This article is an extract from the 5th edition of Government Procurement.
In its June 2017 decision in ASI Group v. Toronto (City), the Ontario Superior Court of Justice upheld the City of Toronto’s decision to cancel and retender a project. The case dealt with a tender call for dive services. The municipality decided to cancel and re-tender the project upon discovering that it had failed to provide material background information to all bidders. The low bidder sued. The court rejected the lost profit claim, finding that the municipality was under a duty to cancel and re-tender the contract since the disclosure of missing material information, namely diving inspection reports, was necessary to maintain a level playing field between incumbent contractors and new bidders:
In the present case, I have no difficulty finding that the unavailability of previous diving inspection reports and the facility drawings was a legitimate concern that affected the integrity of the tender process. I make that finding for several reasons.
First, RFQ #1 provided that the previous diving inspection reports and the facility drawings would be available to the bidders for inspection. Relying upon the terms of the RFQ, two of the bidders requested the opportunity to review the previous diving inspection reports and the facility drawings. In response, the City undertook to provide these reports and drawings. Thus, the failure of the City to provide the reports and drawings undermines the integrity of the process as defined in the contract.
Second, the principal of ASI confirmed on his cross-examination that the water treatment facilities in Toronto were unique. Thus, knowledge of the facilities would be useful to the bidders’ task of making an effective bid. Moreover, it is logical and sensible to conclude that facility drawings and inspection reports regarding the facilities that were the subject of the RFQ would provide some knowledge that could assist the bidders in developing their bids.
Third, I also find that there was a legitimate concern that those bidders who had done work for the City in the past had a competitive advantage over those who had not, and that the competitive advantage would be greater if the facility drawings and inspection reports were not available.
The court also found that cancelling and retendering was fair in the circumstances even though the original low bidder’s bid price was disclosed to all bidders during the original bid opening:
Given these procedural concerns about the tender process, was it fair and reasonable for the City to cancel RFQ #1 and re-tender the project? I acknowledge that the course of action taken by the City caused ASI to lose some of its advantage over General because of the fact that the bids were read aloud. That is, at the close of RFQ #1 all parties were made aware of the quotations from all bidders with respect to all four parts of the contract. This knowledge, no doubt, was useful to the competition when the project was re-tendered.
However, the terms of RFQ #1 included a term that all bids would be read aloud. Therefore, all parties had agreed to that process when they submitted their bids. Further, I find that some of the loss alleged by ASI that was caused by having its bid read aloud is the loss of the competitive advantage that ASI unfairly enjoyed because of ASI’s prior experience with the City.
Overall, in my view, the cancellation of RFQ #1 and the re-tendering of the project made good sense. I note that in the case of Glenview Iron v. Smith Falls (Corporation), 2012 ONSC 5378, Hackland J. found that, given the concerns raised in that case, the re-tendering of the project was a reasonable course of action. At para. 27 Hackland J. wrote, “It has been observed that re-tendering can be seen as protecting the interests of all parties and as protecting the integrity of the tendering process.”
For all these reasons, I find that the City had the contractual right to cancel RFQ #1 pursuant to the terms of the tender contract. Further, I find that by canceling RFQ #1 and re-tendering the contract, the City treated the bidders fairly and equally. I find that the City has not breached its duty of fairness. Therefore, there is no liability on the City in this case.
As this case illustrates, the failure to address material disclosures can have significant adverse effects on the fairness of a tendering process. Purchasers would be well served to ensure that their original tender calls contain all required material disclosures since the ability to rectify these deficiencies downstream after bids are submitted is significantly restricted and may compel the cancellation of a bidding process and give rise to related legal challenges.
