As revealed by recent case law, flawed bidding processes are leading to re-evaluation orders and legal disputes over cancelled contract awards.
For example, in its January 2023 determination in Cistel Technology Inc. v. Department of Health, the Canadian International Trade Tribunal rejected the complaint of a winning bidder who had its contract award revoked after the federal government’s after-the-fact discovery of a process error. The dispute dealt with a request for proposal for database and information management services. The complainant was initially awarded the tendered contract. However, that award was rescinded after the Department discovered an “unfortunate oversight” where it had failed to answer a pre-bid question posed by a competing bidder.
The government determined that this resulted in an unfair process, terminated the award, and retendered the opportunity. The complainant challenged the revocation of its award, but the Tribunal upheld the government’s decision, finding that the failure to answer the question denied that bidder “an opportunity to participate in the solicitation process on the same terms as other bidders.”
While the Tribunal cautioned that “a cancellation clause cannot be invoked in a totally arbitrary manner” it also noted that “it is incumbent on government institutions to take appropriate steps to rectify mistakes in the procurement process, in keeping with the terms of the solicitation and in a manner that preserves the integrity of the competitive procurement system.” Even thought the Tribunal ultimately upheld the Department’s decision to cancel and retender, this case serves as a useful reminder that bidding procedures should be carefully followed to avoid downstream bid disputes.
Further, in its February 2023 determination in Chantier Davie Canada Inc. and Wärtsilä Canada Inc. v. Department of Public Works and Government Services, the Canadian International Trade Tribunal ordered a re-evaluation after finding latent defects in the government’s evaluation criteria. The dispute dealt with an invitation to tender issued by the Department of Public Works and Government Services on behalf of the Department of Fisheries and Oceans for repair work on a Canadian Coast Guard icebreaker. The complainant challenged the government’s evaluation of each bidder’s collective bargaining arrangements and the government’s assessment of how expiring collective agreements could impact contract performance.
The Tribunal found that the government was unreasonable in its interpretation of the criteria since the evaluators sought to eliminate all risk of work stoppages. As the ruling stated, “it is impossible to completely eliminate the risk that a workplace will be in a strike or lockout through an evaluation criterion.” The Tribunal therefore ordered a re-evaluation. As this case illustrates, public institutions should avoid imposing unrealistic standards in their evaluation criteria and should avoid unreasonable double standards in how those criteria are applied.
Finally, in its November 2024 decision in Canada (Attorney General) v. EllisDon Corporation, the Federal Court of Appeal upheld a Canadian International Trade Tribunal decision that awarded damages against the federal government over a contract award termination. The dispute dealt with a tender call for a large refurbishing project in Charlottetown, Prince Edward Island. After the contract award, EllisDon Corporation (EllisDon) was put under a stop work order for several months while the government investigated an evaluation error and ultimately revoked the award. EllisDon argued that this prevented it from bidding on other projects during that timeframe and sought damages from the government.
As the Federal Court of Appeal summarized, the government made an evaluation error when it improperly rejected a competing bid from Pomerleau Inc. (Pomerleau) after mistakenly determining that Pomerleau’s electronic bid bond was invalid. As the court noted, after downloading Pomerleau’s valid bid bond, a government employee incorrectly “printed” the document as a regular PDF file, which stripped away the hyperlinks and invalidated other bid bond data. While Pomerleau immediately brought the error to the government’s attention, the government denied the error and proceeded to award the contract to EllisDon as the next-best bid.
The government then kept EllisDon under the stop work order for several months while it investigated the issue, before notifying EllisDon that it had made “an inadvertent error” that required the award to be redirected to Pomerleau “in order to maintain the integrity of the procurement process.” After being found liable for damages by the Canadian International Trade Tribunal, the government appealed, arguing that the Tribunal had exceeded its jurisdiction by going beyond regulating the bidding process to regulate a post-award contracting decision that was outside of the scope of the Tribunal’s jurisdiction.
The Federal Court of Appeal disagreed, finding that the Tribunal’s remedy was based on a government error made during the bid evaluation process. The court agreed that the Tribunal’s damages award remedy flowed out the government’s “mismanagement of the procurement process” and upheld the ruling. As this case illustrates, public institutions should move quickly to rectify evaluation errors to mitigate downstream prejudice to competing bidders.
These recent cases offer fresh evidence of how failing to properly administer a bidding process significantly increases the risk of legal challenge since after-the fact rectifications can prove to be costly and time-consuming exercises when compared to doing things properly in the first place.
