Toronto considers litigation provision on bids

A City of Toronto staff recommendation to disqualify suppliers who are in ongoing litigation with the city from bidding on projects is being described by several industry stakeholders as a “heavy hammer.”

According to a city report, staff are recommending changes to the city’s purchasing bylaw and procurement processes policy, with a major change including the adoption of a Supplier Code of Conduct. Part of this includes a recommendation that the city treasurer has "the authority to disqualify a supplier who is in ongoing litigation with the City related to a contract awarded by the City."

City staff state the focus of the provision is to address suppliers with a history of "bringing vexatious or frivolous litigation against the City" and not to stop suppliers who have legitimate issues from addressing them through the courts.

The recommendation was brought to the Broader Construction Association Consultation Group (BCACG), a city advisory group comprised of various industry representatives, at the end of May, explains Geoff Wilkinson, executive director of the Ontario Road Builders’ Association (ORBA), which "came up as a big surprise to all of the industry associations that are supposed to be consulted."

Wilkinson, along with Ontario General Contractors Association president Clive Thurston and Ontario Sewer and Watermain Construction Association executive director Giovanni Cautillo, told the Daily Commercial News during the Canadian Construction Association spring board meeting in Halifax, N.S. that they felt they were not properly consulted on this issue.

"Our opportunity to provide any input is negligible and in our opinion the city staff are doing this in a very rushed way, in order to avoid industry consultation. It should be every contractor’s right to pursue a claim through litigation," Wilkinson says, adding it appears the City of Toronto is saying, "If you want to do business with us, and you have a claim and you want money from us, too bad."

But Michael Pacholok, Toronto’s chief purchasing official and director of purchasing and materials management, says the intent behind the recommendation is not to stifle proper litigation.

"To be clear, it’s not necessarily a ban. It might be a disqualification with respect to a particular procurement. The treasurer will have to consult with the city solicitor on determining whether they would disqualify a supplier for a particular procurement," he explains. "We’ve listed some non-exclusive factors in the report, which will be a guideline, and then we’re going develop procedures to help flush that out and to make it clearer. We want to make procedures that are very clear on how we will make a decision and get their (the industry’s) input on that."

The report went to the city’s Government Management Committee on June 13 and is slated to go to council in July for approval.

"Rather than become more efficient, they, like some other owners, believe that it’s better to become more punitive. Let’s penalize the people who work for us," says Thurston. "These clauses are intended to intimidate contractors from accessing their due process, their rights under the law. They have no other purpose."

"Industry consultation occurs before something is put into motion," adds Cautillo. "This is a matter of control and the city is using a very archaic way of control."

Pacholok, however, states there is still plenty of time for industry consultation.

"There will be more opportunity for consultation with respect to the procedure of how it would actually work," he explains, adding interested stakeholders can also provide written comments to council. "If council approves the report, we will definitely be working with the industry to work on those procedures, late summer into the fall, so we get good consultation with respect to how it will work before it turns on in January."

For Wilkinson, the litigation provision issue is all too familiar. In 2015, Ontario’s Minister of Transportation (MTO) Steven Del Duca announced that the litigation provision was being removed from the exclusion clause in government contracts. It was a move ORBA had been pushing for since 2007. Prior to that, MTO contracts had a provision that stated the ministry could exclude vendors from bidding on future contracts under specific conditions.

"We just had this removed from MTO," Cautillo says. "The MTO had the foresight and understood the restrictions."

"We’re not going to keep taking this from owners," Thurston adds. "There is going to be a response from the industry."

A June 24 letter to the city from the Construction and Design Alliance of Ontario expresses disappointment with the proposal and states "should the City continue to proceed with such onerous and unfair proposals, we will have no choice but to reconsider the value of working within the BCACG."

Pacholok states he hopes the industry will work with the city on this process.

"From our perspective it’s not going to impact what goes to court. This is really about should we work with supplier on a particular case given certain factors in play. We’re trying to narrow it to the situation where were its frivolous and vexatious lawsuits that we’re dealing with," he explains. "If a supplier is in litigation and they win the litigation against the city, that shouldn’t be something we hold against them, they legitimately won. If we’re going to exercise such discretion, we have to do it in good faith and that’s why we need to establish this very transparent decision-making process."

But Wilkinson says it’s not up to the city to make those decisions.

"The courts will define themselves what is frivolous and vexatious," he says. "They’ll throw out a court case that is frivolous. Why should a public owner think that they have more power than the court?"