This article is an extract from the 5th edition of Government Procurement.
In its June 2022 decision in Thales DIS Canada Inc. v. Ontario, the Ontario Superior Court of Justice – General Division granted a losing bidder’s judicial review application and quashed the Ontario government’s decision to issue a Request for Bids (“RFB”) with Canadian content requirements, as well as the government’s decision to reject the complainant’s protest under the government’s internal bid dispute mechanism.
The judicial review decision dealt with an RFB issued by the Ontario Ministry of Transportation on behalf of multiple government ministries for a contract to provide image capture services, photo comparison technology services, and identification card production services for various identity cards including drivers’ licence cards and health cards. The applicant, Thales, who is part of a French multinational company with a Polish subsidiary that produces identification cards and passports at its facility in Gdansk, Poland, for governments in the European Union, the United Kingdom, and certain American states and Canadian provinces, challenged the government’s domestic production requirements and challenged the government’s decision to reject its bid protest.
In its judicial review application, Thales asserted that the Canadian card production requirement in the RFB violated the non-discrimination provisions of the Canada-European Union Comprehensive Economic and Trade Agreement (“CETA”) and the Canadian Free Trade Agreement (“CFTA”) and that the government’s decision to reject its bid protest under the government’s internal bid dispute mechanism (“the Decision”) was biased and procedurally unfair.
The government argued that the terms of the RFB were not reviewable by the court, that its bid dispute process was fair, and that its related bid dispute Decision was reasonable. The court disagreed, with the two-judge majority (“the Court”), as well as the concurring third judge, finding that the government’s RFB and subsequent bid dispute Decision should be quashed.
By way of background, the RFB required that the physical cards (“Card Stock”) required to produce the personalized identification cards be produced in a single secured facility in Canada that had to be operational by November 2023 to meet the contractual performance requirements. The RFB expressly stated that it was subject to both the CETA and CFTA and, as the Court summarized, was subject to the trade treaty non-discrimination rules that prohibited local preferences unless the application of those preferences fell within recognized exceptions. Under the CETA, those neutrality exceptions include measures necessary to “protect public morals, order or safety”, provided that those measures were not applied in a manner that constituted “arbitrary or unjustifiable discrimination.”
Thales challenged the domestic production requirements as discriminatory measures pursuant to the Ontario government’s internal bid dispute process. As the Court summarized, the government’s internal bid dispute process was centrally administered by Supply Chain Ontario on behalf of all Ontario government ministries with the requirement that ministries attempt to resolve bid disputes at the ministry level and, where the complaint is not resolved at the ministry level, allowed bidders to file a complaint to be centrally reviewed by the government’s bid protest director (“the Director”). Thales submitted a compliant to the Director on December 10, 2021 and concurrently filed its notice of judicial review application on that same day.
The Director replied to Thales on January 10, 2022, setting out the timetable for the procedural steps for the bid dispute decision. On February 7, 2022, the Director submitted her decision in the form of a briefing note that contained her analysis and recommendations to the Assistant Deputy Minister of Supply Chain Ontario, who in turn submitted the recommendations to the Deputy Minister of Transportation, who agreed with those submissions and advised Thales that its complaint was dismissed.
As the Court observed, the Director’s Decision focused on whether the RFB’s discriminatory domestic production restrictions were permitted under the above-noted “public safety exception” based on the risk of loss of theft associated with the overseas transportation of the Card Stock. As the Court summarized, in the arguments contained in the Director’s bid dispute Decision, the government relied on a World Trade Organization ruling, referred to as the “Brazil Decision”, for determining when otherwise restrictive domestic production requirements qualify under a public safety exception as being necessary to materially reduce an identified material risk that cannot otherwise by adequately addressed through less restrictive means.
In relying on the Brazil Decision principles, Thales countered by arguing that its security measures were superior to those currently employed by the incumbent Ontario manufacturer, that its multinational customers already included other Canadian provinces, and that there had been no instances of loss or theft during its shipment of over 50 million cards in the prior five years.
