have defined several key duties implied within Contract A that have profound strategic consequences. These duties are not optional; they are embedded within the legal framework of the tendering process and create a series of obligations for the procuring entity. Failure to adhere to these duties constitutes a breach of Contract A, exposing the entity to legal challenges and potential liability for damages, including a bidder’s lost profits.

• Duty of Fairness and Equal Treatment ▴ This is the most encompassing duty. It requires the procuring entity to treat all bidders with scrupulous fairness and equality. Strategically, this means that an entity must establish clear, objective evaluation criteria in the RFP and apply them consistently to all proposals. Hidden preferences, such as an undisclosed bias towards a local supplier or an incumbent, are prohibited and can lead to a successful legal challenge from a disadvantaged bidder.
• Duty to Disclose ▴ Procuring entities have an obligation to disclose all material information that bidders would need to prepare a compliant and competitive proposal. This duty prevents an entity from withholding critical details that could affect a bidder’s pricing or technical solution. From a strategic standpoint, comprehensive and transparent disclosure in the RFP documents is the best defense against claims of unfairness.
• Duty to Reject Non-Compliant Bids ▴ This is a critical and often litigated aspect of the implied contract. An entity must disqualify any bid that fails to meet the mandatory requirements set out in the RFP. Accepting a non-compliant bid is considered a breach of the duty of fairness owed to all other compliant bidders, as it effectively changes the rules of the competition mid-process. The strategic challenge for procurers is to clearly distinguish between mandatory requirements and desirable features in the RFP text.
• Duty to Award as Tendered ▴ The procuring entity must award the final contract (Contract B) based on the terms and evaluation criteria originally specified in the RFP. It cannot change the scope of work or the evaluation methodology after bids have been submitted. This duty ensures that the competition remains consistent from start to finish.

Navigating the RFP Process under Contract A

The Contract A framework imposes a disciplined approach on the RFP process. Each stage is influenced by the underlying legal obligations. Bidders must be meticulous in their submissions, while procurers must be rigorous in their adherence to procedure.

The following table outlines the strategic considerations for both parties at key stages of the RFP process, as dictated by the implied duties of Contract A.

The Rise of Non-Binding RFPs

In response to the rigidity and litigation risk associated with the Contract A framework, many public entities have shifted towards using RFPs that explicitly attempt to disclaim the formation of an implied contract. These documents will often include clauses stating that the RFP is not a formal tender and that no legal obligations arise upon the submission of a proposal. The strategic goal is to create a more flexible, “non-binding” process that allows for negotiation, clarification, and dialogue with bidders without triggering the strict duties of Contract A. This approach, often called a Negotiated RFP (NRFP), allows the entity to engage with one or more proponents to refine solutions and pricing after initial submissions are ranked.

However, even with such disclaimers, courts may still find that an implied contract exists if the language and structure of the RFP contain hallmarks of a traditional tender, such as requirements for bid security or irrevocability. Furthermore, even in a true non-Contract A process, public bodies remain subject to administrative law duties of procedural fairness, meaning their decisions can still be challenged through judicial review.

Execution

The operational execution of a public sector RFP is fundamentally conditioned by the legal architecture of the implied contract. Every procedural step, from the initial drafting of the solicitation document to the final debriefing of unsuccessful proponents, must be executed with a precise understanding of the duties and liabilities established by Contract A. This requires a systems-based approach to procurement, where the RFP is not merely a request for pricing but a carefully constructed legal process designed to ensure fairness, transparency, and defensibility.

Operationalizing Fairness in RFP Design and Evaluation

The duty to treat all bidders fairly and equally is the central pillar of the implied contract, and it has significant operational consequences. Executing this duty requires moving beyond good intentions and implementing concrete, verifiable procedures.

Constructing the Evaluation Framework

The evaluation criteria detailed in an RFP are the primary instrument for ensuring fairness. To be defensible, this framework must be meticulously designed before the RFP is issued and must be applied with mechanical consistency.

