This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its June 2018 determination in ALS Canada Ltd v. Statistics Canada, the Canadian International Trade Tribunal rendered one of its first rulings under the Canadian Free Trade Agreement (CFTA) and the Canada-Europe Comprehensive Economic and Trade Agreement (CETA). The case dealt with a direct award for the provision of municipal wastewater testing for evidence of cannabis consumption. The government issued an Advanced Contract Award Notice, as required by the procurement rules, announcing its intention to directly award the contract instead of putting it out to tender. The government maintained that the awardee was the sole provider of the required testing methodology and that the services were required on an urgent basis, as Statistics Canada needed data of cannabis levels prior to legalization to acquire the pre-legalization data to support before-and-after statistics.
The Tribunal rejected the government’s assertions of only one available service provider who could perform the required sampling, finding that the government failed to prove that the testing performed by the selected service provider was the only available test method, or that other available test methods could not achieve the required results.
Furthermore, the Tribunal found that the requirements did not fall under the trade treaty extreme urgency exceptions that permitted direct awards since the requirements were foreseeable in advance. The Tribunal ruled that the government’s failure to plan for water testing did not constitute an emergency, given its long-announced intention to legalize cannabis:
Statistics Canada’s decision also fails for lack of urgency, let alone extreme urgency: the requirement was sufficiently foreseeable for normal tendering procedures to be followed. The Tribunal has held that in order to justify limited tendering under the ground of urgency, the government institution must show both that there is extreme urgency and that it was caused by unforeseeable events.
Statistics Canada has not explained why it waited until November 2017 to begin considering research projects for measuring potential changes in the use of cannabis in Canada resulting from legalization. Decriminalization of cannabis was a major plank in the current government’s platform in the 2015 general election. Bill C-45 (the bill to decriminalize cannabis) was introduced in the House of Commons on April 14, 2017, with a second reading by June 8, 2017, followed by the presentation of a report dated October 5, 2017, by the Standing Committee on Health.35 Statistics Canada failed to articulate any reason why it did not recognize cannabis consumption as a subject worthy of research until November 2017, some eight months after the government bill was first introduced. Other government agencies had already issued procurements for services related to decriminalization as early as July 2017.36 In that government-wide operational context, and given the ubiquitous coverage of the issue in Canadian and foreign media, the Tribunal finds that the behaviour exhibited by Statistics Canada under the circumstances of the impending decriminalization cannot be justified as being in response to an unforeseeable event. The Tribunal has previously found that government institutions cannot claim delay or inaction of their own causing as an excuse for recourse to sole sourcing under the guise of urgency.
As this case illustrates, government institutions bear the onus of establishing legitimate trade treaty exceptions when seeking to avoid their open tendering duties. In this case, the government failed to establish that the selected supplier was the sole source of the required services. The government was also unable to rely on its failure to properly plan its requirements in advance as the basis for bypassing its open procurement obligations. The complainant was therefore awarded its lost profits for being denied an opportunity to compete for the contract award.