Design Services Ltd. v. Canada

Design Services Ltd. v. Canada
Court (s) Database
Federal Court Decisions
Date
2005-06-23
Neutral citation
2005 FC 890
File numbers
T-219-00
Notes
Digest
Decision Content
Date: 20050623
Docket: T-219-00
Citation: 2005 FC 890
Ottawa, Ontario, dated this 23rd day of June, 2005
Present: The Honourable Mr. Justice Richard Mosley
BETWEEN:
DESIGN SERVICES LIMITED,
G.J. CAHILL & COMPANY LIMITED,
PYRAMID CONSTRUCTION LIMITED,
PBH GROUP INC.
CANADIAN PROCESS SERVICES INC.
METAL WORLD INCORPORATED INC.
Plaintiffs
and
HER MAJESTY THE QUEEN
Defendant
REASONS FOR JUDGMENT AND JUDGMENT
Nature of the dispute
[1] This case arises out of a request for proposals and a tendering process for the construction of a naval reserve building, HMCS Cabot, in St. John's, Newfoundland. The defendant, Public Works and Government Services Canada ("PWGSC"), requested the proposals and handled the tendering process. The plaintiffs were originally Olympic Construction Limited ("Olympic"), a general contractor and the proponent of a tender for the design and construction of HMCS Cabot; PHB Group Inc., an architectural practice; Design Services Limited, a structural consultant; G.J. Cahill & Company Limited, an electrical contractor; Pyramid Construction Limited, a civil contractor; Canadian Process Services, a mechanical contractor; and Metal World Incorporated Inc., a structural trade contractor.
[2] Prior to trial, a tentative settlement was reached between the defendant and Olympic. On November 17, 2004, following the hearing in this matter, with consent of the defendant, Olympic discontinued its action against Her Majesty. These reasons and order for judgment reflect this change in the parties.
[3] The architect, structural consultant, and contractors had all agreed to work with Olympic in developing and presenting the tender as part of a "design-build team." In the traditional tendering model, as described in the evidence, bids are solicited to construct an owner-designed structure. The owner retains architects and engineers to develop a precisely defined project. All of the bid proponents submit prices to build the same design. Subcontractors may submit prices to several general contractors bidding on the project through a bid-depository system.
[4] In a design-build tendering process, interested parties are invited to submit initial proposals that include detailed designs and supporting documentation to meet the owner's requirements. In this case, PWGSC had retained an architectural firm to prepare conceptual drawings that outlined the floor plans, exterior elevations and performance specifications that each submitted proposal had to meet.
[5] A feature of the design-build approach followed by PWGSC in this instance was pre-qualification of the design-build team, including the subcontractors, to ensure that only those teams that had demonstrated ability and a history of solid performance entered the field for the selection of the successful bid.
[6] The Olympic design-build team was pre-qualified by PWGSC, but their bid was not accepted. Instead, a bid from Westeinde Construction Limited ("Westeinde") was successful. Olympic and a number of its design-build team members then brought this action on the basis that Westeinde's proposal was noncompliant. A number of questions, both factual and legal, were settled prior to trial.
[7] For the purposes of this decision, the parties agree that I am to assume that Westeinde was noncompliant and that Olympic should have received the contract to construct HMCS Cabot. The issue before me is whether the remaining plaintiffs have any standing in law to also benefit in the claim against the defendant, in contract, tort, or both, to recover their costs or fees and the opportunity lost to share in the profits of the enterprise. I have only to determine a relatively narrow question:
Did PWGSC owe a duty, in contract or in tort, to the other members of the Olympic design-build team?
Background
[8] The parties presented at the hearing an "Agreed Statement of Facts", which is substantially reproduced below:
Statement of qualifications stage
[9] In May 1998, PWGSC issued a Request for Statement of Qualifications ("Request for SOQ") for pre-qualification of Design-Builders for project number 101596, described in Annex "A" of the Request for SOQ as a "major capital construction project," for construction of a new building to house HMCS Cabot.
