Bot Construction Limited et al. v. Her Majesty the Queen in Right of Ontario (Ministry of Transportation)
99 O.R. (3d) 104
Ontario Superior Court of Justice,
Divisional Court,
Lederman, Karakatsanis and van Rensburg JJ.
August 28, 2009
Administrative law -- Judicial review -- Availability -- Government procurement decisions -- Decision of Ministry of Transport to award public road construction contract subject to judicial review -- Decision to award road construction contract in public tender constituting statutory power of decision -- Decision raising public law issues with respect to fairness, transparency and integrity of public tendering process for public roads.
Construction law -- Tenders -- Ministry of Transportation specifying that bids for public road construction contract had to be in strict compliance with contract drawings and that each bidder had to declare value of steel manufactured or fabricated outside Canada -- Successful bidder declaring that all steel would be Canadian made -- Design drawings specifying rolled steel beams -- Rolled steel beams not available in Canada -- Ministry's decision that bid was compliant not reasonable -- Bidders entitled to rely on specification of rolled steel beams in making their steel declaration as to Canadian content -- Ministry breaching its duty of fairness by accepting winning bidder's proposal during bidding process that welded steel could be substituted for rolled steel without putting other bidders on notice of that fact.
The applicant submitted the next lowest tender for a road- widening contract which was awarded by the Ministry of Transportation (the "MOT") to C Ltd. The applicant brought an application for judicial review of the MOT's tendering decision, submitting that the C Ltd. bid did not comply with the mandatory tender requirements that each bidder declare the value of steel "manufactured or fabricated" outside of Canada and that the bids be in strict compliance with the contract drawings. The applicant asserted that it was impossible to comply with the design specifications of the project without the use of imported steel and that although the tender specifications called for rolled steel beams that were not available in Canada, C Ltd. declared that all steel would be Canadian made. As a result, the applicant submitted that C Ltd.'s bid was non-compliant and that the MTO was required to disqualify the bid in compliance with Ontario's mandatory Procurement Directive and Procurement Operating Policy, as well as a pol icy to support domestic steel vendors. The MTO took the position that the government's tendering process is a commercial contract activity for which there is a private law remedy, that judicial review was not available and that the directive did not have the force of law.
Held, the application should be granted.
Whether judicial review of a public tendering decision is available will depend on whether and to what extent public interest issues are engaged. In this case, the MTO exercised a power of decision to award a road construction contract as part of the exercise of the Minister's broad general power for public roads construction conferred by the Public Transportation and Highway Improvement Act, R.S.O. 1990, c. P.50. The provisions of the statute displaced the prerogative [page105] powers of the Crown. The decision to award a road construction contract in a public tender is a statutory power of decision. This was not a purely commercial decision, governed only by private law. The decision raised public law issues with respect to fairness and transparency and the integrity of the public tendering process for public roads. The directive was not a regulation and did not have the force of law. However, it created and informed the MTO's duty of fairness in the procurement process. That duty was reviewab le by the court on an application for certiorari.
With respect to the issue of whether the MTO acted within its statutory powers and for proper and relevant considerations, the standard of review was reasonableness.
The evidence did not support the MTO's decision that C Ltd.'s bid was compliant, despite the fact that rolled steel beams were not available in Canada, because welded beams complied with the specifications. Rolled steel beams were specified in the design drawings. C Ltd.'s bid could not possibly comply with that mandatory requirement. The MTO's decision that the C Ltd. bid was compliant was not reasonable. The bid could not possibly comply with the specifications in view of C Ltd.'s declaration that it would be using only Canadian-sourced steel. The requirement of rolled steel beams was not a mere formality. Bidders were entitled to rely on that specification in making their steel declaration as to Canadian content. In finding the C Ltd. bid to be compliant notwithstanding that it failed to meet a specification for rolled steel beams and on the understanding that welded steel would be substituted, the MTO failed to fulfill its duty of fairness to all bidders. If rolled steel was no longer a specified requir ement, all bidders should have been put on notice of that fact and given an opportunity to revise their bids in light of that new information. The MTO's decision was quashed.
APPLICATION for judicial review of a decision of the Ministry of Transportation to award a road construction contract.
Cases referred to Shell Canada Products Ltd. v. Vancouver (City), 1994 115 (SCC), [1994] 1 S.C.R. 231, [1994] S.C.J. No. 15, 110 D.L.R. (4th) 1, 163 N.R. 81, [1994] 3 W.W.R. 609, J.E. 94-374, 41 B.C.A.C. 81, 88 B.C.L.R. (2d) 145, 20 Admin. L.R. (2d) 202, 20 M.P.L.R. (2d) 1, 46 A.C.W.S. (3d) 132; St. Lawrence Cement Inc. v. Ontario (Minister of Transportation) (1991), 1991 7108 (ON SC), 3 O.R. (3d) 30, [1991] O.J. No. 438, 50 B.L.R. 319, 26 A.C.W.S. (3d) 48 (Gen. Div.), consd Friends of the Oldman River Society v. Canada (Minister of Transport), 1992 110 (SCC), [1992] 1 S.C.R. 3, [1992] S.C.J. No. 1, 88 D.L.R. (4th) 1, 132 N.R. 321, [1992] 2 W.W.R. 193, J.E. 92-180, 84 Alta. L.R. (2d) 129, 3 Admin. L.R. (2d) 1, 7 C.E.L.R. (N.S.) 1, 31 A.C.W.S. (3d) 250; Ottawa-Carleton Dialysis Services v. Ontario (Minister of Health), [1996] O.J. No. 2721, 93 O.A.C. 82, 41 Admin. L.R. (2d) 211, 64 A.C.W.S. (3d) 1253 (Div. Ct.), distd Other cases referred to Ainsworth Electric