This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its April 2013 decision in F.L. Ravin Ltd. v. Southwestern Ontario Student Transportation Services, the Ontario Superior Court of Justice granted an injunction against Southwestern Ontario Student Transportation Services (STS). The dispute arose over the third and final Request for Proposals (RFP) issued by STS for school bus transportation services in southwestern Ontario. The motion for the injunction was brought by two school bus operators, Ravin and Badder, who had for many years provided school bus transportation services to school boards operating within STS’s scope of operation (STS had assumed responsibility for conducting competitive bidding processes for school bus services on behalf of a number of school boards). The RFPs in question were part of a broader, provincially mandated process requiring school boards to conduct open competitive bidding processes for bus services since province-wide spending on these services totalled $1 billion annually.
As the Court noted, this new provincially sponsored open tendering program attracted a great deal of criticism from local bus operators who feared being run out of business by larger operators:
From the beginning of the new process, concerns were expressed from various quarters including small bus lines, Chambers of Commerce and others as to the ability of small bus lines that had historically provided bus service to students in primarily rural areas to compete under the new system. In December 2008, the then Minister of Education, Kathleen Wynne, sent a letter to the concerned parties, expressing both an acknowledgment of the concerns and a commitment to institute a process that would be fair to all.
However, as the Court observed, notwithstanding escalating concerns from small operators over the province-wide implementation of the new competitive bidding processes, STS proceeded to fast-track its implementation of open tendering well ahead of most other school boards across the province. After being underbid, the plaintiffs questioned whether STS had properly taken into account the safety concerns initially raised by the Ministry of Education and its external advisors:
In the fall of 2010, the Deloitte accounting firm was retained by the Ministry to carry out a review of STS and make recommendations with respect to the competitive procurement of student transportation services. Deloitte recommended, among other things, a focus on determining local market conditions and advised that in procuring appropriate and safe student bus services, price should not be the primary factor in entering into contracts for these services. After hiring PPI Consulting services to prepare an RFP, STS issued its first RFP on January 11, 2011. It is the position of the plaintiffs that this first RFP did not take into account local experience or conditions.
In March 2011, the results of the RFP were announced. Ravin lost a significant number of its bus routes as did a number of other larger companies who had been providing service to the catchment area served by STS. It is not in dispute that the winning bids accepted by STS were for rates approximately 20% below what the Deloitte study for the Ministry had set as the minimum amount for which operators could provide safe and reliable service on an ongoing basis.
The controversy over safety concerns and over the potentially detrimental impact of large-scale tendering on small locally based suppliers led the provincial government to announce a six-month pre-election moratorium on competitive bidding of school bus services:
The experience of bus companies in the area served by STS was not unique. On June 23, 2011, then Minister of Education Dombrowsky announced a six-month moratorium on the procurement practices and established a Task Force to review the experiences to date of competitive procurement processes, expressing the view that such a review “would be beneficial to all parties.” The management of STS did not welcome this announcement, referring to it during a management meeting as a “curveball”, possibly because it might interfere with the successful completion of its five-year plan to which STS had committed in September 2010.
As the Court noted, once the moratorium was lifted, STS proceeded with a second and then a third RFP. The plaintiffs launched their last-minute injunction challenge in a final attempt to stop the evaluation of the third set of proposals:
STS issued another RFP for another one third of its school bus routes for the 2012-2013 school year. None of the plaintiffs’ routes were involved in that RFP. Thus, after the routes were awarded as a result of that RFP, the positions of Ravin and Badder did not change. At issue in this motion is the third RFP set to close today.
In determining whether to grant an injunction, the Court applied the three-part test established by the Supreme Court of Canada in the RJR MacDonald v. Canada (Attorney General) decision:
The test that I must apply in determining whether an interlocutory injunction should be granted is set out in RJR MacDonald v. Canada (Attorney General), [1994] 1 S.C.R. 311. The party requesting the injunction must meet all three parts of the test by establishing on the record that: 1) there is a serious issue to be tried; 2) the party requesting the injunction faces the risk of irreparable harm if the relief is not granted; and 3) the balance of convenience (or inconvenience) between the parties favours the granting of the interim injunction.