[10] The stated purpose of the Request for SOQ was to identify design-build entities and teams that would be interested in being considered for the Request for Proposals (RFP) stage of the process. The architect, structural consultant, and subcontractors proposed by Olympic participated in a design-build team assembled by Olympic. Their Reply to SOQ was submitted on June 24, 1998.
[11] Except for Canadian Process Services Inc. ("CPSI"), each of the Plaintiffs were named by Olympic as part of Olympic's design build team in the Reply to the SOQ submitted to PWGSC by Olympic as the "Proponent", [defined in the SOQ as the entity submitting the statement: see glossary attached as section 1 of Appendix "A"]. The architect, structural consultant and subcontractors were also named, along with others, as members of the design-build team in the Reply to RFP submitted to PWGSC by Olympic as proponent, also as defined in the RFP.
[12] Olympic required its architect, consultants and subcontractors to enter into a confidentiality and non-disclosure agreement, a copy of which is reproduced as follows:
CONFIDENTIALITY AGREEMENT
Design/Build Proposal for HMCS Cabot, Southside
St. John's, NF
The undersigned hereby acknowledges that the Architects, Engineers, Olympic Construction Limited and its associates have spent significant time in the preparation of preliminary drawings related to the above-noted project. I/We hereby acknowledge that we will provide a quotation to the Olympic Construction Limited Design/Build Group based on the design drawings and specifications provided herewith and that this quotation, along with the contents of the documents provided, will remain totally confidential and not be provided to other bidders. As a caution, we note that as this is a proposal, all other bidders should have their own design drawings related to this project for you to price, or they should not be given a price.
I/We hereby certify that I/we will maintain the confidentiality requested.
On Behalf of:
[Company, Name, Date]
[13] Olympic's SOQ Reply was accepted by the PWGSC as one of the top four Replies and Olympic's team proceeded to the RFP stage. On June 29, 1998, proponents who had responded to the SOQ were notified of the four proponents from whom responses to the RFP were being invited, one of which was a Joint Venture as defined in the SOQ. They were also notified of a mandatory briefing session and site visit to take place on July 10, 1998.
[14] PWGSC provided RFP documentation to the four proponents. This documentation included a description of the project, a glossary of terms, a number of required forms, an explanation of the evaluation process, performance specifications and drawings, a copy of the articles of agreement (a standard form contract), and labour conditions requirements.
Mandatory briefing
[15] At both the SOQ and RFP stages, PWGSC had no direct dealings with any of the plaintiffs. However, Charlie Henley of the Plaintiff PHB Group Inc. ("PHB"), along with
Carl Mallam of Olympic and Eric Paulson of Paulson Engineering Limited (Olympic's marine consultant) attended at the mandatory briefing session and site visit on July 10, 1998.
[16] All four finalists had representatives at the mandatory briefing session and site visit. Some of the finalists had three people attend, and one finalist had only one person attend. Significant questions asked at the mandatory briefing session and site visit were minuted and written responses to those questions were issued as addenda to the RFP and forwarded to all four finalists.
Request for proposal stage
[17] The RFP was delivered to Olympic on July 2, 1998. The Plaintiffs participated in preparing Olympic's RFP Reply, which was submitted on August 12, 1998. The RFP Reply was made up of two volumes. Volume 1 contained financial materials, including a proposal price form, detailed cost breakdown, financial security documents, and a list of optional or separate prices. Volume 2 contained the technical portion of the RFP Reply, including a design brief, design drawings, code compliance documents, and project management information.
[18] All four proponents who were invited to reply submitted RFP Replies. The Proposals were evaluated and PWGSC awarded the Design-Build Contract for the HMCS Cabot project to Westeinde.
