Tendering: Does your bid contain a minor or major irregularity?

You have submitted a bid in response to a public call for tenders, but it does not meet all the conditions of tender. Does this discrepancy constitute a minor irregularity or a major one?

In its Jan. 10, 2023 decision in Location Martin-Lalonde Inc. c. Municipalité de Mansfield-et-Pontefract,^[1] the Superior Court of Quebec applied the Quebec Court of Appeal's criteria from Tapitec c. Ville de Blainville^[2] ("Tapitec") to determine whether non-compliant aspects of a bid constituted a minor or a major irregularity.

Specifically, the Superior Court had to determine whether the failure to provide a letter guaranteeing the issuance of a performance bond and a labour and material payment bond^[3] constituted an essential condition of the call for tenders.

Background

In October 2015, the Municipalité de Mansfield-et-Pontefract (the "Municipality") issued a public call for tenders seeking a partner to collect household waste, recycling and oversized items.

The Municipality received two bids: one from Entreprise Charette Inc. ("Charette") and one from Location Martin-Lalonde Inc. ("LML").

In December 2015, the Municipality awarded Charette the five-year contract, worth $144,660 per year before taxes.

LML then obtained access to Charette's tender documents and found that the company's bid did not meet all the requirements of the call for tenders.

Because of this, LML took legal action against the Municipality for the loss of profits it experienced due to the contract being awarded to Charette. The Municipality defended its decision in part by pointing out that LML's bid did not meet the requirements of the call for tenders either, as LML had failed to provide a letter guaranteeing the issuance of a performance bond and a labour and material payment bond.

Principles and reasoning

In this case, the Superior Court ruled that (i) Charette's bid was non-compliant in at least five respects, (ii) LML's bid contained a minor irregularity (omission of the letter guaranteeing the issuance of bonds), and (iii) as such, the Municipality had to compensate LML for loss of profits because of its decision to award the contract to Charette.

The Court's decision is a reminder of the principle set out in Tapitec that public bodies must evaluate bids in a fair and consistent manner to avoid creating a competitive advantage for one bidder at another's expense.

Consistency is demonstrated through close attention to both minor and major irregularities. The distinction between these two types of irregularity circumscribes public bodies' flexibility when selecting a bid. Whereas a bid that contains a minor irregularity is not automatically excluded and may still be awarded the contract under "administrative discretion,"^[4] one that contains a major irregularity must be excluded unequivocally. An irregularity is considered "major" if it involves failure to comply with an essential or material requirement of the call for tenders. The purpose of this reasoning is to prevent distortion of fair and equal competition between competing bidders.

However, it is not always easy to differentiate between minor and major irregularities. This decision is an example of how to apply the three-step test developed in Tapitec for assessing whether an unfulfilled requirement is essential or not. The Superior Court used this test to determine whether the irregularity in LML's submission was minor or major.

• Is the requirement of public order?

This question was rather straightforward, since, after a simple reminder of the concept of public order, the Court pointed out that while a bond is a useful tool, it is not a mandatory rule of law.

By way of comparison, in Tapitec, that Court agreed that the requirement for the contractor to be licensed by the Régie du bâtiment du Québec was in fact a requirement of public order.

• Do the tender documents expressly state that the requirement is essential?

In this case, the tender documents stated that the bid "must" be accompanied by a letter guaranteeing the issuance of bonds. This left no doubt as to the essential nature of that requirement.

• Does the requirement, in light of the uses, constructive obligations and the parties' intent, convey an essential or an accessory element of the call for tenders?

At this stage of the test, the Court found that the value of the bond, equal to 3.5 per cent of the annual contract value, was relatively small. It also noted that Charette, the successful bidder, did not submit a similar letter, yet the evidence showed that the Municipality never asked Charette about it and thus did not consider the bond truly important.

This raised the question of whether this requirement was in fact non-essential, despite the wording of the tender documents. The Court found that it was not required to substitute itself for the Municipality in the assessment of risk, which is the responsibility of the adjudicator, and that if the latter had not required this bond, it should not be given undue weight.

Consequently, the Court ruled that LML's failure to provide a letter guaranteeing the issuance of a performance bond and a labour and material payment bond should not be given undue weight and did not render LML's bid non-compliant with the essential requirements of the call for tenders.

As such, the contract should have been awarded to LML, not Charette, and the Municipality was ordered to compensate LML. The Court pointed out, however, that the Superior Court has held failure to provide such a letter to be a major irregularity in past rulings, where the amount of bond was greater than 3.5 per cent of the annual contract value.

Conclusion

Six years after the fact, the criteria developed in Tapitec are still relevant in assessing bid irregularities.

This decision is an important reminder that the flexibility granted to public bodies in selecting bids is not unlimited, and that public sector tendering is governed by clear rules to ensure that the selection process is fair and transparent to all bidders.^[5]

For more information on this decision, help drafting public tender documents, or assistance with any aspect of your current and future public-private partnership plans, don't hesitate to contact Gowling WLG's Infrastructure team.

The author thanks Nicolas Desmats for his contribution to this article.