This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its January 2019 decision in Murray Purcha & Son Ltd. v. Barriere (District), the British Columbia Court of Appeal determined that the District of Barriere did not breach its tendering duties in the evaluation and award of a contract. The case dealt with a non-Contract A Request for Proposals (RFP) for winter road maintenance services. A losing bidder brought an application for judicial review, challenging the validity of the evaluation and award process.
The Court of Appeal ruled that the RFP did not create a Contract A contractual duty of fairness that would give rise to a commercial lost profit remedy claim by a proponent:
Whether a Request for Proposal creates a contractual duty of fairness under a Contract A analysis is determined by whether the parties intended to initiate contractual relations by the submission of a response to the RFP. If such a contract arises, its terms are governed by the terms and conditions of the RFP: M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd.,  1 S.C.R. 619 at para. 19.
Both Powder Mountain and Tercon were actions in breach of contract. It was necessary in each case to determine whether the terms of the RFP indicated an intention to create contractual relations, the precondition to a Contract A analysis. The case at bar has been framed in judicial review on administrative law grounds, not breach of contract. As a consequence, the chambers judge gave no consideration to a contractual analysis and accordingly made no finding as to whether the terms of this RFP were intended to create contractual relations, as was found in Tercon.
In this case, the terms of the RFP make it clear that the parties did not intend that a response to the RFP would create contractual obligations in the nature of a Contract A or otherwise. The General Conditions of the RFP are stated in this way:
E. General Conditions
No Contractual Obligations Arising from this RFP or the Submission of a Proposal
This RFP is not a call for tenders or a request for binding offers and no contractual or other legal obligations shall arise between the District and any Proponent as a result of the issuance of this RFP or the submission of any Proposal in response to this RFP, until and unless the District and a Proponent enter into a contract for the services sought by the District under this RFP. For clarity and without limiting the foregoing, this RFP does not commit the District in any way to treat Proponents in any particular manner, to select a Proponent, to proceed to negotiations with any Proponent or to enter into any contract and the District may reject any and all Proposals, reissue a new RFP or end this RFP process at any time, at its sole discretion.
There is nothing in the record before us to mitigate this clear language in the RFP. Accordingly, I conclude that no Contract A was formed by the responses to the RFP, and no contractual duty of fairness arises in this case.
However, the Court of Appeal ruled that even if no Contract A was created to give rise to a lost profit claim, government procurement decisions remain subject to two different standards of review under administrative law. As the Court of Appeal determined, procedural decisions are subject to the strict standard of procedural correctness, whereas substantive decisions are subject to a more deferential reasonableness standard:
The standard for reviewing the merits of procurement decisions has not been definitively established by this Court or the Supreme Court of Canada, but there is authority for the proposition that the standard for substantive review of such decisions is reasonableness: Metercor at para. 4; Bot Construction Ltd. v. Ontario (Ministry of Transportation), 2009 ONCA 879 at paras. 8 and 18; Mastermeter Products Canada Inc. v. Corporation of the City of North Bay, 2012 ONSC 1887 at para. 25. In the case at bar, the substantive decisions were based on considerations of subjective evaluation, discretion and policy considerations, which supports reasonableness review under the Dunsmuir standard: Dunsmuir v. New Brunswick, 2008 SCC 9 at para. 51.
Purcha argues that a correctness standard should apply to the substantive review on the basis that the question at issue is one of general law that is both of central importance to the legal system as a whole and outside the adjudicator’s specialized area of expertise. I do not agree. The substantive decision of the District rests on a discretionary assessment of the material submitted to it, and is reviewable on a standard of reasonableness.
By contrast, compliance with the duty of procedural fairness is not assessed on a standard of reasonableness. The process undertaken by the decision-maker either complies with the duty of fairness or it does not. No deference is given by the reviewing court to the views of the decision-maker on this issue.
As the Court of Appeal summarized, “there are two standards of review at play in this judicial review proceeding: correctness for the question of procedural fairness and reasonableness on the merits of the District’s decision, including intermediate decisions made in assessing the proposals.” The Court of Appeal then elaborated on the procedural fairness duties owed to competing proponents:
It was at one time thought that procurement decisions of a municipality were immune from judicial review, but that view was rejected by the Supreme Court of Canada in Shell Canada Products Ltd. v. Vancouver (City),  1 S.C.R. 231 at 239 241 (per McLachlin J. dissenting, but not on this point) and 273 274 (per Sopinka J.).
In my view, the chambers judge was not in error when she concluded that the decision of the District to award the road maintenance contract to another proponent was reviewable on administrative law grounds. The District had an obligation of procedural fairness towards proponents who responded to the RFP.
The difficulty in this case is not whether the District owed the proponents responding to its RFP a duty of procedural fairness, but what the content of that duty was.
The underlying statute does not assist. The District has the authority through s. 8(2) of the Community Charter, S.B.C. 2003, c. 26 to “provide any service that the council considers necessary or desirable, and may do this directly or through another public authority or another person or organization.” No statutory guidelines constrain the manner in which a municipality must award road maintenance contracts. Procedural duties will arise from the manner in which a municipality chooses to carry out these responsibilities.
