COURT OF APPEAL RESTATES GENERAL PRINCIPLES OF PUBLIC CALLS FOR TENDERS

 In Non classifié(e)

By Geneviève Claveau

In the recent decision Ville de Montréal c. EBC inc., 2019 QCCA 1731, the Court of Appeal confirmed a judgment of the Superior Court condemning the City of Montreal, Borough of St-Laurent (the “City”) to pay EBC a sum of $1,550,000 for lost profits following a public call for tenders (EBC inc. c. Ville de Montréal, 2017 QCCS 5480).

In February of 2013, the City issued a public call for tenders for the construction of a $50 million sports complex. The contract was to be awarded to the bidder with the lowest compliant tender. The tender documents contained a “Evidence of Proficiency” clause.

In April 2013, the City proceeded to open the four tenders received. EBC’s tender came in second place, behind that of Unigertec. A few days later, EBC wrote to the City’s procurement agent to express its surprise at the result, given that, in its opinion, Unigertec had very little experience as a general contractor.

The City then realised that the evidence of proficiency provided by Unigertec in support of its tender was insufficient. The procurement agent thus demanded that it produce a list of finished and ongoing projects, with the finish dates, and to specify which of these were LEED projects. Unigertec provided in response a document listing seven projects, six of which were ongoing. One of the projects was undertaken in conformity with the LEED Gold certification. The most significant one was for $8,062,735.

On June 20, 2013, the contract was awarded to Unigertec. The City decided to disregard the “Evidence of Proficiency” clause on the basis of an opinion prepared by its legal department which suggested that the tender documents did not contain any disqualifying criterion pertaining to the bidder’s experience.

On appeal, the City submitted that the clause in question was not a mandatory requirement. In this context, the Court of Appeal took the opportunity to restate the general principles applicable to public calls for tenders:

  1. A public body must reject any tender containing a material irregularity. However, it retains discretion with respect to minor irregularities. A material irregularity is a “failure to comply with an essential or substantial requirement of the call for tenders” affecting the equality between the bidders and the integrity of the process (Tapitec inc. v. Ville de Blainville, 2017 QCCA 31, par. 18-19).
  2. The test for determining whether a requirement set out in tender documents is mandatory is that of Tapitec inc. c. Ville de Blainville, 2017 QCCA 317: (a) is the requirement of public order? (b) do the tender documents expressly indicate that the requirement is an essential element? and (c) if both questions are answered negatively, does the requirement, in light of uses, implicit obligations and the parties’ intention, convey an essential or an ancillary element to the call for tenders?
  3. With respect to the third point (c), the reasonable understanding and conduct of the bidders may be considered to determine whether a requirement is mandatory. However, one should first look at the intention expressed by the offeror in the context of the call for tenders.
  4. This context consists of the nature, scope and circumstances of the project, other clauses in the tender documents which could contain a mandatory requirement, as well as uses in public calls of tenders and the offeror’s conduct.
  5. Public interest considerations can also factor in, i.e. proper administration of public funds, transparency, equity and equality amongst bidders and the quality of the goods, services or construction work to be provided by a bidder with the established proficiency and experience to contract.
  6. Public interest therefore goes beyond the mere question of price. It requires that bidders have the ability, expertise and solvency required to carry out the contract. Guaranties are not sufficient in this regard, considering that the industry is vulnerable to infiltration by organized crime, as was demonstrated by the 2015 Report of the Commission of Inquiry on the Awarding and Management of Public Contracts in the Construction Industry.
  7. While acting on the basis of a legal opinion can be an indication of good faith, it cannot exempt the City from liability in an action for damages, as same requires the demonstration that the public body incorrectly accepted a non-compliant tender, to the detriment of the lowest compliant one.

In this case, the Court of Appeal considered that the trial judge did not commit an overriding and palpable error in finding that the “Evidence of Proficiency” clause of the call for tenders was a mandatory requirement and that failure to comply therewith was a material irregularity that should have resulted in Unigertec’s tender being rejected. In addition, the Court found that the City had violated the principle of equality between bidders by choosing not to apply the requirement without notifying the other bidders or the public.