Escrow Bid Documents… not new, but worth a look • Dan Leduc
By Dan Leduc
January 18, 2017 – A though not new, Escrow Bid Documents are being increasingly used in tender requirements for many public agencies and, in particular, municipalities.
The process, which should show up in your “Instructions to Bidders” (or equivalent document), would have the low bidder (or the lowest two or three) submit the backup documents and breakdowns used for their estimate and bid preparation, typically within 48 to 72 hours after the close of tender.
Those documents are then held in escrow—meaning held separate and apart from any other documents—with some degree of safekeeping by the public agency or municipality, and are to be used in case there are any disputes regarding scope (change orders/directives) or any other claims that might arise.
The benefit to the owner is obvious, as he now has access to what the winning contractor included in its scope and bid, and any assumptions associated with its bid submission. Owners typically believe that having escrowed bid documents discourages contractors from pursuing claims that are inconsistent with the assumptions included in their bid submissions.
Some would argue the bid documents are irrelevant to dispute resolution because they do not always include the assumptions that were carried, but rather line items for certain scopes of work. Moreover, bid documents typically do not assist in determining whether such bid assumptions were reasonable in the circumstances.
But what about subcontractors? Would they be required to provide their tender breakdown and supporting documents to the contractor to be held in escrow?
In fact, the tender documents can be equally applicable to a sub’s bid on that particular package. As a sub, take an interest at the outset of your bid preparation and enquire as to how your tender takeoff and documents need to be submitted.
(Against the whole notion of escrow bidding documents, I would characterize this issue as a grey area.)
Of equal concern is ensuring the documents remain in escrow. For municipalities in Ontario, their disclosure requirements can be found in the Municipal Freedom of Information and Protection of Privacy Act (R.S.O. 1990, c. M.56), with similar legislation in other jurisdictions. With this legislation, anyone can make a request for information in the possession of the municipality.
But take heart: because escrow bid documents include proprietary information, it is unlikely the municipality would be required to disclose such information. Section 11 of the act contains language indicating, for example, that the head of an institution “may refuse to disclose a record” containing things like “trade secrets or financial, commercial, scientific or technical information” and “positions, plans, procedures, criteria or instructions to be applied to any negotiations carried on or to be carried on by or on behalf of an institution”.
Those safeguards notwithstanding, should the “Instructions to Bidders” (or equivalent) not give you sufficient information, it may be in your best interest—during the bid preparation stage—to ask how the particular public agency or municipality intends to maintain the documents in escrow.
Dan Leduc is a partner in the law firm Norton Rose Fulbright Canada LLP and practices almost exclusively in construction law. He is frequently called upon to advise and represent owners, engineers, subcontractors, suppliers and builders in such front-end services as contract review, tender issues and general construction matters, as well as in litigation and arbitration. Dan can be reached at 613-867-7171 or firstname.lastname@example.org.
* This article also appears in the January 2017 edition of Electrical Business Magazine. Check out our ARCHIVE page for back issues.