This article is an excerpt from Government Procurement, which is available for purchase.
In its August 2013 decision in Envireen Construction (1997) Ltd. v. Canada, the Federal Court dismissed a contractor’s claim and upheld the federal government’s decision to terminate the contractor for non-performance. The dispute involved a hazardous material abatement and demolition contract at a decommissioned heating plant at the Department of National Defence base in Goose Bay, Labrador. The contractor encountered hazardous materials at the site that led to project delays. The government ultimately terminated the contract. The contractor challenged the termination and brought a legal action for compensation. The government maintained that the conditions encountered on site fell within the scope of the contract, that the project delays were caused by the contractor’s failure to properly deal with those in-scope conditions and that the delays justified the termination of the contract. The court agreed.
In dismissing the claim for negligent misrepresentation, the court found that the government did not provide inaccurate site information or hold back any material information in its possession:
49 As I stated above, the hazardous material survey provided with the tendering documents was only meant to serve as a guide. The correspondence between PWGSC and Envireen also made it clear that it was Envireen’s responsibility to ensure, after two site visits, that Envireen understood the full scope of the project, including the provisions of Addendum Five, which specified caustics/corrosive materials could be present. Thus, there is no evidence that PWGSC negligently made representations that were untrue, inaccurate or misleading, nor was there any negligence in making representations to Envireen in respect of the caustic soda. The claim for negligent misrepresentation cannot succeed.
The court also agreed that the contractor had failed to properly deal with the situation once the site conditions were encountered and was therefore responsible for the project delays:
54 However, a number of Joe’s positions were inconsistent or raised questions. His explanation for the repeated delays in submitting an appropriate safety plan, namely that PWGSC was not providing clear direction as to the deficiencies in the plans, was rebutted in cross examination by a letter sent from PWGSC to Joe on February 27, 2002, which contained specific directions on what needed to be changed in the various plans that had been submitted.
55 Further, Mr. Rogers gave evidence that the personal protective equipment in use by Envireen, PAPR and tyvek suits, would have been sufficient to handle and dispose of the Substance. If workers felt more comfortable with a higher level of protective equipment, supplied air units and chemically-treated suits could have been used. In addition to these recommendations, Mr. Rogers testified that the maintenance room could be sealed and subjected to negative air pressure so work could continue on the rest of the building until the desired safety equipment was available to remove the Substance. This evidence was not challenged in cross examination and it contradicts Joe’s assertions regarding the safety procedures that were necessary to appropriately deal with the Substance and to continue work on the project in a timely fashion.
56 Mr. Rogers also gave evidence regarding pictures taken by Joe after the Substance cleanup. These pictures show an Envireen worker in Building #77 post-removal of the Substance with bare hands and improperly attired boots. Mr. Rogers stated that the lack of skin protection on the hands of the worker meant that toxic gas could infiltrate the suit and harm the worker. This is an inconsistency that undermines Joe’s stated paramount concern, and one that was supposedly responsible for delays on the project: worker safety.
As this case illustrates, the failure to properly deal with site conditions is a major contributing factor to performance delays and project failures. When performance issues arise, purchasing institutions should quickly address those issues, identify whether the issues fall within the scope of the original contract, and establish a clear record of communications that can then be relied on in the event that the issues escalate to contract termination and result in legal claims.
