This article is an extract from the 5th edition of Government Procurement.
In its February 2021 decision in Heiltsuk Horizon Maritime Services Ltd. v. Atlantic Towing Canada, the Federal Court of Appeal overruled the Canadian International Trade Tribunal after concluding that the Tribunal made significant errors in its adjudication of the bid protest. The dispute involved a federal government request for proposals (“RFP”) for emergency towing vessels for the British Columbia coastline. The bid protest resulted in three Tribunal determinations, which in turn resulted in five judicial review applications to the Federal Court of Appeal. The controversy turned on a mandatory technical evaluation criterion that set out the minimum towing power for the required ships. The second-placed losing bidder, Heiltsuk Horizon Maritime Services Ltd. (“Heiltsuk”), challenged the evaluation process used by the government to confirm the vessel towing capacity of the winning bidder, Atlantic Towing Limited (“Atlantic”).
The mandatory requirement in question called for the vessels to “exert a minimum continuous bollard pull of no less than 120 tonnes when all required engine driven consumers (shaft generators, etc.) are taken into account.” In lay terms, this appeared to mean 120 tonnes of free pulling power for towing purposes after taking the non-towing requirements of vessel operations into account. As the court noted, the government added further complexity to the technical requirement in an addendum stating that, depending on the age of the proposed ship, bidders could prove their compliance by submitting a bollard pull certificate or, alternatively, through “specified bollard pull calculations”. As the addendum stated:
The Bidder must provide a certificate of compliance (independently verified) or bollard test output data (in accordance with MSC/Circ 884 section 11.1) less than 10 years old that demonstrates a minimum continuous bollard pull of no less than 120 tonnes when all required engine driven consumers (shaft generators, etc.) are taken into account. As per “Noble Denton Marine Services – Certification for Towing Vessel Approvability (DNVGL-SE0122), edition March, 2017”, in instances where a certificate of continuous bollard pull, less than 10 years old cannot be produced, then for tugs less than 10 years old, bollard pull may be estimated as 1 tonne/100 (certified) BHP of the main engines and for tugs over 10 years old, with a bollard pull certificate greater than 10 years old, Bollard Pull may be accepted as the greater of: — the certified value reduced by 1% per year of age since the BP test, or — 1 tonne/100 (certified) BHP of the main engines reduced by 1% per year of age greater than 10.
As the court summarized, to meet the requirement, each of the bidders produced independently verified bollard pull certificates and, after a review of those certificates, all proposed vessels were found to be compliant with the mandatory requirement. The government evaluators identified Atlantic as the top-ranked responsive bidder and, in accordance with the terms of the RFP, proceeded with a “Vessel Confirmation Assessment” to verify whether the vessels met the features, functionalities and capabilities required in the RFP. At this stage of the process, Heiltsuk submitted a written objection to the government, asserting that Atlantic’s proposed vessels lacked the propulsion power required to satisfy the minimum 120-tonne bollard pull standard. Notwithstanding these objections, the government proceeded to award the contract to Atlantic.
Heiltsuk then brought a formal bid protest to the Tribunal, where it challenged the award on the basis that Atlantic’s proposed vessels did not meet the 120-tonne bollard pull requirement when all other engine requirements (referred to as “engine driven consumers”) were accounted for. Heiltsuk sought an order voiding the award to Atlantic and asked that the contract be awarded to Heiltsuk instead as the best compliant bidder. The Tribunal determined that the government was not entitled to rely on a third-party certification of the technical requirements, particularly since that assessment had been performed in 2013, well before the challenged 2018 RFP. However, the Tribunal did not rule on the compliance of Atlantic’s bid and did not award the contract to Heiltsuk. Instead, the Tribunal issued a re-evaluation order, wherein it directed the government to reassess the compliance of all proposed vessels with the mandatory requirement.
In the interim, given the government’s current operational needs, the Tribunal allowed the award to Atlantic to stand until after the re-evaluation. The Tribunal also directed the government to rescind the award to Atlantic and to award to the next-ranked compliant bidder if Atlantic was found non-compliant in the re-evaluation. The Tribunal also awarded lost profits to Heiltsuk for the period that Atlantic performed the contract if the re-evaluation found that Atlantic was non-compliant.
Heiltsuk appealed the Tribunal’s re-evaluation order, asserting that Atlantic’s proposal should not have been re-evaluated but should have been ruled non-compliant. Further, Heiltsuk asserted that, as the sole compliant bidder, it should have been awarded the contract by the Tribunal. In the interim, the government struck a re-evaluation committee. That committee confirmed that Atlantic’s vessels met the technical requirement.
