Annual Report March 31, 2018- Chapter IV

Introduction

Potential suppliers that believe that they may have been unfairly treated during a procurement solicitation covered by NAFTA, the AIT, the AGP, the CCFTA, the CPFTA, the CCOFTA, the CPAFTA, the CHFTA or the CKFTA, or any other applicable trade agreement, may file a complaint with the Tribunal. The relevant provisions of the Canadian International Trade Tribunal Procurement Inquiry Regulations allow a complainant to first make an attempt to resolve the issue with the government institution responsible for the procurement before filing a complaint.

The Tribunal’s role is to determine whether the government institution followed the procurement procedures and other requirements specified in the applicable trade agreements.

When the Tribunal receives a complaint, it reviews it against the legislative criteria for filing. If there are deficiencies, the complainant is given an opportunity to correct them within the specified time limit. If the Tribunal decides to conduct an inquiry, the government institution is sent a formal notification of the complaint and a copy of the complaint itself. If the contract has been awarded, the government institution, in its acknowledgement of receipt of a complaint letter, provides the Tribunal with the name and address of the contract awardee. The Tribunal then sends a notification of the complaint to the contract awardee as a possible interested party. An official notice of the complaint is published in the Canada Gazette. If the contract in question has not been awarded, the Tribunal may order the government institution to postpone the award of any contract pending the disposition of the complaint by the Tribunal.

After receipt of its copy of the complaint, the relevant government institution files a response called the Government Institution Report. The complainant and any intervener are sent a copy of the response and given an opportunity to submit comments. Any comments received are forwarded to the government institution and other parties to the inquiry.

Copies of any other submissions or reports prepared during the inquiry are also circulated to all parties for their comments. Once this phase of the inquiry is completed, the Tribunal reviews the information on the record and decides if a public hearing is necessary or if the case can be decided on the basis of the information on the record.

The Tribunal then determines whether or not the complaint is valid. If it is, the Tribunal may make recommendations for remedies, such as re-tendering, re-evaluating or providing compensation to the complainant. The government institution, as well as all other parties and interested persons, is notified of the Tribunal’s decision. Recommendations made by the Tribunal should, by statute, be implemented to the greatest extent possible. The Tribunal may also award reasonable costs to the complainant or the responding government institution depending on the nature, circumstances and outcome of the case.

Procurement Complaints

Summary of Activities

During the fiscal year, the Tribunal issued 66 decisions on whether to accept complaints for inquiry and 27 final decisions on complaints that were accepted for inquiry, for a total of 93 decisions. Six cases were still in progress at the end of the fiscal year, one of which was still under consideration for being accepted for inquiry.

Sample of Noteworthy Decisions

Of the procurement complaints inquired into by the Tribunal, certain decisions stand out. Brief summaries of a representative sample of these cases are included below. These summaries have been prepared for general information purposes only.

PR-2015-051 and PR-2015-067 Oshkosh Defence Canada Inc. (Compensation Order)

On the merits, the Tribunal found that the Department of National Defence’s (DND) testing of military vehicles proposed by Oshkosh Defence Canada Inc. (Oshkosh) was flawed. As a remedy, the Tribunal recommended that DND either re-test Oshkosh’s vehicles in accordance with the solicitation’s terms or compensate Oshkosh for its losses. When DND concluded that re-testing would be impractical, the Tribunal began its compensation inquiry.

The compensation phase lasted over a year. Parties’ submissions included six affidavits, four expert reports, and several requests to strike or compel disclosure of documents. The volume of submissions exceeded 2,000 pages.

Given the magnitude and complexity of the claim, the Tribunal took the opportunity to explain in detail how it analyzes compensation claims consistent with its governing legislation. The Tribunal ultimately recommended an award of $25.3 million, representing one third of Oshkosh’s lost profits for the initial five-year term of the solicitation contract. It also recommended that Oshkosh be awarded one third of its lost profits should PWGSC exercise any of the options under the contract awarded. Because the proceedings were unusually complex and lengthy, the Tribunal awarded Oshkosh $153,120 in complaint costs.

An application for judicial review in regards to this matter is pending before the Federal Court of Appeal.

PR-2016-064 Leonardo S.P.A.

Leonardo S.P.A. (Leonardo), an Italian corporation, filed a complaint concerning the procurement of fixed-wing search and rescue aircraft and related support services by the Department of Public Works and Government Services (PWGSC) on behalf of the Department of National Defence. Leonardo alleged that PWGSC had awarded the solicitation to a competing bidder, Airbus Defence & Space S.A. (Airbus), in breach of the applicable evaluation criteria and of Article 506 of the Agreement on Internal Trade (AIT).

