Written by Brian Reid, David Wahl and Stephanie Gagne
The Alberta Court of Appeal recently confirmed in Aquatech Canadian Water Services Inc v Alberta (Minister of Environment and Parks), 2020 ABCA 153 that for a bid to be valid, a tenderer does not need to meet all mandatory conditions of a tender, provided that the tenderer commits to meeting them by the time the work is to be performed.
The legal framework governing tendering is set out in the landmark decision of the Supreme Court of Canada in The Queen in Right of Ontario v Ron Engineering & Construction (Eastern) Ltd,  1 SCR 111 [Ron Engineering]. When an owner issues a tender, it makes two offers: (i) to consider the bids it receives; and (ii) to enter into a contract to complete the project when a bid is accepted. A bidder accepts the first offer by submitting a bid that complies with the requirements in the tender documents, forming Contract A. Once a bid is accepted, the owner and the successful tenderer enter into Contract B for the performance of the services. To protect the integrity of the tendering process, an owner is required under Contract A to strictly follow the requirements set out in the tender documents. The owner also has an implied obligation to treat all bids fairly and equally, and only accept a compliant bid.
Alberta Environment and Parks (AEP) issued a public tender for the operation, monitoring and servicing of water and wastewater facilities in the Kananaskis region of Alberta (the "Tender"), which contract had been held by Aquatech for the previous 16 years. One of the mandatory requirements of the Tender was that bidders have at least five in-house certified operators with level 1 Alberta certification in water treatment, water distribution, wastewater collection and wastewater treatment. However, AEP awarded the contract to H2O who admitted in its bid that it did not have the required five in-house certified operators. However, H2O committed to comply with this requirement before commencing services.
Aquatech applied for judicial review of AEP's decision to award the contract to H2O on the basis that H2O had admitted that it did not comply with one of the mandatory requirements of the Tender, which, it argued, rendered H2O's bid non-compliant, thus preventing it from being accepted.
The Court of Appeal first noted that the Aquatech's claim was effectively that AEP had breached Contract A and suggested that a breach of contract claim rather than a judicial review application may have been a more appropriate means of pursuing the claim.
The Court also acknowledged that an owner is required under Contract A to strictly follow the requirements set out in the tender documents to protect the integrity of a tendering process. However, it found that the situation at hand fell squarely within the scope of Double N Earthmovers Ltd v City of Edmonton and Sureway Construction of Alberta Ltd, 2007 SCC 3, which held that depending on the language of the tender documents, an owner can accept a bid that commits to comply with a mandatory condition. The Court noted that the chambers judge held that H2O's bid was substantially compliant because H2O committed to have the required staffing by the time the services were to be performed.
The Court further noted that, in the alternative, if H2O's bid was non-compliant, AEP could have waived the non-compliance because there was a discretion clause in the Tender that permitted AEP to "waive an irregularity or noncompliance with the requirements of this [Tender] where the irregularity or noncompliance is minor or inconsequential."
The Court noted that the chambers judge had found H2O's proposal to be substantially compliant because: (i) H2O made a commitment to have the required staffing by the time the services were to commence; (ii) providing specific names of the five in-house certified operators was not required; and (iii) H2O's commitment to have the required staffing by the time the services were to commence was not unfair to the other tenderers and had no impact on the price or nature of the work to be performed.
The Alberta Court of Appeal's decision in Aquatech confirms that while the principles set forth in Ron Engineering continue to bind both owners and bidders in a true tender process, the principle of "substantial compliance" does allow for a certain amount of reasonable discretion when awarding work to the successful bidder. Furthermore, the inclusion of a properly worded discretion clause may also give an owner discretion to award the work to the preferred bidder.