In the recent decision of Interpaving Ltd. v. The City of Greater Sudbury (2018 ONSC 3005), the Ontario Superior Court of Justice Divisional Court reaffirmed the right of a public institution to debar the bid of a private contractor, where the contractor has a history of poor performance of contracts or a history of litigation with the purchaser.
The Divisional Court found that a public institution, such as a municipality or a Crown corporation, has the same right as any business person to decide with whom it will do business.
Interpaving is a roadwork company. Regularly involved in projects for the City, Interpaving had developed a reputation for poor performance on its contracts, evidenced by the receipt of several stop work orders and its abuse of the change order mechanism. Interpaving and the City were also involved in litigation resulting from the death of a pedestrian; though it was the constructor running the worksite, Interpaving argued that the City was responsible for the death. Finally, there was also evidence that Interpaving demonstrated abusive or threatening conduct in its dealings with the City.
In light of these problems, the City issued a bylaw, allowing it to exclude bids from eligibility when submitted by a bidder involved in litigation with the City, or where there was evidence of the bidder’s poor performance of contracts or abusive conduct.
The City informed Interpaving by letter of the decision to debar bids. Subsequent meetings and written requests for reconsideration sent by Interpaving did not result in a change of City policy.
Faced with exclusion from bidding on the projects of a major provider of work, Interpaving instituted legal proceedings seeking to invalidate the bylaw. It argued that the City did not have the power to enact such bylaws, and that the decision to debar Interpaving was not procedurally fair nor reasonable.
The Divisional Court declared the bylaw to be valid, enacted in good faith in accordance with the City’s powers. It recognized that ongoing litigation could have a negative effect on the parties’ working relationship, such that the City was justified in seeking to avoid doing business with a party prone to litigation or with a documented history of poor performance of contracts.
Regarding procedural fairness, the Divisional Court found that the City’s failure to send formal notice of its bylaw to Interpaving constituted a breach of procedural fairness; however, this breach was resolved by the City’s reconsideration of its initial decision to debar Interpaving – even though that reconsideration did not lead to a change of policy.
Finally, the Divisional Court found the City’s decision to be reasonable, affirming the City’s right to rely on events that pre-dated the issuance of the bylaw, including poor-performance of contracts and abusive behaviour on the part of Interpaving, as well as its involvement in litigation with the City.
Public institutions can take some comfort in the Divisional Court’s decision allowing public institutions to conduct business as any other business person. Bidders should be mindful of conditions imposed during the bidding process, but, depending on the situation, may be protected by procedural fairness requirements and considerations.
Should you have any questions regarding bid-barring policies or situations, lawyers from the construction litigation team at MLT Aikins are available to provide counsel and advice to address your needs.
This article first appeared in Build Manitoba, a publication of the Winnipeg Construction Association.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.