Monday 6 May 2013

Procedural Fairness in Public Procurement

Public procurement is governed by a plurality of legal regimes. Statutes, regulations, international law and common law all have a say. Norms are enforceable by judicial review and (somewhat more lucratively) in private actions. Given the pluralistic nature of legal regulation of public procurement, it is unsurprising that norms associated more with public law have seeped into the private law framework. A recent Canadian example is Entreprise P.S. Roy inc. c. Magog (Ville de), 2013 QCCA 617.
Here, Magog had issued an invitation to tender for snow removal contracts. One of the clauses in the tender documents provided that:
Pour être admissible à l'adjudication du contrat, un soumissionnaire, ainsi que tout sous-traitant qu'il associe à la mise en œuvre de sa soumission, ne doit pas avoir, dans les cinq dernières années, fait l'objet d'une résiliation de contrat par une municipalité pour cause de non-respect des obligations prévues par le contrat.
La période de cinq ans est calculée à compter de la date de la fin du contrat telle qu'établie par les documents d'appels d'offres de la municipalité, peu importe la date de résiliation du contrat.
La résiliation peut avoir fait l'objet d'une décision judiciaire ou non.
The long and short of this clause is that an interested party would not be eligible to bid if any of its contracts in the previous five years had been terminated by a public authority. This occurred in the case of the party awarded the snow-removal contract. The second-placed party took legal action.

Kasirer J.A. held that the clause was unlawful because it penalized parties for terminations which they might not have been in a position to control:
[54]        Par contre, je suis d'avis que le critère choisi par la municipalité pour s'assurer de la fiabilité des soumissions est inadéquat. La clause 2.12 a essentiellement pour effet d'exclure un soumissionnaire potentiel sur la base d'une décision unilatérale d'un autre organisme public, sans égard aux circonstances ayant mené à la résiliation du contrat et sans que l'entreprise ait eu l'occasion de se faire entendre au préalable.
In the instant case, the termination in question was one taken unilaterally, at the discretion of a different public authority. Crucially, the interested party had no opportunity to contest the termination in question:
[56]        Se fier à cette résiliation unilatérale pour exclure des soumissionnaires potentiels, sans qu'ils aient eu l'occasion de s’expliquer au moment de la résiliation, ne permet pas de jauger réellement la fiabilité du soumissionnaire comme futur contractant...
[57]        La clause 2.12 porte ainsi démesurément atteinte au droit de contracter des soumissionnaires avec la Ville de Magog. En définitive, la clause 2.12 contrevient au principe d'égalité d'accès aux marchés publics en établissant une condition d'exclusion fondée sur un critère arbitraire.
To put this language in public law terms, the lack of procedural fairness in the termination decision meant that the decision could not reasonably be relied upon by other public authorities as evidence of unfitness to carry out public contracts.

For a more complete rundown of the decision, see this post by Martin Boodman (McCarthy Tetrault).

2 comments:

  1. Very interesting Paul. From a comparative perspective the courts here in South Africa have not been particularly consistent regarding procedural fairness in procurement matters. While it is generally accepted that the award of a public contract amounts to administrative action and thus (possibly) attract rules of procedural fairness, it is much less clear whether the cancellation of a public contract also amounts to administrative action and thus subject to procedural fairness rules. In some cases, such as Logbro Properties NO v Bedderson NO (http://www.saflii.org.za/za/cases/ZASCA/2002/135.html) the Supreme Court of Appeal held that where the contract was entered into using public power, i.e. not on equal footing, cancellation would still attract rules of procedural fairness. In other cases, however, such as Government of the RSA v Thabiso Chemicals (http://www.saflii.org.za/za/cases/ZASCA/2008/112.html) the same court held that cancellation of a public contract was not subject to administrative law rules. At para 18 the judge stated: "I do not believe that the principles of administrative law have any role to play in the outcome of the dispute. After the tender had been awarded, the relationship between the parties in this case was governed by the principles of contract law."

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  2. Thanks, Geo.

    Those cases are also interesting. One would think that, with the common law's traditional solicitude for the individual, protections would be *greater* once a contract had been awarded.

    The preference for oversight of the award process suggests that the courts are interested more in ensuring good governance than in vindicating individual interests.

    Perhaps the "rights-based approach" does not quite enjoy the primacy its proponents claim for it!

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