CITATION: Mastermeter Products Canada Inc. v. Corporation of the City of North Bay, 2012 ONSC 1887
DIVISIONAL COURT FILE NO.: 282/10
DATE: 20120514
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
THEN R.S.J., SWINTON AND BRYANT JJ.
BETWEEN:
MASTERMETER PRODUCTS CANADA INC.
Applicant
– and –
THE CORPORATION OF THE CITY OF NORTH BAY and NEPTUNE TECHNOLOGY GROUP (CANADA) LTD.
Respondents
Joel Farber and Yadira Flores, for the Applicant
Murray Stieber and Sonny Ingram, for the Respondent City of North Bay
HEARD at Toronto: March 22, 2012
BY THE COURT:
Overview
[1] Mastermeter Products Canada has brought an application for judicial review to prevent the respondent City of North Bay (“the City”) from entering into a contract with the respondent Neptune Technology Group Canada Ltd. (“Neptune”) for the supply and installation of water meters. Mastermeter claims that it was denied procedural fairness because of the way in which the City conducted the bidding process for the contract and, therefore, the decision should be set aside, and the City should be required to conduct the bidding process over again.
[2] For the reasons that follow, we would dismiss the application for judicial review, as we are satisfied that the City conducted a fair process.
Factual Background
[3] On June 25, 2007, North Bay City Council (“Council”) passed a resolution directing City staff to develop a Request for Proposal (“RFP”) to hire a firm to develop a long-term Universal Water Metering Strategy and to source out all funds and options available for installation and financing of the system.
[4] On November 5, 2007, Council retained Veritec Consulting Inc. (“Veritec”) to assist the municipality in developing a universal water metering strategy.
[5] On March 6, 2009, Council passed Resolution No. 2009-144, authorizing City staff to proceed with the Universal Water Metering Program (the “Program”) as outlined in the water metering strategy developed by Veritec.
[6] On March 16, 2009, Council enacted By-Law No. 2009-55, which authorized the expenditure of funds for the Program totaling $6,961,450.00 with the project costs to be shared equally by the City, the Government of Canada and the Ontario Government, pursuant to the Building Canada Fund Contribution Agreement for Infrastructure Projects dated April 14, 2009 (“Contribution Agreement”). Pursuant to the Contribution Agreement, any project costs in excess of this amount would be the sole responsibility of the City.
[7] On May 22, 2009, the City issued a Request for Proposal #2009-166 (the “RFP”) for the Implementation of Universal Water Metering Program which includes the supply and installation of water meters in the City and an associated “Fixed Area Network” (“FAN”) to allow autonomic electronic meter reading, data collection and storage. The RFP allowed bidders to submit a proposal whereby the FAN either belonged to the City or it would be independently owned. If the independent FAN infrastructure was chosen, the proposals could contemplate the City hosting the data (“the in-house option”) or the proponent hosting the data (“the hosted option”). Both the FAN and the water meters were to have a minimum life cycle of 15 years.
[8] The City established an Evaluation Committee to evaluate each of the proposals submitted. The Committee first evaluated the proposals in accordance with the points system set out in the RFP and then divided the points by the cost of the proposal to give the “technical ratio”.
[9] Based on an initial assessment, the Evaluation Committee identified three leading proponents: Neptune, Mastermeter and Wamco Municipal Products (“Wamco”). The Committee evaluated and re-evaluated the three proposals for the hosted and in-house FAN options.
[10] On August 31, 2009, the Evaluation Committee awarded initial scores to Neptune of 993.75 and to Mastermeter of 1,047.50. The Evaluation Committee then asked Veritec to provide a Net Present Value (“NPV”) model, which would account for the operating costs of each model so that the Committee could better evaluate the proposals. Using Veritec’s analysis, Neptune had the highest technical ratio for the in-house FAN option, and Mastermeter had the highest technical ratio for the hosted option.
[11] On September 16, 2009, the Evaluation Committee revised its scoring of the technical ratio of the proposals based on the capital costs of the proposals. Neptune continued to have the highest technical ratio.
[12] At this time, Brian Rogers, the City’s former Chief Financial Officer, became concerned about the 15 year evaluation period used for the NPV. Mr. Rogers was concerned that by using a 15 year evaluation period, the City would be required to rely on an assumption that the estimated operating and maintenance costs (indexed) would remain constant, notwithstanding the fact that the successful proponent was not required to make any such commitment to operating and maintenance estimates.
