This article is an extract from the 5th edition of Government Procurement.
In recent years the Canadian courts have started playing a more interventionist role in judicially reviewing the procurement decisions made by public bodies. This increasing interventionism represents one of the most significant recent legal developments in the Canadian procurement system, highlighting the significance of administrative law principles as a source of checks-and-balances in the Canadian government procurement system.
For example, in its September 2017 decision in Grascan Construction Ltd. v. Metrolinx, the Ontario Divisional Court rejected a judicial review challenge brought against a prequalification process by a rejected contractor. The case dealt with a $125 million express rail project. The contractor was disqualified for failing to provide the required audit letter confirming that its company had appropriate conflict of interest and ethical bidding practices in place. The contractor argued that it was provided insufficient time to meet the requirements and that the new audit rules favoured larger contractors. The court disagreed and rejected the challenge after finding that the prequalification process did not give rise to a judicially reviewable duty of fairness and, even if it did, on the merits the decision of Metrolinx to disqualify the applicant was reasonable.
Further, in its June 2018 decision in Interpaving Limited v. City of Greater Sudbury, the Ontario Divisional Court found that the City of Greater Sudbury breached its fair process duties when it failed to provide advanced notice to Interpaving Limited (“Interpaving”) prior to barring the contractor from future contracts. However, the majority of the court ruled that the municipality cured that initial process breach through a subsequent reconsideration.
As the court summarized, Interpaving had a 40-year track record performing work for the municipality, with contracts valued at up to $19 million annually and a workforce that fluctuated seasonally from 200 to 400 staff. The municipality decided to debar Interpaving for four years because the contractor had initiated litigation against the municipality and also violated health and safety legislation, both of which were recognized grounds for debarment under the relevant municipal by-law. The municipality alleged that Interpaving had breached health and safety standards, and Interpaving then took a position against the municipality in the Ministry of Labour safety violation proceedings. The municipality further alleged that Interpaving abused the contract change processes and threatened municipal staff and inspectors.
After receiving the initial debarment letter, Interpaving met with municipal officials and sought a rescission of the municipality’s debarment decision. The municipality ultimately directed Interpaving to seek a reconsideration and to make written submissions in response to the issues raised in its debarment letter. After considering the responses provided by Interpaving, the municipality issued a reconsideration letter, which confirmed that the municipality had taken Interpaving’s submissions into account but had decided to maintain its original debarment decision. Interpaving then brought a court application challenging its debarment.
As an initial finding, the court determined that neither the municipality’s by-law debarment rules nor its specific debarment decision breached applicable open competition obligations under the trade treaties. However, the court also found that the municipality’s debarment decision was subject to procedural fairness and determined that the municipality’s failure to provide advanced notice to Interpaving prior to making the debarment decision breached its due process duties.
However, notwithstanding the initial breach of its procedural fairness duties, and notwithstanding challenges by Interpaving regarding the admissibility of evidence in subsequent discussions between the parties prior to the municipality’s reconsideration decision, the court found that the municipality ultimately cured its original procedural defects through its reconsideration process since Interpaving was given the opportunity to address the initial grounds of debarment.
In support of the conclusion that the municipality had cured its initial procedural defect, the court noted that Interpaving was provided ample opportunity to respond to the grounds on which the original debarment decision was made. The court concluded that the process followed by the municipality after the initial debarment letter constituted “a bonafide reconsideration” of the debarment decision, which “cured the initial lack of procedural fairness in the City’s failure to give notice” by providing Interpaving with an opportunity to make submissions prior to the final reconsideration of the debarment decision. The court also concluded that “the City’s actions after delivery of the Debarment Letter satisfied the requirements for procedural fairness in respect of the Debarment Decision.”
In its January 2019 decision in B&G Sprinklers Ltd. v. Her Majesty the Queen, the Court of Queen’s Bench of New Brunswick rejected a losing bidder’s judicial review challenge after finding that the challenge was raised after the relevant limitation period. While the court recognized that the government’s contract award decisions were subject to legal challenge under the statutory and regularity framework established in New Brunswick, the court also ruled that those challenge rights were subject to a three-month limitation period and that the bidder failed to file its claim within that period. The action was therefore dismissed before the merits of the challenge to the evaluation process could be considered.
However, in its January 2019 decision in Leading Edge Geomatics Ltd. v. Service New Brunswick, the Court of Queen’s Bench of New Brunswick recognized the right to challenge government evaluation decisions under applicable statutory frameworks, finding that the government was not immune from judicial review challenges to its procurement processes. The dispute dealt with a request for proposals issued by Service New Brunswick (“SNB”) for aerial surveying services. A losing respondent brought a judicial review challenge, alleging that the evaluation and award process was conducted in an unfair manner and seeking to strike down the contract award. The court ultimately concluded that the government’s evaluation process was reasonable. As the court stated “SNB, at all material times, fulfilled the requirements of fairness and transparency in the procurement process” and that “all prospective bidders received the same RFP documents and information”. The court also noted that the complainant’s pricing was “exorbitantly high” and that “the evaluation committee gave appropriate credit to both the applicant and respondent in both the technical portion of the evaluation and the pricing portion.” In so ruling, the court found that “SNB meets the threshold of justification, transparency and intelligibility” and the judicial review challenge was therefore dismissed on the merits of the case.