[19] Except for what was set out in the SOQ, RFP, Olympic's SOQ Reply and Olympic's RFP Reply, the PWGSC had no knowledge of the agreements or arrangements made between Olympic and the plaintiffs. The bonding and evidence of financial capability required by the SOQ and RFP were provided by Olympic. Nevertheless, the parties accept that the following arrangements were made between Olympic and the other team members:
Design Services Limited
[20] Design Services Limited ("DSL") was invited by Olympic to be the structural consultant
as part of the Olympic design-build-team for the HMCS Cabot project. DSL was responsible to Olympic for structural engineering. DSL provided structural engineering design and consulting services for the Building's structural steel, concrete, and pile foundation to Olympic. At the Reply to SOQ stage, DSL provided details of its qualifications to Olympic.
[21] At the Reply to RFP stage, DSL completed preliminary design work and structural analysis to Olympic for the Project. DSL formulated structural components, attended meetings of the Olympic design-build team, coordinated with PHB and Metal World Inc. ("Metal World"), provided sketches to Olympic and ensured compliance with the structural design and engineering with the specifications set out in the RFP.
[22] DSL had no input into whom the other members of the Olympic design-build team would be. DSL's fee was derived from the fee scale recommended by the Association of Professional Engineers and Geoscientists - Newfoundland and Labrador and was agreed upon with Olympic. No member of the Olympic design-build team, including the Architect or any subcontractor had any input into the price submitted by DSL to Olympic and DSL did not have input into the prices submitted by other Olympic design-build team members to Olympic. DSL provided a price quotation to Olympic and to no other proponents (as defined in the RFP). Olympic did not seek bids from alternate structural engineers to compete with DSL.
G.J. Cahill
[23] G.J. Cahill and Co. Limited ("G.J. Cahill") was invited by Olympic to be the electrical
subcontractor for the Olympic design-build team. G.J. Cahill was to supply and install electrical systems for the project and to coordinate that work with the electrical engineer for Olympic. At the Reply to SOQ stage, G.J. Cahill provided details of its qualifications to Olympic.
[24] At the Reply to RFP stage, G.J. Cahill reviewed the design drawings provided by the electrical engineer and the Architect, priced the supply and installation of electrical systems, liaised with the electrical engineer, ensured "workability" of the design, ensured technical compliance with the RFP requirements for electrical work, and attended Olympic design build team meetings.
[25] No member of the Olympic design-build team, including the Architect, structural consultant, or any other subcontractor had any input into the price submitted by G.J. Cahill to Olympic and G.J. Cahill did not have input into the prices submitted by other Olympic design-build team members to Olympic. G.J. Cahill provided a price quotation to Olympic and to no other potential proponents (as defined in the RFP). Olympic did not seek bids from alternate electrical system supply and installation contractors to compete with G.J. Cahill.
Pyramid Construction
[26] Pyramid Construction Limited ("Pyramid") was invited by Olympic to be the civil subcontractor for the Olympic design-build team. Pyramid was responsible to Olympic for civil engineering works, including demolition, site development, excavation, water main, and provision of aggregates and paving.
[27] At the Reply to SOQ stage, Pyramid provided details of its qualifications to Olympic. For the Reply to RFP, Pyramid participated in Olympic design-build team meetings, assisted with the design for the work it was to complete for Olympic, and prepared pricing for its portion of the work it would perform for Olympic.
[28] No member of the Olympic design-build team, including the Architect, structural consultant, or any subcontractor had any input into the price submitted by Pyramid to Olympic and Pyramid did not have input into the prices submitted by other Olympic design-build team members to Olympic. Pyramid provided a price quotation to Olympic and to no other potential proponents (as defined in the SOQ and later, the RFP). Olympic did not seek bids from alternate civil engineering works firms to compete with Pyramid.
PHB Group Inc.
[29] PHB was invited by Olympic to be part of the Olympic design-build team for the HMCS
Cabot Project. PHB was the Architect as defined in the SOQ and later, the RFP. PHB agreed with Olympic that it was to be paid a lump sum for its work and would be paid if Olympic was the successful proponent. At the Reply to SOQ stage, PHB provided to Olympic information regarding its qualifications.
