Matthew DiBerardino, Summer Student
Overview & Facts
In Aquatech Canadian Water Services Inc v. Alberta (Minister of Environment and Parks), 2020 ABCA 153, Aquatech was an unsuccessful bidder that participated in an Alberta Minister of Environment and Parks request for proposal process. The RFP process was undertaken by Alberta to award a contract for the “operation, monitoring and servicing of water and wastewater facilities in the Kananaskis region of Alberta.” Aquatech brought an application for judicial review of Alberta’s decision to award the contract to H2O Innovations Inc. Aquatech claimed that H2O’s RFP response failed to comply with a mandatory requirement of the RFP that, in accordance with the principles of Canadian tendering law, could not be waived by Alberta. The specific mandatory requirement of the RFP at issue was the requirement that bidders “have at least five in-house certified operators with Level 1 to perform the services under the contract.” H2O did not expressly provide the names of its certified operators that would be assigned to complete the contract works in its RFP response. However, the Court of Appeal of Alberta upheld the lower Court’s decision that H2O’s RFP response was both: (i) compliant with the mandatory provision of the RFP, and (ii) substantially compliant with the RFP provisions such that the Owner could waive the minor irregularity pursuant to an included discretion clause.
Application for Judicial Review, Award of Public Water Management Contract
Aquatech chose to apply for judicial review because the tender documents included a liability limitation clause that may have limited Aquatech’s ability to bring an action for breach of contract. Generally, judicial review is “only available where there is an exercise of state authority and where that exercise is of a sufficiently public character”: Highwood Congregation of Jehovah’s Witnesses (Judicial Committee) v. Wall, 2018 SCC 26, para 14. Where a public body makes a decision that is largely private in nature, it still may be brought within the purview of public law if it is “coloured with a [sufficient] public element, flavour or character”: Air Canada v. Toronto Port Authority, 2011 FCA 347, para 60. Notably, the Alberta Court of Queen’s Bench held that Alberta’s procurement of the water management contract satisfied the Wall criteria and was subject to judicial review. After determining that “the decision-makers in this case were government employees acting for the AEP who was acting as an agent for the Crown”, the court held that “the procurement of [the operation of water treatment plant] services takes on a public dimension that may not be present in other forms of contract between the government and other private concerns”: Aquatech v. Alberta (Minister of Environment and Parks), 2019 ABQB 62, paras 19, 25. The Alberta Court of Appeal did not comment on the availability of judicial review as the issue was not cross-appealed by Alberta (Aquatech Canadian Water Services Inc v. Alberta (Minister of Environment and Parks), 2020 ABCA 153 at paras 13–14).
Contract A, Mandatory Compliance – Double N Earthmovers Exception
Contract A requires, inter alia, that the owner must not accept a bid that is not compliant with the terms of the tender documents: MJB Enterprises Ltd v. Defence Construction (1951) Ltd,  1 SCR 619. However, the Supreme Court of Canada in the 2007 decision of Double N Earthmovers Ltd v. Edmonton (City), 2007 SCC 3, created an exception to the strict compliance requirement. The Double N Earthmovers exception effectively stipulates that, unless otherwise expressly stated in the tender documents, a bid will be deemed compliant with a mandatory provision of the tender documents where it “commits to comply with [that] mandatory condition in the tender documents.” This exception is based on the proposition that “the nature of the bidding process… represents a commitment to comply with what is bid” (Double N, para. 42). Therefore, depending on the language of the tender documents, a bidder may comply with a tender requirement at the time of tender by including in its bid a representation that it will comply with the requirement at the requisite time.
In Aquatech, H2O did not expressly name which licenced operators would be dedicated to the contract work in its RFP response. However, H2O provided “an organization chart and information about how it deals with staffing and recruiting” and “a list of nine names and their qualifications which exceeded the requirements in the request for proposal.” The court held that in providing this information and representing that “it would have the requisite staffing in place to perform the contract”, H2O had committed to comply with the mandatory condition of the RFP documents. Thus, H2O’s bid was compliant with the RFP documents under the strict compliance exception from Double N.
Contract A, Mandatory Compliance – Discretion Clauses & Substantial Compliance
Notwithstanding the overarching mandatory tender compliance imposed by Contract A, many owners will include in their tender documents a discretion clause. Discretion clauses generally stipulate that the owner will have the right to waive minor errors, omissions or irregularities in a bid. Discretion clauses are generally upheld as valid where the allegedly non-compliant bid is substantially compliant: Steelmac Ltd v. Nova Scotia (Attorney General), 2007 NSSC 156. A non-compliant bid will be substantially compliant if, objectively, it does not deviate from the mandatory requirements of the tender documents in a material way: Graham Industrial Services Ltd v. Greater Vancouver Water District, 2004 BCCA 5. As an example, some considerations that ought to be evaluated when determining whether a non-compliance is objectively material are: (i) whether the non-compliance gives the non-compliant bidder an unfair advantage over other bidders, (ii) whether the non-compliance truly matters, (iii) the language of the relevant provisions of the tender, and (iv) the degree to which the bid is non-compliant.
In Aquatech, Alberta’s tender documents included a discretion clause which stated that Alberta could “waive an irregularity or noncompliance with the requirements of this [RFP] where the irregularity or noncompliance is minor or inconsequential.” The court held that H2O’s bid was substantially compliant and that Alberta was justified in waiving the minor non-compliance. In so doing, the court rightfully considered “the conditions of tender, matters affecting fairness to other bidders, impact on price and work in relation to the overall bid price and nature of work”. H2O’s bid was substantially compliant because its RFP response committed to staffing the project in accordance with the RFP documents and the failure to allocate specific licenced operators to the contract was not unfair to other bidders and did not affect the bid price or nature of the work.
Although the Court of Appeal for Alberta ultimately held that H2O’s failure to specify which of its listed licenced pump operators would be assigned to the project was not a material and substantial non-compliance, this is not a rule that can be applied universally. In completing an objective analysis for material bid non-compliance, reference must always be made to the underlying facts and tender provisions. For example, where tender documents include a privilege clause, an owner is permitted to take a more nuanced view of project cost than just the bottom-line price. In such a case, a failure to provide specific names and qualifications of key project personnel may be found to be a substantial and material non-compliance. In Aquatech, the project team members at issue were Level I Certified Water and Waste Wastewater Operators as prescribed by the regulations of the Environmental Protection and Enhancement Act, R.S.A. 2000, c. E-12. The court effectively held that employing one licenced operator on the project over another would not have an impact on work in relation to the nature of the work. On many projects, however, the specific individuals that populate the project management team are of critical importance to the project. Certainly not all project managers, superintendents, engineers, architects or other project leaders are identical. To avoid any undesired scrutiny over the compliance of one’s bid, bidders would do well to name specific intended project team members on their tender submissions where requested. Should an intended project team member become unavailable at some point after contract award, depending on the language of the contract, it is likely that a replacement could be installed with the consent of the owner.