While not technically binding in Ontario, the World Trade Organization’s Brazil Decision was accepted by both parties as informing the governing test for assessing when domestic production restrictions can fall under the public safety exception, and, as the Court determined, that governing test should be adopted under Canadian law as providing constraints on administrative decisions relating to the adoption of domestic production requirements. The Court’s consideration of that test is elaborated on below.
After summarizing the background context that led to the Thales judicial review application, the Court then turned to the specific arguments raised by the government in response to that application. In its first line of argument, the government maintained that the complaint was moot since Thales ranked fourth in the evaluation process and the Canadian production requirements did not impact that ultimate ranking. However, Thales asserted that the evaluators knew that it could not meet the domestic production requirement and that this knowledge tainted the evaluation outcome. Thales argued that this issue could not be disentangled from the rest of the evaluation process. The Court agreed, finding that the government failed to establish that the evaluators were not influenced by their knowledge of the complainant’s inability to meet the domestic production requirements when they scored its bid.
While the Court recognized that the issue would be moot if Thales was mathematically eliminated based on its price, it found that Thales would have scored second if it had received full marks on the non-price criteria and would have been positioned to enter contract award negotiations with the government if negotiations ultimately failed with the top-ranked bidder. In any event, the Court concluded that it should exercise its discretion to hear the merits of the case even if the dispute was moot since it was in the public interest to address the outstanding treaty compliance issues for the purposes of avoiding uncertainty in future procurement processes.
In its next line of argument, the government asserted that its bid protest Decision was not judicially reviewable. The Court disagreed. While the Court determined that the government’s bid dispute Decision did not constitute a formal statutory decision, it ruled that the Decision still constituted the exercise of state decision-making authority with sufficient public characteristics to be judicially reviewable and to be subject to the remedies of certiorari, mandamus, or prohibition under Ontario’s Judicial Review Procedures Act.
Noting that the government’s internal bid dispute Decision involved a mixed question of fact and law, the Court determined that the Decision should be reviewed on a more deferential reasonableness standard, rather than on a stricter correctness standard. However, as discussed below, the government’s Decision still failed to survive judicial scrutiny notwithstanding that more deferential standard of review. As the Court noted, the hallmarks of a reasonable decision include “justification, transparency, and intelligibility”. The reasonableness standard requires a decision to be “based on reasoning that it both rational and logical” and requires the decision-maker to act within the constrains of the applicable legal and factual context. The Court also stated that “conformity with Canada’s international obligations will inform the reasonableness of any decision that engages those obligations”
As the Court noted, the Brazil Decision called for the application of a two-part “necessity” test that considered whether the domestic production restrictions materially addressed the government’s security concerns and also considered whether less intrusive measures could have been adopted to address those same concerns. The Court concluded that the Director’s bid protest Decision was unreasonable since it was based on inadequate and speculative reasoning that failed to provide a rational and logical chain of analysis for determining whether the domestic production requirements were necessary:
The Analysis Regarding the Test for “Necessity”
As discussed above, the Director’s determination that MTO is entitled to avail itself of the public safety exception under the CETA is based on the following three propositions: (1) the MTO Fraud Note and the Thales evidence establish that, in the absence of a domestic production requirement, there is a risk of risk of loss, theft and fraud in respect of Card Stock associated with the transportation from a foreign facility to Canada for personalization and potentially also a risk of risk of loss, theft and fraud in respect of the production of Card Stock at a foreign facility; (2) while Thales has been able to eliminate these risks as a practical matter by the imposition of stringent safety protocols and practices, there is no guarantee that all other bidders proposing to produce Card Stock in a foreign facility can, or will, do likewise; and (3) therefore, the domestic production requirement is “necessary” for public safety and, accordingly, MTO is entitled to avail itself of the public safety exception under the CETA.
