The City of Montreal has just been ordered to pay one million dollars to the recycler Ricova for having been too intransigent in the management of a blue bin collection contract.
The metropolis violated “its obligation of good faith” by withholding payments due to the company without valid reason, pushing it to the brink of bankruptcy, the Superior Court determined. Ricova, which until recently held a virtual monopoly on recycling in Montreal, maintains stormy relations with city hall.
In the case before the courts, the problems arise from mistakes made on both sides. In 2018, the City of Montreal is issuing a call for tenders for recycling collection in four boroughs. The document significantly underestimates the number of doors in Côte-des-Neiges–Notre-Dame-de-Grâce. The error was corrected in a second document, but Ricova prepared its submission based on the first, failing to consult the correction. Its price is therefore much lower than its competitors. She wins the contract.
Quickly after signing, Ricova and Montreal realized the problem: the company was losing between $70,000 and $100,000 per month by collecting recycling in Côte-des-Neiges–Notre-Dame-de-Grâce, according to the decision by Judge Martin F. Sheehan dated mid-January.
After negotiations, the City agreed to return to a call for tenders. However, it requires Ricova to pay for blue-collar workers who must carry out part of the collection in its place, as well as for the difference between the amount for which it had bid and the amount of the new contract. It also adds penalties. Ricova refuses to pay, but these amounts are withheld from other company invoices payable by Montreal.
“Ricova did his best”
This behavior by the City was inadequate, Judge Sheehan determined.
“Making a company work without payment on contracts that are not the subject of litigation when we know that it has been suffering losses of $70,000 to $100,000 per month for seven months does not respect the minimum requirements of good faith,” he wrote. “The totality of the evidence demonstrates that Ricova did the best he could in the circumstances. »
“The city managers themselves described their contractual management as “rigid”,” continued the magistrate. “No solution was offered to Ricova. »
The Superior Court determined that Montreal had the right to impose penalties on Ricova and demand compensation for the work of its blue-collar workers. However, it did not have the right to claim the difference between the amount of its bid and the amount that Montreal ultimately had to pay. It is this amount – a little over one million – that the City will have to reimburse the company.
“We have no comment at this time,” Ricova said by email. “The Legal Affairs Department is currently analyzing the judgment rendered,” explained the City of Montreal, which “will not make any comments.”
According to the Superior Court, Montreal must adapt its procedures to prevent such a problem from recurring. “The adoption of a practice aimed at detecting bidders’ errors before the award of contracts in the presence of significant discrepancies between them or between bids and internal estimates appears advisable,” wrote Judge Sheehan.