This article is an excerpt from the 2020 edition of The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its February 2019 determination in Turbo Expert Québec Inc. v. Department of Public Works and Government Services, the Canadian International Trade Tribunal ruled that the government was not permitted to let the bid validity period expire due to its own lack of diligence and then use that expiry reason as an excuse to cancel and not award the contract to the top bidder. The Tribunal ordered the government to award the contract to the complainant or pay the complainant’s lost profits.
The dispute dealt with a Request for Proposals (RFP) for the provision of frigate engine turbo chargers. The complainant was the second-ranked proponent. After its attempts to award to the top-ranked proponent failed, the Department of Public Works and Government Services (PWGSC) decided to cancel the process instead of proceeding to the second-ranked proponent, arguing that it was too late to select the second proponent because of the expiry of the bid validity period. However, the Tribunal found that the government failed to exercise proper due diligence during that bid validity period, which could have included taking steps to have the remaining bidders agree to extend their initial offers:
PWGSC submits that, when it terminated the contract, it was too late to consider the next highest-ranked bidder, i.e. Turbo Expert.
In February 2018, during the bid validity period, PWGSC did not consider that Wӓrtsilӓ Global was not an authorized agency and that it did not meet the mandatory criteria of the RFP, even though two bidders had informed it of that. PWGSC did not explain why it failed to act at that time to ensure that the successful bid complied with the solicitation requirements.
In any event, PWGSC also did not explain why over five weeks passed between the Tribunal’s decision to conduct an inquiry into Dynamic’s complaint, PWGSC’s finding following its internal audit, which found that the Wärtsilä bid was in fact non-compliant, and the cancellation of the Wärtsilä contract. Moreover, as set out in the Standard Instructions, incorporated into the RFP by reference, PWGSC also had the prerogative of asking the compliant bidders to extend the validity of their bids, which it failed to do under the circumstances described.
The Tribunal therefore concluded that “PWGSC failed to act in a reasonable and diligent manner by letting the bid validity period expire”, and that “PWGSC cannot use the expiration of the bid validity period caused by its own lack of diligence to justify not awarding the contract.” The Tribunal therefore ordered the government to award the contact to the complainant or pay lost profit damages for failing to do so.
As this case illustrates, purchasing institutions cannot rely on their own lack of procedural diligence as a defence against failing to make a contract award.
