The recent English case of J A Developments -v- Edina Manufacturing Limited highlights the risks to employers of going to competitive tender, and not playing by the tendering rules. It is a tale of an opportunistic contractor, an employer who thought it had successfully driven down build cost, and an architect who remained silent throughout.

The background to the case is a fairly typical scenario. Seven contractors were invited to tender for building works. The conditions of tender were stated to be in accordance with the principles of the Code of Procedure for Single Stage Selective Tendering 1996. The Code deplored any subsequent negotiations on price which aimed at reducing the price of the works below the figure of the lowest tender. That is exactly what happened here however. J A Developments (JAD) was told that its tender price was the lowest. A series of meetings then took place with the three lowest tenderers, during the course of which JAD refused to reduce their price below their originally submitted tender. The contract was awarded to another company which was prepared to undercut JAD.

Most tenderers would have left matters at that, but not JAD, who raised an action seeking recovery of its preparation costs as well as the loss of notional profit had they been awarded the contract.

The Judge took the view that a contract existed between Edina and all of the companies who submitted tenders. The Judge considered the earlier case of Blackpool and Fylde Aero Club Limited -v- Blackpool Council, where it was decided that in certain situations, contractual relationships can exist between a tenderer and an employer. What Edina did was clearly in breach of the principles of the Code which they stated would regulate the tendering process. JAD was entitled to damages. It was awarded its tender preparation costs and also its loss of profits.

Also of interest in this case was that Edina attempted to recover the damages awarded against the architects, who prepared the tender and advised them throughout the subsequent negotiations.

The Court's view here was that an architect could not be expected to advise that a failure to adhere to the Code might give rise to an action of damages for breach of contract. The architect should however have at least warned Edina that subsequent negotiations was a breach of the Code. On the facts however, even though the architects failed to do this, the Court concluded that Edina would have gone ahead with the subsequent negotiations anyway. The architects got away with it. It was a double whammy for Edina.

The attention this case has attracted has undoubtedly raised the consciousness of these issues within the architectural profession and it may, ironically, mean that the defence which was put forward by the architects in this case might not succeed in the future.

There are lessons here for the contractor, employer and professional adviser alike.

For the contractor, this case demonstrates that a failed tender does not always mean a nil return. For the employer, be aware that the tendering process might give rise to obligations you weren't aware of - and to people you didn't know you owed them to. The professional adviser is now best advised to point out to employers that a breach in the rules governing the tendering might lead to a claim for breach of contract.

Finally, consider the fortunate predicament of JAD. They were awarded their loss of profits and tendering costs. When you think about it, they recovered more than they would have done had they been awarded the contract. Who said the law was fair?