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No Work, No Deal?
Refusing Bids for Unworked Hours, Non-Disclosure: You be the Judge
Contributed by National Education Consulting Inc.
Green Country Maintenance Ltd., (Green Country) was a small business owned and operated by Mr. Joe Jorge. The City of Calgary (the City) needed extra equipment or manpower to handle its maintenance needs, and invited tender bids from outside contractors. Green Country submitted a tender bid for the years 1996 and 1997, and the two parties subsequently signed a General Conditions of Leasing Construction Equipment contract.
Under this contract, the time worked by a contractor was reported in an Operators Machine Report. The contractor/operator signed this report to verify that the hours reported had actually been worked.
The City received a complaint that Green Country equipment and operators were leaving work areas early. City staff investigated the matter for six weeks, and determined that it had overpaid Green Country approximately $541.00 during that period. The investigation report listed many incidences of Green Country's equipment and operators leaving a worksite early, but for which Green Country then billed the City for time not actually worked.
After receiving the investigation report, the City Purchasing Manager suspended Green Country from providing any services for the remainder of 1997. When Green Country submitted a tender bid for 1998 and 1999, the City Purchasing Manager refused this tender bid.
Next, Nelia De Castro, Mr. Jorge's daughter and an employee of Green Country, submitted a tender bid to the City in her own name for the 1998 and 1999 time period. This bid offered to provide the same equipment as that used by Green Country. The City Purchasing Manager also refused the tender bid from Ms. De Castro.
What authority does a city have for dealing with a contractor who bills for hours not worked? What is the fair process for suspending the contractor? Can the City refuse to accept other tender bids from a close relative of the contractor?
Who Gets to Say When?
This scenario arose in Green Country Maintenance Ltd. and Nelia De Castro vs. The City of Calgary, [2001] A.J. No. 1194, Alberta Court of Queen's Bench.
Suspension of Contractor?
Two clauses in the contract between the City and Green Country specifically stated that certain City officials had the power to suspend or terminate the services of the contractor. A City bylaw also provided the Purchasing Manager with broad authority to represent the City in contracts valued under $500,000.
The Court concluded that the bylaw and the contractual clauses, taken together, gave the Purchasing Manager the power to terminate or suspend any item or equipment the City has leased.
Moreover, the contract allowed the City to reject the use of any equipment if it was not efficient. The Judge said, It is hard to think of a more inefficient use of equipment than having to pay for hours that the equipment has not worked.
As well, the contract clauses and other relevant City bylaws gave the Purchasing Manager the right to reject Green Country's tender bid.
Fair Process for Suspending the Contractor?
The Court held that the City's representatives had acted fairly. Mr. Jorge had an opportunity to explain his actions in a way that did not deprive him of his right to be heard before a decision was made. Mr. Jorge had spoken with officers from the City's Corporate Security division, and during these discussions, he had admitted charging for hours not worked.
Before making his decision, the Purchasing Manager reviewed the full investigation report, and the admission by Mr. Jorge that he had billed for hours not worked. The Purchasing Manager had relied on this evidence in making his decision to suspend Green Country's services, and had not acted arbitrarily. The Court commented that, The City has a duty, when dealing with public money, to be especially diligent in protecting itself from acts such as this. The billing for hours not worked is akin to fraud and cannot be tolerated.
Rejection of the Tender Bid from Nelia De Castro?
The Judge found that no Contract A had been formed, since the tender bids were revocable (i.e., they could be withdraw by the bidders at any time). Thus, the City was not bound by Contract A law. As well, Ms. De Castro did not make a disclosure, as required by clause 2.3 of the tender package: her tender bid failed to disclose that she was Mr. Jorge's daughter, that she was an employee of Green Country, and that the equipment listed in her tender was the same as that used by Green Country. Automatic disqualification of the tender was the appropriate result.
In summary, the City acted within its authority and acted fairly in making its decision not to deal with Green Country. The lawsuit was dismissed. Since the City did not ask for court costs, no costs were awarded. b2b
Thanks to Bernie Trahan, Director of Fleet Services at the City of Calgary, for bringing this case to our attention.
This article originally appeared in the Aug. 2004 issue of The Legal Edge, a newsletter published six times a year by National Education Consulting Inc. (NECI). For more information, call (250) 370-0041 or visit the NECI web site at www.neci-legaledge.com.
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