The foregoing summary of the Director’s reasoning demonstrates three significant features of the Decision. First, although the parties both proceeded on the basis that the two-stage test for “necessity” in the Brazil Decision, among other cases, as described above, was applicable, the Director did not express her conclusions in conformity with that test. In order to accommodate the Director’s analysis to the operation of the two-stage test in the present circumstances, it is necessary to make certain significant assumptions regarding the findings required for the purposes of the test. Second, as a consequence, the Director failed to address the four principal issues discussed below which must be considered in the application of that test. Third, as a further consequence, it is not possible to identify a chain of analysis that is both rational and logical leading to the conclusion of the Director. In broad terms, the Director’s discussion of the issues encompassed by statements (1) and (2) above is inadequate and speculative, and the conclusion reached in (3) does not necessarily follow from the first two statements. The Decision is more properly characterized as a summary of the positions of the parties followed by a peremptory conclusion, with the Director’s analysis limited to the comments in paragraph 27 of the Decision. The foregoing features of the Decision are more than sufficient to find it to be unreasonable.
The Court then discussed how the Brazil Decision should have been applied to determine whether the domestic production restrictions were necessary. As the Court stated, the first issue that the Director should have addressed was whether the government properly identified the specific matter of “public morals, order or safety” that the domestic production requirements were intended to protect. However, the Court found that the Director’s reasoning on this issue was overly broad and failed to adequately specify the public interest concerns that were being addressed through the adoption of the domestic production restrictions:
The public safety interest
The first issue that the Director ought to have addressed was identification of the specific matter of public morals, order or safety that the domestic production requirement was intended to protect. From the general tenor of the Decision, it is likely that the Director accepted MTO’s position that there was a “vital security interest related to protecting public morals, order or safety” which MTO defined as “reducing the risk of loss, theft, and fraud associated with identity documents.”
However, it is certainly arguable that this characterization of the alleged public interest is overly broad and that the significance to be attached to it is inflated. At a minimum, it is difficult to see how the interest in reducing the risk of loss, theft, and fraud associated with identity documents has anything to do with public morals or public order and there is a legitimate question as to whether public safety must engage public order. In any event, because she failed to address the specific public interest at issue, the Director failed to consider these issues.
Secondly, the Court found that the Director failed to adequately address the material connection between the domestic production restrictions and the objectives of protecting “public morals, order or safety”, finding that the “MTO Fraud Note” relied on by the Director failed to address the materiality issue and that the Director accepted the government’s position notwithstanding this lack of evidence:
Material connection with the domestic production requirement
The next issue that the Director should have addressed is whether the domestic production requirement is “materially connected” to protecting “public morals, order or safety” of Ontario residents, that is, in the present circumstances is “materially connected” to the reduction of the risk of loss, theft, and fraud associated with identity documents. Rather than addressing this question, it appears that the Director also accepted the MTO position without any analysis that there is a material connection because the “the measure is intended to, and will, mitigate the risk of loss or theft of card stock inherent with off-shoring production”.
This defect in the Director’s reasoning is more serious for the reason that she thereby failed to address the nature of the alleged connection as well as whether the connection was material. The evidence in the MTO Fraud Note did not support a material connection between the domestic production requirement and the reduction of the risk of loss, theft and fraud associated with production of Card Stock in a facility located in the EU. At most, the evidence before the Director could justify a connection between the domestic production requirement and the reduction of the risk of loss, theft, and fraud associated with the transportation of Card Stock from a foreign plant to Canada for personalization in that, if the production and personalization are performed in the same facility in Canada, the requirement would remove the risk of loss, theft and fraud in respect of the transportation of the card stock to a printing facility in Canada. At the hearing, MTO effectively conceded this point by limiting its submissions on this issue to the connection between the domestic production requirement and the reduction of the risk associated with transportation.
The question remains however whether such connection is a “material connection”. In the present circumstances, this issue appears to be closely related to the issue of whether the contribution of the domestic production requirement to the achievement of the MTO objective is “material”, which is addressed below.