[13] The Evaluation Committee then re-evaluated the leading proposals on a 5, 10, and 15 year evaluation period. Following the re-evaluation, Neptune continued to have the highest technical ratio for all three evaluation periods for the in-house option. It also had the highest technical ratio for the hosted option based on a 5 year evaluation period.
[14] On October 6, 2009, the Evaluation Committee recommended to Council that the contract should be awarded to Neptune based on their assessment that the Neptune proposal offered the best value to the City.
[15] On October 19, 2009, Council approved a contract to be issued to Neptune for the supply and installation of a Universal Water Metering Program. The award was conditional upon reaching a final agreement with Neptune.
[16] During the course of negotiations with Neptune, the City discovered nominal additional costs that would be incurred that were not reflected in Neptune’s proposal. Therefore, the Evaluation Committee re-evaluated the proposals of the three leading proponents. Neptune still had the highest technical ratio for the in-house option, the option the City chose to proceed with.
[17] In May, 2010, the Evaluation Committee reported to Council with two options: execute the negotiated agreement with Neptune or issue a new RFP. The Report provided a summary of the evaluations of the in-house option using the 5 year evaluation period. Despite a revision in Neptune’s operating costs, it remained in first place for the in-house option. The Evaluation Committee recommended that Council execute the contract with Neptune.
[18] On June 11, 2010, Mastermeter filed an application for judicial review for an order prohibiting the City from entering into a contract with Neptune for the supply and installation of water meters and associated services in accordance with the RFP. In essence, Mastermeter seeks an order from the Divisional Court that the City go back and reconsider the proposals because the City failed to disclose the criteria for the evaluation.
The Issues
[19] Section 278(1) of the Municipal Act, 2001, S.O. 2001, c. 25 states in part: “A municipality shall adopt and maintain policies with respect to … its procurement of goods and services.” The City enacted By-law 2004-16 which requires the City to acquire goods and services in a manner that complies with its procurement by-law and purchasing policy. Counsel for the City acknowledged in oral argument that the municipality exercised a statutory power of decision in the procurement of the water meters and services, and therefore, its decision to award the contract to Neptune is subject to judicial review.
[20] Mr. Farber, counsel for Mastermeter, submitted that the City denied it procedural fairness because the City failed to disclose to Mastermeter the criteria to be used to evaluate the proposals. Counsel further submits that Mastermeter would have revised its bid if the criteria had been disclosed. More specifically, Mastermeter argues that the City improperly considered the technical ratio, as that criterion was not set out in the RFP. As well, the City failed to disclose that it would evaluate the proposals on a 5 year period.
The Admissibility of an Expert Opinion
[21] Counsel for the applicant proffered an expert witness statement of Rishi Kumar, M.Sc. Eng, P.Eng. Mr. Kumar was retained to provide an opinion for this application for judicial review on the following question:
Whether or not the bid process under RFP 2009-006 was conducted responsibly and with the requisite degree of fairness, openness and transparency applicable to major competitive procurement process.
[22] Mr. Stieber, counsel for the City, objected to the admissibility of the proffered opinion on the ground that it does not meet one of the criteria for the admission of expert evidence from R. v. Mohan, 1994 80 (SCC), [1994] 2 S.C.R. 9, in that it is not necessary to assist the court.
[23] We agree that the proffered opinion does not meet the necessity criterion because the Court can form its own conclusion about the fairness of the City’s procedure without the assistance of the proffered expert testimony. Therefore, the affidavit of Mr. Kumar was struck at the outset of the hearing.
Analysis
[24] The RFP grants the City a broad discretion to accept a proposal. The RFP #2009-66 informs the proponents as follows:
The City reserves the right to accept or reject any proposal based on our evaluation. The lowest or any proposal not necessarily accepted.
All proposals will be evaluated by the Evaluation team comprised of City of North Bay Staff.
The purpose of the Evaluation Team is to select the Proposal that provides the best value and meets the City’s needs and requirements.
- Proposals will be evaluated using a best value approach considering both merit and price. They will be assessed on a point rating system for the following (managerial and organizational, financial, technical, and total points available).
