The Mother Of All Tender Cases!

The recent decision in Envoy Relocation Services Inc. v. Canada (Attorney General) certainly deserves the title of Mother of All Tender Cases.  It is a judgment of over 1800 paragraphs in which Mr. Justice Annis of the Superior Court of Ontario analyzed and found in great depth how an invitation to tender by the federal government went wrong due to unfairness.  Not only is the factual analysis extremely detailed. The legal issues are of the greatest importance to the building industry and the procurement process, particularly relating to allegations of favoring an incumbent or preferred bidder.

The basic issue in this case was whether unfairness by a sponsor of a procurement which occurs prior to the time when the tenders are submitted by the bidder, or after the award of the substantive contract to the successful bidder, can be a breach of the bidding contract (known as Contract A under the Ron Engineering analysis).  The Crown said that the prior conduct could not be a breach of contract, since before the submission of tenders there was no Contract A.  As well, the Crown said that the subsequent conduct could not be a breach of conduct since, upon the award of the final contract (known as Contract B under the Ron Engineering analysis), the tender process was terminated.  The Crown said that it was only conduct by the sponsor between the time that the tenders were received and the time of the award of the contract to the successful bidder that could be considered for unfairness under the Ron Engineering line of tender cases.

Mr. Justice Annis held that the unfairness principle applied to conduct by the sponsor before the tenders were submitted because that conduct was embedded in the tender documents and in the sponsor’s consideration of the bid.  Mr. Justice Annis also held that this unfairness principle  applied to the sponsor’s conduct after the award of the contract if the sponsor colluded in the improper award of the contract.


Mr. Justice Annis took 1194 paragraphs to set forth the facts, so the following is a brief synopsis. The dispute arose in relation to a 2004 RFP by the Canadian government for a relocation service for personnel employed in the Canadian armed services, government services and RCMP.  An earlier RFP had been undertaken in 2002.

One element in both RFPs was a service called Property Management Services, or PMS.  Under PMS, the winning bidder was required to arrange and pay for various services to the individuals being moved, such as realty services, legal services and similar services. The incumbent provider which had won the 2002 RFP knew that the RFP services were hardly used at all by any of the transferred individuals. It had bid the 2002 RFP showing zero as the ceiling cost for the PMS service, thereby contracting to provide the service free of charge. In fact, it actually charged the few individuals who used the service under the 2002 contract.

Then, in the 2004 RFP, the incumbent provider again knew that few individuals used the PMS service.  So it again included zero cost for this service in its bid.  The other bidders were told by the sponsor to include a specified level of projected users of the PMS service, and did so.  By reason of doing so, their bids were about $45 million more than they would otherwise have been if they had bid zero as a ceiling for PMS services, as the incumbent had done.

These facts about the 2002 and 2004 procurements were subsequently discovered by the Office of the Auditor General.  One of the other bidders, Envoy Relocation Services Inc., sued the Canadian government and this trial ensued.

Reasons of the Trial Judge

The trial judge concluded that the Crown had breached the express terms of the 2004 RFP, for instance by accepting the incumbent’s zero cost for PMS services. The trial judge also concluded that the Crown had breached the implied term that the invitation to tender would be fairly conducted. His reasons included the following:

  1.  By inserting a zero price for the PMS, the incumbent had failed to bid the ceiling price in accordance with the requirements of the 2004 RFP, and its bid was non-compliant and ought to have been disqualified.
  2. By inserting a zero price for the PMS, the incumbent was in an “obvious actual conflict of interest.”  By quoting a zero price for PMS, the incumbent would wish to discourage any transferee form using the PMS services, because it would have to pay for those services if the transferee requested them.
  3. the weighting in the selection formula used by the Crown was “intentionally amended to favour” the incumbent bidder, and the government’s “conduct on the issue of amending the selection formula [constituted] bad faith.”
  4. The Crown “fail[ed] to follow its own published evaluation process, which was also set out in the RFP.”
  5. The Crown was in a “conflict of interest as the result of being implicated in litigation with the incumbent bidder arising out of the 2002 RFP.”  The Crown “knowingly drafted…the provisions of the [2004] RFP intended to favour the incumbent.”
  6. The “Crown intentionally turn[ed] a blind eye to [the incumbent bidder’s] intention to breach the contract, if awarded it” since the incumbent intended to charge for PMS services even though it had bid a ceiling of zero for this service.