Co. and Board of Governors of Exhibition Place (Re) (1987), 1987 4317 (ON SC), 58 O.R. (2d) 432, [1987] O.J. No. 89, 36 D.L.R. (4th) 299, 19 O.A.C. 216, 35 M.P.L.R. 56, 3 A.C.W.S. (3d) 39 (Div. Ct.); Baker v. Canada (Minister of Citizenship and Immigration), 1999 699 (SCC), [1999] 2 S.C.R. 817, [1999] S.C.J. No. 39, 174 D.L.R. (4th) 193, 243 N.R. 22, J.E. 99-1412, REJB 1999-13279, 14 Admin. L.R. (3d) 173, 1 Imm. L.R. (3d) 1, 89 A.C.W.S. (3d) 777; Bezaire (Litigation Guardian of) v. Windsor Roman Catholic Separate School Board (1992), 1992 7675 (ON SC), 9 O.R. (3d) 737, [1992] O.J. No. 1478, 94 D.L.R. (4th) 310, 57 O.A.C. 39, 8 Admin. L.R. (2d) 29, 34 A.C.W.S. (3d) 947 (Div. Ct.); Co-operative Housing Federation of Canada v. York (Regional Municipality), 2009 7081 (ON SCDC), [2009] O.J. No. 696, 247 O.A.C. 90, 58 M.P.L.R. (4th) 68, 89 Admin. L.R. (4th) 305, 81 R.P.R. (4th) 236 (Div. Ct.); [page106] Cougar Aviation Ltd. v. Canada (Minister of Public Works and Government Services), 2000 16572 (FCA), [2000] F.C.J. No. 1946, 264 N.R. 49, 26 Admin. L.R. (3d) 30, 101 A.C.W.S. (3d) 740 (C.A.); Delivery Drugs Ltd. (c.o.b. Gastown Pharmacy) v. British Columbia (Deputy Minister of Health), [2007] B.C.J. No. 2424, 2007 BCCA 550, 286 D.L.R. (4th) 630, 73 B.C.L.R. (4th) 261, 67 Admin. L.R. (4th) 121, 162 A.C.W.S. (3d) 63, 248 B.C.A.C. 163 [Leave to appeal to S.C.C. refused Ballem v. Delivery Drugs Ltd., [2008] S.C.C.A. No. 17]; Double N Earth Movers Ltd. v. Edmonton (City), [2007] 1 S.C.R. 116, [2007] S.C.J. No. 3, 2007 SCC 3, 275 D.L.R. (4th) 577, 356 N.R. 211, [2007] 3 W.W.R. 1, J.E. 2007-213, 68 Alta. L.R. (4th) 1, 401 A.R. 329, 28 B.L.R. (4th) 169, 58 C.L.R. (3d) 4, 29 M.P.L.R. (4th) 1, 153 A.C.W.S. (3d) 583, EYB 2007-112458; Dunsmuir v. New Brunswick, [2008] 1 S.C.R. 190, [2008] S.C.J. No. 9, 2008 SCC 9, 329 N.B.R. (2d) 1, 64 C.C.E.L. (3d) 1, 164 A.C.W.S. (3d) 727, EYB 2008-130674, J.E. 2008-547, [2008] CLLC Â220-020, 170 L.A.C. (4th) 1, 372 N.R. 1, 69 Imm. L.R. (3d) 1, 291 D.L.R. (4th) 577, 69 Admin. 4L.R. (4th) 1, 95 L.C.R. 65; Graham Industrial Services Ltd. v. Greater Vancouver Water District, [2004] B.C.J. No. 5, 2004 BCCA 5, 194 B.C.A.C. 1, 25 B.C.L.R. (4th) 214, 40 B.L.R. (3d) 168, 128 A.C.W.S. (3d) 69; Halifax Shipyard Ltd. v. Canada (Minister of Public Works and Government Services), [1996] F.C.J. No. 682, 113 F.T.R. 58, 63 A.C.W.S. (3d) 627 (T.D.); Hamilton-Wentworth (Regional Municipality) v. Ontario (Minister of Transportation) (1991), 1991 7099 (ON SC), 2 O.R. (3d) 716, [1991] O.J. No. 439, 78 D.L.R. (4th) 289, 46 O.A.C. 246, 49 Admin. L.R. 169, 45 C.L.R. 257, 34 M.V.R. (2d) 276, 26 A.C.W.S. (3d) 100 (Div. Ct.) [Leave to appeal to the Court of Appeal refused [1991] O.J. No. 3201, 4 Admin. L.R. (2d) 226n, 34 M.V.R. (2d) 276n, 28 A.C.W.S. (3d) 937]; Holy Cross Surgical Services v. Calgary Health Region, [2005] A.J. No. 1804, 2005 ABQB 760, 14 B.L.R. (4th) 95, 149 A.C.W.S. (3d) 414; Martineau v. Matsqui Institution Inmate Disciplinary Board (No. 1),[cf 41] 1977 4 (SCC), [1978] 1 S.C.R. 118, [1977] S.C.J. No. 44, 74 D.L.R. (3d) 1, 14 N.R. 285, 33 C.C.C. (2d) 366, 1 W.C.B. 204; Martineau v. Matsqui Institution Inmate Disciplinary Board (No. 2), 1979 184 (SCC), [1980] 1 S.C.R. 602, [1979] S.C.J. No. 121, 106 D.L.R. (3d) 385, 30 N.R. 119, 50 C.C.C. (2d) 353, 13 C.R. (3d) 1, 15 C.R. (3d) 315, 4 W.C.B. 178; NAC Constructors Ltd. v. Alberta Capital Region Waste Water Commission, [2005] A.J. No. 1581, 2005 ABCA 401, 380 A.R. 318, 10 B.L.R. (4th) 269, 49 C.L.R. (3d) 177, 144 A.C.W.S. (3d) 469, affg [2005] A.J. No. 847, 10 B.L.R. (4th) 252, 46 C.L.R. (3d) 258 (Q.B.); Peet v. Canada (Attorney General), [1996] F.C.J. No. 59, 107 F.T.R. 102, 60 A.C.W.S. (3d) 977 (T.D.); Telezone Inc. v. Canada (Attorney General) (2008), 94 O.R. (3d) 19, [2008] O.J. No. 5291, 2008 ONCA 892, 86 Admin L.R. (4th) 163, 40 C.E.L.R. (3d) 183, 245 O.A.C. 91, 303 D.L.R. (4th) 626; Thomas C. Assaly Corp. v. Canada, [1990] F.C.J. No. 243, 34 F.T.R. 156, 44 Admin. L.R. 89, 20 A.C @@.W.S. (3d) 260 (T.D.) Statutes referred to Federal Courts Act, R.S.C. 1970, c. P-6, s. 18 Judicial Review Procedure Act, R.S.O. 1990, c. J.1, ss. 1, 2 Management Board of Cabinet Act, R.S.O. 1990, c. M.1, ss. 3(1) (e) [as am.], (3) Public Transportation and Highway Improvement Act, R.S.O. 1990, c. P.50, ss. 26(1) [as am.], (2), 116(1) [as am.]
Christopher D. Bredt and Matthew Alter, for applicants. Ronald E. Carr, Sara Blake and Henry Weilenmann, for respondent Her Majesty the Queen in Right of Ontario. Daniel J. Leduc, for respondent Thomas Cavanagh Construction Limited. [page107] P.E. DuVernet, for intervenor Ontario Road Builders Association.
1BY THE COURT: -- This is an application for judicial review of the decision (the "Decision") by the respondent, Her Majesty the Queen in Right of Ontario (Ministry of Transportation) (the "MTO"), to award MTO Contract No. 209-4009 (the "Contract") for certain work to widen Highway 417 to the respondent Thomas Cavanagh Construction Limited ("Cavanagh"). The applicants are Bot Construction Limited and other corporations (together "Bot"), which submitted the next lowest tender for the Contract.
2Bot asks the court to quash the Decision, to declare that Cavanagh's tender be disqualified and to send the matter back to the MTO to re-evaluate the tenders. (In oral submissions, counsel for Bot acknowledged that it was not in a position to seek mandamus that the Contract be awarded to Bot.)
3Bot's position is that the Cavanagh bid did not comply with the mandatory tender requirements that each bidder declare the value of steel "manufactured or fabricated" outside of Canada and that the bids be in strict accordance with the Contract drawings. Bot asserts that it is impossible to comply with the design specifications of the project without the use of imported steel and that although the tender specifications called for rolled steel beams (the W and WT beam sections) that are not available in Canada, Cavanagh declared all steel would be Canadian made. As a result, Bot submits that Cavanagh's steel declaration was inaccurate, its bid was non-compliant and the MTO was therefore required to disqualify the bid in compliance with the province's mandatory Procurement Directive and Procurement Operating Policy, as well as a policy to support domestic steel vendors (the "Steel Policy").
