On July 1, 2018, the Construction Lien Act became the Construction Act (the “Act”). The transition rules of section 87.3 have been discussed in earlier issues of this newsletter. This article will focus solely on the issue of when a procurement process, as referred to in the transition rules, should be considered to have been commenced for the purposes of s. 87.3(1)(b).
Section 87.3 provides as follows:
Transition, Construction Lien Amendment Act, 2017
87.3 (1) This Act, as it read immediately before the day subsection 2 (2) of the Construction Lien Amendment Act, 2017 came into force, continues to apply with respect to an improvement if,
(a) a contract for the improvement was entered into before that day, regardless of when any subcontract under the contract was entered into;
(b) a procurement process, if any, for the improvement was commenced before that day by the owner of the premises; or
(c) the premises is subject to a leasehold interest, and the lease was first entered into before that day.
Examples, procurement process
(2) For the purposes of clause (1) (b), examples of the commencement of a procurement process include the making of a request for qualifications, a request for proposals or a call for tenders.
While the Act gives three examples of a procurement process, requests for qualifications, requests for proposals and calls for tender, it stops short of defining the term. Other Acts do define the term. The Fairness in Procurement Act, 2018, S.O. 2018, c. 4, s. 1, for example, provides as follows:
“procurement process” means a process in which a purchaser selects a supplier with which to enter into a procurement contract, other than a process initiated by a Government entity or broader public sector entity for the procurement of goods and services intended for commercial sale or resale.
“Procurement contract”, in turn, is defined in that Act as:
a contractual or commercial arrangement for the acquisition by a purchaser of goods or services from a supplier, through purchase, rental, lease or conditional sale, or by otherwise conferring value or a benefit on the supplier.
However, the law is clear that since the meaning ascribed to a particular term in a statute is always coloured by the legislative context in which that definition appears, it is inappropriate to simply use a definition from another statute: see Ontario (Ministry of Community Safety & Correctional Services) v. Ontario (Infor-mation & Privacy Commissioner), 2009 CarswellOnt 8321 (Div. Ct.); Apache Canada Ltd. v. Johnson, 2005 ABCA 71.
When a word is not defined by the governing statute, the plain and ordinary meaning of the term should be applied: Ontario (Ministry of Labour) v. United Independent Operators Ltd., 2011 ONCA 33.
It has been said that:
In the construction industry, “procurement” can be broadly defined as the acquisition of project resources for the realization of a constructed facility or project… In other words, procurement involves the selection of bidders for each portion of the work of a construction project who are qualified, competitive, interested in performing the work, and capable of doing the work within the project time requirements. The ultimate goal of the procurement endeavor is to secure the successful bidders under contract and direct them to commence the work”: American Bar Association, Forum on the Construction Industry, The Annotated Construction Law Glossary (Chicago: ABA Publishing, 2010).
While that is a useful and accurate description of the term, it does not clarify when the procurement process commences.
In the international trade context, the Canadian International Trade Tribunal has consistently taken the view that a procurement process for the purposes of free trade agreements commences after an entity has decided on its requirements and continues up to and including contract award: Atlantic Catch Data Ltd. v. Department of Public Works and Government Services, 2018 CarswellNat 1927. Again, though, that is based on statutory definitions elsewhere and therefore not directly applicable. Article 1017(1)(a) of NAFTA provides that the procurement process "begins after an entity has decided on its procurement requirement and continues through the contract award."
Section 87.3(2) provides that “the making of a request for qualifications, a request for proposals or a call for tenders” are examples triggering the commencement of the procurement process. Even on projects where an owner makes a request for proposals, however, it is at least arguable that the procurement process began well before the RFP, potentially even as early as the planning stage, perhaps when the owner requested a feasibility study from a consultant. While that might seem far-fetched, the Government of Canada, for example, does consider the procurement process to start in the planning phase. The Government of Canada website sets out the phases of the procurement phase (https://buyandsell.gc.ca/for-government/buying-for-the-government-of-canada/the-procurement-rules-and-process/phases-of-the-procurement-process):
Phases of the Procurement Process
Table of Contents
- Pre-contractual phase: Planning
- Contracting phase: Bidding and awarding of contract
- Contract management phase: After the contract is awarded
- Postcontract phase: Close out, warranty and audit
The website also provides a description of the planning, pre-contractual phase:
Pre-contractual phase: Planning
Includes activities related to requirement definition and preliminary procurement planning up to issuance of bid solicitation. During this phase, various activities may arise such as:
- Verify the requisition form for goods and services, the funding and the security requirements
- Review the require-ment and analyze options
- Verify the statement of work
- Identify environmental performance considerations
- Choose the appropriate procurement instrument
- Verify the Intellectual Property Considerations
- Develop the procure-ment strategy
- Review the non-com-petitive justification
- Review the evaluation criteria
- Develop the solicitation document
- Determine the appro-priate contractor selec-tion methodology
- Approval of the procurement process
Based on that understanding, the procurement process would commence long before the actual “making” of the RFP or call for tender. Again, the Construction Act stipulates that the “making of the RFP” may commence the process, but the Act does not say that it automatically does on every project where it occurs.
There is much to be said for a more restrictive reading of the Act. The examples given in s. 87.3(2) are all readily ascertainable by the participants in the project. The more expansive reading would lead to a scenario in which it would be impossible for anyone but the owner to know which Act applies. However, had it been the intention to always link the commencement to one of those s. 87.3(2) events, the drafters of the Act could have provided for that outcome.
The Act provides that the commencement of a procurement process, if any, triggers the application of the old Act. Given the potentially expansive interpretation of a “procurement process”, what about an owner who picks up the phone to informally get prices from two contractors for a home renovation project? Does that qualify as a “procurement process”? If so, there would be very few projects indeed without a procurement process, but again, it is at this point arguable that those calls commenced the process.
What of a situation in which five bidders respond to a call for tenders, but all come in over budget? After negotiations with the lowest bidder fail, the owner invites the three lowest bidders to rebid on slightly modified bid documents under a new bid call, as per CCDC-23. Which tender call commenced the procurement? Arguably, the second call for tenders with its revised scope could be in respect of a different “improvement” for the purposes of the Act, making the second call the relevant one. Again, though, there is at least room for argument.
While the answers to all these issues will have to await determination by the courts, until there is clarity and guidance from the courts, the prudent course for lien claimants and their counsel will be to preserve and perfect liens as if the old Act, with its stricter time frames, applies.