[30] At the Reply to RFP stage, PHB took the drawings provided with the RFP and developed 33% working drawings detailing the Building for use by other members of the Olympic design build team in preparing Olympic's Reply to the RFP. PHB participated in Olympic design build team meetings and coordinated the activities of Olympic design build team members. PHB had several sub-consultants, including A Day in the Life Company, responsible for kitchen layout, and Tract Consulting, a landscape design firm. In addition, PHB retained CADDRAFT, a company that provides technical support and working drawings to architectural firms.
[31] PHB had no input into the prices or fees submitted by the structural consultant, the subcontractors or any other members of the Olympic design-build team, and no other member of the Olympic design-build team had any input into establishing PHB's fee. PHB had no input into the prices submitted by other consultants to Olympic (other than its own subconsultants) and subcontractors to Olympic (other than its own subcontractors). Conflict of Interest and Confidentiality provisions of the Code of Professional Conduct of the Newfoundland and Labrador Association of Architects would preclude an architect from acting for two proponents in a Design-Build process. PHB provided a price quotation to Olympic and to no other potential proponents. Olympic did not seek bids from alternate architects to compete with PHB.
Canadian Process Services Inc.
[32] Canadian Process Services Inc. ("CPSI") were invited by Olympic to be the mechanical
subcontractor for the Olympic design-build team. CPSI was to supply and install mechanical systems for the project for Olympic. CPSI is a wholly-owned subsidiary of G.J. Cahill. At the Reply to SOQ stage, CPSI provided details of its qualifications to Olympic.
[33] At the Reply to RFP stage, CPSI reviewed the design drawings provided by the mechanical engineer and the Architect, priced the supply and installation of mechanical systems, ensured "workability"of the design, ensured technical compliance with the RFP requirements for electrical work, and attended Olympic design build team meetings.
[34] No member of the Olympic design-build team, including the Architect, structural consultant, or any other subcontractor had any input into the price submitted by CPSI to Olympic, and CPSI did not have input into the prices submitted by other Olympic design build team members to Olympic. CPSI provided a price quotation to Olympic and to no other potential proponents (as defined in the RFP). Olympic did not seek prices from other mechanical system supply and installation contractors to compete with CPSI.
Metal World Inc.
[35] Metal World was invited by Olympic to be the structural subcontractor for the Olympic design-build team. Metal World provided a price and expertise to Olympic in structural steel fabrication and erection. Metal World also submitted a price to Olympic for "miscellaneous metals."
[36] At the Reply to SOQ stage, Metal World provided details of its qualifications to Olympic. At the Reply to RFP stage, Metal World reviewed the design drawings provided by the structural engineer and the Architect, priced the supply and installation of structural steel to Olympic, and attended Olympic design build team meetings.
[37] No member of the Olympic design-build team, including the Architect, structural consultant, or any subcontractor had any input the price submitted by Metal World to Olympic, and Metal World did not have input into the prices submitted by other Olympic design-build team members to Olympic. Metal World provided a price quotation to Olympic and to no other proponents (as defined in the SOQ and later the RFP). Olympic did not seek bids from alternate
structural steel suppliers to compete with Metal World.
Others
[38] Other firms who are not parties to this action were consultants and members of the Design-Build Team assembled by Olympic. These companies are Paulson Engineering Ltd, (Marine Work), H.T. Kendell & Associates Ltd (Civil Engineering Site Work), Newton Engineering Ltd. (Mechanical Engineering), Provincial Consultants Ltd, (Electrical Engineering) and MNC Business Management Ltd (Quality Assurance and Quality Control). The Olympic design-build team members who are not parties to this action represent 3.9% of the total price submitted by Olympic in Olympic's Reply to RFP.
[39] Olympic obtained prices and quotations from other smaller subcontractors and suppliers
who are not members of the Olympic design-build team, including, but not limited to, Apex Building Supplies, Trico Limited, Mercury, Craft, Interex (closet designers), Otis Elevator, Whittle Painting, Viking Fire Protection, Overhead Doors, and O'Brien's Masonry. Olympic used these prices in preparing its price.
[40] Superior Masonry Limited submitted a price to Olympic for the masonry work for the HMCS Cabot Project. Superior also submitted a price to Westeinde Construction Limited and performed the masonry subcontract for Westeinde.
