Casual legal: Avoiding pitfalls in procurement

DISCLAIMER: This article is meant to provide information only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated. 

By Ben Throndson 

Reynolds Mirth Richards Farmer LLP 

Alberta Municipalities Casual Legal Service Provider  

It is common for municipalities to rely on competitive procurement processes such as tender calls and requests for proposals (RFPs) to obtain new assets and to find new external contractors. When properly structured, competitive procurement processes have several advantages compared to undertaking one-on-one negotiations with external suppliers, including lower pricing through competitive bidding, limiting the time required to achieve a final contract, and allowing municipalities to set the terms of a final agreement. 

Despite these advantages, procurement can expose a municipality to the risk of liability and result in litigation. As such, it is important to mitigate this risk by choosing an appropriate procurement method for the particular project and to ensure the procurement process has adequate contractual protections for the municipality.  

Canadian case law distinguishes between several kinds of procurement documents. The two most significant procurement processes are: 

• Tender Call: A “tender call” is a two-step process. By issuing a tender call, a municipality is offering to consider bids received and enter a contract where the bid is accepted. A proponent who submits a compliant bid is deemed to have entered into “Contract A” with the municipality. The terms of Contract A will depend on the tender documents, but generally includes an obligation on the municipality to act in good faith and treat all bidders fairly. The successful proponent then enters into “Contract B” with the municipality, which is the ultimate contract for the equipment or services. With a tender call, the expectation is that a contract will result from the process and flexibility for the municipality to deviate from the terms set out in the procurement documents is limited.
• Request for Proposals: In contrast to a tender call, an RFP does not feature the same expectation that a contract will result. Under an RFP, a municipality requests proposals considers them. It is expected that discussion/negotiation, which may ultimately lead to a contract, will follow. RFPs generally afford more flexibility to the municipality. 

When considering whether a procurement document is a tender call or an RFP, the courts will look at substance over form. While a document may be called an RFP, that does not automatically make it so. For this reason, it is important to ensure that procurement documents and processes are properly structured to achieve the desired result. It is also important that procurement processes account for trade agreements, such as the New West Partnership Trade Agreement. The NWPTA imposes specific rules for procurement on municipalities depending on the value of the procurement and it is important that municipalities comply with these obligations. 

To access Alberta Municipalities Casual Legal Helpline, Alberta Municipalities members can call toll-free to 1.800.661.7673 or email casuallegal [at] abmunis.ca (casuallegal[at]abmunis[dot]ca) and reach the municipal legal experts at Reynolds Mirth Richards and Farmer LLP. For more information on the Casual Legal Service, please contact riskcontrol [at] abmunis.ca (riskcontrol[at]abmunis[dot]ca), or call 310.MUNI (6864) to speak to Alberta Municipalities Risk Management staff. Any Regular or Associate member of Alberta Municipalities can access the Casual Legal Service.