Heiltsuk then brought two new complaints to the Tribunal and challenged the validity of the government’s re-evaluation process. While the Tribunal determined that the re-evaluation was flawed, it also conceded that it lacked the necessary technical expertise to conduct the re-evaluation itself. It therefore ordered the government to conduct a second re-evaluation, and directed the government evaluators to assess the pulling power of the ships after deducting the power required from the engine for non-towing operations in emergency sea conditions that could include “cross currents, high winds, rough seas or confined or busy navigational corridors, along with requiring continuous and simultaneous use of winches, thrusters, dynamic positioning systems and/or other auxiliary equipment”. Heiltsuk also appealed this second ruling, maintaining that it should have been awarded the contract since Atlantic was non-compliant.
The government, along with Atlantic, also appealed the Tribunal’s second determination, claiming that the Tribunal exceeded its oversight jurisdiction by imposing an improper interpretation of the mandatory evaluation requirement.
As the court summarized, the government and Atlantic asserted that the Tribunal exceeded its jurisdiction by “failing to accord deference to the re-evaluation committee” and by “misapprehending the relevant evidence.” After a complex legal analysis, the court ultimately rejected the complainant’s case. In siding with the government and the winning bidder, the court determined that the Tribunal had erred in its review of the government’s evaluation process. In support of its ruling, the court confirmed that the complainant was not entitled to a contract award arising out of the first Tribunal determination since the Tribunal never ruled that Atlantic’s bid was noncompliant. Rather, as the court noted, the Tribunal found that the evaluation was flawed and should be repeated. Furthermore, the court found that the Tribunal’s second determination was flawed since the Tribunal directed the re-evaluation panel to consider technical factors outside of the scope of the RFP when conducting a second re-evaluation. More specifically, the court found that “the Tribunal introduced a concept of ‘functional’ bollard pull which was to be measured against a number of criteria unstated in the text of MR 12” and that “it reduced the role of bollard pull certificates to that of mere ‘starting points’ in the evaluation” so that the Tribunal distorted the meaning of the requirement to a point where “it bears little resemblance to what was published in the RFP.”
In overruling the Tribunal on the technical aspects of the evaluation, the court determined that “bollard pull testing is not designed to provide a functional assessment of a vessel’s towing capability in specified harsh conditions in a specified geographical location, as suggested by the Tribunal” and that the “Tribunal has misinterpreted this in improperly elevating bollard pull to a measure of a vessel’s ability to handle real emergency situations.” Rather than allowing the evaluators to rely on the bollard pull certificates, as contemplated in the RFP, the court found that the Tribunal “essentially demanded that evaluators create new standards regarding bollard pull determinations with no basis in industry practice.” Further, the court concluded that requiring the government evaluators to “take into consideration such undisclosed and unanticipated criteria would undermine the integrity and efficiency of the competitive procurement system.”
Given the Tribunal’s misinterpretation of the challenged mandatory requirement, the court concluded that the Tribunal’s assessment of the government’s first re-evaluation was fatally flawed, which “resulted in a failure to show appropriate deference to the evaluation team’s expertise” when conducting the re-evaluation:
The Tribunal acknowledged that it lacked the expertise to determine compliance with MR 12 and that “it will review a procurement process on a reasonableness standard, showing deference to the evaluators’ expertise and making recommendations only when a decision is unreasonable” (Decision II at para. 47). However, in substituting its own interpretation of MR 12 for that of the evaluators, the Tribunal failed to abide by this principle. As discussed above, the re-evaluation team arrived at a consensus and interpreted “required engine driven consumers” along the lines of how those are considered by classification societies such as DNV. Indeed, the language of MR 12’s assessment methodology suggests that MR 12 was informed by industry standards. I am simply not convinced that the evaluators failed to apply their expertise and experience to the task or ignored the language of MR 12.
The court ultimately concluded that the government’s re-evaluation had addressed the procedural flaws identified in the Tribunal’s first determination. It therefore upheld the initial contract award and dismissed the complainant’s case. While the government’s initial evaluation and award decision was ultimately upheld, this case serves as a cautionary tale against using bid compliance criteria that are based on complex technical factors and unclear verification procedures since the use of complex criteria exposes an evaluation process to protracted legal proceedings.
In fact, instead of exposing the technical requirement to an evaluation challenge, the government could have relied on bidder representations regarding vessel towing capacity and then enforced the technical requirement during contract performance. The failure to meet that technical standard during contract performance could then result in contract termination. As a further deterrent against bidder misrepresentations, the failure to meet the technical requirement during contract performance could also result in the forfeiture of performance security and in the debarment of the contractor from future bidding opportunities due to prior misrepresentations. However, by reframing a technical performance standard into a bid compliance requirement, the government introduced avoidable complexity into its evaluation process that exposed its award decision to a protracted legal challenge.
