This article is an excerpt from Government Procurement, which is available for purchase.
In its April 2014 decision in Dignam v. New Brunswick Liquor Corp., the New Brunswick Court of Queen’s Bench quashed a contract award decision made by the New Brunswick Liquor Corporation after finding that an unsuccessful bidder was denied its promised contract award review process rights. The case dealt with an RFP issued by the Corporation for the appointment of agents who would be authorized to sell liquor in several communities across the province, including Hanwell, which is located near Fredericton. Chris Scholten, the operator of a convenience store, retail gas bar and restaurant in Hanwell, submitted an unsuccessful proposal in response to that RFP. He then brought a judicial review challenge alleging that the Corporation did not comply with its duty to act fairly since, among other things, it failed to disclose all the relevant documentation relating to the evaluation process and failed to provide reasons for not selecting his proposal.
The Corporation challenged the reviewability of the contract award decision, relying on a long line of cases that have recognized that the commercial decisions of government institutions are beyond the scope of judicial review. The court disagreed, citing the Supreme Court of Canada’s prior consideration of the issue to support the position that government contracting decision may be subject to judicial review in certain circumstances:
33 In Shell Canada Products Inc. v. Vancouver (City),
[1994] S.C.J. No 15., Justice McLachlen, as she then was, wrote the minority decision. In it she reviewed the arguments for and against subjecting purchasing decisions to judicial review:
Against allowing judicial review of the purchasing power of governments is the argument that these are matters of private law. According to the private law of contract, each person, individual or corporate, has the right to contract with whom it chooses, and on the terms it chooses. The courts have not restricted this freedom of contract, but confine themselves to enforcement and interpretation of contracts. It has been said that a public body which seeks to procure goods or services is in the same position as any private individual or corporation which seeks to contract with another party. Vickers, J. expressed this opinion in Peter Kiewit Sons, supra, where he held that the ordinary rules of private law apply to the public contracting process, and that judicial review does not lie for commercial decisions of public authorities. He explained (at p. 120) that “it would be inappropriate to allow both a public law and a private law remedy in situations involving government contracts where no particular procedure is prescribed by statute or regulation”. Adding weight to the argument that government purchasing decisions should be immune from judicial review is the potential for excessive litigation, which may in turn result in significant inconvenience to the public through a disruption of the procurement process.
In favour of allowing judicial review of the procurement or purchasing power of governments is the argument that while this principle is valid for private contracts, the public nature of municipalities renders it inapplicable to them. As Arrowsmith states, supra, at p.14, “there are many considerations applicable to public bodies and not to private which may justify different treatment of the two, even when engaged in similar activity”. The most important difference is the fact that municipalities undertake their commercial and contractual activities with the use of public funds. Another consideration justifying different treatment of public contracting is the fact that a municipality’s exercise of its contracting power may have consequences for other interests not taken into account by the purely consensual relationship between the council and the contractor. For example, public concerns such as equality of access to government markets, integrity in the conduct of government business, and the promotion and maintenance of community values require that the public procurement function be viewed as distinct from the purely private realm of contract law. Finally, it must be remembered that municipalities, unlike private individuals, are statutory creations, and must always act within the legal bounds of the powers conferred upon them by statute. In particular, council members cannot act in pursuit of their own private interests, but must exercise their contractual powers in the public interest.
On balance, it is my view that the doctrine of immunity from judicial review of procurement powers should not apply to municipalities. If a municipality’s power to spend public money is exercised for improper purposes or in an improper manner, the conduct of the municipality should be subject to judicial review.34 She concluded, as did the majority, that procurement powers are not immune to judicial review.
35 A review of the many cases on the subject, suggests that the answer to the question of whether procurement decisions are subject to judicial review is “sometimes”. Justice McLachlin says that if the power is exercised in “an improper manner”, it is subject to judicial review. In this case, Scholten’s says the process was unfair which is tantamount to saying that N.B. Liquor exercised its power “in an improper manner”. I therefore hold that in these circumstances, the conduct of N.B. Liquor is subject to judicial review.
The court determined that in this specific situation, the Corporation’s contracting decision was reviewable and the Corporation was under a duty of fairness in how it administered its process. It found that the Corporation breached its procedural duty when it failed to honour the following provision in its RFP that committed to offering unsuccessful proponents an opportunity to review the process before making a contract award:
47 The Request for Proposals (Record page 964-1010) contains the following:
3.5 Review Process
A review process will be available for all unsuccessful respondents. This review period will last two weeks following the first date the applicant is advised of the Corporation’s decision. Generally, the review process will be limited to a meeting to recap the Corporation’s evaluation of the applicant’s offer. If it can be demonstrated that the Corporation misinterpreted critical elements of the applicant’s proposal, the Corporation will review its evaluation.The court found that the Corporation failed to provide Scholten, who had narrowly lost out on the contract award by one point in the overall scoring, with the opportunity to review the process as promised in the RFP:
54 In this case, we now know (but the applicant did not know at the time of the review) that the difference in scores between the two candidates was one point.
55 In light of the importance of this decision to both applicants and the public interest in ensuring that such decisions are made openly and fairly, I find that the review procedure adopted by N.B. Liquor is inadequate and unfair. The party seeking a review must be provided with more information and the person or persons conducting the review must be open to the possibility of reviewing its decision.
56 Under the system followed by N.B. Liquor, the Board makes its decision and informs the successful candidate that it has been awarded “the agency store contract” before the unsuccessful candidate is informed (In this case on January 25, 2013). The review is not conducted until after the contract has been awarded (February 15, 2013). It is apparent from Mr. Von Richter’s affidavit that the reviewing committee is not open to reversing the decision and in light of the fact that the Board of Directors has already “made the decision” (Record p. 217), it is possible that the reviewing committee could not reverse the decision even if it were convinced that it should.
57 A review for the purpose of showing an applicant “where points were lost” is not a review at all. Scholten’s expected a meaningful review of its application with the possibility of altering the decision. It did not get a meaningful review and under the procedures adopted by N.B. Liquor one was not possible.
The court found that the review provisions contained in the RFP went well beyond a typical right to a post-process debriefing and that these provisions created a duty on the part of the Corporation to provide a meaningful in-process review right to competing proponents prior to the final award of a final contract. The court ruled that the Corporation’s failure to provide Scholten that promised review process was fatal to the validity of the competition. It therefore struck down the contract that was awarded to the competing bidder.