4There is no suggestion that the MTO acted in bad faith or for improper purposes. Before the Contract was awarded to Cavanagh, the MTO investigated Bot's position that the bridge design documents prepared by the MTO called for steel materials that are only fabricated and available outside of Canada. The MTO enquired with third parties and with Cavanagh. Cavanagh confirmed that all steel components (including the W and WT sections) could be fabricated with Canadian-sourced steel to the required specifications. The MTO advised Bot that based upon its enquiries, it was satisfied that all steel could be made in Canada and that the bid was therefore compliant.
5Cavanagh asserts that welded Canadian-sourced steel to the same specified dimensions would better meet the drawing specifications than rolled, non-welded beams. The specifications [page108] include both beam dimensions (WT205 x 33.5 and W410 x 46) and, in the case of the WT beams, conformance with a prescribed Canadian Standards Association ("CSA") standard. The MTO and Cavanagh contend that Cavanagh's bid is compliant; Cavanagh did not need to use imported steel; Cavanagh is obliged to comply with the specifications; and the MTO is in a position to enforce its compliance. Alternatively, the MTO submits that a change to permit the substitution of welded steel for rolled steel would be approved after the award of the Contract, if requested; the requirement for rolled steel beams is a formality that could be waived pursuant to art. 11.1 of the Instructions to Bidders. Such a change is not material and would not alter the price, the performance of the Contract or the order of bidders.
6Bot submits that the MTO tendering decision may be judicially reviewed on the basis that it did not comply with the Directive that made the Steel Policy mandatory and required both that non-compliant bids be rejected and that any changes to the specifications be communicated fairly to all bidders while the bid was still open. Bot also takes the position that the MTO breached its duty of fairness to provide a level playing field for all bidders by permitting Cavanagh's bid to substitute Canadian-sourced welded beams for the specified rolled beams without advising all bidders of the availability of the substitution. Bot submits that the use of Canadian- sourced welded steel materials in place of the specified rolled steel beams is a change proposal by the contractor that, under the General Conditions of Contract, is available only to a compliant bid after the Contract award. Any inquiry about a substitution during the bidding process must be in writing and made available to all bidders -- a process that was not followed in respect of Cavanagh's proposed substitution.
7The intervenor, Ontario Road Builders' Association ("ORBA"), representing over 100 road-building contractors and 80 associated members who are suppliers to the road building industry, supports Bot's position that judicial review must be available to protect the public law interest in the fairness, transparency, integrity and public confidence in the MTO's public tendering system for road construction.
8The MTO and the Ministry of the Attorney General assert that the government's tendering process is a commercial contract activity for which there is a private law remedy; that judicial review is not available; and that the Directive does not have the force of law. [page109]
Availability of Judicial Review
9Bot requests: (a) judicial review in the nature of certiorari, quashing the Decision; (b) a declaration that the tender by Cavanagh must be disqualified; (c) an order of mandamus, requiring that the Contract be awarded to Bot; (d) in the alternative to (c), a declaration that the Decision be remitted and that the tenders be re-evaluated and Cavanagh's tender be excluded; (e) in the alternative to (d), a declaration that the Decision be remitted and that the tenders be re-evaluated in accordance with the terms and conditions set out in the tender documents.
10Section 2(1) of the Judicial Review Procedure Act, R.S.O. 1990, c. J.1 (the "JRPA") states:
2(1) On an application by way of originating notice, which may be styled "Notice of Application for Judicial Review" the court may, despite any right of appeal, by order grant any relief that the applicant would be entitled to in any one or more of the following: 1. Proceedings by way of application for an order in the nature of mandamus, prohibition, or certiorari, or 2. Proceedings by way of an action for a declaration or for an injunction or both, in relation to the exercise, refusal to exercise or proposed or purported exercise of a statutory power.
(2) The power of the court to set aside a decision for error of law on the face of the record on an application for an order in the nature of certiorari is extended so as to apply on an application for judicial review in relation to any decision made in the exercise of any statutory power of decision to the extent it is not limited or precluded by the Act conferring such power of decision.
11The common law remedy of certiorari may be available for administrative decisions of government of a public nature whether or not they are an exercise of a statutory power. The Supreme Court of Canada noted in Martineau v. Matsqui Institution Inmate Disciplinary Board (No. 2), 1979 184 (SCC), [1980] 1 S.C.R. 602, [1979] S.C.J. No. 121, at para. 73 [at p. 628 S.C.R.]:
Certiorari is available as a general remedy to supervise the machinery of governmental decision-making. The order may go to any public body with power to decide any matter affecting the rights, interests, property, privileges [page110] or liberty of any person. The basis for the broad reach of this remedy is the general duty of fairness resting on all public decision-makers.
12The MTO has a broad general mandate to build public roads pursuant to s. 26(1) of the Public Transportation and Highway Improvement Act, R.S.O. 1990, c. P.50 that provides that "[t]he Minister may construct, extend, alter, maintain and operate such works as he or she considers necessary or expedient for the purposes of the Ministry . . .". Section 26(2) provides that the Minister "may enter into agreements to construct and maintain roads for and on behalf of a Minister or agency of the Crown". Section 116(1) provides that the Minister "may enter into agreements for the purposes of this Act, including agreements, (a) related to the planning, design, construction, maintenance, management and operation of highways and bridges and related structures and works".
13Section 3(3) of the Management Board of Cabinet Act, R.S.O. 1990, c. M.1 provides that the Management Board of Cabinet (the "Management Board") "may issue such administrative directives as it considers necessary in the performance of its duties". The Management Board has the power and duty to "establish, prescribe or regulate such administrative policies and procedures as the board considers necessary for the efficient and effective operation of the public service generally" (s. 3(1)(e)).
14The Management Board has issued a Procurement Directive (the "Directive"), dated November 2007, which provides mandatory directions to public service employees regarding procurement and tendering processes. The stated purpose of the Directive is to "ensure that goods and services . . . are acquired through a process that is fair, open, transparent, geographically neutral and accessible to qualified vendors" (s. 1). The Directive describes the mandatory evaluation process, requiring that evaluations be consistent and that vendors be disqualified without further evaluation if they do not comply with a mandatory requirement (s. 5.6.6). The Directive provides for a Steel Policy of preferential pricing for domestic steel as part of the mandatory requirements (s. 5.7.12). The Directive and the Steel Policy are available to the public and published on the provincial government's website. The website provides that "if the Canadian Steel Content information is found to be incorrect, the quotation/proposal will be rejected and the proponent may be disqualified from future submission of proposal". However, the MTO submits that rejection of the bid is just one potential outcome.
15The MTO submits that its procurement decision to award the contract for Highway 417 is not subject to judicial review as it is a commercial decision made by the Ministry pursuant to the [page111] Minister's prerogative power and his broad general mandate under the Public Transportation and Highway Improvement Act. The MTO asserts that the broad general mandate of the Minister to engage in purely commercial activity to build public roads is not constrained by any statutory or regulatory provisions. The Directive is comprised of administrative policies and procedures that are instructions to staff and do not have the force of law. The MTO submits that the government's tendering decisions are commercial contracts subject to private law remedies that are not subject to judicial review. Furthermore, the fact that one of the parties is a government ministry does not take the matter out of the realm of contract or tendering law where private law remedies are available. (Although TeleZone Inc. v. Canada (Attorney General) (2008), 2008 ONCA 892, 94 O.R. (3d) 19, [2008] O.J. No. 5291 (C.A.) confirms that private law remedies are available in contractual disputes with government agencies, it is not authority that judicial review is excluded.)