Thirdly, the Court found that the Director improperly accepted the government’s assertions that the foreign production and shipping of the identity cards created a material risk, and that the adoption of a domestic production requirement materially reduced that risk, to arrive at her unsupported conclusion that the restrictions were necessary:
The analysis of the contribution of the domestic production requirement
As described by the WTO in United States – Measures Affecting the Cross Border Supply of Gambling and Betting Services (Complaint by Antigua) (2005), WTO Doc. WT/DS 285/ABR (Appellate Body Report), at paragraphs 306 and 307, and as affirmed at paragraph 178 of the Brazil Decision, the first stage of the test for “necessity” involves an inherent weighing and balancing process that begins with an assessment of the “relative importance” of the interest furthered by the challenged measure. The analysis must also involve an assessment of other relevant factors usually including “the contribution of the measure to the realization of the ends pursued by it” and “the restrictive impact of the measure on international commerce”.
The Director failed to engage in this exercise of weighing and balancing the foregoing considerations. She failed to consider the relative importance of the public safety interest furthered by the domestic production requirement. The Director also failed to consider both the contribution of the domestic production requirement to the reduction of the risk of loss, theft, and fraud associated with Card Stock and the restrictive impact of the requirement on international commerce.
There is therefore no finding that, on a preliminary basis, the domestic production requirement satisfies the first stage of the test for “necessity”. Instead, the Director appears to have adopted, without expressly so stating, the MTO position that the domestic production requirement is “necessary” in that its contribution to the achievement of the objective is ‘material’ without providing any reasoning that explains this conclusion. Accordingly, insofar as there is an implied conclusion on the first stage of the test for “necessity”, it is purely conclusory – that the appropriate standard is a “material contribution” to the reduction of the risk of loss, theft, and fraud associated with Card Stock and that the domestic production requirement satisfies this standard.
In reducing the issue before the Director to the question of whether the domestic production requirement would make a “material” contribution to the achievement of the objective of reducing the risk of loss, theft, and fraud associated with Card Stock, MTO relied on a view expressed in the Brazil Decision at paragraph 150. In that passage, the Appellate Body opined that in the case of a measure that produces restrictive effects on international trade that are as severe as those resulting from an import ban, it would be difficult for a panel to find the measure to be “necessary” unless it was satisfied that the measure was apt to make a “material” contribution to the achievement of its objective.
Thales and MTO proceeded on the basis that this standard applies in the present circumstances. In this case, the impact of the domestic production requirement is absolute in that it would ban any bidder proposing to produce Card Stock in a facility outside Canada. However, in order for the Director to find that the domestic production requirement will make a “material contribution” to the reduction of loss, theft and fraud associated with identity cards, the Director had to establish both that there was a material risk and that the domestic production requirement would materially reduce that risk. I will address each of these issues in turn.
The Court also found that the government failed to address the materiality of the alleged risk and that the Director failed to properly consider the probative value of the evidence provided by Thales that countered the government’s unsupported assertions regarding those alleged risks:
While the MTO Fraud Note sets out a litany of reasons why the MTO Fraud Office believes the risk of loss, theft and fraud associated with Card Stock could increase with foreign manufacture and transportation to Canada for personalization, the Note concludes by stating only that “[f]oreign production of card stock poses increased security and chain of custody risks.” As mentioned, there is minimal, if any, support in the MTO Fraud Note for the suggestion of increased risk associated with the foreign manufacture of Card Stock; the MTO’s position focusses on the risk associated with transportation to Canada. More significantly, the MTO Fraud Note does not purport to quantify the increased risk, even in general terms, and it is silent on the issue of whether the MTO Fraud Office considers the actual risk to be material. Moreover, the MTO Fraud Note does not address the submission of Thales that it has managed the risk through various security protocols and practices. There is therefore no basis in the MTO Fraud Note for determining that the risk described therein is material.
