This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
As the following Canadian International Trade Tribunal cases illustrate, inside advantage can prejudice the fairness of a procurement process and result in breaches of applicable trade treaties.
In its September 2007 determination in Bureau d’études stratégiques et techniques en économique v. Canadian International Development Agency, the Tribunal considered allegations of conflict of interest and bias in connection with the procurement of consulting services for an international local governance project. The complainant claimed that its competitor had an inside advantage because of access to government information obtained during its involvement in the planning stages of the project and that the government’s prior relationship with the competitor during those planning stages biased the subsequent evaluation process.
With respect to the first allegation, the Tribunal agreed that the complainant’s competitor had access to information that was not available to other bidders:
In the Tribunal’s opinion, it is clear from the evidence on the record that the contract winner had information in his possession that was not available to B.E.S.T.E. and the other bidders. The Tribunal notes that, within the context of the contract with CIDA to assist with the selection and award of the CSA contract for the LGM project, from February 3, 2006, to March 31, 2007, Mr. Courtemanche had access to information of which B.E.S.T.E. and the other bidders for the RFSP were deprived. More specifically, this was information common to both procurements, the one for the selection of the CSA and the one in issue here.
The Tribunal also noted that this access to inside information translated into a clear advantage during the evaluation process:
It must be noted, for Requirements 10 and 11 of the RFSP, of the seven bidders, the contract winner received the most points. He received nearly all points or almost 50 percent more than the second-place bidder, while B.E.S.T.E. received very few points for these two requirements. The Tribunal cannot determine that the contract winner would not have received the most points for these two requirements had it not been for the fact that he had access to the information of which the other bidders were deprived. According to the evidence on the record, however, it is reasonable to conclude that he appears to have obtained a clear advantage from it. The Tribunal therefore finds that the fact that B.E.S.T.E. was deprived of information relevant to the preparation of its bid, information that the contract winner had because of his mandate relating to the selection of the CSA, constitutes a breach of the AIT.
After concluding that the access to inside information resulted in a breach of the Agreement on Internal Trade (AIT), the Tribunal then considered allegations of favouritism flowing from the prior relationship between the contract winner and the government and whether that situation constituted a reasonable apprehension of bias. The Tribunal’s analysis provides a good example of how the use of external advisors can result in downstream conflicts of interest and undermine a procurement process:
In this case, the Tribunal has closely studied the facts and, while it does not find there is de facto bias on the part of CIDA, it is of the opinion that, in applying the relevant test, there is indeed a reasonable apprehension of bias. Several factors support the Tribunal’s reasoning in this regard. The mere fact that one of the evaluators had worked with Mr. Courtemanche in the past is not sufficient, in itself, to warrant a finding of reasonable apprehension of bias. Rather, it is the particular circumstances of this case that support this finding.
First, the Tribunal notes that it was for the same overall project, namely, the LGM project for which Mr. Courtemanche provided his services to CIDA for the selection of the CSA. The evaluator of the contract at issue and Mr. Courtemanche were called upon to work closely on this project, no doubt since February 3, 2006, the start date of his contract. This working relationship began well before the date on which the bids for the contract at issue were opened. It is therefore inevitable that he knew Mr. Courtemanche professionally.
Second, looking at the time frame, it can be seen that, because of his previous contracts with CIDA, Mr. Courtemanche had worked for the evaluator as early as August 2004. As the head of the evaluation team, this CIDA employee also sat on the selection committee for the CSA and the selection committee for the monitor/advisor. It seems, then, that the contract winner had worked for this CIDA employee starting in 2004, before becoming his colleague on the selection committee for the CSA, in 2006, and before finally being evaluated by him for the mandate of monitor/advisor later that same year.
Third, the Tribunal considers the key role played by the evaluator in question. Indeed, the head of the evaluation team for the monitor/advisor contract is the Senior Project Officer of the Maghreb Program, in the Europe, Middle East and Maghreb Branch of CIDA. It is likely that, because that person was the head of the evaluation committee, that person’s opinion and judgment had considerable weight, and it is reasonable to believe that that person may have influenced the other two members of the evaluation team. Moreover, the Tribunal notes that the evaluator in question is the one who awarded Mr. Courtemanche the most points.
In applying the criterion set out in Committee for Justice and Liberty v. National Energy Board and, in particular, in doing an overall analysis of the facts of the case, the Tribunal finds that there is a reasonable apprehension of bias. Indeed, the Tribunal determines that, in light of the facts, in all likelihood, an informed person, viewing the matter realistically and practically, and having thought the matter through, would conclude that the evaluator in question, and perhaps even the evaluation committee, whether consciously or unconsciously, would not decide fairly.
The Tribunal concluded that this prior relationship tainted the government’s contract award process and cast “doubt on the impartiality of the evaluating committee in evaluating all the proposals of the bidders with regard to all the requirements.” As this case illustrates, a finding of reasonable apprehension of bias can seriously undermine the defensibility of the government’s evaluation process. As a remedy, the Tribunal gave the government the option of either cancelling the awarded contract or conducting a re-evaluation with a new team of evaluators who were not involved in any way with the procurement process, and then compensating the complainant if its proposal turned out to be the highest scorer after that new evaluation.
In its September 2008 determination in Re Bluedrop Performance Learning Inc., the Tribunal ordered the government to terminate a contract due to conflict of interest arising out of the involvement of a former employee in a tendering process. The case dealt with a re-issued Request for Proposals (RFP) for learning services for the Department of National Defence. The commanding officer who oversaw the development and release of the original RFP retired while the RFP was on the market. That RFP lapsed and was then reissued. In the interim, the former commanding officer was hired as vice-president of a firm that submitted a bid on the re-issued RFP. That firm was awarded the contract. The Tribunal summarized the material facts as follows:
The following facts are not in dispute:
the former commanding officer was Commanding Officer of the G7 Branch of the CTC Headquarters during the drafting of RFP-1;
the former commanding officer’s subordinates had a direct role in drafting RFP-1;
the former commanding officer maintained an overview of the RFP-1 project and provided technical advice for the preparation of RFP-1, as required;
all members of the RFP-1 technical evaluation team worked within the G7 Branch of the CTC Headquarters under the former commanding officer;
the former commanding officer participated at a bidders’ conference relating to RFP-1 (which was held to provide prospective bidders with information on the proposed procurement) as the DND technical authority and would have been the designated technical authority for any contract awarded pursuant to RFP-1;
some time after bid proposals had been received in respect of RFP-1, the former commanding officer retired from the Canadian Forces and was hired by Acron to serve as its Vice-President, Strategic Initiatives;
on December 10, 2007, shortly after the former commanding officer’s departure from DND, RFP-1 was allowed to expire without a contract having been awarded pursuant thereto; and
RFP-2, which was issued on January 31, 2008, was essentially a re-tendering of DND’s RFP-1 requirement.
A competing bidder challenged the contract award, alleging conflict of interest. In considering the detailed conflict of interest provisions in the tendering documents, the Tribunal determined that the government had a duty to look behind the winning bidder’s “no conflict” misrepresentation and reject the bid. Since the Tribunal found that this failure to reject the bid compromised the integrity of the bidding process and violated the applicable trade treaty provisions, it ordered the government to terminate the contract or pay the complainant its lost profits.
As these examples illustrate, failing to address the risks created by inside advantage can significantly impact the integrity of an institution’s procurement processes. Institutions should therefore ensure that their procurement practices include clear protocols for dealing with confidentiality considerations to guard against downstream issues that undermine the integrity of future competitions.