Further to motions filed by PWSGC and Airbus (as intervener), the Tribunal issued an order dismissing the complaint on the basis that Leonardo did not have standing to file a complaint before the Tribunal under the AIT. In particular, the Tribunal concluded that Leonardo was not a “Canadian supplier” within the meaning of Article 518 of the AIT because Leonardo (not its subsidiaries operating in Canada) was the entity that bid on the procurement and would have entered into any resulting contract. As Leonardo was incorporated and headquartered in Italy and had no place of business in Canada, it was not a “Canadian supplier”.

PR-2016-056 Valcom Consulting Group Inc.

The Tribunal conducted an inquiry into a complaint filed by Valcom Consulting Group Inc. (Valcom) concerning a procurement by the Department of National Defence (DND) for the services of a senior technician. Valcom challenged DND’s decision to terminate and re-tender the resulting contract that was initially awarded to Valcom.

DND moved that the Tribunal cease its inquiry, on the grounds that the termination involved a matter of contract administration outside of the Tribunal’s jurisdiction. The Tribunal denied the motion, finding that the termination fell within its mandate to hear complaints regarding “any aspect of the procurement process”, pursuant to subsection 30.11(1) of the CITT Act. Because DND had terminated the initial contract award due to concerns with the solicitation process, and Valcom’s complaint challenged those concerns, the complaint pertained to the procurement process.

The Tribunal found the complaint valid on the merits. It recommended that Valcom be awarded the resulting contract and be compensated for any lost profits for services already rendered by another supplier.

An application for judicial review in regards to this matter is pending before the Federal Court of Appeal.

Judicial Review of Procurement Decisions

Attorney General of Canada v. Hewlett-Packard (Canada) Co., 2017 FCA 227

Hewlett-Packard (Canada) Co. (HP) filed a complaint (PR-2016-043) challenging Shared Service Canada’s (SSC) evaluation of HP’s proposal regarding a solicitation for a high-performance computing solution for atmospheric and other scientific research. SSC filed a motion to strike the complaint for lack of jurisdiction, based on its invocation of a national security exception (NSE) under the trade agreements. The Tribunal denied the motion, finding that SSC had not properly invoked the NSE to exclude suppliers from filing complaints with the Tribunal. However, the Tribunal ultimately upheld SSC’s evaluation of HP’s proposal.

Despite its success on the merits, SSC filed an application for judicial review of the Tribunal’s decision denying the motion to strike. Because HP did not defend the judicial review, the Tribunal filed a motion for leave to intervene and to file a motion to strike the application on the grounds that it was moot. SSC consented to the Tribunal’s motion to intervene so that there would be another party for the court to hear from. SSC contested the Tribunal’s motion to strike though, arguing that the court should exercise its discretion to hear SSC’s application because it raised a systemic issue. The Court dismissed SSC’s application. The Court observed that SSC agreed the application was moot. The Court then found that none of the reasons provided by SSC for hearing the application despite it being moot were persuasive.

Attorney General of Canada v. Springcrest Inc., 2017 FCA 202

In PR-2016-021, the Tribunal found a complaint by Springcrest Inc. (Springcrest) concerning a solicitation by the Department of Public Works and Government Services (PWGSC) on behalf of the Department of National Defence (DND) to be valid. The procurement was for seawater pumps for Halifax class frigates of the Royal Canadian Navy. Springcrest challenged a requirement in the Request for Proposal (RFP) that all bidders except the incumbent include a shock testing certificate for the pumps in their proposals. Springcrest argued that it was impossible for any bidder to meet the requirement in the time between publication of the RFP and bid closing (62 days).

The Tribunal held that the requirement violated Article 504(3)(c) of the Agreement on Internal Trade (AIT), which prohibited measures regarding “the timing of events in the tender process so as to prevent suppliers from submitting bids”.

PWGSC filed an application for judicial review of the Tribunal’s decision. The Court dismissed the application. It found that the Tribunal reasonably determined that Article 504(3)(c) applied to technical requirements as well as procurement process timelines. The Court also found that it was objectively impossible for suppliers to meet the timeline set out in the RFP. Finally, the Court found that Tribunal reasonably determined that PWGSC’s legitimate operational requirements could have been met by invoking other provisions of the AIT to excuse compliance with Article 504(3)(c).