Grascan Construction Ltd v Metrolinx should be viewed as a cautionary case for contractors when bidding on public projects. In Grascan Construction Ltd v Metrolinx, the court dismissed the contractor’s application for judicial review of a decision by the two public sponsors of a new infrastructure project to disqualify a bidder for failure to abide by the RFQ rules. The decision thoroughly discusses the applicable standard of review and the duty of fairness owed to RFQ participants.
The facts of this case involve the Ontario government’s commitment to funding the improvement of transit infrastructure in Southern Ontario. This transit improvement program was to be delivered by Metrolinx over a ten-year period. The Lakeshore – East Corridor Expansion project (the “Project”) is one of the many projects under this program.
On March 22, 2017, Ontario Crown agencies, Metrolinx and Ontario Infrastructure and Lands Corporation (“OI”) (collectively, the “Sponsors”), issued an open market Request for Qualifications (“RFQ”) to build and finance the Project. The Project RFQ process was intended to identify prequalified parties to participate in the request for proposals (“RFP”) process.
The applicants, Grascan Construction Ltd. (“Grascan”) and Torbridge Construction Ltd. (“Torbridge”), were part of a team called Lakeshore East Corridor Infrastructure Partnership (“LIP”) that filed a submission for the Project RFQ process.
One of the requirements in the RFQ process was for each applicant to obtain an accounting firm letter (“AFL”) by the submission deadline. The AFL was designed to identify possible unethical bidding practices, including failures to disclose conflicts of interests. Because this AFL requirement was relatively new, all Project RFQ applicants had the ongoing opportunity to submit questions regarding the requirements of the AFL or to request an extension of the Submission Deadline during the open-market period for the Project RFQ. However, the Project RFQ gave the Sponsors the general right to disqualify an Applicant “…at any time and in their discretion… without incurring any liability for costs and damages incurred by the Applicant… in the event that the Applicant… (iii) fails to comply with a requirement prescribed by Section 4.4 [the AFL requirement]”.
Although LIP obtained a letter from Deloitte LLP (“Deloitte”) advising that the AFL was in progress, LIP ultimately failed to provide the AFL by the submission deadline. As a result, the Sponsors disqualified LIP’s prequalification submission from the Project RFQ and did not consider their submission for its technical and financial attributes.
LIP brought an Application to quash the Sponsors’ decision, alleging that the Sponsors breached their Duty of Fairness. LIP argued that the Sponsors had not insisted on the AFL in prior projects and that by refusing to exercise their discretion to waive the AFL requirement, the Sponsors’ effectively permitted only the largest construction companies to compete for the Project.
The Sponsors argued that the Application should be dismissed as the Project RFQ clearly stated that a failure to include an AFL was grounds for disqualification, and that the applicants failed to request an extension of the submission deadline. Furthermore, the Sponsors argued that if the relief sought were to be granted, this would prejudice the integrity of the Project RFQ process.
In dismissing the Application, the Court considered the following issues:
- Was the Sponsors’ decision subject to judicial review?
- If so, what was the standard of review?
- Did the Sponsors owe a duty of fairness to LIP and if so, has LIP proven that the Sponsors breached that duty and/or that the Sponsors’ decision was unreasonable?
- Was LIP estopped from seeking judicial review?
- Should relief be denied on the basis of prejudice?
In determining whether or not LIP’s submission was subject to judicial review, LIP relied on s. 2(1)1 and 2(1)2 of the Judicial Review Procedure Act, R.S.O. 1990, c. J.1 (“JRPA”). With respect to s. 2(1)2 of the JRPA, which allows an application for judicial review to be brought for an exercise of a statutory power, the Court relied upon Midnorthern Appliances Industries Corp v The Ontario Housing Corp. (1977), 17 OR (2d) 290, for the proposition that not all decisions made by entities created by statute can be reviewed by a court. The Court then stated that LIP had failed to identify any specific right or power in Metrolinx or OI’s enabling statutes prescribing how the Sponsors were to make policy decisions regarding the requirements of the Project RFQ, nor how they were to make disqualification decisions. The Court did not accept that the broadly worded objectives of each Crown agency could be used as the basis for a judicial review of their decision to reject LIP’s submission.
LIP also relied upon s. 2(1)1 of the JPRA, which allows for, inter alia, the common law remedy of certiorari for administrative decisions of a public nature. LIP relied on Martineau v Matsqui Institution Inmate Disciplinary Board, [1980] SCR 602 at p 628 and Bot Construction Ltd v Ontario (Ministry of Transportation) (2009), 99 OR (3d) 104 (“Bot Construction”) for the authority that Certiorari is available as a general remedy to supervise the machinery of governmental decision-making.
With respect to the application of s. 2(1)1 of the JPRA on the facts presented, the Court distinguished the authorities relied upon by LIP stating that they either dealt with a formal consultation process prior to the launching of the request for proposals or the actual bid process, calling for tenders, or request for proposals. It found that each of those situations was distinguishable from the prequalification RFQ process. The Court then considered the dicta in Hub Excavating Ltd v Orca Estates Ltd, 2009 BCCA 167, where the British Colombia Court of Appeal stated that “[t]here is no free-standing duty of fairness in the bidding process independent of [the] contractual duty [arising on the formation of Contract A]”.
Ultimately, the Court accepted that the “weight of authority supports the position of the Sponsors that no duty of fairness arises at the stage where potential bidders are prequalified” and concluded that it could not judicially review the Sponsors’ decision. Nevertheless, the Court continued to consider the balance of the application.
The Court stated that had the Sponsors’ decision been subject to judicial review, it would have been assessed under the standard of reasonableness since the “challenge made by the LIP applicants is not really one of procedural fairness in that the Sponsors followed the process set out in the Project RFQ.”
Despite the Court finding that the proper standard of review was that of reasonableness, the Court considered the arguments made by LIP with respect to a breach by the Sponsors’ duty of procedural fairness. Ultimately, the Court rejected LIP’s argument that only large construction companies were able to meet the RFQ requirements, stating that obtaining an AFL was not a matter of financial resources. Rather, the Court found that LIP was slow in providing the information that Deloitte requested, and that Deloitte was being diligent in requesting information from LIP. Furthermore, the Court found that even if LIP was not given enough time to obtain an AFL, they remained silent and did not advise the Sponsors of their concerns, nor did they ask for an extension of the Submission Deadline. With respect to LIP’s argument that in their past experience with the Sponsors, they were not required to prepare an AFL, the Court stated that “to allow the position of the LIP applicants to prevail would mean that the Sponsors in situations like this would have to consider what each of the applicants might be thinking the Sponsors might do in light of their own unique experiences rather than relying on the clear language of the Project RFQ.” The Court found that in any event, the Sponsors did not breach any duty of fairness and that their decision was reasonable.
With respect to the Sponsors’ argument that LIP was estopped from seeking judicial review, they relied upon a declaration from Grascan’s President and Chief Operating Officer, which stated, among other things, that “any omission or failure to substantially comply with a requirement included in the RFQ Documents may result in the Project RFQ Prequalification Submission being disqualified.” The Court found that this argument was supportive of its conclusion that the Sponsors did not breach any duty of fairness owed to LIP and that the Sponsors’ decision was reasonable.
Finally, the Court considered the Sponsors’ argument that relief should be denied on the basis of prejudice to the other compliant RFQ applicants. The Court emphasized that it was not necessary to consider this issue, however, that it agreed with the Sponsors that the compliant parties “would have a good complaint if the applicants were prequalified even though they did not comply with all the terms of the Project RFQ.”