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
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?
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
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.
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.
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