Bot Construction Limited v. Ontario (Transportation), 2009 ONCA 879

CITATION: Bot Construction Limited v. Ontario (Transportation), 2009 ONCA 879

DATE: 2009-12-11

DOCKET: C51196

COURT OF APPEAL FOR ONTARIO

MacPherson, Sharpe and Cronk JJ.A.

BETWEEN:

Bot Construction Limited, Bot Holdings Limited, Bot Construction (Canada) Limited, Clarkson Construction Company Limited, Bot Ventures Ltd., Bot Construction (Ontario) Limited, Bot Management Systems Ltd.

Applicants (Respondents in Appeal)

and

Her Majesty the Queen in Right of Ontario

Respondent (Appellant)

Thomas Cavanagh Construction Limited

Respondent (Respondent in Appeal)

APPLICATION UNDER the Judicial Review Procedure Act, R.S.O. 1990, c. J.1

COUNSEL:

Sara Blake and Ronald Carr, for the appellant

Dan Leduc and Ian Clarke, for the respondent Thomas Cavanagh Construction Limited

Christopher D. Bredt, Matthew R. Alter and Morgana Kellythorne, for the respondents Bot Construction Limited et al

P.E. Du Vernet, for the intervenor, Ontario Road Builders’ Association

Heard: December 7, 2009

On appeal from the order of the Divisional Court (Justice Sidney Lederman, Justice Andromache Karakatsanis and Justice Katherine van Rensburg) dated August 28, 2009.

By the Court:

A. INTRODUCTION

[1] The appellant, Her Majesty the Queen in Right of Ontario (The Ministry of Transportation) (the “Crown”), appeals the decision of the Divisional Court dated August 28, 2009 that granted an application brought by the respondents (collectively, “Bot”) to quash the Ministry of Transportation’s (the “MTO”) decision dated April 27, 2009 to award a major highway construction project near Arnprior to Thomas Cavanagh Construction Ltd. (“Cavanagh”).

[2] The Crown appeals on four grounds: (1) the Divisional Court erred by concluding that it had jurisdiction to judicially review the Crown’s procurement decision; (2) the Divisional Court erred by concluding that Bot had a legitimate expectation that was enforceable on an application under the Judicial Review Procedure Act, R.S.O. 1990, c. J. 1; (3) the Divisional Court erred by concluding that the MTO’s decision declaring that Cavanagh’s bid was compliant with the rules of the tendering process was unreasonable; and (4) the Divisional Court erred by quashing the MTO’s procurement decision.

[3] In our view, the appeal can and should be resolved solely on the basis of the third ground of appeal, without expressing any view as to the other grounds. We conclude, with respect, that the Divisional Court erred by holding that the core of the MTO’s procurement decision – that Cavanagh’s bid was compliant – was unreasonable.

B. FACTS

[4] The MTO issued a Request for Tender for work to widen Highway 417 east of Arnprior from two to four lanes of traffic, including the construction of two bridges. To comply with the MTO’s Steel Policy, the Tender required that each bidder complete a Declaration of Declared Value of Imported Steel form and a statement of the value of Canadian structural steel products supplied, so that the MTO could apply a 10% preference for Canadian steel content to arrive at each bidder’s “Adjusted Total Tender”. The Tender did not require the Statement of Canadian Steel Content form, which states that any steel statement that is found to be incorrect will automatically disqualify the bid. However, Stephen Bot’s affidavit states that Bot’s prior experience with MTO suggests that this is their practice.

[5] Cavanagh’s bid declared nil value for imported steel, so all of its steel would be subject to the 10% price preference. After bids closed on April 1, 2009, Cavanagh bid the lowest Total Tender and Adjusted Total Tender ($63,000,000 and $56,700,000) and Bot was the second lowest ($65,459,000 and $58,930,100).

[6] Before the MTO actually awarded the Contract, Bot submitted to the MTO in two letters on April 2 and 7, 2009 that Cavanagh’s bid failed to declare a value of imported steel, so its tender must be rejected as non-compliant because the MTO’s design documents for the bridges called for steel that was only available outside Canada. After the MTO investigated and determined that Cavanagh’s bid was compliant, Bot clarified its complaint in a letter, stating that the MTO specified the use of “rolled steel beams”, which are not available in Canada, for the “W” and “WT” dimensions of beam sections of the two bridges. The MTO investigated again and Cavanagh replied by stating that it intended to use only Canadian steel and that Canadian steel welded to the same specified dimensions as rolled steel would better meet the drawing specifications.