16The MTO relies upon the only decided case in Ontario dealing directly with the provincial government's tendering practice for road construction. In St. Lawrence Cement Inc. v. Ontario (Minister of Transportation) (1991), 1991 7108 (ON SC), 3 O.R. 30, [1991] O.J. No. 438 (Gen. Div.), at para. 45, the court refused certiorari in respect of a decision disqualifying a bidder for a highway construction project. Montgomery J. held that the bid in question was non-compliant and therefore had been properly disqualified, but he further observed that at issue was a commercial contract involving private rights that in no way affected the public interest. This decision does not stand as a barrier to judicial review in the present case. Whether judicial review of a public tendering decision is available, in our view, will depend on whether and to what extent public interest issues are engaged.
17At one end of the spectrum are decisions that are characterized as "purely commercial" or involve discretionary public policy decisions. Long-standing Divisional Court decisions have held that there was no jurisdiction to judicially review the decisions of public authorities that were purely commercial in nature (Ainsworth Electric Co. and Board of Governors of Exhibition Place (Re) (1987), 1987 4317 (ON SC), 58 O.R. (2d) 432, [1987] O.J. No. 89 (Div. Ct.)); that were ministerial discretionary decisions about the expenditure of public funds; or that were purely policy decisions (Hamilton-Wentworth (Regional Municipality) v. Ontario (Minister of Transportation) (1991), 1991 7099 (ON SC), 2 O.R. (3d) 716, [1991] O.J. No. 439 (Div. Ct.), leave to appeal to the Court of Appeal refused [1991] O.J. No. 3201, 4 Admin. L.R. (2d) 276n)). [page112]
18The issue of whether municipal government procurement decisions ought to be subject to judicial review was considered by the Supreme Court of Canada in Shell Canada Products Ltd. v. Vancouver (City), 1994 115 (SCC), [1994] 1 S.C.R. 231, [1994] S.C.J. No. 15. The court considered a resolution by the City of Vancouver that it would not do business with Shell while related companies continued to do business in South Africa. The court was unanimous in finding that judicial review was available to review the business decisions of the municipality and the majority concluded the city had exercised its authority for improper or irrelevant considerations. In a dissenting opinion (on the merits but not on the issue of the availability of judicial review), McLachlin J. referred to conflicting decisions on whether government purchasing decisions were immune from judicial review, articulated the competing considerations, and decided, on balance, that the doctrine of immunity from judicial review of procurement powers sho uld not apply to municipalities (at paras. 7-12).
19Among the considerations against allowing judicial review of the commercial decisions of governments was the potential for both public and private remedies and for excessive litigation that may in turn result in significant inconvenience to the public through a disruption of the procurement process (at para. 54). McLachlin J. also noted (at para. 11):
In favour of allowing judicial review of the procurement or purchasing power of governments is the argument that while this principle [of freedom of contract] is valid for private contracts, the public nature of municipalities renders it inapplicable to them. . . . [M]unicipalities undertake their commercial and contractual activities with the use of public funds. After consideration justifying different treatment of public contracting is the fact that a municipality's exercise of its contracting power may have consequences for other interests not taken into account by the purely consensual relationship between the council and the contractor. For example, public concerns such as equality of access to government markets, integrity in the conduct of government business, and the promotion and maintenance of community values require that the public procurement function be viewed as distinct from the purely private realm of contract law.
20While Shell dealt with a resolution of a municipal government, the considerations identified by McLachlin J. apply with equal force to procurement decisions of provincial governments and the reasoning is persuasive.
21Judicial review of government procurement has been found to be available in appropriate circumstances to address public interest concerns. Because of the important public interests at stake, judicial review is employed in particular where government procurement decisions are authorized or constrained by statutes, rules or regulations. [page113]
22The Federal Court in Thomas C. Assaly Corp. v. Canada, [1990] F.C.J. No. 243, 34 F.T.R. 156 (T.D.) and Cougar Aviation Ltd. v. Canada (Minister of Public Works and Government Services), 2000 16572 (FCA), [2000] F.C.J. No. 1946, 264 N.R. 49 (C.A.) held that judicial review was available for procurement decisions of a federal agency and the federal government respectively. In those cases, the procurement requirements were set out in regulations and trade agreements. In Holy Cross Surgical Services v. Calgary Health Region, [2005] A.J. No. 1804, 2005 ABQB 760, the court held that a decision of the Calgary Health Region, a public statutory body, to cancel a request for proposals ("RFP") was susceptible to judicial review. In Ottawa-Carleton Dialysis Services v. Ontario (Minister of Health), [1996] O.J. No. 2721, 93 O.A.C. 82 (Div. Ct.), the Divisional Court held that the Ontario Minister of Health was exercising a statutory power in cancelling an RFP for independent health facilities and issuing a new RFP and that judicial review was available to determine (1) whether the decision complied with the detailed statutory requirements; and (2) whether the Minister took into account extraneous and improper considerations.
23In the case now before us, the MTO exercised a power of decision to award a road construction contract as part of the exercise of the Minister's broad general power for public roads construction conferred by the Public Transportation and Highway Improvement Act. The provisions of the statute displace the prerogative powers of the Crown (see Delivery Drugs Ltd. (c.o.b. Gastown Pharmacy) v. British Columbia (Deputy Minister of Health), [2007] B.C.J. No. 2424, 2007 BCCA 550, leave to appeal to S.C.C. refused Ballem v. Delivery Drugs Ltd., [2008] S.C.C.A. No. 17). We conclude that the decision to award a road construction contract in a public tender is a statutory power of decision as defined in s. 1 of the JRPA as "a power or right conferred by or under a statute to make a decision deciding or prescribing, (a) the legal rights, powers, privileges, immunities, duties or liabilities or any person or party . . .". The Decision affected the legal rights and pr ivileges of the bidders for the Contract, including Cavanagh and Bot.
24We are also satisfied that the public law interests in this case are sufficient to require that judicial review be available. The tendering decision of the MTO has obvious broad public interest implications that extend beyond the interests of the contracting parties, not only with respect to the construction of public roads but also to the fairness and integrity of the process followed in the expenditure of significant public funds -- totalling $2 billion in 2008 and about $60 million for this project. As [page114] noted in Shell, public concerns such as equality of access to government markets, integrity in the conduct of government business, and the promotion and maintenance of community values are relevant to government procurement powers. As well, the issues in the tendering process in this case have significant economic implications for both the steel industry in Canada and the road building industry in Ontario. The government is the only market for provincial road construction and i t controls the pre- qualification of bidders and the economic opportunities for the road building industry. Clearly, the tendering of public highways in Ontario impacts not only the rights and interests of the industry bidders but also broader public interests.
25The MTO's tendering process follows the Directive that is consistent in large part with the law of tendering, and a private law remedy could be pursued. However, the effectiveness of that private law remedy in this case is significantly curtailed by the tender provision waiving the MTO's liability for any damages suffered by any bidder by reason of the MTO's acceptance or non-acceptance of any tender. Furthermore, the MTO's qualification procedures allow it to exclude any contractors from bidding in response to MTO tender calls where the contractor is engaged in a legal proceeding. This raises the possibility that Bot may be sanctioned throughout the duration of a lengthy action for damages.