Request for SOQ documentation
[41] The Request for SOQ documentation provided a glossary of terms, an invitation and explanation of the process, a section describing the limitation of submissions, licencing and eligibility requirements, a requirement for financial statements, security requirements, proposal and contract financial security requirements, insurance requirements, requirements for completion and submission of statement of qualifications, and how submissions were to be received. The Request for SOQ also contained an Annex "A" setting out the description of the HMCS Cabot project, and more detail on how the SOQ and RFP would be evaluated. Reproduced as Appendix "A" are the key portions of the Request for SOQ document.
RFP documentation
[42] The Request for Proposal package contained the RFP document, which provided for: a glossary of terms, a limitation of submissions, performance evaluation, the completion of the proposal, signing procedures, the submission, revision and acceptances of proposals, contract financial security, insurance, enquiries and addenda, and a briefing and site visit. Annex "A" to the RFP contained evaluation criteria. In addition, a Design-Build Standard Form of Contract and a sheet of required labour conditions were part of the package of RFP documentation. Reproduced as Appendix "B" are the key portions of the RFP documentation.
VIVA VOCE EVIDENCE
[43] In addition to the jointly presented facts as recited above, several witnesses testified at the hearing.
[44] Mr. Carl Mallam, Professional Engineer and President of Olympic Construction Limited, testified as to the practices followed in the construction industry relating to tendering bids for contracts in both the traditional or regular manner and in the design-build approach. He had been with the firm since 1977 and had been involved in several prior design build projects for the private sector and for the Newfoundland Government. This was their first bid as "proponent" on a design-build project for the federal government.
[45] Mr. Mallam described design-build as offering certain advantages to the owner: it usually took less time to complete and posed less risk that the project would go over budget as the bids offered a "package" deal and lump sum price covering everything from the design to final inspection and "turnkey" operation.
[46] The pre-qualification process in this instance was "fairly unusual," according to Mr. Mallam. His firm had been asked to pre-qualify before, but in those circumstances they had merely filled out a standard Canadian Construction Association document of three or four pages to describe their project experience. Nothing would be included about the other participants in their bids - the designers and major sub-trades.
[47] Mr. Mallam was surprised by the amount of detail required by PWGSC, especially the extent to which information about the other members of the design-build team had to be provided. Details were required about the role each firm would perform in the project development, their relationship to each other, the firms' experience with other projects and history of working with each other. The principals of each firm that would be involved in the project had to be named. None of this was customary in the tendering process, according to Mr. Mallam. Assembling that information took "a lot of work" by himself and the other principals involved. Writing the proposal was chiefly the responsibility of himself and Charles Henley of PHB Group, but all of the principals met regularly over the course of three to six weeks to complete the submission.
[48] One requirement Mr. Mallam found particularly unusual was that the proponents could not change any of the consultants and major sub-trades named unless authorized to do so by PWGSC before a decision was made on which teams could bid in response to the request for proposals.
[49] When the Olympic bid was selected as one of the four to move to the next stage, the team members were required to produce what Mr. Mallam describes as a "fairly complete design" in order to arrive at their lump sum price. He estimated, for example, that the structural engineer, Design Services Limited, had to do 80-90% of the final design for the steel pile foundation and steel structure in order for their steel subcontractor to give them a price. Similar effort was required of the mechanical and electrical consultants and with the architect, PHB Group, they had to "scramble" to pull it all together between June and August 1998.
[50] The RFP documentation also precluded changing the team members under the heading "Limitation of Submissions":
The proposal must be made in the same name or joint venture as the entity named as the proponent in the Statement of Qualifications. Proponents must utilize in the preparation of their proposal the same architect, consultants, firms and individuals named in their Statement of Qualifications and in the same roles and with the same responsibilities as set out therein unless a change to the proponent's team has been authorized in advance in writing by Public Works. Public Works will not unreasonably withhold such authorization if the request for the authorization is accompanied by a good cause explanation and if, in the sole opinion of Public Works, such change will not diminish the value of the proposal to Public Works.