Further, in its January 2019 decision in Murray Purcha & Son Ltd. v. Barriere (District), the British Columbia Court of Appeal determined that the District of Barriere did not breach its tendering duties in the evaluation and award of a contract. The case dealt with a non-Contract A request for proposals (“RFP”) for winter road maintenance services. A losing bidder brought an application for judicial review, challenging the validity of the evaluation and award process.
The Court of Appeal ruled that the RFP 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 ruled that even if no Contract A was created to give rise to a lost profit claim, government procurement decisions remain subject to two different standards of review under administrative law. As the Court of Appeal determined, procedural decisions are subject to the strict standard of procedural correctness, whereas substantive decisions are subject to a more deferential reasonableness standard.
As the Court of Appeal concluded, “there are two standards of review at play in this judicial review proceeding: correctness for the question of procedural fairness and reasonableness on the merits of the municipality’s decision, including intermediate decisions made in assessing the proposals.”
In assessing the non-Contract A RFP, the Court of Appeal determined that “there is no suggestion that the procedures set out in the RFP were inherently flawed or unfair to the proponents.” Rather, the Court of Appeal found that “the general procedure to be adopted by the District in reviewing the proposals has elements that are clear, unambiguous and unqualified” and that proponents “could legitimately expect that the District would follow these general procedures before making a decision on the road maintenance contract.”
In other words, the municipality was subject to procedural correctness in how it administered its RFP process. The Court of Appeal also stated that if “this process was followed equally for all proponents, the District’s duty of procedural fairness would be met” and that any “remaining questions relating to the substantive fairness of the decisions made by the District would be reviewable on the deferential standard of reasonableness.” The Court of Appeal concluded that the municipality followed the procedures set out in the RFP.
Although, like the lower court, the Court of Appeal found that the winning proponent’s indirect disclosure of its pricing outside of the sealed price was inappropriate and, had this been a Contract A RFP, could have required the rejection of the bid as non-compliant, it determined that the acceptance of that proposal did not result in a procedural breach on the part of the municipality.
The Court of Appeal then turned to the municipality’s substantive evaluation and award decision, which was subject to a more deferential reasonableness standard. While the applicant argued that the evaluation decision fell outside the acceptable bounds of reasonableness, the Court of Appeal disagreed and deferred to the evaluation decision.
The Court of Appeal therefore dismissed the appeal, stating that “I am satisfied that the proponents were treated fairly in this process. The decision reached is supportable on the facts and the law.” As this case illustrates, while public institutions can conduct their competitive bidding processes without creating the Contract A process contract, and thereby avoiding exposure to a lost profit claim, those institutions remain subject to potential judicial review challenges whereby losing proponents can seek procedural relief that could include non-monetary remedies such as a re-evaluation order or the quashing of a contract award. However, to win an administrative law remedy, an applicant must convince the court that the contract award decision was procedurally or substantively unsound, which it failed to do in this case.
Conversely, in its June 2019 decision in Wauzhushk Onigum Nation v. Minister of Finance (Ontario), the Ontario Divisional Court, ruled that the government institution’s decision to proceed to tender and its contract scoping decisions were policy and commercial decisions that were not subject to judicial review. The dispute dealt with decisions made by the Ontario Lottery and Gaming Corporation to privatize casino operations and award those outsourced contracts pursuant to competitive bidding processes. A member of a bidding consortium brought a judicial review application, challenging a series of internal decisions relating to that bidding process. However, the court ruled that the decisions of the provincial government and the agency regarding the privatization of casino operations were policy decisions that were not subject to judicial review. Furthermore, the court ruled that the scoping decisions that bundled the contract opportunities together for award were commercial decisions that were also beyond the scope of judicial review. Finally, the court ruled that even if those decisions were justiciable, they did not breach any procedural fairness duties owed to the applicant. The complaint was therefore dismissed.
However, in its July 2019 decision in Independent Contractors and Businesses Association v. British Columbia (Transportation and Infrastructure), the Supreme Court of British Columbia rejected a summary dismissal application after ruling that the provincial government’s decision to limit work on a government construction contract to unionized labour remained subject to legal challenge by way of judicial review. The dispute dealt with a request for qualifications issued by the Minister of Transportation and Infrastructure for British Columbia for the Pattullo Bridge Replacement Project. The solicitation required that contractors source their labour exclusively from B.C. Infrastructure Benefits Inc., a Crown corporation that, in turn, directed that work to the unions affiliated with the Allied Infrastructure and Related Construction Council of B.C. through a collective bargaining agreement referred to as a “Community Benefits Agreement”.
