This article is an excerpt from the 2020 edition of The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its October 2019 decision in CG Acquisition Inc. v. P1 Consulting Inc., the Ontario Court of Appeal upheld the summary dismissal of a $150 million damages claim brought by a losing bidder in a negotiated Request for Proposals (RFP) process. The case dealt with an RFP for the Liquor Control Board of Ontario (LCBO) for the sale and subsequent redevelopment of land located along the Toronto waterfront. The plaintiff, CG Acquisition Inc., was an unsuccessful proponent that was disqualified during that RFP process. It brought the claim for damages against the LCBO, Infrastructure Ontario, and P1 Consulting Inc., arguing that all three defendants breached their duty of fairness by not including P1 Consulting Inc., the fairness monitor, in the reconsideration of the disqualification decision in the RFP process.
However, the lower court summarily dismissed the claim, finding that the fairness monitor was a consultant for the purchasing institutions and owed no duty to the proponents. Furthermore, the Court found that the RFP in question did not give rise to a Contract A tendering process and therefore could not be subject to a lost profit damages claim.
The plaintiff appealed the ruling, but the Ontario Court of Appeal dismissed that appeal. As the Court of Appeal noted, the appellant did not challenge the validity of its original disqualification, but instead challenged the decision not to reinstate it proposal after a reconsideration, and challenged the failure to include the fairness monitor in that reconsideration decision. However, as the Court of Appeal determined, there was no requirement to include the fairness monitor in the reconsideration decision, which was made after having received legal advice, since the fairness monitor was not a decision-maker or evaluator, and it had no authority to provide legal or quasi-legal advice:
The Sponsors chose to reconsider the disqualification based on the material provided by the appellant. The material was circulated to senior management and to P1. The Sponsors met to discuss the request for reconsideration and sought legal advice from outside counsel. No one from P1 attended those meetings.
On May 12, 2015, the Sponsors advised P1 that, based on their assessment and the legal opinion they had received, the Sponsors had decided they would not change the disqualification decision.
P1 subsequently reviewed the Sponsors’ decision to uphold the disqualification of the appellant. P1 indicated to the Sponsors that from a fairness perspective it concurred in the decision to maintain the disqualification. P1 did so only after receiving assurances that the Sponsors would take a consistent position moving forward in relation to other RFPs if the same issue arose again.
In considering the appellant’s submission that P1 was not sufficiently involved in the request for reconsideration, it is important to bear in mind that there was no relationship of any kind between P1 and the appellant. P1 contracted to provide fairness monitoring services to the Sponsors in accordance with the terms of an agreement. Under that agreement, P1 was to provide observations on fairness issues and an impartial opinion on the fairness of the procurement process. P1 had no decision-making power, no authority to provide legal or quasi legal advice, and no authority to evaluate in any way the merits of the various bids.
The Court of Appeal concluded that the reconsideration of the plaintiff’s disqualification had been conducted appropriately by the purchasing institutions after having sought legal advice, and that not having obtained the advice of the fairness monitor prior to making the reconsideration decision did not impact the fairness of that decision:
We agree with the motion judge (para. 95) that the reconsideration process was neither inadequate nor unfair. The appellant got exactly what it asked for – a reconsideration of the disqualification of its proposal based on the information provided in the affidavits forwarded to the Sponsors by counsel for the appellant. On the advice of external legal counsel, and no doubt out of concern to maintain the overall integrity of the procurement process, the Sponsors determined that the explanation offered by the appellant did not warrant a rescinding of the disqualification.
In our view, the fact that P1 did not opine on the fairness of the process in respect of the reconsideration of the disqualification before the Sponsors made their decision did not adversely affect the fairness of the process. The basis for the Sponsors’ decision had nothing to do with the process, but rather turned on the Sponsors’ assessment of the merits of the request for a reconsideration. In any event, P1 did agree with the Sponsors’ decision after receiving assurances that should the same situation arise in the future, the Sponsors would deal with it in the same way.
As this case study illustrates, project teams should be careful to properly define the roles and responsibilities of various members of their advisory team and should carefully adhere to the distinction between evaluators, decision-makers, procurement advisors, and legal advisors. While some purchasing institutions may elect to retain the services of fairness monitors to supplement their process, those services should be in addition to, and not a substitute for, obtaining appropriate procurement and legal advice in connection with their major procurement projects.
