Most owners spend months on design and a few days deciding how to tender it. That's backwards. The tender strategy decides who prices your project, how hard they compete, how much risk ends up in the numbers and, in Canada, what legal obligations you take on the moment the first bid arrives. A good design tendered badly still costs more than it should.
This guide explains the main tendering options for private and broader-public-sector owners in Ontario, the Contract A / Contract B framework that sits underneath every formal tender, and how trade packages and bid depositories fit in.
Three ways to go to market
Most stipulated-price tenders in Ontario use one of three approaches.
- Open tender. The call is advertised publicly and any contractor can bid. It gives the widest competition and the clearest evidence of fairness, which is why public bodies use it. The cost is less control over who turns up. The Ontario Association of Architects notes that open bidding brings numerous bidders and the question of contractor qualifications.
- Invited tender. The owner picks a short list, often three to six firms, and only those firms bid. Private owners use this most. It's quick and lets you exclude contractors you wouldn't hire anyway. The risk is a list built on habit rather than research, so the same few firms keep winning and the price tension fades.
- Two-stage (prequalify, then invite). The first stage is a public or private prequalification on experience, capacity, safety, financial strength and key staff. The second stage is a priced tender among those who pass. It combines open access with control over quality, at the cost of a few extra weeks.
Some owners with many similar projects go one step further and keep a standing list of prequalified contractors, refreshed periodically. The OAA describes this vendor-of-record approach as common among public and quasi-public organizations with recurring work. Our guide to prequalifying a general contractor in Ontario covers the first stage in detail.
View the data
| Approach | Who prices the work | Main strength | Main risk for owners |
|---|---|---|---|
| Open tender | Any contractor that responds | Widest competition; visibly fair | Weak or overstretched bidders get through |
| Invited tender | Owner's short list, often 3 to 6 firms | Fast; you only get firms you'd hire | List built on habit; price tension fades |
| Two-stage | Firms that pass a prequalification | Open access plus quality control | Adds weeks; criteria must be published |
Contract A and Contract B: why tendering is a legal event
In most jurisdictions, a call for tenders is just an invitation and a bid is just an offer. Canadian law is different. In R. v. Ron Engineering & Construction (Eastern) Ltd. (1981), the Supreme Court of Canada described two contracts.
- Contract A forms between the owner and each bidder when a bid is submitted in response to a formal tender call. Its terms are the tender documents: the instructions to bidders, the evaluation rules, the bid validity period and the privilege clause.
- Contract B is the construction contract itself, signed with the successful bidder.
Later cases built on this. In M.J.B. Enterprises (1999), the Supreme Court held that the owner had an implied obligation to accept only compliant bids, and that a "lowest or any tender not necessarily accepted" clause didn't permit it to award to a non-compliant bidder. The damages were the bidder's lost profit on the job it should have won, not just the cost of preparing its bid. Courts have also found an implied duty to treat all bidders fairly and equally.
The Ontario Court of Appeal refined the compliance rules in Rankin Construction v. Ontario (2014). An owner may waive a mere formality, an honest slip that doesn't affect price or the comparison between bids, but it can't waive a material non-compliance. The same case upheld an exclusion clause that barred the bidder's claim, which shows how much depends on the drafting.
The practical point for owners: once you issue a formal tender, the documents bind you as well as the bidders. If you announce evaluation criteria, you must use them. If you reserve rights, reserve them clearly. And if you plan to negotiate after bids close, say so up front, or don't run a formal tender at all.
Formal tender, RFP or negotiation?
Not every competition has to create Contract A. Owners can structure a request for proposals or a request for quotations as non-binding, an invitation to negotiate, if the documents are written that way and the owner behaves consistently with them. That flexibility is useful when price is only one part of the decision, or when you expect to refine scope with the preferred bidder.
The trade-off is market response. Contractors price a formal tender more sharply because they know the rules protect them. A loose process with room for "best and final" rounds invites bidders to hold something back for the negotiation. On programs we've supported, the cleanest results usually came from a formal tender on a well-documented scope, with any negotiation reserved for packages that weren't ready to price.
Broader-public-sector owners have less choice
Hospitals, school boards, colleges, universities and other designated organizations under Ontario's Broader Public Sector Accountability Act, 2010 must follow the BPS Procurement Directive. It sets value thresholds above which an open competitive process is required and below which invited competition is recommended. It requires evaluation criteria and weightings to be set before the process starts and disclosed in the documents, and it requires a debriefing to be offered to unsuccessful bidders on larger procurements.
The thresholds have been amended over time. BLG's summary of the January 2024 changes, for example, describes a higher threshold for goods and services. Check the current directive, any applicable trade agreements and your own board-approved policy before choosing a route. Municipalities follow their own procurement by-laws, and private owners aren't bound by the directive at all, though many borrow from it because it's a tested model of fairness.
