The province must pay a Vancouver water treatment systems company approximately $100,000 after the government engaged in “bid shopping,” a B.C. Supreme Court judge has ruled.
Madame Justice Sandra Balance ordered the Ministry of Water, Land and Air Protection to pay Stanco Projects Ltd. the full profit it would have received – in the range of $91,766 to $111,766 – for water tanks installed at the Cypress Bowl ski area in Cypress Provincial Park. After a call for tenders, the province indicated that it would accept Stanco’s bid, which was the lowest, but later handed the contract to another company – after the second company saw Stanco’s bid and undercut it.
“The bottom line is that the ministry was driven by the bottom line,” wrote Ballance in her July 30 decision.
The judge ruled that the province did not follow the policies, procedures and guidelines in its own contract administration manual after it had essentially contracted with Stanco.
The province shopped its bid around – without Stanco’s knowledge – after indicating that the company would receive the contract.
The decision comes as the province is facing protests from B.C. shipbuilders for its decision to award a contract for two Super C-class ferries to either a German or Finnish firm, the RAV rapid transit line is entering its best and final-offer stage, and builders are preparing bids to construct 2010 Winter Olympic Games venues. All of those projects are funded in whole or in part by the province.
John Logan, Stanco’s lawyer, said the decision provides a clearer description of “bid shopping” and ensures that tenderers treat bidders fairly.
“It’s a very good decision for contractors and sub-contractors who bid on these things every day,” said Logan. “All they want to know is what the rules are.”
The province’s tendering manual required the province to accept the lowest bid from qualified bidders that complied with the requirements laid out. The province countered by claiming that the engineering company handling the project on its behalf – Aplin and Martin Consultants Ltd. – was at fault. But the judge found that almost all of the engineering company’s alleged breaches amounted to “little more than misguided quibbling from which nothing of consequence flows.”
Although Aplin and Martin did the initial bid shopping, wrote the judge, the province became aware of the “nefarious” practice before it awarded the contract to Westport Construction Group Inc., which completed the work.
Initial plans called for two water tanks to be installed, but the province decided to put in just one because of a lack of available funding.The tendering terms allowed the province to adjust the contract so that it covered just one tank, and disputes were to be settled through arbitration.
The province asked the bidders to quote the costs of one glass fused-to-steel tank, but it failed to ask for the cost of one epoxy-coated steel tank, which it eventually wanted.
Stanco said it had to charge a higher price than the province anticipated for one tank because the company could not get as good a deal as it would have if it had ordered two from its supplier.
Westport received a contract after it saw Stanco’s price quote for one tank with a thick epoxy coating and put in a quote for one tank – with a thin epoxy coating - that was $18,000 lower. Westport’s tank contained a thin epoxy coating, but the province’s tendering specifications called for a thick coating.
In accordance with the bid rules, Stanco offered to match Westport’s price for one tank, but the province still gave the contract to Westport.
“The tendering process is designed to replace negotiations with competitive bids,” said Logan. “You can’t have both.”
Citing a lack of evidence that would enable her to set the exact amount of the award, the judge instructed the province and Stanco to decide on an amount within the $91,766 to $111,766 range.
In addition to providing Stanco with its full profit, the province must pay the company’s legal costs, which Logan estimated to be $50,000, plus interest.
Under the rules of court, said Logan, the province must pay double Stanco’s legal costs – which amount to the $50,000 estimate – because the government rejected Stanco’s offer to settle before the case proceeded to court.
The settlement offer was approximately $80,000, said Logan.
He said the province has until August 31 to make an appeal.
Jim Maxwell, the province’s lawyer on the case, said he has no comment until he has read the judgment. A decision on whether to appeal the ruling will be made after that point, Maxwell said.
(Monte Stewart can be reached at monte@businessedge.ca)