Some of the other comments of the trial judge about the conduct of the Crown are best left to be read in the actual judgment.

Based upon these findings, the trial judge found that Envoy Relocation Services would have been the winning bidder if the RFP had been properly conducted and he awarded about $29 million in damages for breach of contract.

The Legal Issues

The Crown maintained that any alleged misconduct by it fell outside its contractual duty of good faith under the decisions of the Supreme Court of Canada in MJB, Martel and Double M Earthmovers, which followed and applied the decision in Ron Engineering. The Crown’s position was that:

  1.  Any misconduct before the tenders by Envoy and the other bidders were filed could not fall within any contractual duty of good faith. Until those tenders were filed, there was no Contract A applicable to the bidding process, under the Ron Engineering analysis. The trial judge put the Crown’s position this way:
  2.  “The defendant argues that the duty of fair and equal treatment is limited to the assessment of bids and does not apply to all aspects of the bidding process. Therefore, the plaintiffs cannot make any claim in respect of property management services because it relates to the drafting of the tender documents, not the evaluation of tenders…. [The] duty of fairness does not extend beyond a duty to treat all bidders fairly and consistently in the process of assessing bids. The duty of fairness therefore, does not apply to other aspects of the bidding process. In particular, it does not apply to the preparation of tender documents.”
  3.  Any misconduct occurring after the 2004 contract was awarded to the incumbent could not be attacked because, under the Double M Earthmovers decision, once that award was made the contract applicable to the bidding  process (that is, Contract A) came to an end.

There were many other important legal issues discussed in this judgment but for procurement and construction law purposes, those are two of the most interesting.

The Trial Judge’s Decision

The trial judge found several elements of unfairness in the way the RFP was run, particularly in relation to the incumbent bidder.  The incumbent “had access to information that it could bid the PMS item based on actual volumes, which Envoy was not aware of because the answers to questions had directed Envoy to use estimated volumes found in the BOP formula.”  The trial judge concluded that “had accurate PMS volumes been provided to non-incumbent bidders, it would have become immediately apparent that the PMS tendering provisions were a scam by their use of egregiously inflated PMS volumes that in no way could be described as “estimates”.  In addition, “the repetition of the 2002 PMS provisions in the 2004 RFP constituted a hidden preference to [the incumbent] that was concealed from Envoy and the other bidders”.

The trial judge rejected the Crown’s defence that the Crown’s conduct could only be legally unfair if it fell within the time period between the submission of the tenders and the award of the final contract. As to the Crown’s conduct before the tenders were delivered, the trial judge essentially found that that conduct was embedded in the tender documents and the sponsor’s selection decision.  The tender documents themselves were unfair by reason of the Crown’s conduct in preparing and administering them in the tender process. As the trial judge said:

“Firstly, the simplest answer is that the definition of what constitutes an unfair evaluation would include an evaluation carried out on an RFP that includes concealed advantages or disadvantages to any bidder. Any aspect of the tendering process upon which an evaluation is based is part of the evaluation process. Accordingly, if the tender terms are inherently unfair because of undisclosed preferences, the evaluation based on those tender terms is equally unfair. The jurisprudence upholds this result.  (emphasis added)

Second, the trial judge relied upon several decisions that establish that undisclosed standards or criteria are classic examples of unfair tenders. The present situation was, in his view, no different:

“I find no distinction between a “concealed preference” and an “undisclosed standard” referred to in the decisions above with respect to preferring local contractors or providing insufficient details. In either case, tender documents concealing preferences or undisclosed standards undermine the integrity of the bidding process and with that, the implied obligation to treat all bidders fairly and equally.”

So far as evidence about the Crown’s conduct after the award of the 2004 RFP to the incumbent, the trial judge distinguished the Double N Earthmovers decision of the Supreme Court of Canada:

“[T]he Crown Collusion is also relevant to the blameworthiness of the owner. One of the factors in the Double N decision was that the City of Edmonton was an innocent party because it had no forewarning or knowledge of the contractor’s deceitful behaviour. In contradistinction to those facts, blameworthiness and culpability on the part of the Crown is evident throughout this tendering process.”

In addition, the trial judge held that the court could look to any relevant evidence, including conduct before or after the moment when the tenders were filed, in determining whether the conduct of the Crown in accepting the incumbent’s bid and rejecting another competing bid, was fair.


