It’s often assumed that the provisions set out in a bid call document – such as a Request for Proposals (RFP) or a Request for Information (RFI) – make up the entire legal framework that applies to a hospital running a procurement process. Regrettably, this assumption is as comforting as it is incorrect. For example, in an RFP that reserves "the right to cancel this RFP process any time, for any reason," it would be unwise for a hospital to cancel the process on the basis alone of the authority apparently provided by that provision. There is much more to it.

The body of laws that apply to hospital procurement in Canada has grown a lot in the last decade. The same laws apply whether the bid call is for construction, goods or services. Annex 502.4 of Chapter 5 of the Agreement on Internal Trade also applies to hospitals. The Annex sets out the procurement requirements that must be followed.

Fewer Disputes, More Value

I’ve seen the number of disputes between suppliers and hospitals growing in the last few years. A little knowledge can help avoid disputes and get more value from your suppliers. What are some areas to watch out for?

  1. Procurement documents are often issued without making sure that the document’s requirements and legalities (RFP, or otherwise) are compatible with the hospital’s policies and procedures. Those policies and procedures form an integral part of the procurement process and should be updated on a regular basis so they meet the latest legal requirements and protect the interest of the hospital.
  2. Especially when an RFP is issued, the hospital should know up front if it wants Contract A to apply to the procurement process. Contract A is the bidding contract that the law automatically applies to the relationship between the hospital and all compliant bidders, if the language of the RFP includes any Contract A indicia, which are many. If the bidding contract applies, the hospital will be subject to a range of ‘fairness’ requirements. Those have been extensively defined by the courts.
  3. Even where the bidding contract doesn’t exist, it’s possible that an obligation to act fairly might apply. For example, some court decisions say there might still be an independent duty of fairness. That was the case in the Ontario Court of Justice (General Division) decision in Ottawa-Carleton Dialysis Services v. Ontario (Minister of Health). Here, the court found the Ministry had cancelled an RFP process "in an arbitrary fashion, and was not acting in good faith." The RFP contained a clause that allowed the Ministry "to cancel the RFP at any time, for any reason," but the court ignored the clause and found an obligation on the Ministry to act fairly. The court then stepped in and dictated to the Ministry how the rest of the RFP process would be conducted.

The Changing Public Sector

There is little doubt the laws in public procurement will continue to change quickly. Procurement is a dynamic area. Rather than to think of the law defensively and to bring the lawyers in only when there is a dispute, it is more useful to think of your procurement counsel as a facilitator in this area, one who can help you achieve greater value in your procurement process. And as the above-mentioned court decision shows, your procurement counsel can also help you to avoid some unpleasant surprises on the back end.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.