26We do not hold that the Directive will raise public law issues in all provincial public tendering. However, the tendering issues in this case raise public law concerns justifying judicial review of the Decision.
27The MTO is therefore required to exercise its statutory power to award a contract for this project in accordance with law. Unlike in Ottawa-Carleton Dialysis Services, the statute in this case confers a broad general power and does not impose any specific limits on the exercise of that power. However, the government has chosen to issue directives to ministries to exercise that power fairly and transparently and to provide open and equal treatment to qualified vendors, with geographic neutrality. The Directive is not a regulation and, unlike the federal procurement directives in Assaly or the federal guidelines in Friends of the Oldman River Society v. Canada (Minister of Transport), 1992 110 (SCC), [1992] 1 S.C.R. 3, [1992] S.C.J. No. 1, it does not require Governor in Council approval.
28In Oldman River (at para. 37), the Supreme Court of Canada noted the "vital distinction" between a directive that is required by statute to be formally enacted by order with the approval of the Governor in Council and "the usual internal [page115] ministerial policy guidelines intended for the control of public servants under the minister's authority".
29The Supreme Court of Canada in the two Martineau cases distinguished between judicial review based upon lawful authority and judicial review based upon fairness in the case of government administrative directives. Martineau v. Matsqui Institution Inmate Disciplinary Board (No. 1), 1977 4 (SCC), [1978] 1 S.C.R. 118, [1977] S.C.J. No. 44 held that that the Federal Court of Appeal had no jurisdiction to review a decision based upon directives issued by the Commissioner of Penitentiaries because the directives were administrative and did not have the force of law. However, in Martineau (No. 2), the court held that the decision in question was reviewable by the Federal Court Trial Division, pursuant to s. 18 of the Federal Courts Act, R.S.C. 1970, c. P-6, as an administrative decision that must be made fairly.
30In Peet v. Canada (Attorney General), [1996] F.C.J. No. 59, 107 F.T.R. 102 (T.D.), the Federal Court dismissed a motion to strike an application for the judicial review of a Deputy Minister's decision that a civil servant was in breach of the Conflict of Interest and Post Employment Code for the Public Service. The federal government argued that the Code was not law. The court held that although the Code was not promulgated by order in council and did not have the same status as the guidelines in Oldman River, an internal administrative directive could form the basis of a public duty at law.
31The Directive does not have the force of law at the instance of third parties and does not constrain the government to the same degree as the statutory or regulatory scheme provided in many of the cases cited. However, in our view, the Directive creates and informs the MTO's duty of fairness in the procurement context. Whether certiorari lies for an administrative government decision and whether a decision is sufficiently public are determined by considering a number of factors such as the nature of the decision maker, the source of the power exercised and the purpose or function of the decision-making body (see Co-operative Housing Federation of Canada v. York (Regional Municipality), 2009 7081 (ON SCDC), [2009] O.J. No. 696, 247 O.A.C. 90 (Div. Ct.), at para. 63). In this case, the decision is made by the MTO, which is the only market for road construction pursuant to its statutory power for the purpose of building public roads that are vital to the public interest. For these reasons and those outline d above, the circumstances of this case attract a public law interest.
32Not all government decisions will attract a duty of fairness: "[T]here must be some qualifying circumstance which triggers the applicability of the duty of fairness" [page116] (Bezaire (Litigation Guardian of) v. Windsor Roman Catholic Separate School Board (1992), 1992 7675 (ON SC), 9 O.R. (3d) 737, [1992] O.J. No. 1478 (Div. Ct.), at para. 32). In Bezaire (at paras. 64-66), the guidelines and policies relating to school closures attracted the duty because they were premised on public consultation. Like the government guidelines in Bezaire, the Management Board Procurement Directive is published and its stated purposes and mandatory nature create a public expectation that the tendering process will be conducted fairly and transparently and will provide a level playing field to qualified vendors.
33For these reasons, we are satisfied that judicial review of the MTO Decision to award the Contract to Cavanagh is available in this case. The MTO exercised a statutory power of decision making that impacted on the rights and interests of bidders from the road building industry. This was not a purely commercial decision, governed only by private law. The decision raises public law issues with respect to fairness and transparency and the integrity of the public tendering process for public roads. Nor is this a case where the court should exercise its discretion to decline to judicially review the Decision because the effectiveness of the private law remedy for breach of contract is curtailed by the MTO. The government must act in accordance with statutory authority. While we do not consider the MTO's compliance with the internal Management Board administrative Directive as a limit imposed by statute or regulation, the Directive gives rise to and informs a duty of fairness that is reviewable by the Divisi onal Court on an application for certiorari.
Standard of Review
34The issue of whether the MTO breached its duty of procedural fairness is determined without any assessment of the standard of review or deference to the MTO. The duty of fairness has been recognized in our courts as a flexible duty that may vary, based on all of the circumstances.
35We have concluded that with respect to the issue of whether the MTO acted within its statutory powers and for proper and relevant considerations, the standard of review is reasonableness.
36The Supreme Court of Canada held in Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190, [2008] S.C.J. No. 9 (at paras. 51-60) that the deferential standard of reasonableness will usually apply where there is a privative clause; the question is one of fact, discretion or policy; where the legal and factual issues are intertwined and cannot be readily separated; where there is a discrete and special administrative regime in which the decision [page117] maker has special expertise; and where the decision maker is interpreting its own statute or statutes closely connected to its function with which it will have particular familiarity. A standard of correctness will apply where the question at issue is one of true jurisdiction or of general law that is both of central importance to the legal system as a whole and outside the adjudicator's specialized area of expertise.
37The parties agree that the appropriate standard of review for the MTO's findings of fact and interpretation of facts is reasonableness.
38However, Bot submits that with respect to the MTO's interpretation of the legal constraints within which it operates, specifically compliance with the Directive, the standard of review must be correctness. It submits that the Decision was made by administrative personnel within the MTO and not by a specialized tribunal, and that the court has much greater expertise in assessing whether the MTO acted within the statutory constraints on its power; the court's expertise is particularly greater here because the Directive mandates elements of procedural fairness in the bid evaluation process.
39We do not agree that the standard of correctness applies to determining whether the MTO acted within its statutory limits. The decision is not made by a tribunal and there is no privative clause or right of appeal. However, the ministry personnel who select bids are highly experienced in the road construction specifications and in the public tender process. They support the Minister in fulfilling the broad mandate for road construction under the Public Transportation and Highway Improvement Act. They operate a public tendering system expending millions, if not billions, of dollars. They pre- qualify vendors. They are charged with complying with the Directive for all tendering for Ontario's road construction and maintenance. They will have considerable expertise in the application of the administrative Directive and the application of the Steel Policy. The Ministry determination of the bid process or of bid compliance is inextricably intertwined with the facts.
40A reasonableness inquiry is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process; it is also concerned with whether the decision falls within a range of possible, acceptable outcomes that are defensible in respect of the facts and law (Dunsmuir, para. 47).