There are two useful aspects of the Envoy Relocation Services decision.

First, the factual circumstances contain a wide variety of circumstances in which an invitation to tender may be found to be unfair, particularly if there is an incumbent bidder:

  • permitting the incumbent access to information not available to other bidders;
  • requiring other bidders to use criteria not used by the incumbent in its bid;
  • failing to address the conflict which may arise if the incumbent has a claim against the sponsor rising from the prior contract, etc.

In fact, the Envoy Relocation Services decision provides a virtual check-off list of problems to be considered anytime an invitation to tender involves an incumbent bidder or potential favouritism to any bidder.

Second, the decision provides a good explanation of why a sponsor’s conduct may be contractually unfair even if it occurs before the bidders’ tenders are submitted. It may be unfair if it affects the fairness of the tender documents or the selection made by the sponsor. In either case, while the conduct may occur before the bidders submit their tenders, that conduct affects the sponsor’s conduct after the tenders are submitted.  That prior conduct affects the fairness of the crucial decision made as part of the bidding contract, namely, the selection of the winning bidder.

That conduct prior to the submission of the tenders may not give rise to liability in tort (as found in Martel). And it may seem illogical that conduct prior to the making of the Contract A bidding contract could be the basis of a claim for breach of that contract. However, the trial judge found that it is entirely logical because that conduct is part of the tender documents and part of the sponsor’s selection decision.

So far as the conduct of the sponsor after the selection of the winning bidder is concerned, the Envoy Relocation Services decision confirms that such conduct may be the basis of unfairness if the owner knows (or is reckless) as to the winning bidder’s subsequent conduct.  If the sponsor knows before awarding the bid that the winning bid is really non-compliant based upon that bidder’s tender or clear intentions (as found in Envoy Relocation Services and MJB,) then the sponsor can be held to have acted unfairly in awarding the contract to that bidder.  If the sponsor does not know these facts (as found by the majority in Double N Earthmovers), the subsequent conduct of the sponsor or winning bidder will not be the basis of allegations of unfairness against the sponsor.

See Heintzman and Goldsmith on Canadian Building Contracts (4th ed.), chapter 1, paragraph 1(f)

Envoy Relocation Services Inc. v. Canada (Attorney General), 2013 ONSC 2034

 Construction Law  –  Tenders  –  Non-Compliant Bids  –   Incumbent bidder  –  Fairness

 Thomas G. Heintzman O.C., Q.C., FCIArb                                                         May 8, 2013


Supreme Court Denies Leave In Tender Case – Refuses To Re-Write History

The Supreme Court of Canada has recently refused leave to appeal in Trevor Nicholas Construction Co. Ltd. v. Canada. In doing so, it has upheld the decisions of the Federal Court Trial Division and Federal Court of Appeal which declined to permit a bidder to rely on after-the-fact information to overturn an invitation to tender.  These decisions, and the Supreme Court’s decision not to allow an appeal, may signal a growing unwillingness of courts to disturb the tender process based upon facts or events occurring after the tender is completed.

Background Facts

This is a long story, starting 23 years ago in 1989. The summary judgment motion judge summarized the facts as follows.

In 1989 and 1990, Trevor Nicholas submitted the lowest bid on two invitations to tender for dredging contracts issued by Public Works Canada.  In each case, Public Works Canada advised Trevor Nicholas that it was “by-passed” in favour of the second lowest bidder based upon its previous work and apparent incapacity.  Trevor Nicholas submitted bids on three further projects between 1990 and 1993. It was the lowest bidder but was by-passed for the same reasons.

In 1995, Trevor Nicholas sued the federal Crown and alleged that the defendant had treated the plaintiff unfairly during the first four tenders.  Trevor Nicholas also claimed that the Crown had breached an implied term of the contracts which were created when the plaintiff delivered four fully qualified low tenders.

In May, 2001, the Federal Court granted summary judgment dismissing the plaintiff’s claim under the implied term theory.

In January 2011, the balance of the plaintiff’s claim was dismissed on summary judgment, on the ground that there was no genuine issue for trial with respect to the plaintiff’s claim that the defendant breached its obligation to treat the plaintiff fairly. The Federal Court of Appeal upheld that decision and the Supreme Court of Canada has now denied leave to appeal from that decision.

