By: Paul Emanuelli
This article is an excerpt from the 2022 edition of The Art of Tendering: A Global Due Diligence Guide.
In March 2021 the Ontario Court of Appeal upheld the January 2019 decision of the Ontario Superior Court of Justice in Inzola Group Limited v. City of Brampton, wherein the trial court dismissed a lost profit claim against the City of Brampton in connection with a Competitive Dialogue Request for Proposals (RFP) process. The case dealt with the construction of an extension to the Brampton City Hall.
The plaintiff was disqualified for failing to sign a confidentiality agreement required by the RFP rules and then breaching the RFP communication protocols by raising its concerns over the confidentiality agreement directly with City Council and the media. It sued for lost profit damages in the amount of approximately $25 million.
The plaintiff claimed that while the City promised an open and fair RFP process, the Mayor, the City Manager, and the RFP evaluation committee were all biased against it. The plaintiff also asserted that its refusal to sign the confidentiality agreement and appeal directly to City Council did not breach the process rules. It claimed that its disqualification was based on personal animus and bias and sought $25 million in lost profit damages.
As the trial and appeal courts noted, city staff sought to enforce the recommendations of the Bellamy Commission, which called for a depoliticization of the procurement process to protect against inappropriate interference with municipal contract award decisions.
In the trail decision, the Superior Court noted that notwithstanding the Bellamy recommendations, some members of City Council wanted more direct involvement in the process. However, the RFP fairness advisor confirmed that the RFP rules did not permit direct contact between the proponents and Council members, nor did those rules permit Council members to insert themselves into the process to engage in their own evaluation process.
After a series of written exchanges between City staff and the plaintiff’s lawyer, wherein the plaintiff refused to sign the confidentiality agreement and instead insisted that all proponents be permitted to submit their final proposals directly to City Council in open public forum, the City eventually followed the fairness advisor’s advice to disqualify the plaintiff.
The trial court ruled that the plaintiff’s real issue with the confidentiality agreement was the fact that it would preclude proponents from making direct submissions to City Council. The trial court also concluded that the plaintiff breached the communication protocols under the RFP rules by communicating its objections to the confidentiality agreement directly with City Council and then directly to the media.
The trial court found that the plaintiff’s attempt to use City Council as a “court of appeal” for its procedural protests ran contrary to the standards contained in the Bellamy recommendations regarding the depoliticization of the public procurement process. Furthermore, the trial court determined that the proponent’s direct communications with the media were also a breach of the RFP rules.
The trial court found that the plaintiff perceived it had a “home field advantage” in Brampton, so it “played hardball, and engaged in brinksmanship” to force the direct involvement of City Council in the process and increase its chances of winning. Further, the trial court found that the plaintiff’s disqualification was not due to bias and that City staff attempted to keep the plaintiff in the process to avoid a political and legal escalation and to maintain greater competition. The claim was rejected and the plaintiff was ordered to pay legal costs. The plaintiff appealed.
In its March 2021 decision, the Ontario Court of Appeal dismissed that appeal. The Court of Appeal noted that the plaintiff had refused to sign the confidentiality agreement since it wanted to directly lobby Council for the contract award and that it had breached the “no media contact” protocols in the RFP in an attempt to undermine and politicize the bidding process:
Inzola’s submission about the trial judge’s reasoning must be considered in the context of its breaches of the requirements of the RFP. Absent a credible basis for refusing to sign the Confidentiality Agreement, Inzola was obligated to sign it. In this case, Inzola had no credible basis for not signing the agreement. Its real reason for not wanting to sign was, as the trial judge found, that Inzola wanted to advocate for its proposal before City Council.
Nor can there be any dispute that Inzola breached the prohibition against “media release, public announcement or public disclosure”. I agree with the trial judge that Inzola’s interpretation of the media provision was highly technical and contrary to its plain meaning. More fundamentally, by mischaracterizing the RFP to the press as a “secret process”, Inzola was attempting to undermine the process to its advantage.
Last, I agree with the trial judge that Inzola’s interpretation of the “Communication Protocol” was also highly technical and ignored the broad meaning of clause A1. The “sole point of contact” feature of the RFP was designed to ensure consistency and fairness in RFP communications. If Inzola had a complaint about the process, it was required, pursuant to the RFP, to communicate that complaint through the sole point of contact. Again, on a more fundamental level, Inzola’s communication with the Mayor and City Council was contrary to a principal objective of the RFP process – preserving the integrity of the process by keeping politics out of it.
The Ontario Court of Appeal stated that the plaintiff “was disqualified because its conduct not only breached the terms of the RFP, but because it threatened the credibility and integrity of the RFP process.” The plaintiff’s appeal was dismissed and the trial court’s judgment ordering the plaintiff to pay over $3 million in legal costs was upheld.
