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Warning to Contractors - Collective RFP Responses May Violate Competition Law

01-Jun-10

Discussion or concerted action amongst contractors needs to be carefully considered in light of the provisions of the Competition Act. From time to time, contractors or contractors' associations act in a concerted fashion to make a point. This may include dissatisfaction with a bidding process or a contract proposed by an owner. Such actions by contractors or associations may constitute bid rigging or conspiracy under the Competition Act.

For example, in 2009, members of the Saskatchewan Roofing Contractors Association ("SRCA") had discussions about not submitting bids in response to a request for tenders for a roofing project for a school. Members of the SRCA were concerned that the owner was calling for tenders pursuant to a contract that did not contain the standard specifications which were endorsed by the SRCA and which had been in use for many years. The Competition Bureau became involved. The result was an onerous Court Order being granted against the SRCA. This Order required the SRCA to advise the Commission of Competition in writing, immediately, if it becomes aware of any unauthorized communications or activity relating to the pricing of products; implement a compliance program for its members; and educate its members about bid rigging and conspiracy offences under the Competition Act.

As another recent example, in Alberta, ATB Financial announced it would engage in a reverse auction electronic bidding process. Responses to this proposal by the ATB from construction associations were understandably negative. The associations must effectively communicate their response to the proposed bidding process by the ATB to fulfill their mandate. On the other hand, discussions or actions by the association or its members encouraging collective action, such as declining to participate in the proposed reverse auction electronic bidding process, may be in violation of the bid rigging and/or conspiracy provisions of the Competition Act. Such conduct may expose associations and participating members to civil liability or quasi-criminal prosecution.

After receiving submissions from the associations, ATB Financial appears to have changed its mind and has announced that it would suspend the proposed reverse auction process and conduct a single bid response process.

Accordingly, where contractors or associations have collective concerns with an owner's contract or bid terms, the nature and form of their response needs to be reviewed carefully with a view to these competition law concerns.

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