Competition Bureau

Industry reacts to Competition Bureau inquiry

Supply of condo refurbishment services under scrutiny amid bid-rigging allegations
Friday, June 3, 2016
By Michelle Ervin

It’s too soon to know what the ultimate fallout from the Competition Bureau’s investigation into allegations of bid-rigging and conspiracy in the supply of condo refurbishment services might be. A media spokesperson for the independent law enforcement agency said in a May 31 email that the inquiry is “ongoing” and that “there is no conclusion of wrongdoing at this time.”

In the short term, it looks as though condo corporations subject to orders for information will have to absorb the costs of compliance. In the long term, if the investigation finds that corporations overpaid for condo refurbishment services as a result of bid-rigging, victims may be entitled to pursue the recovery of any associated damages. And in the meantime, experts suggest, news of the investigation is likely to prompt boards to raise their contract-tendering standards.

CondoBusiness independently confirmed reports last week that the Competition Bureau applied to the Ontario Superior Court of Justice on May 10 for 142 orders requiring specified condo corporations in the GTA to produce records and provide written returns of information. Corporations have 90 days to deliver the requested materials, which relate to contracts spanning from August, 2006, to September, 2014.

Since news of the investigation made headlines, condo boards and property managers — who do not appear to be implicated — have faced questions from owners as they set about understanding the situation themselves.

Short-term compliance

As orders were served to subject buildings, it set off a series of events. Site staff called their head offices, property management firms advised their clients to consult their legal counsel and condo lawyers fielded inquiries from their clients. The general consensus that has emerged is that corporations must comply with the orders.

As the clock ticks down on the three-month deadline, managers have the arduous task of collecting the requested materials, which may include contracts, RFPs and specifications as well as emails and meeting minutes. That may involve searching through archive boxes and contacting ex-directors to track down details about events that in some cases date back nearly a decade — which exceeds the seven-year audit requirement for retaining records.

“To our knowledge, the cost of the managers’ extra time, the cost of reproducing the documents, and the legal fees associated with compliance will all be borne by the condominium corporations,” said Allan Rosenberg, vice president of Del Property Management, who is aware of 20 corporations within the firm’s portfolio that received orders.

Long-term questions

Condo lawyer Mario Deo, whose firm represents upwards of 30 clients subject to orders, recently wrote about what directors need to know about the investigation. He said that not only do corporations risk prosecution if they fail to comply, but they risk incurring liabilities if they do not obtain proper legal advice on how to fulfill the particulars of the requests.

The Competition Bureau’s queries suggest that its current focus is communication between parties bidding on contracts for the supply of condo refurbishment services, making the involvement of directors “highly unlikely,” Deo noted. Bid-rigging essentially occurs when two or more parties communicate amongst themselves to arrange for one or more of them to withhold, withdraw or submit bids or tenders based on an agreement, unbeknownst to the persons requesting bids or tenders.

Now directors and owners are wondering how they might have been victimized, but it could be years before they get answers, said the condo lawyer.

“Many of these contracts are $2-million and higher,” Deo observed. “If there was bid-rigging and it cost them $200,000 or $300,000 or even more, and information comes out in these investigations that they were a victim, do they have a cause of action?”

Contract-procurement standards

Robert Weinberg, president of the Association of Condominium Managers of Ontario (ACMO), predicts that news of the investigation will spur boards to bring increased scrutiny to the tendering process. For its part, ACMO requires association members to adhere to codes of ethics, which set general standards such as exercising diligence in safeguarding the interests of their clients.

“As it relates to major expenditures for our clients, if we know, for instance, a project should cost $100,000 and the quotes are coming in at $300,000, we should be notifying them that further investigation is warranted rather than advising them to proceed and blindly issuing purchase orders based on the quotes received,” said Weinberg. “I believe every management company has its own established procedures which will differ in levels of complexity.”

The association expects ACMO 2000-certified companies to follow best practices, which should include conducting sealed bidding and using Canadian Construction Documents Committee (CCDC) contracts, where applicable. Recent Condominium Act reforms introduced contract procurement requirements, which will be outlined in forthcoming regulations.

As for the investigation, a media spokesperson for the Competition Bureau said that “should evidence indicate that the Competition Act has been contravened, the commissioner will not hesitate to take appropriate action.” The agency relies on enforcement tools ranging from information letters to litigation.

Bid-rigging and conspiracy, which includes price-fixing, among other activities, are criminal offences under the Competition Act. Both carry possible penalties of fines — unlimited for bid-rigging and up to $25-million for conspiracy — and prison sentences of up to 14 years.

Information about bid-rigging awareness and prevention is available on the Competition Bureau’s website.

Michelle Ervin is the editor of CondoBusiness.

One thought on “Industry reacts to Competition Bureau inquiry

  1. I hope that nobody is shocked by what is going on with the Competition Bureau and their investigation, to me this is just a tip of the iceberg.

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