The applicants legally challenged this process, seeking a declaration that the labour restrictions were an unreasonable exercise of the Minister’s statutory power and infringed the Canadian Charter of Rights and Freedoms. The government brought a motion to dismiss the case. However, while the court found that the decision in question was shielded from challenge under the provincial Judicial Review Procedure Act, it remained subject to challenge under the general judicial review powers of the courts, whereby the courts can review the contracting decisions of government institutions when the exercise of statutory power is involved and impacts the public interest.
The case was therefore allowed to proceed to determine the reviewability and defensibility of the government’s decision to impose labour restrictions on the public infrastructure projects and to determine whether the court should strike down those restrictions as invalid. In its August 2020 ruling, the British Columbia Court of Appeal agreed that the government’s decision was subject to common law judicial review under the constitutional powers of the courts. The Court of Appeal also overruled the trial court and ruled that the government’s decision was also subject to review under the Judicial Review Procedure Act. Further, the Court of Appeal determined that the courts, and not the Labour Relations Board, had the jurisdiction to rule on the issue.
As this case illustrates, attempts by public purchasing institutions to impose limits on competition remain subject to legal challenge in various forms, which can include judicial review challenges based on the statutory or common law review powers of the courts. Purchasing institutions should therefore tread carefully before imposing requirements that unnecessarily restrict competition.
Further, in its March 2021 decision in Pomerleau Inc. v. The Province of New Brunswick, the New Brunswick Court of Queen’s Bench struck down the government’s decision to disqualify a $65 million hospital project bid over an insurance certificate requirement. The requirement in question called for an insurance certification letter from a “New Brunswick resident agent of an insurance company” but the government rejected the certificate since the agent did not have a physical office in the province.
The complainant brought an application for judicial review seeking to quash that disqualification, maintaining that the government was inconsistent in interpreting the residency rule for insurance agents since it had previously accepted the complainant’s insurance certificate from the same insurance company in a prior bidding process. The court agreed, finding that the government acted unreasonably and that the decision to reject the insurance certificate raised “concerns of subjective, arbitrary and inconsistent decision-making that may offend the principle of the rule of law.”
However, in its July 2022 decision in GCT Canada Limited Partnership v. Vancouver Fraser Port Authority, the Federal Court of Canada dismissed a judicial review application after finding that the Vancouver Fraser Port Authority (“VFPA”) was operating within its commercial decision-making authority and was not biased in its decision to reject a current operator’s proposed port expansion project.
The VFPA’s decision was partially based on the rationale of not granting any single company more than 60 percent of the container handling capacity at the Vancouver Port. The applicant argued that this decision reflected on inherent structural bias on the part of the VFPA decision-makers given their dual role as operators and regulators of the port lands. The court disagreed, finding that the decision fell within the discretion granted to VFPA for making commercial decisions under the governing legislation that established the institution’s dual role as regulator and operator of the lands in question.
The court rejected the applicant’s assertions that the VFPA was biased in setting the 60-percent limit for container business. The court also rejected the applicant’s claim that the lack of documentation in support of the final decision was further evidence of bias. Noting that the decision-makers had deliberated on the project for around five years, the court ruled that as a commercial operator VFPA’s decisions were not held to the same level of record-keeping that would be expected from other public institutions. While the court agreed that the VFPA breached the procedural fairness duties owed to the applicant in its initial rejection decision, it ultimately ruled that the VFPA cured that breach through its subsequent reconsideration of the matter.
The court ultimately found no bias in the VFPA’s decision-making and ruled that the institution operated within its jurisdiction when it reconsidered and affirmed its original decision to reject the project. As this case illustrates, institutions that are charged with running commercial operations under statutory powers will not necessarily be held to the same standards as other public institutions. The fairness duties that apply to a public institution’s decision-making will vary based on the statutory powers granted to that institution and based on the nature of the specific decisions that it is mandated to make under those powers.
Finally, in its January 2023 decision in Transdev Canada Inc. v. York (Regional Municipality), the Ontario Superior Court of Justice – Divisional Court dismissed a judicial review application after finding that the applicant failed to provide evidence in support of its arguments. The case dealt with the award of a contract pursuant to a competitive bidding process for the operation of a public transit system in the Region of York. The second-ranked bidder challenged that award, arguing that the winning bidder should have been disqualified due to the inclusion of a subcontractor in its bid. The court disagreed, noting that the applicant’s bid would have been disqualified as well had the solicitation rules prohibited the incorporation of subcontractors in the bid documents. While the applicant argued that the procurement process breached the fair process provisions in the Canadian Free Trade Agreement, the court found no evidence to support these allegations and found no breaches of the rules set out in the specific tender call document. The court concluded that the contract award decision was reasonable and dismissed the application.
As these cases illustrate, the scope of government procurement judicial review challenges remains a complex and situation-specific question of fact and law and is subject to ongoing jurisprudential evolution. While the overall trend appears to be moving toward more oversight and judicial intervention, this trend is not absolute, and open questions remain regarding the scope of judicial review in government procurement decisions.