• Mandatory Criteria ▴ These are the pass/fail requirements of the RFP. Operationally, they must be drafted as clear, unambiguous, and objectively verifiable questions (e.g. “Does the proponent possess X certification? Yes/No”). Any bid that fails to meet a single mandatory criterion must be rejected without further consideration. There is no room for discretion at this stage.
• Rated Criteria ▴ These are the scored elements used to differentiate compliant bids. Each rated criterion must be broken down into a clear scoring rubric. For example, instead of a vague criterion like “Proponent’s Experience,” a detailed rubric would assign specific point values for the number of years of experience, the number of similar projects completed, and the quality of client references. This transforms a subjective concept into a set of objective measurements.
• Price Evaluation ▴ The formula for scoring price must be explicitly stated. Whether it is a lowest-price model or a formula that assigns points based on the difference from the lowest bid, the mechanism must be transparent to all participants from the outset.

The following table illustrates a sample evaluation rubric, demonstrating how a subjective requirement can be operationalized into a quantifiable system.

A Case Study in Procedural Failure

To understand the tangible impact of the implied contract, consider a hypothetical municipal government, the City of Veridia, issuing an RFP for waste management services. The RFP specifies mandatory requirements, including the use of trucks that meet current emissions standards. The evaluation criteria allocate 70% to technical score and 30% to price.

Two companies submit bids ▴ “EcoHaul,” a new entrant with a modern, compliant fleet, and “CityWaste,” the incumbent provider for the last 20 years. CityWaste’s bid uses older trucks that do not meet the emissions standards specified as mandatory in the RFP, but their price is 15% lower than EcoHaul’s.

The evaluation committee, influenced by a long-standing relationship with CityWaste and pressure to reduce costs, decides to waive the emissions standard requirement for CityWaste, deeming it “substantially compliant.” They rationalize that the cost savings outweigh the environmental concern. CityWaste is awarded the contract.

EcoHaul, upon learning that the winning bidder did not meet a mandatory requirement, initiates legal action, claiming a breach of Contract A. They argue that the City of Veridia breached its implied duty of fairness by:

1. Failing to reject a non-compliant bid.
2. Applying an undisclosed criterion (a preference for cost savings over a mandatory technical requirement).

The acceptance of a non-compliant bid fundamentally breaches the duty of fairness owed to all compliant bidders under Contract A.

In this scenario, a court would likely rule in favor of EcoHaul. The City’s decision to accept a non-compliant bid from CityWaste undermined the integrity of the entire process and was unfair to EcoHaul, which had invested resources to submit a fully compliant proposal. The remedy could require the City to cancel the contract with CityWaste and re-tender the project, and could also include awarding damages to EcoHaul to cover their bid preparation costs and potentially their lost profits from the contract they should have won. This case illustrates that the implied contract is not a theoretical concept; it is an enforceable set of rules with significant financial and operational consequences when breached.

Reflection

System Integrity as a Strategic Asset

The legal framework of the implied contract in public procurement provides more than a set of rules; it establishes an operational system with defined inputs, processes, and outputs. Viewing the RFP process through this systemic lens allows an organization to move beyond mere compliance and toward strategic advantage. The duties of fairness, disclosure, and equality are the core protocols that ensure the system’s integrity. A procurement body that builds its processes with these protocols at the center develops a reputation for predictability and transparency, attracting higher-quality proponents and fostering greater competition.

For bidders, a deep understanding of this system allows for the confident allocation of resources to proposals, secure in the knowledge that the evaluation will be conducted according to a predictable and enforceable logic. The ultimate reflection for any participant is how this legal architecture informs their own internal systems. Does your organization’s procurement or proposal development process function as a coherent, defensible system, or is it a series of ad-hoc decisions that invite risk? The answer determines whether the implied contract is a liability or a powerful tool for achieving strategic objectives.