41The Federal Court considered the appropriate standard of review of a Minister's decision concerning the compliance of a bid in [page118] Halifax Shipyard Ltd. v. Canada (Minister of Public Works and Government Services), [1996] F.C.J. No. 682, 113 F.T.R. 58 (T.D.) and determined it was reasonableness. The court stated, at paras. 24 and 25:
It is not the role of the Court to embark on a substantive review of the Minister's interpretation of the tender documents, but rather to review the decision in order to determine whether the manner in which it was made was fair . . .
In order for a judicial review remedy to be available therefore, it must be demonstrated that the respondent acted in an unfair, unreasonable or arbitrary manner; based its decision on irrelevant considerations; or, acted in bad faith. The issue is the legality of the action, not the wisdom of the decision rendered and the burden of proof on the applicant is a substantial one.
42This was also the approach of the court in Assaly, where Strayer J. stated, at para. 15:
If this were exclusively a matter of unfairness of result, I am not sure that it would be an appropriate case for judicial intervention. But, it appears to be, on the evidence before me, a matter of unfairness of procedure. A fair procedure requires that the party whose interests are to be affected by a decision be aware of the issue he must address in order to have a chance of succeeding. (In that case, Strayer J. also observed that while a civil remedy may have been available, an action for damages with its attendant delay would be an inadequate alternative to the applicant's administrative law remedy (at para. 16)).
43In Shell (at para. 16), the Supreme Court noted that the court should not interfere with the municipality's decision unless there is "evidence of bad faith or absurdity, where the decision was unreasonable in the sense that no reasonable authority could ever have come to it". The court's caution in para. 21 applies equally to the review of decisions of the provincial government:
Excessive judicial interference in municipal decision-making can have the unintended and unfortunate result of large amounts of public funds being expended by municipal councils in the attempt to defend the validity of their exercise of statutory powers. The object of judicial review of municipal powers should be to accord municipalities the autonomy to undertake their activities without judicial interference unless clearly warranted.
44In conclusion, the MTO is entitled to considerable deference in its determination of tender issues and its decision to award the Contract.
Issues
45Having determined that the Decision is susceptible to judicial review, the issues to be determined in this application are as follows: [page119] (1) Was the Decision of the MTO that Cavanagh submitted a bid that was compliant with the mandatory requirements reasonable? (2) Did the MTO waive any non-compliance as a formality? (3) Did the MTO in the circumstances breach its duty to act fairly?
Facts
1. The tender process
46The MTO issued a call for tenders for a project involving the widening of Highway 417 near Arnprior, Ontario, which included the construction of two bridges: the Madawaska River Bridge and the Division Street Bridge.
47The Procurement Directive issued by the Management Board of Cabinet provided for a Steel Policy to support domestic steel vendors. It stated as follows:
5.7.12 Domestic Steel
To support domestic steel vendors, procurement evaluation processes must include a price preference of 10% for Canadian steel products identified in vendor proposals submitted in response to construction procurement tenders with an estimated total contract value of $100,000 or more.
48In compliance with the Steel Policy and Directive, the tender documents required that each bidder include with its tender a Declaration of Declared Value of Imported Steel, in respect of steel "manufactured or fabricated" outside of Canada as well as a declaration that "the Declared Value of Imported Steel . . . will not exceed the Actual Value of Imported Steel". A 10 per cent preference for Canadian content was to be applied to the total value, excluding the value of imported steel, to arrive at each bidder's "Adjusted Total Tender".
49In order to qualify for application of the 10 per cent price preference policy for Canadian structural steel products identified in a quotation or proposal, proponents must state the value of Canadian structural steel products supplied under the requirements of the particular RFP. The Statement of Canadian Steel Content declares"If the Canadian Steel Content information is found to be incorrect, the quotation/proposal will be rejected and the proponent may be disqualified from future submission of proposal".
50Tenders were closed for acceptance on April 1, 2009, at 3:00 p.m. Cavanagh was listed as the bidder with the lowest [page120] Total Tender and Adjusted Total Tender. Bot was the second lowest bidder.
51Cavanagh had not declared any value for imported steel in its tender for the performance of the Contract.
52On April 2, 2009, Marty Harris, Bot's chief estimator, wrote to the MTO advising that, based on Bot's review, Cavanagh had failed to declare the value of imported steel for the Contract and failed to correctly calculate the Adjusted Total Tender Price. Bot informed the MTO that as a result, Cavanagh's tender must be rejected as non-compliant. Bot sent another letter on April 7, 2009, advising that the Madawaska River Bridge design documents prepared by the MTO called for steel materials that are only fabricated and available outside of Canada, yet Cavanagh did not declare such materials.
53The MTO enquired with Essar Steel (formerly Algoma Steel) as to the availability of Canadian fabricated steel for all plate thicknesses and widths as specified for the Madawaska River Bridge. It provided the MTO with assurance that it could produce such steel in Canada. Cavanagh confirmed that they could complete the project using Canadian steel. The MTO also followed up with Cavanagh's steel supplier, Tomlinson, and the ultimate supplier, Central Welding and Iron Works. They indicated that Canadian-made steel could be substituted for the imported steel and that the fabrication of such steel in Canada would cost less than the imported product. Central Welding had initially provided a quote to Bot that included imported steel but subsequently provided an updated quote to Tomlinson without imported steel; Tomlinson had also provided its own bid and was the only other bidder without any imported steel.
54On April 15, 2009, counsel for the MTO advised Bot's counsel that the MTO had conducted an investigation and had found that the materials are available in Canada by special order, and, as a result, Cavanagh's tender was compliant.
55Bot replied and stated that the investigation had not considered the use of specified rolled steel beams that are not available in Canada.
56The MTO again asked Cavanagh, which responded with its letter of April 20, 2009, stating that that Canadian-made steel welded to the same specified dimensions as rolled steel would better meet the drawing specifications. The drawings included both beam dimensions (WT205 x 33.5 and W410 x 46) and references to CSA standards.
57The MTO awarded the Contract to Cavanagh on April 27, 2009. [page121]
58Bot contends that the tender documents specified the use of rolled steel and not welded steel for the W and WT sections of the bridges and, therefore, Cavanagh's bid was non- compliant.
59The MTO submits that the bid is compliant. Ultimately, the MTO disclosed that it plans to allow Cavanagh, if it so requests, to use different, Canadian-sourced welded steel materials in place of the specified rolled beams.
60The MTO's General Conditions of Contract provide for change proposals by a contractor after the Contract award"when all applicable conditions are met". A bidder may make an inquiry about a substitution during the bidding period but the Directive provides that it must be made available to all bidders (s. 5.6.5).
2. The procurement directive and operating policy
61As noted above, the MTO follows the requirements of the Directive and the Procurement Operating Policy (the "Operating Policy") of the Management Board in regard to the assessment of bids. The preamble of the Directive indicates that it must be used in conjunction with the Operating Policy.
62The purpose of the Directive, as stated in s. 1 of the Directive, is to ensure that goods and services, including construction services"are acquired through a process that is fair, open, transparent . . .". The Directive applies to the procurement of all goods and services including construction, is mandatory and its principles and requirements must be applied to all procurements. The procurement process should conform to certain principles, including that it be conducted in a fair and transparent manner, providing equal treatment to vendors (Directive, ss. 1, 3 and 4).
