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NECI Procurement Prequalification wordcloudDid Prequalification Include Subcontractors?

In February 2010, the Regional Municipality of Niagara created a shortlist of general contractors through a formal Request for Prequalification (RFQ) process, in accordance with its Purchasing Policies and Procedures Bylaw. The shortlisting process was for work related to two renovation projects at the Niagara District Airport: the “Groundside” project and the “Airside” project.

Weinmann Electric Ltd. acted as the electrical subcontractor for Dufferin Construction Company, the successful bidder on the Groundside project, which commenced in June 2010.

By way of letter dated April 21, 2010, the Region informed each of the five prequalified general contractors, including Dufferin, that they were eligible to submit written tender bids for the Airside project. On the advice of its consultant, the Region decided to specify minimum qualifications for the electrical subcontractors on the Airside project, due to the nature and complexity of the airfield lighting requirements.

In the April 21, 2010 letter, the Region advised the general contractors bidding on the Airside project that “… electrical subcontractors must have successfully completed at least two airfield lighting projects in Canada with a value of at least $750,000 each.” In the same letter, the Region set out the names of the four electrical contractors that its consultant had said would meet the minimum qualifications, with a stipulation that other subcontractors would be considered, provided they met the minimum qualifications. The requirement for minimum qualifications was subsequently incorporated into the tender document for the Airside project by addendum, without mention of the four named companies.

Although Weinmann was clearly a well-established electrical contractor, it was not one of the named companies, and did not meet the minimum qualification requirements, as its experience with airfield lighting work was limited. Weinmann contacted representatives of the Region and, through discussions, it became clear that Weinmann might have been able to meet the minimum requirements by partnering with another electrical contractor with suitable experience.  On August 3, 2010, before such partnering arrangements could be formalized, and shortly before tender bids for the Airside project were due, the Region informed the bidders that they “may carry Weinmann as the airfield lighting/electric subcontractor for [their tender bids] pending receipt of the requested backup information.”

Dufferin’s bid for the Airside project named Weinmann as the electrical subcontractor, incorporating Weinmann’s pricing for that aspect of the work. By letter dated August 11, 2010, the Region requested, among other things, the documentation with respect to Weinmann’s qualification as the proposed subcontractor. Although Weinmann did provide the backup documentation to Dufferin on August 13, Dufferin by that point had decided to use another electrical subcontractor on the project, in part due to its concerns about whether Weinmann could meet the requirements, and in part due to concerns about the possibility that Weinmann would be overextended by taking on the Airside project.

Weinmann initiated litigation and sought damages from the Region, alleging that it lost the Airside electrical subcontracting job because of the unlawful actions of the Region. The Region’s bylaws prescribe the procedure for conducting prequalification processes, including prequalification of any subcontractors. Weinmann alleged that the Region had failed to follow the bylaw by not preparing and advertising a prequalification process for the electrical subcontractors on the Airside project – despite naming four “prequalified” companies in the letter of April 21. The Region denied that any prequalification was done for the electrical subcontractors, so there could have been no breach of the bylaw in question.

The matter was complicated by the fact that an email from the Region’s consultant referred to female concerned procurement professional in blue shirtthe “prequalified list of electrical subcontractors,” although the issue was clarified by a subsequent letter confirming that other subcontractors could qualify by meeting the stipulated minimum requirements.

What would you decide in this case?

 

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Answer

Judge sitting at desk with papers and gavel looking angryIn Weinmann Electric Ltd. v. The Regional Municipality of Niagara, 2016 ONSC 13, the Ontario Supreme Court of Justice concluded that the conduct of the Region was not intended to produce, and did not produce, an exclusive shortlist of electrical subcontractors. The April 21 letter was clear that other subcontractors would be considered if they could meet the requirements. The letter simply included a non-exclusive list of suggested electrical subcontractors, which the Court found to be entirely reasonable, given the non-routine nature of the project. This conclusion was supported by the fact that the tender document for the Airside project did not list these suggested subcontractors; rather, it specified the minimum requirements that had to be met by any electrical subcontractor to be used.

In concluding that the Region did not conduct a prequalification process for electrical subcontractors, the Court found that there could have been no breach of the cited bylaw. The Court also dismissed general allegations of breach of the duty of fairness. In the words of the Court, “If there has been no breach of the By-Law, and no other unlawful act, there can be no breach of a duty of fairness.”

In the alternative, the Court found that, even if the Region had conducted a prequalification process and had breached the bylaw in doing so, Weinmann failed to prove that it had suffered any damages as a result. A plaintiff must prove more than an unlawful act in order to recover damages: it must also prove, on the balance of probabilities, that it has suffered a loss as a consequence of the unlawful act. In this case, if the Region had conducted a prequalification process, Weinmann would not have met the requirements, and therefore would not have made the shortlist, rendering it ineligible for the subcontract work in any event.

Coupled with the vague calculation of the damages alleged by Weinmann – including the fact that the impact on profit margins of having to partner with another company for the electrical work was not reflected – the Court had no hesitation in dismissing Weinmann’s claim, leaving the parties to agree on the amount of costs payable by Weinmann.

Readers are cautioned not to rely upon this article as legal advice nor as an exhaustive discussion of the topic or case.  For any particular legal problem, seek advice directly from your lawyer or in-house counsel.  All dates, contact information and website addresses were current at the time of original publication.

Reprinted from The Legal Edge Issue Feb, 2016

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