This article is an excerpt from Government Procurement, which is available for purchase.
In its September 2012 decision in Skypower CL 1 LP v. Ontario (Minister of Energy), the Ontario Superior Court of Justice ruled that the provincial government’s contract award application process for Feed-In Tariff (“FIT”) renewable energy projects was not a formal tendering process. After the applicants had submitted numerous applications under 118 separate limited partnerships, the government amended the FIT Rules for contract awards. The applicants challenged the government’s ability to change the rules midstream, arguing that they should be evaluated under the rules that were in effect at the time that they submitted their applications. The court rejected the legal challenge, finding that the government had not acted unreasonably in promulgating new contract awards rules under the relevant statutory framework and that, among other things, the application process did not constitute a bidding process governed by tendering law.
In coming to this conclusion, the court noted that the FIT process did not include the core characteristics of a formal tendering process:
In terms of the comparison to a tender process, I reject the contention that the application process for the FIT program and the contents of the FIT Rules 1.0 are akin or equivalent to a tender process. There is little in the FIT Program to which the applicants can point that mirrors a typical tendering process. The FIT Program did not involve fixed specifications for a contract where the main, if not sole, issue is the question of the price to be charged for the specified work to be performed. Under the FIT Program an applicant would only receive a contract if it met the application criteria and if the project passed the applicable connection availability assessment process. Grid availability is a precondition to a FIT contract and is subject to impact assessments that are required by the system operator, the transmitter or distributor and possibly the Ontario Energy Board. There were therefore many variables to the success of any application and the awarding of a contract.
On this ground, the applicants rely on Tercon Construction Ltd. v. British Columbia (Minister of Transportation and Highways),
[2010] 1 S.C.R. 69. Yet, the situation in that case was much different that is the situation here. In Tercon, there was a Request for Proposals (“RFP”) that set out detailed evaluation criteria and specified that they were to be the only criteria to be used to evaluate proposals. A specific form of agreement was attached. There were detailed provisions about pricing that were fixed and non-negotiable. A proponent was required to accept substantially the form of contract contained within the RFP. Here virtually none of those same constraints are present. In particular, not only did the OPA expressly reserve to itself the right not to enter into a contract with any compliant bidder, the FIT Program itself makes it clear that the awarding of any contract is subject to grid availability and connectivity.In addition, and as is frequently the case with government programs, there were many other considerations outside of the formal FIT Rules that would legitimately impact on the awarding of contracts. Policy considerations relating to, and the cost to the ratepayer of, any particular project would invariably form part of the analysis in terms of deciding whether a specific project should proceed or not. An applicant might submit a fully compliant application but, if the cost to the ratepayer of adding it to the grid was found to be prohibitive, there was no obligation on the OPA to award a FIT Contract to the applicant.
It is at this point that I deal with the assertion with which the applicants lead off their submissions: that the situation presented here involves matters strictly of a commercial nature and does not involve matters of social policy. I do not accept that characterization of the FIT Program, the FIT Rules and the application process in which the applicants were engaged. The FIT Program arose out of the desire of the Government of Ontario to increase the amount of energy provided in this Province from renewable sources. The Government also wished to create within this Province a favourable location for the development of renewable energy industries. Those objectives are evident from the statements made by the Minister at the time that the GEA was enacted.All of those objectives are matters of public policy. While I understand the desire of the applicants to portray the situation as one of strictly commercial dealings, because it aids in their efforts to contend that they had rights in the nature of contractual rights arising from their participation in the FIT Program, the suggestion that this situation is one solely of a commercial nature devoid of any foundation in social or public policy is entirely fictional. The FIT Program was the vehicle by which the Government intended to deliver their policy on renewable energy and the applicants were fully aware that that was the fundamental underpinning for the endeavour in which they chose to become engaged.
Given all of those factors, I conclude that there was no intention by the OPA or the Minister to create contractual obligations through the submission of a proposed project under the FIT Program, even if all of the necessary criteria for the project identified under the FIT Program were met. That fact represents a fundamental distinction between this situation and that of a true tender process. The attempt to characterize the FIT Program as equivalent to a tender process fails. (paras. 56-61)
As the court noted in consideration of the tendering law issue, the FIT Program lacked the core indicators of a formal tendering process, including pre-established specifications, an evaluation based primarily or exclusively on price considerations, process rules that required fixed non-negotiable pricing and that compelled selected respondents to enter into contracts based on predefined legal terms contained in pre-established pro forma legal agreements. Rather than containing the process constraints that are typically associated with a formal tendering process, the FIT application process contained significant pre-conditions to any contract award, including the availability of space on the power grid, and factored non-commercial social and public policy factors into the ultimate contract award decision-making process. The courts have repeatedly concluded that some contract award processes do not create legally binding commitments at the bid submission stage and instead offer institutions greater post-bid flexibility in their contract award deliberations. As this case illustrates, only those contract award competitions that include the formal and restrictive protocols of a binding bidding process will give unsuccessful respondents the legal standing to launch tendering-law-based lost-profit claims.
