Divisional Court Clarifies Judicial Review of Procurement Decisions and Upholds Disqualification of Bidder

In Land Design Inc. v. Ontario Infrastructure and Lands Corp., the Divisional Court confirmed two important procurement principles: not every procurement decision is subject to judicial review, and bidders bear responsibility for compliance with no-contact rules across their organizations. The case arose from an Infrastructure Ontario (IO) procurement for contract administration services on the Ontario Place redevelopment project (Project), where the proponent (Proponent) was disqualified after a prohibited contact with the Premier and a provincial Minister during the request for proposals (RFP) process.

Background

The RFP prohibited proponents from contacting specified persons, including the Premier and Members of Provincial Parliament, on matters related to the RFP process, and conferred discretion on IO to disqualify a proponent that had contact with a prohibited person.

During the RFP process, following a conversation between an employee of the Proponent and the Premier, the Premier and the Minister of Tourism visited the Proponent’s offices to view a three-dimensional model of the Project that the Proponent had prepared under an earlier contract.

IO raised its concerns about the visit with the Proponent. After receiving the Proponent’s response and conducting its own investigation, IO disqualified the Proponent, finding that the visit contravened the RFP’s prohibited contact provisions. On a subsequent reconsideration, IO confirmed its decision.

When Procurement Decisions Are Subject to Judicial Review

The Proponent subsequently brought a court application to challenge the decision.

Although IO did not contest jurisdiction, the Court nevertheless held that jurisdiction is a threshold issue that cannot be conferred by consent. Section 2(1) of the Judicial Review Procedure Act engages the Court’s power of judicial review only where the decision is of a “sufficiently public character.” The Court confirmed that “public procurement decisions are not reviewable in this court as a general class”: jurisdiction “turns on a case-by-case analysis” guided by the factors set out in Air Canada v. Toronto Port Authority. The Court rejected the Proponent’s submission that the size of a project and the value of the contract are sufficient, alone or together, to make a procurement decision reviewable, observing that “[m]any public tendering processes involve large projects and expensive contracts.” Referring to the Divisional Court’s earlier decision in Bot Construction Limited v. Ontario (Transportation), the Court explained that size and value may be important, but that the decision in that case became “sufficiently public” only because it also raised issues about the integrity of the procurement process. Here, the grounds for disqualification and the involvement of the Premier and a Minister gave the matter a “serious public dimension” that grounded jurisdiction.

IO Acted Reasonably in Disqualifying the Proponent

The Court held that the standard of review was reasonableness, and that a challenge to the merits of a decision does not attract correctness review because it is framed as a matter of fairness. It upheld both the finding of a contravention and the choice of disqualification:

1. Compliance rests with the bidder. The Court agreed with IO that the obligation to comply with the RFP rests with the bidder, not with the persons it is prohibited from contacting. A public official’s expression of interest does not relieve a bidder of that obligation, so a bidder’s internal compliance processes should be able to identify a potential prohibited contact during the RFP process.
2. Context and incumbency matter. The Court recognized that a chance encounter, or an initial contact that goes no further, would not likely warrant sanction, and that a public owner must exercise its discretion to disqualify reasonably and in context. The Court also accepted that an incumbent’s unfair advantage in a staged procurement is inherent and unavoidable. However, it held that disqualification is justified where contact with elected officials could reasonably be seen by other bidders as adding to that advantage.

Duty of Fairness Owed to All Proponents

IO’s duty of fairness was owed to all proponents, not only the Proponent, and included “even-handed enforcement of the rules governing the RFP process.” The Court affirmed that process integrity requires enforcing prohibitions on contact with elected officials during an active RFP. The Court held that the Proponent, which had notice and an opportunity to respond and for reconsideration, was treated fairly.

Contractual Claims Not Available on Judicial Review

As a statutory court, the Divisional Court does not have jurisdiction over contractual claims on applications for judicial review. The Court also assessed the Proponent’s contractual claim as weak, because the RFP expressly negated contractual relations and a non-disclosure agreement executed in connection with accessing the RFP documents did not render the RFP contractual: “such a result would disable public authorities from establishing non-contractual RFP processes that include binding non-disclosure agreements”.

Takeaways

Judicial review of procurement decisions is available only on a case-by-case basis; a large project or valuable contract will not open the door on its own, but a decision engaging the integrity of the procurement process may. Owners that give notice, consider the bidder’s response and act proportionately will be well placed to have their decisions upheld when they enforce no-contact rules. Bidders should treat those rules as an organization-wide compliance obligation, institute measures to ensure compliance, and incumbents should take particular care that existing relationships do not become a channel for prohibited contact.

Blakes acted for the successful respondent.

For more information, please contact our Construction Dispute Resolution or Procurement groups.