The Federal Court of Appeal’s decision

The Federal Court of Appeal quoted, and agreed with, the following portion of the trial judge’s reasons which stated the ingredients of the duty of fairness in an invitation to tender.  The Federal Court of Appeal underlined the concluding portion of the quote:

“The defendant’s implied obligation to treat the plaintiff fairly flows from its “obligation to treat all bidders fairly in the sense of not giving any of them an unfair advantage over the others” and not unfairly preferring one bidder over another… In assessing whether this obligation was breached, it must therefore be determined whether the plaintiff was treated unfairly, relative to other bidders. This assessment should include a determination as to whether the By-Pass Decisions were made on the basis of considerations that were extraneous to those set forth or implied in the tender documentation…. In my view, the assessment should also include a determination as to whether the defendant was biased against the plaintiff or made one or more of the By-Pass Decisions in bad faith, for example, by basing any of the By-Pass Decisions on facts that the defendant knew or ought to have known were untrue at the time those decisions were made. [underlining added]”

The central argument of Trevor Nicholas was that the Crown knew or should have known at the time of the tender that the information which the Crown relied upon to by-pass Trevor Nicholas was false.  Trevor Nicholas attempted to show the falsity of that information, and the Crown’s contemporary knowledge of it, through cross examination of witnesses on the summary judgment motion. Its difficulty was that all the facts that it relied upon were dated long after the invitation to tender.  Trevor Nicholas was attempting to show that, by virtue of those facts long after the tender, the Crown knew or should have known of the falsity at the time of the tender. But it had no information that the Crown did know that falsity at the time of the tender.

The trial judge and the Federal Court of Appeal were not prepared to allow Trevor Nicholas to proceed to trial on the issue of fairness when Trevor Nicholas based its case on facts occurring long after the tender, and sought to extrapolate backwards from those facts to show unfair conduct by the Crown at the date of the tender.  As the Federal Court of Appeal said:

“[T]he plaintiff had no direct evidence to show that when making his decision not to accept the plaintiff’s tenders, the decision-maker knew that the information before him was incorrect or based upon irrelevant factors. At best, the plaintiff’s evidence took issue with the accuracy of various opinions placed before the decision-maker…[T]he Judge wrote that there was nothing in the plaintiff’s motion record:

[…] that would indicate or suggest in any way that the defendant knew, at the time when it made the By-Pass Decisions, that any of the facts upon which it relied in making those decisions were false, erroneous or misleading. Despite my repeated requests during the oral hearing, the plaintiff was not able to identify any basis for this claim, other than its mere belief that the defendant knew that some of those facts were false.”

The Crown led evidence to show that, at the time of the tenders, it retained and relied upon independent experts to evaluate the bids.  The tender documents explicitly stated the past performance of bidders, and the similarity of work previously undertaken by bidders to the proposed work, would be considered.  The summary motion judge concluded that, in all the circumstances, Trevor Nicholas had not shown that there was any genuine issue for trial on the issue of fairness. The Federal Court of Appeal agreed.


The decision brings to an end 23 years of disputes and litigation over tenders. There have been 20 reported decisions in the two actions brought by Trevor Nicholas over these tenders. This is a remarkable amount of unsuccessful litigation.

One can well understand the frustration of a contractor repeatedly losing out on invitations to tender on which it was the low bidder.  This frustration is then fed by discovering later facts which demonstrate, in its view, that the decisions to by-pass it were unjustified.  In invitations to tender, bidders are outsiders to the decision-making process.  When they are excluded for subjective reasons, such as unsuitability or incapacity, there is a natural tendency to blame the process and to jump to the conclusion that the process was unfair.

But the invitation to tender process cannot be run by “monday morning quarterbacking.”  Business is business, and courts are not going to paralyze the tender process by raising the spectre of penalizing owners if facts are later discovered which call into question the wisdom of the tendering decision.  Fairness will be judged by the fairness of the process, and the later discovery of new facts does not render a prior process unfair.

See Heintzman and Goldsmith on Canadian Building Contracts (4th ed.), Chapter 1, section 1§1(f)    

Trevor Nicholas Construction Co. Ltd. v. Canada, 2012 FA 110

Building Contracts  –  Tenders  –  Fairness  –  Duty of Care  –  Remedies

Thomas G. Heintzman O.C., Q.C., FCIArb                                                                                                                          December 9, 2012