The provincial transportation ministry lost a big case recently when the Supreme Court of Canada condemned its "egregious conduct" in steering a major highways contract to an ineligible bidder, then trying to cover up what it had done.
The high court upheld an earlier, no-less-damning finding from the B.C. Supreme Court regarding the $25-million contract to build a new road through Nisga'a territory in the Nass Valley in northwestern B.C.
The court record documented a series of decisions by officials that together undermined the integrity of the ministry's own bidding process as well as its broader obligations, as a public institution, to fairness and transparency.
The trouble began when the ministry accepted a belated bid on the contract from Brentwood Enterprises and Emil Anderson Construction. Brentwood was eligible based on its involvement at an earlier stage, but lacked the qualifications to complete the project. Emil Anderson had the expertise, but was a late addition to the process, hence ineligible to bid.
The ministry not only welcomed the duo, it selected them ahead of other bids that were both eligible and well qualified. "In short," the high court found, "a bid was accepted and the work awarded to a party who should not have been permitted to participate in the tender process."
Moreover the ministry "fully understood" that it had violated its own bidding process, as evidenced by the way it altered documents to minimize Emil Anderson's involvement, making it look as if the contract had gone to Brentwood and Brentwood alone. A coverup, in other words. Or as the court put it: "The ministry took active steps to obfuscate the reality of the true nature of the bid."
One of the losing bidders, Tercon Contractors, subsequently launched the court action.
The deplorable facts were determined four years ago, in a trial before B.C. Supreme Court Justice Janice Dillon. The provincial government was unable to overturn any of her findings of fact, and for the most part (according to the Feb. 12 decision from the Supreme Court of Canada) it did not even try.
But the province believed it had devised an escape hatch, one that was cleverly incorporated into the bidding process. Before submitting proposals, bidders were required to agree to an "exclusion clause," worded as follows:
"No proponent shall have any claim for compensation of any kind whatsoever as a result of participating in this process, and by submitting a proposal each proponent shall be deemed to have agreed that it has no claim."
Tercon, the firm that filed the lawsuit, and the other bidders had all read those words and submitted their bids. Provincial government lawyers argued that the company had "agreed to the exclusion clause and must accept the consequences."
Thus, in the province's view, the exclusion clause should provide blanket immunity for any degree of bad behaviour by the ministry.
Except it didn't.
"I cannot accept the contention that by agreeing to exclude compensation for participating in this process, the parties could have intended to exclude a damages claim resulting from the province unfairly permitting a bidder to participate who was not eligible," wrote Justice Thomas Cromwell on behalf of the majority on the Supreme Court of Canada.
"The provision as well, was not intended to allow the province to escape a damages claim for applying different eligible criteria, to the competitive disadvantage of other bidders and for taking steps designed to disguise the true state of affairs.
"I cannot conclude that the parties intended to waive compensation for conduct like that of the province in this case that strikes at the heart of the integrity and business efficacy of the tendering process."
The high court thereby upheld Justice Dillon's verdict and her award of $3.3 million in damages to Tercon.
A relatively small amount, given the ministry budget of $800 million for operations, another $1 billion for capital. But the potential implications could be far greater.
The abuses documented in this case -- the tampering, coverup and the rest -- actually happened in the last days of the previous New Democratic Party government.
But far from brushing off the documented wrongdoing as yet another instance of the kind of thing that went on in the "the dismal decade of the 1990s," the B.C. Liberals went to court to defend the ministry's conduct as well as the exclusion clause.
I'm guessing they did so because they wanted to maintain a free hand for themselves on tendering, with the exclusion clause as an all-purpose get-out-of-jail-free card.
They almost succeeded.
The high court decision was a narrow one, five judges siding with the contractor, four others saying it was not in the public interest to stick taxpayers with the bill for the ministry's questionable conduct.
In a subsequent column, I'll have more to say about the minority opinion, and the broader implications of this case for fair and open tendering in the public sector.
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