When the contract for medical waste management and disposal with Alberta Health Services’ (“AHS”) current service provider was set to expire with no further extensions available, AHS issued a Request for Proposals for the provision of medical waste management services for specified facilities.
Daniels Health submitted a proposal in response to the RFP but was advised that it was not the successful proponent. AHS commenced negotiations with another proponent, Stericycle, although to date no contract had been finalized between Stericycle and AHS.
Daniels Health sought to halt the negotiations between Stericycle and AHS by commencing an application on an urgent basis seeking an injunction preventing AHS from continuing to negotiate or enter into a Services Agreement with Stericycle.
The court applied the established test for injunctive relief:
Is there a serious issue to be tried?
Will the party seeking the injunction suffer irreparable harm if the injunction is not granted? and
Does the balance of convenience favor the granting of the injunction?
On the first leg of the test, the court noted that while usually, an applicant need only establish that the case is neither vexatious nor frivolous, the test in this case was elevated because the requested relief, if granted, would have the same effect as a final determination of the issues. AHS would be precluded from pursuing a contract for medical waste management services with its proponent of choice, Stericycle. Given that AHS required a new service provider in place by the end of July 2024, an injunction preventing it from negotiating with Stericycle would force it to pursue a contract with another provider instead of its preferred provider. It would be too late to revisit Stericycle’s proposal once an action had been determined fully on its merits.
Accordingly, Daniels Health had to demonstrate that it had a strong prima facie case.
The court proceeded on the basis that although this was an RFP process and not a formal tendering process, there was a duty on AHS to act fairly, to treat all responders to its RFP consistently and not to ignore, alter or delete RFP criteria as they please except in accordance with the terms of the RFP.
Daniels Health argued that Stericycle’s bid did not meet the technical requirements set out in the RFP and that by proceeding to negotiate with Stericycle, AHS had unilaterally and unfairly changed the terms of the RFP to the detriment of Daniels Health.
Daniels Health alleged that Stericycle’s medical waste management equipment suffered from design flaws that could result in containers being overfilled and a risk of needle sticks. They further alleged that the design of Stericycle’s containers could allow someone to reach inside a container containing hazardous medical waste and that containers could leak if dropped or topple over and spill their contents. Finally, there was an allegation that the labelling and color coding of the containers provided by Stericycle did not meet required standards.
The evidence that Daniels Health relied on were affidavits from its Chief Financial Officer who claimed that it was his “understanding” that Stericycle’s containers did not meet CSA and ISO requirements, among other things, and they therefore did not meet the standards required by the RFP. The basis for his understanding was not disclosed. He did refer to a Stericycle brochure, but that brochure clearly stated that Stericycle’s containers are “designed to meet the most recent CSA and ISO standards on reusable sharps containers.”
The affidavits also referred to an undisclosed person acting on behalf of Daniels Health who observed Stericycle containers being delivered to the hospital, and to an undisclosed individual assessing and inspecting a Stericycle container provided by an anonymous client. Based on those undisclosed sources, the affiant formed his opinion that the Stericycle containers were deficient.
The court held that that evidence constituted hearsay. Besides, the person swearing the affidavit was the company’s chief financial officer, and there was nothing in his evidence that would suggest he had the training, knowledge, or experience to be evaluating equipment utilized by a competitor or opining on whether such equipment might be compliant with various technical standards.
The most that could be said of the evidence proffered was that Daniels Health has some concerns about whether Stericycle’s response to the RFP was compliant with its stated requirements. The RFP only required a proponent to certify compliance with the mandatory requirements. It did not require third party verification of the stated compliance.
Stericycle did certify compliance with all the mandatory requirements in its response to the RFP. Daniels Health’s stated concerns, based primarily on hearsay and speculation were, in these circumstances, insufficient to establish that it had a strong prima facie case against AHS for being unfair in the conduct of its RFP process.
Daniels Health effectively attempted to alter the RFP process by suggesting there should be some form of third-party verification of information provided by proponents in the RFP process. There was no basis to do so.
Even if Daniels Health was concerned that equipment Stericycle has used in other provinces or for other customers was not sufficient to meet the mandatory requirements set out in the RFP, that did not give it the right to demand the RFP process be changed to assuage its concerns.
Daniels therefore failed to establish a strong prima facie case.
While that would have been good enough to dismiss the application, the court commented on the two remaining steps, irreparable harm and the balance of convenience.
Daniels Health claimed that it would suffer irreparable harm if the injunction was denied because there was a meaningful risk that it would suffer a loss of market share and a loss of reputation, neither of which could be adequately compensated with an award of damages. That was rejected by the court because of a complete lack of evidence regarding a potential loss of market share or harm to reputation.
Daniels Health then raised an innovative argument in support of irreparable harm based on a limitation of liability clause found in the RFP, which limited AHS’ liability to the lesser of the Proposal preparation costs or $5,000. According to Daniels Health, that clause made the harm to it irreparable in the sense that it could never collect more than the lesser of its costs of preparing its response to the RFP or $5,000 even though the losses associated with not being the successful proponent would far exceed those amounts. That argument ignored the fundamental premise that when considering irreparable harm, the term "irreparable" refers to the nature of the harm suffered rather than its magnitude and was also dismissed. In any event, there were sound policy reasons for rejecting Daniels Health's argument that the limitation of liability clause in the RFP gave rise to a claim of irreparable harm. Daniels Health was fully aware of the existence of the limitation of liability clause in the RFP when it decided to submit a response. Having accepted that limitation of liability clause by engaging in the process, it could not now convert its acceptance of that clause into a claim of irreparable harm. To allow it to do so would undermine the integrity of the RFP process and create significant uncertainty in the process for a party issuing or engaging in a request for proposals process.
Finally, the balance of convenience favoured AHS. If the application for an injunction was dismissed, Daniels Health could still pursue a claim against AHS for any damages it alleges it suffered because of AHS engaging in allegedly unfair practices. It would not be prejudiced in that regard. On the other hand, any delay at this stage in AHS's process to replace its medical waste management and disposal services would be detrimental to AHS and potentially to its workers and the public. AHS engaged in an RFP process and ought to be able to conclude that process to ensure there is no interruption in the handling and disposal of the medical waste generated at its facilities.