The only evidence which addresses the materiality of the risk of loss, theft and fraud associated with identity cards was that presented by Thales. The Thales evidence establishes that it is possible to manufacture Card Stock in a facility in an EU country and to transport it to North America, including to Canadian locations, for personalization without loss or theft of Card Stock. Accordingly, as mentioned, this suggests that the actual risk of such loss or theft can be effectively minimized by the application of stringent safety protocols and practices. Under such circumstances, any residual risk of loss, theft and fraud associated with Card Stock is, at best, modest and speculative and certainly not material.
Instead of taking this evidence into consideration, however, the Director ignored the probative value of the Thales evidence and responded with two negative statements. The MTO Fraud Note states that Thales’ evidence was not evidence of the absence of any risk, or of only low risk, of loss or theft associated with foreign manufacture and transport of Card Stock. In addition, the Director suggested that Thales’ evidence was not evidence that other suppliers in other countries have equally successful manufacturing and transportation track records. Thales was not, however, arguing that its evidence demonstrated either circumstance. More significantly, while it is correct that the Thales evidence is not a basis for inferring either of these states of affairs, it is also not a basis for inferring that a material risk of loss, theft and fraud of Card Stock exists if stringent safety protocols and practices are adopted.
Apart from the Thales evidence, there was no other evidence before the Director regarding risk of loss or theft of Card Stock associated with the Card Stock production industry in general, or with any other specific manufacturer or bidder. In particular, there was no evidence that supported the Director’s assumption that the actual risk associated with other potential foreign suppliers of Card Stock was materially greater than the risk associated with Thales’ operations. I also note that the Director’s assumption required the further assumption, which was also not expressly acknowledged, that potential foreign suppliers other than Thales do not, and would not even if so required, apply the stringent safety protocols and practices that have allowed Thales to operate without any loss of Card Stock.
Accordingly, while the evidence before the Director could justify a finding of a potential risk of loss, theft and fraud associated with Card Stock production and transportation to Canada, it could not justify a finding that the practical risk was material.
The Court found that in making her Decision, the Director relied on government hypotheses that were unrealistic, unsupported by evidence, and speculative:
Does the Domestic Production Requirement Materially Reduce the Alleged Risk?
There remains the further issue of whether a domestic production requirement would materially contribute to the reduction of the risk of loss, theft and fraud associated with identity cards.
In the Brazil Decision at paragraph 151, the Appellate Body stated that the demonstration of an alleged material contribution can be demonstrated by “quantitative projections in the future” or “qualitative reasoning based on a set of hypotheses that are tested and supported by sufficient evidence”. While a party is not required to provide a quantitative analysis of the anticipated reduction of risk, it cannot avoid consideration of this issue by limiting its evidence to qualitative statements that are not “tested and supported by sufficient evidence”. In this case, there were no quantitative projections before the Director. Accordingly, she had to rely on qualitative statements, principally the statements in the MTO Fraud Note. However, to the extent that it can be said that the MTO Fraud Note constituted “qualitative reasoning based on a set of hypotheses” which the Director adopted, such reasoning was deficient for the following reasons.
First, and most importantly, as discussed below, the Director’s determination was based on hypotheses that were unrealistic, unsupported by evidence and speculative.
It is not possible to address the question of material reduction in risk without first considering the extent of the actual risk of loss, theft and fraud associated with foreign production and transportation to Canada of Card Stock. As discussed above, this requires an assessment of the extent to which stringent safety protocols and practices would otherwise be applied by potential suppliers, or could be imposed as a condition of a request for bids, in the absence of a domestic production requirement. Such a consideration requires knowledge of the extent to which the Card Stock production industry generally applies the same safety protocols and practices as Thales. Further, if there is, in fact, a variation in the safety protocols and practices among the members of the industry, it is also necessary to consider the extent to which there is a similar variation among the potential bidders in any request for bids. As discussed above, the Director was not, however, in a position to address these matters because of the absence of any relevant evidence before her.