Neither the qualifying proposal which scores the highest number of rating points, nor the one which contains the lowest price will be necessarily accepted. Contractor selection will be based on the best overall value to the Corporation in terms of merit and price ratio. Each Proponent must score a minimum of 50% of the total points available to be considered for any award. The evaluation committee will short-list and only those firms successful may be asked to make a presentation which will be taken into consideration in the final selection.
- The City reserves the right to reject any or all proposals in his [sic] best interest. The lowest or any proposal will not necessarily be accepted.
The award of any Agreement and or Purchase Order will be at the absolute discretion of the City. The City reserves the right to negotiate any terms or conditions of the Agreement as it chooses with the Preferred Proponent without obligation to communicate, negotiate, or review similar modifications with other Proponents. …
[25] The decision of the City to award a contract to a particular bidder is reviewable on a standard of reasonableness (Bot Construction Limited v. Ontario (Ministry of Transportation), 2009 ONCA 879 at para. 8).
[26] Despite the City’s broad discretion, Mastermeter takes issue with the process followed, arguing that the City failed to treat bidders fairly and equally in the following ways:
- It implemented a 5 year NPV financial evaluation after the bids had opened and been scored without disclosure to the bidders. The 5 year NPV evaluation was not consistent with the RPV.
- It failed to provide a fair and impartial report to Council in May 2010.
- It based its decision on the technical ratio, as well as the points, when the technical ratio criterion had not been disclosed in the RFP.
[27] In our view, the RFP process was fair, and the decision to award the contract to Neptune was reasonable. Thus, there is no basis for judicial intervention in the City’s decision to award the contract to Neptune.
[28] The Evaluation Committee applied the same set of criteria and undertook the same evaluation for the proposals of Neptune, Mastermeter and the other proponents.
[29] The Evaluation Committee did not apply a criterion undisclosed in the RFP when it looked at the technical ratio. The RFP clearly specifies that price is part of the financial evaluation. While the RFP does not use the term “technical ratio”, it clearly states in Article 11 that the selection will be based on “the best overall value to the Corporation in terms of merit and price ratio.”
[30] While the RFP did not explicitly set out an evaluation period, this did not render the process unfair. The City made no representation about the evaluation period. Mastermeter chose to use a capital cost ratio based on a 15 year period because the RFP required the meters to have a life cycle of at least 15 years. Mastermeter did not inquire or request clarification concerning its use of the 15 year period. Neptune calculated cost differently.
[31] Each proponent received the same information from the City. Members of the Evaluation Committee applied the same set of criteria for each of the selected proponents. Some of the members of the Evaluation Committee provided sworn affidavits concerning the criteria they had used and they were not cross-examined. There is no suggestion of bad faith or that the decision was unreasonable or based on irrelevant extraneous factors.
[32] The City reserved the right to accept any and all proposals in its best interest and the award of any contract was within the City’s absolute discretion. The Evaluation Committee used a 5, 10 and 15 year evaluation period, and Neptune had the highest technical ratio for the in-house option for each of these periods. The City selected the in-house option and, therefore, the City reasonably concluded that Neptune’s bid was the best.
[33] The City had no obligation to negotiate with Mastermeter after it decided to award the contract to Neptune in October 2009 (Article 23). Therefore, there is no basis for Mastermeter to argue that it was treated unfairly because of the contents of the May 2010 report to Council.
Conclusion
[34] Accordingly, the application for judicial review is dismissed. If the parties cannot agree on costs, they may make brief written submissions through the Divisional Court Office within 30 days of the release of this decision.
THEN R.S.J.
SWINTON J.
BRYANT J.
Released:
CITATION: Mastermeter Products Canada Inc. v. Corporation of the City of North Bay, 2012 ONSC 1887
DIVISIONAL COURT FILE NO.: 282/10
DATE: 20120514
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
THEN R.S.J., SWINTON AND BRYANT JJ.
BETWEEN:
MASTERMETER PRODUCTS CANADA INC.
Applicant
– and –
THE CORPORATION OF THE CITY OF NORTH BAY and NEPTUNE TECHNOLOGY GROUP (CANADA) LTD.
Respondents
REASONS FOR JUDGMENT
BY THE COURT
Released: May 14, 2012