[51] Included in the documentation required by PWGSC for the response to the RFP was a written declaration signed by the principals of the key design build team members stating that they had been involved in the preparation of the drawings and plans, had discussed them with all of the members of the team and certifying that they would produce the listed requirements as a minimum. Mr. Mallam said that he had never before seen such a certificate.
[52] A further certificate, also signed by the principals, dealt with the production of deliverables, that is work plans, drawings and specifications, including a quality assurance plan and quality control plan. In addition, an organization chart was required, listing all of the key personnel essential to the timely and orderly completion of the work. For each of the members of the team, terms of reference were required to be prepared and signed, acknowledging the scope of the work they would be responsible for. All of this, Mr. Mallam described as very unusual. He had never been involved in a project that required the individual consultants and subcontractors to commit to perform the work in accordance with individual terms of reference.
[53] For the successful bidder, PWGSC required attendance at a "partnering session" between their project manager and all of the "project management staff, prime consultants, all disciplines and principal trade contractors." Again Mr. Mallam said this was unusual as such meetings normally involved only the owner's representative and the general contractor.
[54] Although Mr. Mallam described his role and that of Olympic in this process as the "front man" for the design-build team, he acknowledged on cross-examination that the Statement of Qualifications and the reply to the RFP was submitted by Olympic as the "proponent" of the project, as defined in the documentation. No consideration had been given to submitting a proposal from the team as a formal joint venture. Had they been awarded the contract, Olympic would have entered into subcontracts with each of the other members of the team, as well as with other suppliers of goods and services, to complete the work.
[55] The total price submitted by Olympic to PWGSC was $10, 518,000, of which $8, 624, 187 represented the costs of the goods and services to be provided by the subcontractors, including their profits, and the balance is what Olympic would receive for the cost of its work on the project and its profit.
[56] Mr. Mallam conceded that the standard forms used for tendering bids to the province of Newfoundland and to PWGSC included provisions for the subcontractors to be listed. Similarly, he acknowledged that the standard PWGSC contract form provided for the subcontractors to be listed and if listed, they could be changed with the consent of the owner. However, in his experience the names of the subcontractors were rarely required. If required, the owner might specify on the form that it wanted the names of certain of the sub-trades, such as the mechanical or electrical contractor. But this was not common and he had never seen a requirement to list all of the key consultants and contractors.
[57] Olympic alone was required to submit a confidential financial statement to confirm its capability to perform the work required by the contract bid.
[58] Charles Henley, architect and principal of the PHB Group, testified as to his experience participating in the traditional model stipulated lump sum price contracts, and in design-build projects. In the traditional model, the architectural firm would prepare a full array of documentation for the owner to go to tender, would review the tendering process and the construction process on behalf of the client, and would be paid either a negotiated fee or a percentage on the construction cost. In design-build projects, in his experience with the private sector, they would contribute their services to a proponent, usually a general contractor, on speculation of being paid if the contract were awarded to that proponent.
[59] In this case, Mr. Henley said, the requirements were much more onerous than he had encountered in previous projects. Considerably greater detail was required. The architectural firm had to work with all of the major subcontractor groups involved and sign off on all of the drawings submitted by the other consultants. Two architects and two or three technologists were involved over several months. He had never previously been required to certify that all drawings and project plans had been discussed with the entire design team and principal sub-trades, nor provide a detailed point-form terms of reference or certification to produce deliverables. Further, the drawings his firm submitted for the reply to the RFP were required to be stamped and certified as if they were providing final design drawings for construction. He estimated that their fees would have been about $250, 000 for their participation in the project.
[60] Mr. Henley never considered entering into a formal joint venture with Olympic to submit the bid, notwithstanding that he regarded it as a team effort. Indeed it was Henley's firm that had spotted the opportunity on the federal government's online procurement notice system and suggested to Olympic that they form the team to make a bid. Nonetheless, he understood that his firm would not be paid a fee unless the contract was awarded to Olympic and incurred a financial risk in contributing to the bid. He dealt with several subcontractors, such as a kitchen design firm and a quality control consultancy, on the same basis.