The concept of procedural fairness has been described as “eminently variable” and “to be decided in the specific context of each case”: Knight v. Indian Head School Division No. 19,  1 S.C.R. 653 at 682. In Baker v. Canada (Minister of Citizenship and Immigration),  2 S.C.R. 817, the Court identified five factors that were relevant to determining the content of the duty. Of these factors, the most significant for this case arises from the legitimate expectations of those parties who responded to the RFP.
The application of the doctrine of legitimate expectations to representations of administrative process was summarized by Justice Binnie in Mavi:
Where a government official makes representations within the scope of his or her authority to an individual about an administrative process that the government will follow, and the representations said to give rise to the legitimate expectations are clear, unambiguous and unqualified, the government may be held to its word, provided the representations are procedural in nature and do not conflict with the decision maker’s statutory duty. …
Justice Binnie went on to explain the meaning of “clear, unambiguous and unqualified:
 … Generally speaking, government representations will be considered sufficiently precise for purposes of the doctrine of legitimate expectations if, had they been made in the context of a private law contract, they would be sufficiently certain to be capable of enforcement.
The doctrine of legitimate expectations cannot give right to substantive rights: Agraira at para. 97.
These principles apply to the fairness requirements for procurement decisions to which the Contract A analysis does not apply. In Government Procurement, 4th ed. (Toronto: LexisNexis Canada, 2017) at 112, Paul Emanuelli expressed the principle in this way:
… a government procurement decision can be compromised by procedural irregularities when pre-established process rules are not properly followed or where those process rules were inherently flawed due to unlawful or hidden requirements, conditions, criteria or procedures.
In assessing the non-Contract A RFP, the Court of Appeal determined that “there is no suggestion that the procedures set out in the RFP were inherently flawed or unfair to the proponents.” Rather, the Court of Appeal found that “the general procedure to be adopted by the District in reviewing the proposals has elements that are clear, unambiguous and unqualified” and that proponents “could legitimately expect that the District would follow these general procedures before making a decision on the road maintenance contract.”
In other words, the municipality was subject to procedural correctness in how it administered its RFP process. The Court of Appeal also stated that if “this process was followed equally for all proponents, the District’s duty of procedural fairness would be met” and that any “remaining questions relating to the substantive fairness of the decisions made by the District would be reviewable on the deferential standard of reasonableness.” The Court of Appeal concluded that the municipality followed the procedures set out in the RFP.
Although, like the lower court, the Court of Appeal found that the winning proponent’s indirect disclosure of its pricing outside of the sealed price was inappropriate and, had this been a Contract A RFP, could have required the rejection of the bid as non-compliant, it determined that the acceptance of that proposal did not result in a procedural breach on the part of the municipality:
I agree that Defiance should not have included in Envelope #1 the information that made it possible to calculate its proposed price. There are circumstances in which consideration of the Defiance proposal might well be considered procedurally unfair. For example, if the evidence was that the District employees had made the necessary calculation, thereby becoming aware of the Defiance proposed price before scoring their ability to do the work, a reviewing court could reach the conclusion that the process represented to be followed in the RFP was not in fact followed. Additionally, if fairness was being assessed in the context of contractual obligations, a term of a Contract A might be implied that would invalidate consideration of the Defiance proposal. Neither of these considerations apply in the case at bar.
On balance, I do not consider that this error by Defiance leads to the conclusion that the promised procedure was not followed, or that the proposals were not considered equally. There is nothing in the record to suggest that the scoring of Defiance’s proposal was enhanced by this “donation disclosure. Defiance in fact scored third of the five proponents for their work plan (Purcha scored fourth).
I conclude that the District did not breach the duty of procedural fairness it owed to the appellant and the other proponents.
The Court of Appeal then turned to the municipality’s substantive evaluation and award decision, which was subject to a more deferential reasonableness standard. While the applicant argued that the evaluation decision fell outside the acceptable bounds of reasonableness, the Court of Appeal disagreed and deferred to the evaluation decision:
The final argument of the appellant was that the judicial review judge erred in finding that Defiance’s scores were within a range of possible acceptable outcomes that are defendable in respect of the facts and law.” It is more accurate to frame the issue as whether the judge erred in finding that the District’s decision to award the contract to Defiance was within a range of possible acceptable outcomes that were defensible in respect of the facts and the law. It was not the responsibility of the judicial review judge to evaluate Defiance’s scores. The question for the judge on this issue was whether the decision under review met the reasonableness standard.
In my view, the District’s decision meets this standard of review. The District followed the process outlined in the RFP, applied the appropriate formula, and offered a contract to the proponent with the lowest adjusted price, as it said it would.
The Court of Appeal therefore dismissed the appeal, stating that “I am satisfied that the proponents were treated fairly in this process. The decision reached is supportable on the facts and the law.”
As this case illustrates, while public institutions can conduct their competitive bidding processes without creating the Contract A process contract, and thereby avoiding exposure to a lost profit claim, those institutions remain subject to potential judicial review challenges whereby losing proponents can seek procedural relief that could include, among other non-monetary remedies, a re-evaluation order or the quashing of a contract award. However, to win an administrative law remedy, an applicant must convince the court that the contract award decision was procedurally or substantively unsound, which it failed to do in this case.