While some of the amendments to the Condominium Act have been in force for almost 1.5 years (training for directors and disclosure requirements, mandatory licensing of managers, mandatory forms, Condo Tribunal for Corporation’s records, Information Certificates, AGM notices etc.), there are other important amendments to the Act that are not yet in force. One of these amendments is the procurement process for certain contracts.
While procurement can take on many different shapes and forms, it is generally the process of buying goods, works or service. As opposed to purchasing a service directly from a seller, procurement is often (but not exclusively) carried out by the process of tendering. Tendering entails specifying the requirements and requesting companies that may be interested to submit proposals for the specified work. The buyer will then select the winning bid and enter into a specific contract with that company.
Section 39.1 of the Condominium Act provides:
A corporation shall not enter into a prescribed contract or transaction unless the procurement process and other contracts or arrangements that the corporation entered into in relation to the contract or transaction meet the prescribed requirements.
The regulations will address what is a prescribed contract/transaction and what are the procurement requirements. In the interim, we have listed a few important points to address questions/concerns frequently coming across our desks/computers:
- Although the procurement requirements under section 39.1 are not yet in force, it is common in the industry to formally tender material projects and contracts. While materiality is not always the same, boards and property managers should be cognizant of industry norms.
- It takes time to fully and properly tender a project. In order to help facilitate a competitive process in which all the necessary parties (including project consultants, engineers, designers, lawyers, property managers, board members, bidders etc.) have an opportunity to contribute to the process, ample lead up time should be set aside. Objectives of tendering include accountability, transparency and competitive pricing. This process requires time to properly play itself out.
- The Supreme Court of Canada established that when there is a tender issued (often referred to as an RFP) and a bidder submits a compliant bid, there is a process contract (“Contract A”) between the purchaser and each compliant bidder. Contract B, the performance contract, is the contract awarded to the winning bidder upon acceptance of that bidder’s tender. Under Contract A, a condominium corporation has a duty to treat each compliant bidder in a fair manner and act in good faith. While Contract A may not arise in every case (it depends on the language in the RFP and the intent of the parties), should it arise, a compliant bidder treated unfairly may have recourse against the condominium corporation. In some instances, compliant bidders have sought legal recourse and were awarded their lost profits on contracts where they were not treated fairly during the tender process.
- Given the importance of the tender process and potential legal exposure as a result of Contract A, condominium corporations should consult with their lawyers well in advance of issuing a tender/RFP. If a tender is issued and legal advice is only then sought, even if a bid is not yet selected, the condominium corporation may be very limited in terms of changes it can request based on legal advice. With the increase of tendered services and projects in condominiums, we are unfortunately coming across condominiums that are seeking legal input on the tender process too late in the game. Legal advice should be provided at the outset.
- It is important that the Board is fully engaged and informed throughout the process. The Board should be able to review drafts well in advance of meetings and understand the process before it plays out. This again comes back to timing. If the board is advised about the tender process and the underlying work/services required well in advance, it will be better informed, more engaged, and acting in a prudent and informed manner.