[61] Similar evidence was provided by Roy Pieroway, owner of Design Services Ltd., the structural consultant. He had been involved with design build projects in the private sector for more than twenty years, and with a number of projects of the same scale as HMCS Cabot. In most of the bids he had been involved with, his firm was guaranteed its fee as it was a small office and could not afford to lose the opportunity to do other work. It was very rare to have put this amount of effort into trying to get a project. He had never previously had to sign a certificate that the technical information and drawings had been discussed in detail with the entire team nor to provide signed terms of reference about the work they were prepared to do on the project. He identified a number of specific commitments that they were required to make that were novel in his experience. It was unusual to be required to certify drawings prior to the construction phase.
[62] On cross-examination, Mr. Pieroway conceded that his firm could not often afford to take the risk they would not get paid for their services but decided to do so in this instance. He stressed that when they decided to take that risk, they did so "with the idea that we are going to be treated fairly." He did not believe he was free to do work for the other proponents but would not have done so in any case.
[63] He testified that the drawings prepared by his firm for the RFP amounted to about 15-20% of what would be employed in the construction phase but represented about 25% of the total design work required.
[64] James Brown, vice-president operations for G.J. Cahill & Company, mechanical and electrical contractors, described the role of that company and Canadian Process Services ("CPSI") a wholly owned subsidiary, in the development of the design-build proposal. In the response to the RFP, the terms of reference and certifications for the electrical work were signed by Mr. Cahill as principal of his company and an employee of CPSI signed for the mechanical work. Mr. Brown coordinated their input on both types of work. He described a significant amount of effort, costing the firms about $40, 000 to $50, 000 to submit their plans and specifications. He had no expectation, assuming the competition was held fairly, to recover their costs if the Olympic team's bid was not successful.
[65] Ivan Butler, President of Metal World, steel fabricators and erectors, testified that the involvement of his firm in this RFP process was much greater than in the normal lump sum tendering situation. They had considerable input into the structural design because of their expertise, with a view to achieving the most economical and practical results. Prior to this occasion, over thirty years of experience, Mr. Butler had never been required to sign terms of reference and certification as he was in this competition. Had the building been pre-designed by the owner, his firm would likely have submitted prices to the various contractors making bids.
[66] Michael Sparrow, Chief Engineer of Pyramid Construction, provided similar evidence about their involvement in the bid process. His firm would have been responsible for the water mains, storm and sanitary sewers, asphalt paving, curb work and any mass excavation required. There was contaminated soil on the site that had to be removed. The plans for this work had to be coordinated with the other elements. Thus, there were extensive meetings and discussions in preparing the RPF reply. The value of the work Pyramid would have done, had the bid been successful, was in the order of a million dollars of which $200,000 would have been profit.
[67] Messrs Pieroway, Brown, Butler and Sparrow testified that they did not feel they were free to offer their services to any of the other proponents in the competition because of their participation in the Olympic team, for ethical and practical reasons. They were all bound by confidentiality agreements with Olympic. Mr. Henley was constrained from offering a price for his firm's services to the other proponents under the rules of the Newfoundland and Labrador Association of Architects.
[68] Darryl Benson, testified for the defendant as the PWGSC project manager for the HMCS Cabot project. He was a member of the board that evaluated the SOQ submissions, he helped prepare the RFP documents and was a member of the RFP evaluation board. This was the first large scale design build undertaking managed by the PWGSC office in St. John's, but they had gained some experience with two smaller projects.
[69] Mr. Benson said that it was expected that for each bid the architect, general contractor, prime consultants and the principal trade contractors would all spend time together as a team in putting together an overall design and price to perform the work. But as far as PWGSC was concerned, the proponent was responsible for each bid and the contract would be issued solely to the proponent. That could include a proponent that was a joint venture between team members. He agreed that each team would have to develop their designs to the extent that the members could make a firm price for their component of the work. PWGSC required each of the team members to certify that they were familiar with the plans and specifications and had met as a team to review them.
