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CCCA_V3No2_Col-McCarthys-FIN.qxd:CCCA_V1No2_Col-Litigat-V1.qxd 4/28/09 11:54 AM Page 37 Procurement in the mist Legal Update – McCarthy Tétrault LLP The troubling implications of an imminent challenge to the tender process. he boundaries of Ontario law regarding one minute late? Check. Unfair because a “potential bidders”? What duty of care T“fairness”in formal tender processes are bid was disqualified for being one minute does the commission owe to Mr.Windsor? about to be tested. On February 26, 2009, late? Check and mate.) It is an unwritten, Why is a public body’s alleged failure to Atlanta businessman William M. Windsor unlegislated contractual legal obligation adhere to its procurement policy more filed an application in the Ontario on the sponsor to be equitable, and signif- appropriate for court intervention than Superior Court seeking an order setting icant damages ― direct and consequential any other alleged failure of public policy? aside the renewal by the Niagara Parks ― can result if there is a breach in preju- Policy is not a contract, nor is it legisla- Commission of the contract with the Maid dice of a bidder. tion. Running afoul of one’s own guide- of the Mist Steamboat Company. Still,notwithstanding that heavy burden lines arguably should have political and The application alleges that the commis- (accompanied by the rise of consultants, public relations repercussions. But it sion has breached an obligation to hold a “fairness commissioners” and anticipatory should not have legal repercussions unless mandatory tender.The obligation’s alleged litigation analysis), the tender process there is a duty of care, or special relation- source? The commission’s own internal remains the best way to procure services in ship, as there is with invited bidders. policy.(Windsor v.Maid of the Mist Steamboat a manner that maximizes the benefits of Such a decision would extend the “fair- Company, Limited and the Niagara Parks an organized competitive process. ness” tent pole from how to run a procure- Commission, Ont. SCJ: DC 09-105JR). The trouble I have is that engaging in a ment process to when you must run a pro- For most corporations, a formal and tender process is a business decision: the curement process.The target here, optical- sophisticated procurement process has applicant in the Maid of the Mist case ly, is legitimate, since this is a public insti- become a modern reality. The tender wants that to be enshrined.Windsor seeks tution with public funds.The target next process,wherein a“sponsor”makes a tender a mandatory order requiring the commis- time may be a widely traded,publicly held for competitive offers from selected “bid- sion to adhere to a corporate policy to call corporation.The logic of the “unfairness” ders,” is an innovative commercial tool, but for tenders when the services at issue are to potential bidders is the same: the inter- it has potential legal consequences. worth $100,000 or more. He wants a nal guidelines of a big company, the argu- Bid/tender law in Canada is fraught crack at the Niagara Falls tourism business ment goes, equally create a pre-tender with a subjective moral quality unlike and alleges that the commission, by vio- fairness obligation to “potential bidders” dynamics seen elsewhere in contract law. lating its own policy, has committed a for all the sponsor’s service needs. Once a sponsor seeking procurement of “breach of its duty of fairness to potential While the Maid of the Mist application goods and services launches a tender, it has bidders.” Talk about taking the law over is in its early stages, it has already drawn a contractual obligation of “fairness and the falls in a barrel. national media attention because it strikes equality” to all invited bidders (the Now, the policy cited contains an at a public concern, stronger these days metaphoric “Contract A” established by exception for procurement requirements more than ever, that due process ought to the Supreme Court in R.v.Ron Engineering where “there are very limited or special- triumph over favouritism.That is the noble and Construction (Eastern) Ltd. (1981), 119 ized vendors, suppliers or bidders” who goal at the heart of procurement law.But it D.L.R. (3d) 267. have the “highly specialized knowledge or must be achieved without sacrifice of the The “equality” obligation is subject to expertise,”and“continuity and experience legal constructs that give it legitimacy. some graspable metrics — for example, that will benefit [the commission].” The uniform bid analysis or an accessible respondent will likely argue that the ven- Awanish (Awi) Sinha is a partner in Request for Information process. But the erable Maid of the Mist operation fits in McCarthy Tetrault’s Litigation Group in its “fairness” part is the springboard for a that carve-out. Toronto office.His practice includes commercial lit- body of tender process complaints limited But the underlying principle is trou- igation, bid/tender and procurement law, and only by the disgruntled bidder’s imagina- bling: even without the exception clause, project/finance litigation. He likes the Canadian tion. (Unfair because a bid was accepted why is the commission legally bound to side of the Falls better. (asinha@mccarthy.ca) ÉTÉ 2009 CCCA Canadian Corporate Counsel Association 37