As this article explains, while “non-binding” RFPs that operate outside of the Contact A tendering rules may not be subject to lost profit claims under common law remedies, those negotiated RFPs remain subject to fairness duties in public sector procurement.
The recent Ontario Court of Appeal decision in Canada Forgings Inc. v. Atomic Energy of Canada (Limited) dealt with a case that was a Contract A-based lost profit claim by a losing bidder that was dismissed by a trial court primarily due to the expiry of a limitation period where the trial court also ruled that Contract A was not created in that tendering process and therefore fairness duties did not apply in the context of seeking a lost profit remedy. However, this is not the same as saying that no fairness duties apply to public institutions based on administrative law rules.
While employing a “non-binding” RFP process may remove the lost profit remedy that would otherwise be available to losing bidders in court-based bid protests, a “non-binding” negotiated RFP structure does not preclude the specific application of trade treaty duties that apply to public institutions or the general administrative law duties and remedies that also apply to public institutions in their procurement processes. Simply stated, while public institutions can “contract out of” Contract A rules and related lost profit claims, they cannot “contract out” of the trade treaty and administrative law duties through the inclusion of terms and conditions in their solicitation documents. In fact, federal institutions remain subject to lost profit claims based on statutory remedies under the trade treaties, and like public institutions at all levels of government, remain subject to other procedural remedies under trade treaty enforcement mechanisms and court-based administrative law judicial review applications.
Existing case law clearly recognizes that fairness duties apply to a public procurement process under administrative law even in a “non-binding” tendering process that operates outside of the common law “Contract A” rules. This is evidenced by a decades-deep body of case law at the federal level developed by the Canadian International Trade Tribunal, which enforces trade treaty rules based on statutory remedies and administrative law principles, rather than under Contract A common law rules. Further, as noted above, in addition to any specific trade treaty enforcement mechanisms, public institutions at all levels of government remain subject to court-based judicial review challenges based on administrative law fairness duties.
For example, in its January 2019 decision in Murray Purcha & Son Ltd. v. Barriere (District), the British Columbia Court of Appeal ruled that a municipality’s “non-binding” RFP process did not create a Contract A contractual duty of fairness that would give rise to a commercial lost profit remedy claim by a proponent. However, the Court of Appeal also ruled that even if no Contract A was created to give rise to a lost profit claim, government procurement decisions remain subject to judicial review under administrative law, where fairness duties are applied by the courts irrespective of whether a tendering process creates Contract A. (see Judicial Review Recognizes Non-Contract A RFP)
Similarly, in its April 2015 decision in Rapiscan Systems Inc. v. Canada (Attorney General), the Canadian Federal Court of Appeal upheld a February 2014 Federal Court of Canada trial decision that struck down a contract award by the Canadian Air Transport Security Authority (CATSA) after finding that CATSA relied on hidden criteria to reject the complainant and award to the incumbent supplier. The RFP process was conducted without creating Contract A and was therefore not subject to a lost profit claim. However, the trial court granted the complainant’s judicial review application and voided the contract award due to the hidden technical standards relied on by CATSA when it rejected the complainant’s bid and awarded to the incumbent. (see Non-Contract A RFPs Subject to Judicial Review)
In more recent years the Canadian courts have started playing a more interventionist role in judicially reviewing the procurement decisions made by public bodies. The courts have the power to grant judicial review remedies to losing bidders in a public sector tendering process, including the power to order a re-evaluation, to void a contract award decision or to order that a contract be awarded to a successful complainant. In fact, in court-based challenges, judicial review is now superseding the more traditional enforcement mechanisms that have historically been based on the commercial law principles of Contract A that focused on lost profit remedies as the main court-based check-and-balance in the government procurement system. (see Recent Rulings Reflect Increasing Judicial Review Challenges)
