Man with hand on face looking frustrated trying to figure out mandatory requirements

 

What Happens When Mandatory Requirements Require Interpretation?

YOU BE THE JUDGE: 

Joginder Ltd v Edmonton (City), 2017 ABQB 328

In October 2009, the City of Edmonton (‘the City’) issued an RFP for a Disabled Adult Transit Service Ambulatory Contract (“DATS Contract”). Joginder Ltd. (“Joginder”) made a bid for the project, as did Prestige Transportation Ltd. (“Prestige”). Joginder’s bid was rejected as non-compliant, and Prestige was awarded the contract. Joginder sued the City, alleging: (1) that Joginder’s bid was compliant; (2) that Prestige’s bid was non-compliant; and (3) that by awarding the contract to an allegedly non-compliant bidder, the City breached its duty to act fairly and in good faith. Joginder alleged that because of this, it had lost profits of $24 million. Here, the City applied for a summary judgment (that is, a judgment on the information at hand rather than a lengthier trial) on the basis that Joginder’s claim had no merit. The City argued that Joginder’s bid was non-compliant and that even if it had been compliant, it would not have been awarded the contract – further, the City argued that Prestige’s bid was compliant.

As in all RFPs, there were mandatory requirements bidders needed to meet in order to have their bids be determined compliant. Specifically relevant here were requirements that proponents must:

  • “be actively and currently engaged in commercial passenger transportation for a period of at least three years;”
  • “be commercial passenger transportation companies whose primary business is to provide commercial passenger transportation services”
  • “have their own dispatch and business telephone number(s) […] (not a shared line);” and
  • “have drivers and vehicles in active service.”

In late October 2009, the City responded to several questions regarding these requirements by posting Addendum No. 3. The City clearly stated that if the proponent is an “inactive holding company” then the proponent does not meet the requirement; that if financial statements are unavailable because the company is currently inactive then the requirement is not met; and that if the proponent does not currently own the vehicles it proposes to use, it must submit a list of the vehicles it proposes. The author of these questions was not disclosed, but the judge held that it was clear they were from Joginder. Further, Joginder acknowledged receipt of the Addendum.

On November 12, 2009, the City sent Joginder a letter rejecting its bid on the basis of non-compliance. Specifically, the city identified these areas as those where Joginder failed to meet the mandatory requirements:

  • the proponent was not a company whose primary business was to provide commercial passenger transportation services;
  • the proponent did not have an exclusive dispatch and business telephone line; and
  • the proponent did not have drivers and vehicles in active service.

Joginder stated that by the time its bid was tendered, its status as an inactive company was incorrect, although it described itself as “dormant” in its proposal. Joginder stated that by the time of the tender bid it was an active corporation with one vehicle and two drivers available, as described and supported by evidence in the tender documents. The vehicle described was a 2002 Ford Taurus, inspected and insured on October 31, 2009 and registered on November 2, 2009, the date tender bids were submitted to the City of Edmonton. However, the vehicle had never been used for commercial transportation services.

Joginder further argued that the successful bid submitted by Prestige was non-compliant, alleging problems with the telephone number and the requirement to have active drivers and vehicles, with vehicles insured. Joginder argued that since Prestige was a wholly owned subsidiary of 331001 Alberta Ltd. and that at the time of the bid all vehicles were owned and insured under that parent company, the bid was non-compliant. At the time of the bid, Prestige had seventy trained drivers and eighty DATS–compliant vehicles, registered to 331001 Alberta Ltd. Prestige was also part of a group of companies – including 331001 Alberta Ltd. – that operated collectively with more than seven hundred vehicles and a thousand drivers. The City argued that the mandatory requirement did not explicitly require direct ownership, and that Prestige’s bid was thus compliant.

Does the wording in the mandatory requirements allow Joginder’s bid to be found compliant? Does it render Prestige’s bid non-compliant? You Be the Judge.

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Answer

The judge found on summary for the City, holding that Prestige did meet the requirements and that Joginder had not. The judge further held that it was unnecessary to consider the City’s argument that Joginder’s bid (if complaint) would have been unsuccessful, as Contract B had not been formed between Joginder and the City.

The judge dismissed the concern regarding the telephone numbers as one of no consequence, since despite Joginder’s claim that it had a compliant number and that Prestige did not, the requirement itself was odd, as setting up such numbers before receiving the award – and some nine months before having to provide service – seemed unnecessary. Thus the telephone numbers did not play further into the judge’s considerations.

The judge combined the other two issues – that of the proponent’s primary business being commercial passenger transportation and of having drivers and vehicles in active service – into one issue for ease of discussion. Because of the language present in the RFP, namely that the proponent is active and that the RFP required vehicles (rather than just one vehicle), the judge held that, in combination with Joginder’s self-description as “inactive” and dormant,” the City was justified in finding that Joginder’s bid was non-compliant.

As for Prestige’s bid, the judge was not convinced by the City’s argument that the mandatory requirement for active drivers and vehicles did not explicitly state that the ownership must be direct.

The judge clarified that the appropriate question is whether it is satisfactory to meet mandatory requirements through related parties. As held in IMP Group Ltd v Canada (Minister of Public Works & Government Services), 2006 FC 1223, in order to use related parties for such requirements the bidder need to establish that it had been in the relevant business for at least five of the past eight years, and that conforming to mandatory requirements should be interpreted with consideration to the overall purpose and objectives of the RFP.

The judge held that since the underlying purpose of the mandatory requirements that the proponent is an active company with active drivers and vehicles is to ensure that the successful proponent would be able to perform the services if awarded the contract, the Prestige bid was compliant. Since Joginder did not meet the mandatory requirements and Prestige did, the judge held for the City of Edmonton.

Editor’s Note:  You may be concerned that, in this case, the judge disregarded the mandatory requirement related to the telephone numbers as seemingly ‘unnecessary’.    Remember that, in the absence of very strict language, the case law requires procurement professionals to ‘look behind the logic’ of the requirement to assess whether substantial compliance has been met.  In this case the judge focused on the underlying purpose of the requirement, which was to demonstrate an active company.  Given the other information submitted by Prestige, the court was satisfied this requirement was met even if the telephone number information was technically deficient.

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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.