63Section 5 of the Directive is headed "Mandatory Requirements" and includes the following relevant provisions:
5.6.5 Additional Information
Any additional information, clarification or modification of the procurement documents must be provided in the same manner as the procurement document via an amendment or addendum and must be released in sufficient time prior to the submission deadline to allow bidders sufficient time to submit a responsive bid. Ministries may extend the submission deadline to ensure sufficient time is provided to bidders.
5.6.6 Evaluation Process
Ministries must evaluate the bid responses received consistently and in accordance with the evaluation criteria, rating and methodology set out in the procurement document.
Where a vendor is disqualified for non-compliance of a mandatory requirement or fails to meet a minimum rated requirements score, as identified in the procurement document, no further evaluation must take place. [page122]
The evaluation of price/cost must be undertaken after the completion of the evaluation of the mandatory requirements and any other rated criteria.
Following the evaluation process, ministries may select only the highest ranked submission(s) that have met all mandatory requirements set out in the related procurement document.
64Many of these provisions of the Directive are mirrored in the Operating Policy.
Was the Decision of the MTO that Cavanagh Submitted a Bid that was Compliant with the Mandatory Requirements Reasonable?
65Bot launched a complaint with the MTO that Cavanagh's failure to declare any imported steel content had to be wrong because some of the specified structural steel components required in the performance of the Contract could not be manufactured or fabricated in Canada. Eventually, Bot specifically indicated that certain W and WT section rolled beams are not produced in Canada. Letters from two steel suppliers were sent to the MTO. The General Managers of Mometal Structures Inc. and Bunco Mfg. Inc., two structural steel suppliers, swore in affidavits that these rolled steel beams must necessarily be imported. This evidence was not challenged in cross-examination, nor was there any sworn evidence to the contrary.
66Cavanagh takes the position that nothing in the tender specifications required the use of rolled steel. It submits that the specific requirement was that all structural steel must meet prescribed CSA standards, and shall be grade 350AT. Cavanagh argues that it believes imported foreign steel would not meet the CSA standard grade-350 steel. Cavanagh submits that these requirements can be met with the use of Canadian welded steel.
67Cavanagh, therefore, submits that its bid was compliant with the tender requirements. The Directive requires a declaration as to the use of imported steel. Cavanagh's bid declared no use of imported steel and it has maintained its intent to use only Canadian steel in the performance of the Contract. It argues that there is nothing in the tender documents that says it cannot submit a bid that relies on using Canadian steel exclusively. Cavanagh did not submit any evidence in this application.
68Paul Sosney, the head of contract tendering, Contract Management Office of the MTO, deposed that on April 17, 2009, he contacted Cavanagh and enquired as to the source of the W and WT beam sections to be incorporated into the bridges. The principal of Cavanagh advised that it was his intent to have these sections fabricated from Canadian steel. Although rolled steel beams could only be obtained from the United States, Cavanagh would have the W and WT beam sections welded from [page123] steel fabricated in Canada. Mr. Sosney then inquired of the Structural Office of the MTO whether the specification for Fabrication of Structural Steel allowed a contractor to fabricate a suitable product from Canadian- produced plate steel rather than using rolled steel. He was advised in his affidavit (at para. 25) that: (a) the MTO considers proposed changes after award of contract so that if a contractor offers a structurally and functionally equivalent product (durability, appearance, etc.), the MTO has accepted same in the past; (b) similarly, if this was an inquiry made during the tendering period by a proposed bidder, a structurally and functionally equivalent product would be considered acceptable; and (c) all costs associated with verifying substituted material would be the responsibility of the contractor.
69The MTO relied upon Cavanagh's position and its inquiries and found the bid to be compliant.
70The affidavit of Philip Hutton, the manager of the Contract Management Office of the MTO, refers to the fact that it "became apparent during the tender process that Cavanagh would request a change in regard to the W and WT sections following the award of the Contract. Cavanagh has indicated that the W and WT sections would be welded from Canadian steel" (para. 9). He also deposes (at para. 12): The MTO determined that the Cavanagh bid was compliant. The MTO took the following factors into consideration in the making of such determination: (a) Cavanagh throughout the bid process demonstrated an intent to use Canadian steel; (b) the use of Canadian steel would be acceptable to the Bridge Office of the MTO; (c) the amount of steel at issue is minor compared to the total cost of all steel to be used in the project; (d) Cavanagh by its bid proposal would use more Canadian steel, so that it better accords with the goals of the policy; (e) the use of Canadian steel will be less expensive than American steel; and [page124] (f) the use of Canadian steel would not impact the order of bidders.
71However, the evidence filed in this application does not support the MTO's decision that the bid was compliant or the position of Cavanagh that welded beams complied with the specifications. Cavanagh did not tender any evidence to support its position. The MTO evidence did not support Cavanagh's position that its substitution met the specifications; rather, it supports Bot's position that the substitution required a change proposal in order to meet the specifications. Nor did the MTO provide evidence to support the position of the MTO's counsel, Mr. Carr, at the oral hearing, that the specifications are internally inconsistent and that the design engineers made a mistake in specifying rolled steel (which can only be imported) because the only way to meet the required CSA standard is to use Canadian welded steel.
72The MTO's expert disagrees with Cavanagh that the rolled steel beams were not specified. Nicolas Theodor, the structural engineer in the Bridge Office of the MTO, St. Catharines, who was the chief design engineer of the Madawaska River Bridge and was also familiar with the design of the Division Street Bridge, at various places in his affidavit clearly states that the rolled W and WT beam sections were, in fact, specified.
73At para. 16, he states that he was the one who specified the rolled steel beams "because it is a common industrial standard that would ensure the necessary strength required at the relevant time".
74It was Mr. Theodor's position, however, that such a specification should not be understood to preclude its substitution with equivalent welded sections. At para. 15 of his affidavit, he states as follows:
I am satisfied that the use of equivalent welded sections, as opposed to the specified W and WT sections, in the circumstances of this contract and for both bridges would meet the requirements of the contract, because these welded sections would still provide the additional support strength required in the design similar to rolled sections.
75Mr. Theodor stated that the W and WT beam sections perform only a support function for the main beams of the bridge and are regarded as secondary members of the structure. They are used only during the construction phase and have no role in the support of the bridges after construction. Moreover, he stated that they comprise a very small portion of the total amount of steel to be used in the construction of the two bridges. Mr. Theodor concluded that, accordingly, any proposed change [page125] from the specification of rolled beams would be minor in nature and if submitted, would be readily approved by him.
76Nevertheless, the fact remains that rolled steel beams were specified in the design drawings and the only evidence before us is that rolled steel beams are not available in Canada.
77Therefore, it is clear on the evidence that Cavanagh's bid could not possibly comply with a mandatory requirement as specified by the MTO drawings.
78Given the factual record before us, the MTO's Decision that the Cavanagh's bid was compliant with the mandatory requirements and the design specifications was not reasonable. It could not possibly comply with the specifications in view of Cavanagh's declaration that it would be using only Canadian- sourced steel.
Did the MTO Waive any Non-Compliance as a Formality?
79Section 5.6.6 of the Directive requires the MTO to evaluate bid responses in accordance with "the evaluation criteria, rating and methodology set out in the procurement document" which is the "Instructions to Bidders". Article 11.1 of the Instructions to Bidders permits the MTO "to waive formalities as the interests of the Ministry may require . . ." (the "Discretion Clause").