ARGUMENT
Plaintiffs' position
[70] The plaintiffs contend that the defendant invited not just a general contractor to participate in the design-build competition but the contractor together with a group of designers, consultants and major trade contractors to come together as a team, spend a considerable amount of effort to prepare designs and plans and submit a price. The defendant stood to gain a great deal through this process in minimizing its exposure and obtaining a building constructed in the most practical and economical fashion. It is unconscionable and contrary to the integrity of the bidding system to allow the defendant to limit its liability to the general contractor alone where it has clearly breached a duty of fairness to the team as a whole.
[71] All of the plaintiffs were pre-qualified as a "Design Build Team" (as defined in the SOQ issued by the defendant) prior to the submission of the bid. This was a rigorous exercise which required the team to convince the defendant that the entire group was capable of performing the job. In doing this, the plaintiffs' argue, the defendant established a relationship with all of the key members of the design-build team.
[72] The plaintiffs argue that the evidence is clear that the terms of the SOQ and RFP issued by PWGSC in this case extend Contract A, as understood in the tendering case law, to the design-build team as a whole. Thus, they were contracting parties to whom a duty of fairness was owed that was breached when the defendant awarded the contract to a noncompliant bidder.
[73] Alternatively, the Plaintiffs say that PWGSC owed a duty of care to the Plaintiffs because of the proximity of relationship that PWGSC had created, which duty was breached when it awarded the work to a noncompliant bidder. PWGSC knew exactly whom it was dealing with because they had required that each of the key members of the team be identified and pre-qualified and insisted that the team members remain in place for the response to the RFP, subject to being changed on consent.
[74] In those circumstances, losses by the team members arising from the breach were readily foreseeable and the class of victims easily ascertained as it was defined by the defendant in the SOQ documents. There is nothing in any of the SOQ or RFP documents to expressly preclude recovery in tort. Public policy would be served by extending liability to the plaintiffs, not by restricting it.
Defendant's position
[75] The defendant's position is that Olympic, but not the plaintiffs (and not the Design Build Team) submitted the formal proposal. The Design Build Team had no legal status in the process. If Olympic and the plaintiffs wanted to submit a proposal as a "Team", the option was available to them to submit a SOQ and RFP Reply as Joint Venturers. They did not.
[76] The defendant submits that there was no Contract A as understood in contract tendering terms between the plaintiffs and the PWGSC. Under the doctrine of privity of contract, the plaintiffs cannot claim the benefit of the Contract A which existed between Olympic and the defendant and the plaintiffs have no claim in contract against the defendant. There is an implied duty of care to treat bidders fairly, not every person who may be adversely affected by the breach of a contract.
[77] The defendant submits that the plaintiff's claims are for pure economic loss. Subcontractors do not have claims in tort against an owner for breaches or non-enforcement of the terms of the contract between the owner and contractor. To hold an owner liable to subcontractors for mistakenly awarding a contract to a noncompliant bidder would result in indeterminate liability by opening the door to the claims of sub-sub-contractors, suppliers and their employees. The defendant submits that subcontractors do not need to have a right to a claim in tort against owners in the tendering process where they have the opportunity to submit their prices and offer their goods and services to all proponents. On the basis of the test reviewed and established in Cooper v. Hobart, [2001] 3 S.C.R. 537, there is no proximity between the plaintiffs and PWGSC upon which the court should extend the categories of economic loss to include the claims of the plaintiffs. This case is not such that a new category of duty of care should be established.
ANALYSIS
Was there a breach of contract as between the Plaintiffs and PWGSC?
[78] The defendant has conceded that PWGSC breached its duty of fairness by awarding the contract to a noncompliant bidder and in failing to award the contract to Olympic. It is undisputed that, had the contract been awarded to Olympic, the plaintiffs would have been paid for their work on the project, including the costs of preparing the bid documents. The professional consultants would have received fees for their services. The subcontractors would have shared in the profits proportionate to the value of their contributio