[7] The MTO’s structural engineer was satisfied that welded beams would meet the MTO’s requirements. The MTO found Cavanagh’s bid to be compliant and awarded the Contract to Cavanagh on April 27, 2009.

C. ANALYSIS

[8] Before the Divisional Court and before this court, the parties agreed that, if judicial review is available, the standard of review of the MTO’s decision was reasonableness.

[9] The Divisional Court understood the contents and implications of the reasonableness standard of review. Under the heading Standard of Review, the court said:

A 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).[^1]

[10] The Divisional Court concluded that “[t]he MTO is entitled to considerable deference in the determination of tender issues and its decision to award the Contract.” It also said that “[t]here is no suggestion that the MTO acted in bad faith or for improper purposes.”

[11] Accordingly, the reasonableness inquiry before the Divisional Court necessarily involved a determination of whether the MTO’s decision “falls within a range of possible, acceptable outcomes that are defensible in respect of the facts and law” (Dunsmuir).

[12] On this issue, the crucial question was whether Cavanagh’s failure to declare any imported steel content in its bid made its bid non-compliant because the design drawings indicated that for parts of two bridges a relatively small amount of rolled steel that could only be manufactured in the United States was required.

[13] The Divisional Court concluded that this posed an insurmountable problem for Cavanagh’s bid:

[T]he 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.

Therefore, it is clear on the evidence that Cavanagh’s bid could not possibly comply with a mandatory requirement as specified by the MTO drawings.

Given 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.

[14] With respect, we do not accept this analysis. Once the MTO was advised by Bot about the potential non-compliance of Cavanagh’s bid, the MTO conducted an investigation before awarding the Contract. The MTO’s investigation established several important facts. Cavanagh said that the contents of its bid were honest and accurate – it intended to use only Canadian steel in the project. For the beams on the two bridges, both American rolled steel and Canadian welded steel, which Cavanagh intended to use, would meet MTO standards for structural strength and performance. The amount of steel required for the bridge beams was small (1.14 per cent of the total steel required for bridges by the Contract) and minor (0.26 per cent of the value of the Contract). Cavanagh’s proposal to use Canadian welded steel better accorded with an explicit Crown policy to use Canadian steel. Even if the use of Canadian steel required a change in the project specifications, this change would be a minor one and would be readily approved. Finally, even if Cavanagh had declared imported steel for use on the bridge beams, it would not have affected the order of bidders because of the large gap ($2,259,000 in the total bids, $2,230,000 in the adjusted bids) between Cavanagh, the lowest bidder, and Bot, the second lowest bidder.

[15] Following its investigation, the MTO declared Cavanagh’s bid compliant and awarded it the Contract.

[16] In our view, the investigative steps taken by the MTO after it received Bot’s complaint satisfied any duty of fairness owed by the MTO to Bot and the facts it discovered through the investigation provide a sufficient basis to support a reasonable conclusion by the MTO that Cavanagh’s bid was compliant. The MTO obviously took Bot’s complaint seriously and investigated it in a genuine and diligent fashion. And the constellation of facts it discovered removes its ultimate decision from the realm of unreasonableness as defined in the case law. The decision that Cavanagh was compliant with the tender process fell within “a range of possible, acceptable outcomes that are defensible in respect of the facts and law.”

[17] We make one final observation. Before turning to its assessment of the MTO’s decision in this case, the Divisional Court said this about the MTO decision-makers:

[T]he ministry personnel who select bids are highly experienced in the road construction specification 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 have considerable experience 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.

[18] We agree with this description. In our view, it must anchor a court’s review of an MTO decision under the reasonableness standard of review. In this case, when one combines this description of the MTO decision-makers, the investigative process followed by the MTO after it received Bot’s complaint, and the facts elicited by the investigation, the judicial decision that must follow is that the MTO’s decision that Cavanagh’s bid was compliant is reasonable.

[19] We emphasize that we come to this conclusion without expressing any view as to the availability of judicial review as a remedy with respect to the tendering process for government procurement contracts.

E. DISPOSITION

[20] The appeal is allowed and the application for judicial review is dismissed.

[21] The appellant is entitled to costs in the Divisional Court and this court fixed at $35,000 in total, inclusive of disbursements and GST. On a similar basis, the respondent Cavanagh is entitled to costs fixed at $15,000.

RELEASED: December 11, 2009 (“J.C.M.”)

“J.C. MacPherson J.A.”

“Robert J. Sharpe J.A.”

“E.A. Cronk J.A.”

[^1]: Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190.