Questions concerning the legality of the call for tenders process are regularly submitted to the courts. Obviously, when the contract contemplated in a call for tenders is important, each of the businesses that went through the process will have an interest in, and will want to obtain, the contract.
What should you do if your business is not awarded the contract you wanted so badly? Below is a brief description of the legal remedies available in light of the recent case law. It should be noted that the remedies described below can be instituted against any business, whether public or private. However, in the case of an action against the government itself, it will not be possible to institute injunction proceedings, but it is possible to obtain a safeguard order in very exceptional circumstances. (We will not consider those circumstances in this article.)
Firstly, before anything else, you must ensure that you responded to all the requests and formalities set out in the call for tenders. It goes without saying that the courts will not be able to sanction the party contracting out the work (the client) at the behest of a bidder that did not comply with the rules laid down in the call for tender documents. 1
GENERAL RECOURSE: DAMAGES
Several recourses are available to aggrieved bidders. Most often, they will institute an action in damages seeking compensation for the losses they have suffered and profits they were deprived of. The bidder’s lost profits must be proven with well-documented evidence to obtain the amounts claimed, and will not be awarded unless it is clearly proven that the bidder ought to have received the contract. Note that the evidence of damages generally requires the disclosure of sensitive information belonging to the aggrieved company, such as profit margins or financial statements.
Furthermore, in the event that a bidder participates in a second call for tenders launched by the client after participating in a first call for tenders (where the first call for tenders was canceled), if the bidder subsequently institutes an action in damages based on the first call for tenders, it may be dismissed on the grounds that the bidder waived this recourse when it decided to bid in the second call for tenders.2
APPLICATION FOR A DECLARATORY JUDGMENT OR ACTION IN NULLITY
Sometimes, an aggrieved bidder may wish to apply for a declaration by the court that the client did not comply with the tender process or that the process should be annulled, particularly in cases where the client is a public entity subject to a special statute establishing a framework for the call for tenders process (e.g. Cities and Towns Act, Act Respecting Contracting by Public Bodies). In such cases, the bidder may institute an action for a declaratory judgment or an action in nullity seeking a declaration that the tendering process engaged in is null and void. The main purpose of such actions is to obtain an answer to a clear question submitted to the court.
INJUNCTION OR APPLICATION FOR A SAFEGUARD ORDER
An aggrieved bidder may also apply to the court for an injunction or safeguard order to suspend a tender process that is underway (temporarily and incidentally to another action or on a permanent basis). However, it is important to know that it is difficult to succeed in an injunction action, among other things, because the criteria for a successful injunction are somewhat difficult to meet in the context of a call for tenders. Injunctions are an exceptional remedy and, since the courts have the discretion to grant or refuse them, they will frequently be reticent to intervene in a process governed by rules laid down in a statute or by the parties.
To obtain an injunction order, the following criteria must be met: a prima facie case, serious or irreparable harm, and the balance of convenience.
A prima facie case is met, in particular, where the applicant (the aggrieved bidder) proves to the court that the process does not comply with the applicable statutes (particularly in matters involving a public body), the client has failed to comply with the very process it put in place, or there is a major irregularity in this process. Indeed, the principle of the equality of bidders is a basic principle in tender matters that has been reaffirmed on many occasions by the courts. By itself, this criterion is generally not too difficult to meet. 3
Once a prima facie case has been established, the bidder must show that it would suffer irreparable or serious prejudice, i.e. which is not compensable in damages. This criterion is more difficult to meet because, in several cases submitted to the courts, they have concluded that the prejudice was ultimately compensable in damages based on the profits which the applicant bidder hoped to make. Note that the loss of expertise where the contract is awarded to the bidder’s competitor instead of the bidder, and the difficulties in assessing the amount of damages (due to mathematically complex calculations) were not found to be irreparable prejudice by the courts.4 On the other hand, where the bidder can show that his business is at risk of shutting down, the courts will be more inclined to issue the order. 5
Finally, if the court finds that the right on which the applicant is relying is not perfectly clear, it must decide which of the parties would suffer greater inconvenience if the order is rendered. In this regard, it should be noted that if the call for tenders involves a public body, it will benefit from a presumption that the contract contemplated in the call for tenders is made in the public interest. In such a case, it will be easier for the public body to turn the balance in its favour as compared with a private interest. On the other hand, there have been some cases involving public bodies in which the illegality committed by the public body was so great that the court concluded it was in the interest of the parties and the public to obtain a ruling on the issue of legality, while suspending the process in the meantime.6
Finally, the court will also consider whether there is sufficient urgency at certain stages of the application for an injunction or safeguard order.
If you feel that you have been wronged in the context of a call for tenders, it is important to quickly assess the solutions available to you. Depending on the facts and legal issues involved, one remedy may be more appropriate than another. In any case, to benefit from all the possible remedies, you should not wait too long before evaluating which solution is best for you.