80The MTO submits that even if it is apparent that Cavanagh will request a substitution of welded steel for rolled steel for the W and WT beam sections of the two bridges after award of the contract, the MTO has the discretion to consider the prospect during the bid evaluation process and determine whether such substitution would be material. To the extent the MTO has considered the prospect of such a change, it is satisfied that this change is minor and would not affect the performance of the contract, the price or the order of the bidders.
81Cavanagh, too, submits that even if it could be said that its bid was non-compliant, recent jurisprudence has consistently applied a test of substantial or material compliance and has not insisted on strict compliance. In Graham Industrial Services Ltd. v. Greater Vancouver Water District, 2004 BCCA 5, [2004] B.C.J. No. 5, 40 B.L.R. (3d) 168 (C.A.), at para. 34, the British Columbia Court of Appeal held that material non- compliance occurs where there is a "failure to address an important or essential requirement of the tender documents" and "a substantial likelihood that the omission would have been significant in the deliberations of the owner in deciding which bid to select". [page126]
82Cavanagh submits that even if its bid was not in strict compliance, there was substantial or material compliance in that: (a) the amount declared by Bot for imported steel constituted only 0.26 per cent of its total bid amount; (b) the estimated quantity of steel for the Madawaska River Bridge comprises only 1.14 per cent of the bridge steel; and (c) the W and WT sections comprise a very small portion of the total amount of steel to be used.
83In its factum, Cavanagh's counsel asked rhetorically:
[H]ow can it be said that on the issue of steel, which represents 0.26% of Bot's overall tender price, the Cavanagh bid represents a "failure to address an important or essential requirement of the tender documents" and "a substantial likelihood that the omission would have been significant in the deliberations of the owner in deciding which bid to select?"
84In Double N Earth Movers Ltd. v. Edmonton (City), 2007 SCC 3, [2007] 1 S.C.R. 116, [2007] S.C.J. No. 3, the Supreme Court of Canada held that a condition requiring strict compliance with the Instructions to Bidders was to be read in harmony with the condition which permitted the owner to waive any formality. The court stated that bidders were made aware that not every failure to comply with tender requirements would invalidate a bid. Cavanagh and the MTO submit that if a substitution is sought by Cavanagh for welded steel in place of rolled steel for the W and WT sections of the two bridges after award of the contract, the substitution would be regarded as immaterial to the contract.
85The non-compliance that was found to have been waived in the Double N case was a failure to supply serial numbers and licence numbers of equipment, which in the circumstances of that case was not an essential term of the tender documents.
86However, in NAC Constructors Ltd. v. Alberta Capital Region Waste Water Commission, [2005] A.J. No. 847, 10 B.L.R. (4th) 252 (Q.B.), affd 2005 ABCA 401, [2005] A.J. No. 1581, 10 B.L.R. (4th) 269 (C.A.), it was held that a discretion clause allowing for the waiver of minor or inconsequential irregularities is to be interpreted narrowly. Read J. stated, at paras. 47-48, that all bidders must be placed in a similar position and no unfair advantage can be provided to a non-compliant bidder. All bidders must have the same information and, therefore, the discretion clause must expressly indicate what form of non- compliance may be waived. [page127] He stated [at para. 47] that "To do otherwise would be to open the door to chaos in the bidding process . . .".
87The difficulty with these submissions is that the MTO's Decision did not refer to waiving any formalities. Nor did the evidence filed by the MTO indicate that the proposed change was a formality or that it waived the need for any such changes. The MTO's conclusion that the substitution was minor and did not affect pricing, timing or the order of bidders and would be approved if requested is entitled to deference. However, once again, the evidence is at odds with the position that the MTO has taken on this application. The evidence of both the design engineer and the head of contract tendering is clear that the MTO considered the substitution of welded Canadian steel for the rolled beams as a change proposal that would be approved if requested. It was the evidence of the manager of the Contract Management Office of MTO in St. Catharines that it became apparent during the tender process that Cavanagh would request a change in regard to the W and WT sections following the award of the Contract. The eviden ce filed by the MTO does not suggest that it considered the substitution a formality that could be waived under art. 11.1. Rather, on MTO's own evidence, the basis for the MTO concluding that Cavanagh's bid was compliant was its expectation that Cavanagh would submit a change proposal that it would readily accept.
88On the evidence before us, the requirement of rolled steel beams was not characterized as a mere formality. It was a part of the specifications and therefore a mandatory requirement. Bidders were entitled to rely on this specification in making their steel declaration as to Canadian content. Any modification of this requirement by a change proposal during the tender period without appropriate and timely notice to all bidders would be contrary to s. 5.6.5 of the Directive and unfair to all of the bidders who should have been informed of this fact.
Did MTO Breach its Duty to Act Fairly?
89The scope of the duty of procedural fairness depends on the facts and circumstances of each case. The factors to be considered in determining the content of the duty were set out in Baker v. Canada (Minister of Citizenship and Immigration), 1999 699 (SCC), [1999] 2 S.C.R. 817, [1999] S.C.J. No. 39 and are as follows: (a) The nature of the decision and the processes followed in making it; (b) the nature of the statutory scheme; [page128] (c) the importance of the decision to the individual or individuals affected; (d) the legitimate expectations of the person challenging the decision; and (e) the choice of procedure made by the agency itself, especially when the decision maker is provided with the ability to choose its own procedure.
90The Decision was administrative in nature, rather than judicial, and thus, the principles that govern judicial processes do not apply. The MTO statutory power to enter into agreements such as the Contract in issue is broad. As discussed above, the Directive is not a statutory constraint. However, the evaluation process provided in the tender documents reflect many of the provisions of the Directive. There is no question, given the monetary size of the Contract, that the Decision is of great importance to all bidders. Bot and the other vendors submitting tenders had a legitimate expectation that the MTO's evaluation of the bidders' tenders would be fair and transparent and consistent with its past practice of disqualifying non-compliant bidders, in particular those who provided incorrect information in their steel declarations. Bot, itself, had been disqualified in two prior tender processes because of the inaccuracy of its own steel declarations. Bot had a legitimate expectation that the Directive, w hich sets out a mandatory evaluation process and is published on the government's Internet site, would be followed.
91In light of these factors (in particular, Bot's legitimate expectations and the MTO's choice of evaluation process), all bidders were entitled to a level playing field with respect to their bids. In finding the Cavanagh bid to be compliant notwithstanding that it failed to meet a specification for rolled steel beams, and on the understanding that welded steel would be substituted, the MTO failed to fulfill its duty of fairness to all bidders, including Bot. The acceptance of such a proposed change during the bidding process was clearly a significant issue given the preference for the use of Canadian steel. If in fact rolled steel was no longer a specified requirement for the W and WT beams, all bidders should have been put on notice of this fact so that they could be placed in the same position as Cavanagh and given the opportunity to revise their bids in light of this new information. [page129]
Conclusion
92The application is granted and an order will go quashing the Decision of the MTO. The matter is remitted back to the MTO to re-evaluate the tenders in accordance with the terms and conditions set out in the tender documents. The MTO may, at its discretion, conduct a fresh tender process.
93If the parties cannot otherwise agree, costs of the application are to be addressed in writing within 30 days directed to the attention of the registrar of the Divisional Court.
Application granted.