Instead, the Director implicitly assumed a scenario of security protocols and practices on the part of all other potential foreign bidders that were less stringent than those of Thales. There was however no evidence for this assumption. In particular, there was no evidence of the security protocols and practices of other potential suppliers of Card Stock, either domestic or foreign. Because the Director’s conclusion was based on, and required, these unsupported assumptions, the Director’s conclusion of a material contribution to the reduction of risk was entirely speculative.
Further, the Court found that the Director failed to consider whether the alleged risks could be mitigated by evaluating each bidder’s existing security measures and by requiring the winning bidder to implement security protocols that were similar to those that were successfully adopted by Thales:
Second, the most that the Director could have realistically inferred from the evidence before her was that a domestic production requirement could possibly contribute to a material reduction in the risk in respect of a potential supplier that was not willing or able to apply safety protocols and practices that were as stringent as those of Thales, even if such actions were a condition of a request for bids. It is not possible on the evidence before the SCO to assess whether, or to what extent, such potential bidders exist. The MTO Fraud Note did not provide any such evidence.
More importantly, the broad conclusion of the Director requires evidence that the security protocols and practices applied by Thales could not have been required of all other foreign suppliers with similar results in terms of the elimination of the practical risk of loss, theft and fraud at a foreign production facility and in the course of transportation to a Canadian printing facility. There was no evidence to this effect before the Director. More significantly, in making this assumption, the Director disregarded the ability of the MTO to exclude any such bidders from the RFB process or to take the elevated risk associated with such bidders into consideration in the evaluation of the bids under the RFB.
Third, the Director justified her approach based, at least in part, on her position that Thales’ argument required acceptance of the proposition that Thales’ track record established that the domestic production requirement was not warranted for any bidders. This statement of the Thales position oversimplifies the necessary inference from the Thales experience and is logically flawed.
On this point, the Thales evidence implies no more than that it is feasible to minimize any practical risk of loss, theft and fraud associated with the manufacture and transportation to Canada of Card Stock by the application of stringent safety protocols and practices. In other words, if one party has been able to manufacture Card Stock in a foreign facility and transport it to Canada for personalization without risk of loss of the Card Stock, a domestic production requirement applicable to all foreign suppliers is not “necessary” to reduce the risk of such loss or theft provided stringent safety protocols and practices are already in place or would be put in place as a requirement of a request for bids. The Thales experience implies that a domestic production requirement is not required, as the Director suggests, because the MTO has the authority in any request for bids to require that successful bidders adhere to stringent safety protocols and practices. The Director ignored this aspect of the Thales’ position and assumed away this possibility without any evidence for so doing.
Fourth, and most importantly, as the foregoing discussion demonstrates, the contribution of a domestic production requirement to the reduction of any risk associated with foreign production of Card Stock and transportation to Canada would depend upon the extent that a foreign supplier put in place, or was prepared to put in place, stringent safety protocols and practices that managed the risk of loss or theft of Card Stock. To the extent they were prepared to do so and any bidders who were unprepared to do so were excluded from, or negatively evaluated under, the RFB, the practical risk of loss or theft associated with foreign production of Card Stock and transportation to Canada could be reduced to a minimal level without the imposition of a domestic production requirement. In such a situation, it follows necessarily that any further contribution to the reduction of the risk of loss or theft of Card Stock by the imposition of a domestic production requirement would not be material.
In summary, the Court found that the Director’s Decision regarding the material necessity of the domestic restriction was neither logically sound nor supported by the evidence:
Lastly, insofar as there is any analysis underlying this aspect of the Decision, it appears that MTO has defined its desired level of protection regarding the risk of loss, theft and fraud as nil and believes that the only means of achieving that level of protection is an absolute prohibition of the circumstances under which such risk could arise – namely, foreign production of Card Stock.
