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Judge rules city was correct to disqualify contractor's bid for sidewalk and traffic project

A Thunder Bay contractor took the city to court after its bid was returned unopened because of litigation over a previous contract
Thunder Bay courthouse evening
The Thunder Bay Courthouse

THUNDER BAY —A Superior Court judge ruled that the City of Thunder Bay acted appropriately when it rejected a local company's bid for a sidewalk and traffic rehabilitation contract without even opening it.

At the time the city issued a tender call for the work in February 2015, it was in litigation with a general contractor over a previous municipal project.

Nonetheless, the contractor dropped off its bid submission for the new job in a sealed envelope at the city's Supply Management counter, where a clerk initialled a time-stamped slip and attached it to the envelope.

The package, however, remained unopened, and was returned to the company later the same day along with a letter from the city advising that its submission was rejected pursuant to a city by-law.

The by-law specifies that the manager of supply management will maintain a disqualified bidders list containing the names of contractors from which no bids will be accepted by the city — including those "who have performed poorly (or not at all) in past contracts or who are involved in litigation with the corporation related to past contracts."

Neither the by-law nor the existence of a disqualified bidders list was specifically referenced in the tender document.

The city ultimately awarded the contract to one of two other local bidders, both of which had submitted higher bids than the company that was disqualified.

After a lawsuit claiming damages was filed against the city, the two parties agreed to have the issue of the city's liability determined first, and that if a court found the city liable, a second trial would be held to determine damages.

The matter was heard in June of this year, and Justice John Fregeau's reasons for judgment were released in September.

The contractor argued that it is settled in law that the submission of a compliant bid, rather than the opening of the bid, marks the acceptance of an offer and requires the requesting party to consider it.

It contended that once the city physically accepted its bid, the city waived its right to rely on its reprisal policy, and further submitted that there was no reference to the policy in the tender documents themselves, nor was there any basis to find that the reprisal policy was an "implied" element of the bidding process.

City argued that all contractors dealing with the city should be aware of its reprisal policy 

The city maintained that municipal by-laws bind everyone within a municipality, that everyone is obliged to take notice of them, and that a municipal corporation cannot waive the requirements of its own by-laws.

It submitted that the restrictions found in the reprisal policy reflect municipal policy, which is in the public domain, and ought to have been known to every contractor dealing with the city.

The by-law and the reprisal policy, the city said, therefore form part of the tendering process and by implication part of the invitation-to-tender package.

The court rejected the argument that the reprisal policy was an express element of the process, noting that in the tender documents the Disqualification of Tenders section omits any reference to the reprisal policy as a ground for disqualification. 

But Fregeau did find that the policy constituted an implied term of contract, based on the presumed intention of the two parties.

In his reasons for judgment, the judge said jurisprudence has clearly recognized the uniqueness of the tendering process, "a process in which fairness and integrity are of paramount importance and in which the courts have consistently recognized an implied duty on the part of the owner to treat all bidders fairly and equally, and to accept only compliant bids."

He said the by-law clearly expresses the intention of the city in mandatory terms, which is that bids shall not be accepted from contractors involved in active litigation with the city.

"Failing to recognize the reprisal policy as an implied requirement ... in circumstances where the disqualified plaintiff's bid was physically accepted due to a clerical error and returned unopened the same day ... would unfairly place the disqualified bidder on an equal footing with the two other qualified bidders," he stated.

"It would also be unfair to other disqualified bidders who did not submit a bid because of the reprisal policy. Such an approach would undermine the business efficacy of the tendering process."

Gary Rinne

About the Author: Gary Rinne

Born and raised in Thunder Bay, Gary started part-time at Tbnewswatch in 2016 after retiring from the CBC
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