In a recent Alberta Court of Appeal decision, a water services company was unsuccessful at challenging the award of a contract to another company after it claimed that the successful bidder had not complied with the tender process requirements.

Water Services Company Challenges Award of Contract

At issue was the tendering process used by the Alberta Minister of Environment and Parks to solicit bids for a contract for the operation, monitoring and servicing of water and wastewater services in the Kananaskis Region.

The Minister had set out a public tendering process with a Request for Proposal in order to award the contract. The contract was for a period of five years and involved 13 facilities.

Alberta’s request for a proposal included provisions requiring bidders to have at least five in-house certified operators with Level 1 to perform the services required under the contract.

The water services company had held the contract for 16 years previous to this, but the contract was awarded to another company in 2018, after the water services company bid unsuccessfully and lost the tender process.

The water services company did not sue Alberta for breach of contract but instead applied for judicial review of the award of the contract to the other company.

It argued that the tender process required bidders to provide the names of the certified operators and that the other company’s proposal failed to comply because it did not list these names. Additionally, the water services company claimed that Alberta had misinterpreted its own request for proposals as not containing this mandatory requirement and as allowing it to waive any requirement to provide the names.

Finally, the water services company argued that the other company had not complied with this mandatory requirement in the request for proposals and that Alberta could not waive the noncompliance, which would mean that Alberta’s decision to award the contract to the other company breached its obligation in Contract A with the water services company to only accept compliant bids.

The other company conceded that it did not provide specific names of proposed operators, but argued this was not required by the request for proposal.

Lower Court Rejects Judicial Review Application

The chambers judge conducted an analysis of the request for proposals and concluded that the other company’s bid was compliant. Specifically, he held that the relevant provision did not require bidders to have five in-house certified operators at the time they submitted their bid, nor did it require them to name five such operators. Instead, the chambers judge found that bidders could comply with the mandatory requirement by undertaking to Alberta in their proposals to have five in-house certified operators at the time the services were to be performed.

In the alternative, the chambers judge held that if the other company’s bid was noncompliant for failing to provide specific names of five certified operators at the time the bid was made, Alberta could waive the noncompliance and accept the bid.

The water services company appealed.

Court of Appeal Upholds Lower Court Decision

The court began by explaining the legal framework governing the tendering process in Canada as set out by a Supreme Court of Canada decision in 1981 as follows:

“The party requesting the bids is referred to as the “owner”. When the owner requests submissions of bids for a project, it makes two offers: to consider the bids it receives and to enter into a contract to complete the project when a bid is accepted. A bidder accepts the first offer by submitting a bid that complies with the requirements in the tender documents (in this case, the request for proposal). This is referred to as Contract A and is governed by the express and implied terms of the tender documents […]. Once a bid is accepted, the contract to complete the project between the owner and the successful bidder is known as Contract B, which is governed by the terms of the tender documents and the bid documents.

To protect the integrity of the tendering process, an owner is required under Contract A to strictly follow the requirements set out in the tender documents. The owner also has an implied obligation to treat all bids fairly and equally, and only accept a compliant bid […].”

The court also explained that, depending on the language of the tender documents, an owner can accept a bid that commits to comply with a mandatory condition in the tender documents; to do so does not breach any obligation of fairness owed to other bidders.

The court then reviewed the other company’s bid and found that it had provided an organization chart and information about how it deals with staffing and recruiting. It had also provided a list of nine names and their qualifications which exceeded the requirements in the request for proposal. Finally, it also represented that it would have the requisite staffing in place to perform the contract.

The court concluded that the chambers judge was correct in finding that the other’s company’s proposal was substantially compliant because it had made a commitment to have the required staffing by the time the services were to be performed. Additionally, the court agreed with the chambers judge that providing names was not necessary for Alberta to evaluate bids, that providing a commitment, but no names, was not unfair to other bidders, and that the lack of names would have no impact on the bid price or the nature of work to be completed.

As a result, the appeal was dismissed.

Get Advice

DBH Law recognizes that there continues to be a concern in Alberta and abroad about the spread of COVID-19. We have implemented several measures to reduce the risk and impact to our employees, clients and the community-at-large.

Please be aware that we are prepared to initiate business continuity protocol for remote work and communications. It is our priority to ensure business continuity for our clients while ensuring the safety of our people. We recognize that the outbreak of COVID-19 is an unprecedented situation globally and we wish to assure you DBH Law is equipped and prepared to maintain and continue business services to our clients during this pandemic.

The knowledgeable Calgary construction lawyers and staff at DBH Law understand the complex risks of both multimillion-dollar and smaller construction projects and the expensive disputes that can arise when something goes wrong in all cases. We handle all elements of a construction relationship. We can proactively advise and help draft important documents such as contractor and subcontractor agreements and similar, to make expectations clear and eliminate as much risk as possible. We can also represent you in any litigation or other dispute resolution that may be needed if a dispute arises.

The team of professional and experienced construction lawyers at DBH Law have the experience and technical knowledge to provide you with the legal advice needed in the modern construction industry. We understand the number of moving pieces involved in construction projects and work tirelessly to resolve issues quickly. Contact us online or by phone at 403.252.9937 to discover how we can help you today.