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Factors to consider during the tendering process

Case Study: Aquatech Canadian Water Services v Alberta (Minister of Environment and Parks)

Howard Borlack
Howard Borlack,
Partner

May 2020

by Howard Borlack

This appeal concerns the tendering process used by Alberta Environment and Parks to solicit bids for a contract for the operation, monitoring and servicing of water and wastewater services in the Kananaskis Region. Aquatech Canadian Water Services Inc. (“Aquatech”), the unsuccessful bidder, appealed a judicial review application in the Court of Queen's Bench.1 H2O Innovation Inc. (“H2O”) was the successful bidder.

This case highlights three important factors to consider during the tendering process: mandatory requirements, discretion clauses and remedies. First, let's discuss an overview, before we dive deep.

Overview of tendering in Canada: Contract A and Contract B

The Supreme Court of Canada2 has outlined the tendering process.

An owner, the party requesting the bids for a project, makes two offers. The first offer is to consider the bids it receives. The second offer is to enter into a contract to complete the project when a bid is accepted.

Contract A is formed when a bidder accepts the first offer by submitting a bid that complies with the requirements in the tender documents (i.e. a request for proposal). This contract is governed by the express and implied terms of the tender documents.3 To protect the integrity of the tendering process, the owner is required to strictly follow the requirements set out in the tender documents and they have an implied obligation to treat all bids fairly equally, and only accept a compliant bid.4

Contract B is formed once a bid is accepted. This contract, to complete the project between the owner and the successful bidder, is governed by the terms of the tender documents and the bid documents.

Factor 1: Consider the mandatory requirements in the request for proposal

In this case, 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.

Aquatech made two arguments:

  1. The request for proposal required bidders to provide the names of the certified operators. H2O's proposal failed to comply because it did not list these names.

  2. Alberta misinterpreted its own request for proposals as not containing this mandatory requirement and as allowing it to waive any requirement to provide the names.

H2O's bid provided an organization chart and information about how it deals with staffing and recruiting. H2O exceeded the requirements in the request for proposal by providing a list of nine staff “currently available” for this project and their qualifications. H2O also represented that it would have the requisite staffing in place to perform the contract.

The chambers judge concluded that H2O's bid was compliant. It agreed with H2O 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 them.5 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.

Takeaway No. 1
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.6 This does not breach any obligation of fairness owed to other bidders.7

There is no duty on an owner to investigate the representations made by a bidder. An owner is entitled to rely on the representation so long as the representations comply with the bid.8

Discretion clauses: waiving minor irregularities and noncompliance in bids

In the alternative, the chambers judge held that if the H2O bid was noncompliant for failing to provide specific names of five certified operators when the bid was made, Alberta could waive the noncompliance and accept H2O's bid.

A discretion clause in the request for proposals permitted Alberta to “waive an irregularity or noncompliance with the requirements of this [request for proposal] where the irregularity or noncompliance is minor or inconsequential.”

The chambers judge found that H2O's proposal was substantially compliant because H2O made a commitment to have the required staffing by the time the services were to be performed and

  1. providing names was not necessary for Alberta to evaluate bids
  2. providing a commitment, but no names, was not unfair to other bidders, and
  3. the lack of names would have no impact on the bid price or the nature of work to be completed.

Takeaway No. 2
To protect the integrity of the tendering process, a discretion clause permits an owner to waive mandatory requirements only if, on an objective assessment, the bid is substantially compliant, and the noncompliance is minor.

The degree of compliance will depend on the following factors: the conditions of tender, matters affecting fairness to other bidders, impact on price and work in relation to the overall bid price and nature of work.9

This suggests that a case-by-case analysis is best when evaluating the extent of irregularities and compliance.

Remedies for bidding disputes

Instead of suing Alberta for breach of contract, Aquatech applied for judicial review of the award of the contract to H2O. Aquatech assumed they did not have a remedy in contract law because Contract A, the request for proposals contained a clause limiting Alberta's liability.

The chambers judge found Alberta's decision to accept H2O's bid reasonable in accordance with Dunsmuir v New Brunswick, 2008 SCC 9. The court did not consider whether it was proper for Aquatech to seek judicial review of Alberta's, a public body, award of the contract to H2O since Alberta did not cross-appeal on the question.

Takeaway No. 3
There are several different approaches to resolving bidding disputes, including breach of contract, injunctions or judicial review. There are also alternative dispute resolution methods such as mediation and arbitration.

The Court of Appeal decided this case without expressing a view as to the availability of judicial review as a remedy with respect to the bid process for contracts involving a public body.

It is important to remember that judicial review is not an alternative to suing for breach of contract. The key difference is that you cannot reargue your case or seek damages as part of judicial review. The purpose of judicial review is to determine if and whether a public body had the authority to make a decision fairly.
  1. Aquatech v Alberta (Minister of Environment and Parks), 2019 ABQB 62 (Reasons).
  2. The Queen in Right of Ontario v Ron Engineering & Construction (Eastern) Ltd, 1981 CanLII 17 (SCC), [1981] 1 SCR 111.
  3. Double N Earthmovers Ltd v City of Edmonton and Sureway Construction of Alberta Ltd, 2007 SCC 3 at para 2.
  4. Martel Building Ltd v Canada, 2000 SCC 60 at para 88; Everest Construction Management Ltd v Strathmore, 2018 ABCA 74 at para 2; MJB Enterprises Ltd v Defence Construction (1951) Ltd, 1999 CanLII 677 (SCC), [1999] 1 SCR 619 at para 42.
  5. Reasons paras 61 and 26.
  6. Double N Earthmovers.
  7. Double N Earthmovers at paras 42-43.
  8. Everest Construction at para 30.
  9. Reasons at para 75.

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