This article is an extract from the 5th edition of Government Procurement.
In its January 2019 decision in Aquatech v. Alberta (Minister of Environment and Parks), the Alberta Court of Queen’s Bench rejected a losing proponent’s claim that the government awarded a contract to a non-compliant competing bidder. The case dealt with a Request for Proposals (RFP) issued by the Alberta government for monitoring and servicing water and wastewater facilities. The Court determined that the RFP process was subject to judicial review and therefore considered the merits of the alleged non-compliance issue.
The applicant, who was a losing incumbent proponent, claimed that the award was made to a competing proponent that failed to meet the RFP’s mandatory staffing requirements, which called for five certified operators. The government maintained that the staffing requirement applied to contract performance once the contract was awarded, but that it did not apply during the evaluation process that led to the contract award.
The Court noted that the interpretation of RFP requirements is subject to the same legal principles that inform the interpretation of contracts. These principles recognize the need to interpret documents based on their objective rather than subjective meaning, and to rely on the entire document and relevant surrounding circumstances to help inform those interpretations:
It is important to remember the principles regarding interpretation of contracts. In IFP Technologies (Canada) Inc. v EnCana Midstream and Marketing, 2017 ABCA 157, the court dealt with the interpretation of a contract and stated at para 79:
I now turn to a brief overview of the applicable principles of contractual interpretation. The goal of contractual interpretation is to determine the objective intent of the parties at the time the contract was made through the application of legal principles of interpretation: Sattva, supra at para 49. To this end, “the exercise is not to determine what the parties subjectively intended but what a reasonable person would objectively have understood from the words of the document read as a whole and from the factual matrix”: Geoff R. Hall, Canadian Contractual Interpretation Law, 2nd ed (Markham: LexisNexis, 2012) at 33 [Hall]. Accordingly, disputed contractual terms must be interpreted, not in isolation, but in light of the contract as a whole: Tercon Contractors Ltd. v. British Columbia (Minister of Transportation & Highways), 2010 SCC 4 at para 64, [2010] 1 S.C.R. 69.
Further in IFP Technologies, the court discussed the importance of surrounding circumstances in interpreting contracts and stated at para 83:
Determining what constitute properly surrounding circumstances is a question of fact. As to what is meant by surrounding circumstances, this consists of “objective evidence of the background facts at the time of the execution of the contract … that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting”: Sattva, supra at para 58. Examples of relevant background facts include: (1) the genesis, aim or purpose of the contract; (2) the nature of the relationship created by the contract; and (3) the nature or custom of the market or industry in which the contract was executed: Sattva, supra at paras 47-48; Geoffrey L. Moore Realty Inc. v. The Manitoba Motor League, 2003 MBCA 71 at para 15, 173 Man R (2d) 300; King v. Operating Engineers Training Institute of Manitoba Inc., 2011 MBCA 80 at para 72, 270 Man R (2d) 63; Ledcor, supra at paras 30, 106. Ultimately, the surrounding circumstances can include “absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man”: Sattva, supra at para 58, citing Lord Hoffman in Investors Compensation Scheme Ltd. v. West Bromwich Building Society (1997), [1998] 1 WLR 896 (UKHL).
In applying those interpretive principles to the RFP, the Court determined that the complainant had misinterpreted the RFP when it mistakenly argued that proponents had to prove that they met the staffing requirements during the evaluation process when in fact the RFP terms only required that those requirements be met after award during contract performance:
I find Aquatech’s submission that H2O had to have had five certified in house operators at the time of the bid would be contrary to common sense, business acumen and the realities of managing the facilities in question. The AEP was committed to maximizing the benefit to the province. Public entities have a responsibility to taxpayers to obtain services at an economical rate. Obtaining an economical rate will often only be possible if there is competition and competing suppliers of services. Aquatech clearly had an advantage in that it had been supplying the services for the previous 16 years. To require other bidders to have employees hired in Alberta with Alberta certification at the time of the Proposal would be commercially unworkable even for corporations large enough to undertake the endeavours in question. Such a prerequisite would likely eliminate corporations such as H2O who had no prior contracts in Alberta. This would significantly undermine the ability for competition between water management companies in Alberta and would make it much more difficult for the minister to “maximize the benefit to the province.” This could not have been the AEP’s intent.
Aquatech recognized the absurdity of requiring other bidders to hire certain resources before obtaining the contract. It argued that H2O did not necessarily have to hire the five resources prior to being awarded the contract; it would have been sufficient if it had contacted these five individuals so as to be able to provide their names in Attachment #2 to Appendix C. However, this would be contrary to a plain reading of mandatory requirement #1, which specifically states that the proponent have at least five in house resources. If, as Aquatech suggests, H2O need only have contacted five individuals, they would not have been in house resources at the time of the proposal, as is clearly required by the mandatory requirement. The mandatory requirement #1 would only make sense if the five resources need not be in house at the time of the bid. This then is consistent with an interpretation that the names of the five in house resources need not be provided at the time of the bid, so long as the proponent can satisfy the AEP that it would have these five in house resources at the time the services were being provided. Such an interpretation would be consistent with good business sense.
The Court therefore dismissed the challenge, finding that the government had properly accepted a compliant winning proposal.
As this case illustrates, when drafting RFP requirements, purchasing institutions should be careful to clearly distinguish pre-award mandatory evaluation requirements from post-award mandatory performance requirements since ambiguities relating to the timing of compliance can give rise to interpretive battles over whether those requirements were properly enforced at the right stage of the process.