Trade packages: one GC tender or many?
The second decision is how to package the work.
Single stipulated-price tender. General contractors tender the whole project, carrying trade prices they collect themselves. One contract, one point of responsibility, and the GC carries the coordination risk. This is the default for most mid-sized projects.
Multiple trade packages. Under construction management, the owner or its construction manager tenders trade packages separately, often in waves as design progresses. Early packages such as demolition, excavation, structure and long-lead equipment can start before the finishes are designed. The owner gains speed and visibility of every trade price, but takes on the gaps between packages. Scope that falls between two trade contracts, such as firestopping, temporary protection or the interface between curtain wall and roofing, becomes the owner's problem unless someone writes it into a package. Our comparison of CCDC 2 and CCDC 5B covers the contract side.
A sensible middle path for many owners is a GC tender with one or two critical packages, such as switchgear or elevators, bought early by the owner and assigned to the GC.
Bid depositories and bid shopping
A bid depository is a system for receiving sealed trade bids before the general contractors close. Trades deposit their prices by a set time. The depository releases them to the bidding GCs, who then carry them into their own tenders and list the trades they've used.
The aim is to stop bid shopping: using one trade's price to squeeze another after the GC has won. In Naylor Group v. Ellis-Don (2001), a hospital project that used the Toronto Bid Depository, the Supreme Court of Canada held that a general contractor that carried a subcontractor's bid generally had to use that subcontractor, unless it had a reasonable objection. The electrical trade recovered its lost profit.
For owners, a depository has real benefits: common trade scopes, published results and a fairer field that can attract stronger trades. It also has costs. The rules add procedure and constrain the GC's ability to replace a trade, and not every trade or region uses one. Specify depository use deliberately, for the trades where it adds value, rather than by copying last year's instructions to bidders.
View the data
| Step | Who | What happens |
|---|---|---|
| 1 | Trades | Sealed trade bids deposited by the deadline |
| 2 | General contractors | Depository releases trade prices; GCs carry them and list their trades |
| 3 | Owner | GC tenders close; Contract A forms with each bidder |
| 4 | Owner | Bids evaluated for compliance under the announced rules |
| 5 | Owner | Award and signing of Contract B |
| 6 | General contractor | Subcontracts the trades it carried |
Common tender strategy mistakes
- Too many bidders. Eight GCs on an invited list doesn't mean eight sharp prices. Contractors who think their odds are poor either decline late or submit a cover price.
- Tendering incomplete documents. Bidders price the risk of what's missing. Gaps come back later as change orders.
- Rules that can't be followed. Mandatory requirements that half the market can't meet produce non-compliant bids the owner then can't legally accept.
- A tender period that's too short. GCs need time to collect trade prices. A rushed close produces plugs and allowances instead of firm numbers.
- Ignoring market conditions. In a busy market, the best contractors choose which tenders to chase. A clear scope, a fair contract and a realistic schedule make your project one they want.
What owners should do
- Decide the route early. Choose open, invited or two-stage at the same time as the delivery model, and build the tender period into the schedule.
- Prequalify on evidence. Use published criteria and real references, and keep the priced stage to a number of bidders who each have a fair chance, typically three to five.
- Write the tender documents as a contract. Under Contract A they are one. Set out evaluation criteria, compliance rules, the privilege clause and any negotiation rights clearly, and get legal advice on the drafting.
- Package deliberately. Decide which trades go through the GC, which the owner buys early, and which use a bid depository, and write a scope matrix so nothing falls between packages.
- Follow your own rules. Evaluate exactly as announced, document every decision, and debrief unsuccessful bidders. It's fairer and it's your best defence.
The bottom line
Tendering in Canada isn't just collecting prices. It creates obligations to every bidder, and the strategy you choose shapes the price you get. Owners who pick the route deliberately, write clean documents and follow them to the letter get sharper bids and fewer disputes. Owners who improvise tend to find out what Contract A means the hard way.
Planning a tender and want a second opinion on the strategy? Book a 30-minute call with Benjamin R. Consulting.
Sources: Canadian Consulting Engineer, Tendering Trials (Ron Engineering and M.J.B. Enterprises); Canadian Consulting Engineer, Bid Shopping (Naylor Group v. Ellis-Don); Construction Law Canada, Eight Rules of Tender Law Pronounced by the Ontario Court of Appeal (Rankin Construction v. Ontario, 2014); Construction Law Canada, When and How is a Subcontractor Bound by its Tender in a Bid Depository System?; Electrical Contractor, Bid Depositories; Ontario Association of Architects, Invited Bid / Two Phase Bid (Prequalification and Invited Bid); Government of Ontario, Broader Public Sector Procurement Directive; BLG, Amendments to the BPS Procurement Directive effective January 1, 2024. This article is general information, not legal advice. Get legal advice on your contract and specific circumstances.