In applying the first part of the test, the Court held that the plaintiffs had established that there was a serious issue to be tried by a court, particularly since a similar tendering process for school bus transportation services in another part of the province was already the subject of concurrent legal proceedings:
There is uncontradicted evidence in the material that a number of other consortia have put their RFPs on hold until there is a decision on the issues that will be before the court during the expedited trial to be held in the East Region in June, less than three months from now. STS appears to be the only consortium in the province that has taken such a hard line in refusing to extend or delay its RFP for a reasonable length of time. It is that hard line that has led to this motion before me.
In turning the second part of the injunction test, the Court also determined that the plaintiffs had established that they could suffer irreparable harm if the tendering process was permitted to proceed:
The plaintiffs argue that the manner in which the current RFP is structured pre-ordains that they will be unsuccessful either in obtaining routes or obtaining routes that are economically viable. In either result, they will suffer financial ruin, impacting not only on their livelihood but on that of their employees as well. The affidavits of Ms. Ravin and Mr. Badder set out in significant detail the results of the 2011 RFP. Given that the 2013 RFP is structured in a similar way to the 2011 RFP, the plaintiffs argue that the result of the current RFP is pre-ordained. The disastrous results are more than speculative. In RJR MacDonald, the Supreme Court of Canada recognized that loss of market share can result in irreparable harm. The future of small rural bus lines and the manner in which they are tied to their individual communities has been recognized by Deloitte, the Ministry as well as The Honourable Mr. Osborne in comments in his Task Force Report.
Finally, in considering the third part of the injunction test, the Court concluded that notwithstanding the impact on STS if an injunction were granted, the balance of convenience still favoured the plaintiffs since STS was well ahead of most other parts of the province in adhering to the provincially mandated requirement to conduct open tendering processes for the award of the relevant services:
This last factor calls for a court to determine on the record before it which of the two parties will suffer the greater harm from the granting or refusal of an interlocutory injunction, pending a decision on the merits. As Fragomeni J. pointed out in the Saan case, some of the same considerations apply in the determination of this step in the analysis as in the consideration of irreparable harm. The defendant and the intervenor argue that if an interlocutory injunction is granted enjoining the RFP process STS will be unable to comply with Ministry Directives, putting STS in non-compliance with the law. Further an injunction will require STS to negotiate or extend existing contracts or otherwise negotiate for the services until a final determination of the issues in the proceeding is made. As well, STS argues that it is in the public interest that STS be allowed to proceed with the RFP. Indeed, STS argued at para. 152 of its factum that “The granting of an injunction in this proceeding impacts on all competitive processes in Ontario and threatens the very foundation of the rationale and legal requirement for same.” STS also asserted that an injunction would result in an abandonment of its business plan and require it to accept an uncompetitive pricing structure for an indeterminate length of time. For all of these reasons, STS argued that “The harm that the Plaintiffs allege is speculative. The harm that STS will suffer is known and real, “… thus” the balance of convenience favours STS.”
With respect, I disagree. STS is ahead of most other consortia in regard to the number of years it has engaged the RFP process in obtaining student transportation services. The fact that it may be in non-compliance with the law, a position also taken by the Ministry, is not a compelling reason in the circumstances of this case to refuse an injunction at this time for a relatively brief period of time. If this case is not consolidated with the case set for trial in June 2013, I can fix an expedited trial in St. Thomas for the week of September 12, 2013. A number of other consortia across the province appear to have recognized that a final and proper determination by the court of the serious issues raised by the plaintiffs in this and other actions ultimately best serves the public interest. STS will be in no different position than the other consortia who voluntarily suspended their RFPs. From the evidence before me, STS appears to have been the only consortium in the province to insist on forging ahead with its RFP in the face of questions from potential bidders about the fairness of the process, based on the Directives from the Ministry itself.
After determining that the situation met all three parts of the injunction test, the Court granted the plaintiff’s motion and ordered STS to cease its tendering process until, at minimum, the conclusion of the parallel legal proceedings that were initiated against a similar process in another region of the province.
As this case illustrates, while instances where the courts will grant an injunction to stop a tendering process are rare, they are not unprecedented. Furthermore, when successful, such injunctions can have a significant impact on government operations. In this case, the injunction had the impact of effectively suspending competitive bidding for school bus transportation services across the entire province of Ontario.
