This article is an extract from the 5th edition of Government Procurement.
In its August 2019 decision in Harris Corporation v. Department of Public Works and Government Services, the Canadian International Trade Tribunal recognized that while Contract A does not automatically apply to a government bidding process, government bodies cannot unilaterally declare themselves exempt from their trade treaty duties by declaring security exemptions.
The dispute dealt with a bidding process for the provision of night vision goggles for the Royal Canadian Mounted Police (RCMP). When challenged, the government declared a national security exemption in support of its argument that the procurement was not subject to review by the Tribunal. The Tribunal disagreed, ruling that the declaration of exemptions remained subject to review since trade treaties are intended to be binding and government institutions cannot simply declare themselves exempt from those obligations:
That stance is untenable both from a general rule of law and administrative law framework and more particularly given the fact that the trade agreements are intended to be binding between Canada and foreign countries or Canada and the provinces and territories. They are not aspirational statements of principle, but legal agreements incorporated by Acts of Parliament into the laws of Canada. To interpret one of their provisions as conferring unreviewable discretion on Canada (at the expense not only of foreign suppliers but also Canadian ones) is contrary to their purpose, and the mandate of the Tribunal as fully articulated by the Federal Court of Appeal in Almon. It is also inconsistent with the a number of legislative provisions and case law including:
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the structure and text of the CITT Act, which show that Parliament has expressly conferred on government institutions the exclusive authority to override the Tribunal’s postponements of contract awards in the public interest but not conferred similar authority on government institutions regarding the NSE;
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administrative law cases recognizing that tribunals with supervisory powers may properly review government exercises of even exclusive discretion; and
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international public law principles and cases requiring parties to exercise their treaty rights in good faith.
The Tribunal also rejected the government’s argument that, due to confidentiality concerns, the Canada Evidence Act precluded the Tribunal from reviewing the procurement process:
Even assuming the RFSO did contain security screening requirements and secret information and the provisions of the Canada Evidence Act were invoked, it does not then follow that the Canada Evidence Act ousts the Tribunal of its jurisdiction to hear this case. In the absence of an authorization from the Attorney General of Canada, there would simply be an interlocutory procedural application where the federal courts would be called upon to rule on whether certain information should be disclosed or not.
PWGSC has cited no cases in which any court has held that the Canada Evidence Act ousts the substantive jurisdiction of a tribunal (or of a superior court) to hear an underlying procurement review matter of which it has jurisdiction simply because of a claim regarding whether certain evidence may be disclosed. The legislative provisions governing the Tribunal’s robust system of protecting confidential information and the accessible and timely disposition of procurement review cases also belie this proposition.
The Tribunal also noted that while Contract A does not always apply to a bidding process, the trade treaties must be enforced to ensure minimum due process standards in government procurement and government institutions cannot require bidders to waive their trade treaty rights as a condition of engaging in a bidding process:
Even assuming that the language in the RFSO should be read in such a manner, such a provision would be in breach of the trade agreements. The framework of federal procurement law under the trade agreements is informed but not limited or bound by the Contract A/Contract B framework under breach of contract doctrine in common law, wherein an express term may rebut any implied duty of fairness. The trade agreements identify a minimum set of substantive and procedural rights to bidders. Outside that minimum, parties may negotiate further terms, on for example whether the government institution will be liable for bid preparation costs. What the government may not do, however, is to condition participation in a public procurement on bidders waiving their rights under the trade agreements.
The Tribunal therefore rejected the government’s assertion that the national security exemption (referred to in the decision as NSE) under the trade treaties gave the government the unilateral ability to cite security concerns as a means of avoiding the review of a procurement process:
In summary, looking at the terms of the RFSO itself, the Tribunal finds no evidence that PWGSC and the RCMP treated this procurement process with the level of confidentiality associated with a genuine NSE concern. Bidders were allowed to work on the resulting contract without any security clearance. The RFSO process was conducted without a Treasury Board security designation. Further, the letter prepared by the RCMP requesting NSE invocation contains no background information or supporting documentation. This is in contrast to the letter prepared by Shared Services Canada (SSC) regarding its request for NSE invocation, discussed in PR-2016-043. There, SSC included a lengthy annex to the letter describing the security threat in depth and with particulars. Invoking the NSE is a serious decision. It should be supported by serious evidence in the administrative record.
Finally, one of the most compelling reasons for the Tribunal exercising its jurisdiction to review PWGSC’s invocation of the NSE is also the simplest and most straightforward. All government procurements are important in that they are (or should be) in the public interest. A procurement that is in the national security interest should not be held to a lower standard. It is necessary that the procurement be not only conducted as confidentially as national security requires, but also that the evaluation, process, and result be reasonable. They are not mutually exclusive. Put simply, it is not in the national security interest for PWGSC’s errors to go unchallenged and unreviewed. No legitimate objective, of security or otherwise, is furthered if PWGSC is allowed to indiscriminately exclude all trade agreement disciplines, including access to the Tribunal (which is the specialized body designated by Parliament as the bid challenge authority for procurements by the Government of Canada) – and by justifying such actions based exclusively on self-justifying and purportedly inscrutable sovereign or unassailable reasons.
Fundamentally, the Tribunal continues to ask that a government entity invoking a NSE satisfies it on two points: (1) What national security rationale exists to deny bidders equality and fairness in regard to holding government entities accountable for respecting the rules that they have set out in their procurements? (2) What national security rationale exists to deny bidders access to the Tribunal’s procurement review mechanism? – or alternatively: How is forcing a bidder to go to the courts instead of the Tribunal justifiable on national security grounds? The Tribunal has already said that it will review the answers to those questions on a reasonableness standard. In order to be able to do this, the Tribunal first needs answers to review. To date, in all of the recent matters involving invocation of the NSE, neither PWGSC nor SSC has provided any answer whatsoever to those questions, despite repeated opportunity and invitation to do so.
Based on all of the above, the Tribunal finds the attempted broad-based NSE invocation for the current RFSO does not represent a good faith attempt to try to limit the application of the NSE provisions to circumstances where they are rationally connected to national security interests. Accordingly, the motion is denied.
As this case illustrates, government institutions bear a heavy burden when attempting to avoid the oversight measures that are established to help promote open, transparent procurement. Purchasing institutions should ensure that they fall squarely within any established exceptions to open tendering since those exceptions tend to be narrowly interpreted by oversight bodies.