This argument ignores the requirement that the proposed measure, in this case the domestic production requirement, must make a material contribution to the reduction of the risk against which MTO seeks to be protected. If, as here, it is demonstrated that, at least under certain realistic circumstances, the risk can be reduced to a level at which the imposition of a domestic production requirement would make no more than a negligible, essentially speculative, contribution to the reduction of whatever risk remains, the Director cannot rely upon this principle to support such a requirement. Imposition of a domestic production requirement to address the reduction of risk in such circumstances becomes arbitrary.
In summary, because the Director did not address the issue of a material contribution to the reduction of risk using realistic assumptions, the Director’s determination that imposition of a domestic production requirement would make a material contribution to the risk of loss and theft associated with the foreign production and transportation to Canada of Card Stock was neither logically sound nor supported by the evidence before her.
As noted above, the Court also found that the Director disregarded evidence in support of less restrictive risk mitigation measures:
First, as mentioned, there was evidence before the Director that at least one bidder which produced Card Stock in a facility in the EU was able to achieve the desired level of protection as a practical matter, being an absence of loss, theft or fraud of Card Stock, by the application of stringent safety protocols and practices. This suggests that the imposition of stringent safety protocols and practices is a potentially viable, less trade-restrictive alternative to the domestic production requirement. For this purpose, there is no meaningful difference between reducing the risk of such loss, theft and fraud by the implementation of stringent safety protocols and practices to a negligible, essentially speculative, risk and eliminating such risk by means of a domestic production requirement. As discussed above, the Director disregarded this evidence without a reasonable basis for so doing.
Second, the Director based her decision on an unreasonable scenario, being the absence of a domestic production requirement without any ability on the part of the MTO to exclude bidders who were not prepared to implement safety protocols and practices comparable to those that have proven effective in minimizing the risk of loss or theft associated with Card Stock. For the reasons discussed above, it is not realistic to consider the alternative to a domestic production requirement in the abstract. Insofar as the Director may have implicitly assumed that, in the absence of such a requirement, all other foreign producers would have applied safety protocols and practices that were less stringent or otherwise inferior to those of Thales, there was no basis for such an assumption on the evidence before her, as discussed above. If it were assumed that only some but not all of the potential bidders would fall into this category, there was even less justification for adopting a blanket domestic production requirement that discriminated against all foreign suppliers including those who applied appropriately stringent protocols and practices, particularly given the ability of the MTO to exclude, or negatively evaluate, the former class of bidders under the terms of the RFB. In short, in the absence of realistic assumptions regarding the operation of such safety protocols and practices in the absence of a domestic production requirement, the Director’s consideration of the less trade-restrictive alternatives was purely speculative.
Collectively, these two considerations compel the conclusion that the Director could not reasonably limit her consideration of alternative less trade-restrictive measure in the manner in which she did. The Director was required to consider whether a requirement that potential suppliers apply stringent safety protocols and practices substantially similar to those of Thales would achieve MTO’s desired level of reduction of the risk of loss, theft and fraud associated with the foreign production and transportation to Canada of Card Stock. The Decision was also unreasonable because the Director failed to conduct such an analysis.
Given the above, the Court concluded that the Director’s Decision to reject the complaint and uphold the government’s restrictive domestic production requirement was unreasonable and should be set aside.
The Court then turned to the issue of whether the RFB should also be quashed. Noting that the application raised significant public interest considerations, including the issue of trade treaty compliance and the expenditure of $80 million in public funds, the Court determined that it had jurisdiction to review the RFB and that it should be reviewed on a reasonableness standard. After finding that the domestic production restrictions were unreasonable since they breached applicable trade treaty non-discrimination rules, the Court granted the applicant’s request to quash the RFB.
As this case illustrates, the decision to limit competition through the adoption of restrictive requirements should be based on legally defensible considerations. When challenged, government institutions bear the burden of defending their restrictive practices and run the risk of having their procurement decisions invalidated by the courts when their decisions fail to meet applicable legal standards.
