In its March 2025 determination in Axxys Construction Group v. Department of Public Works and Government Services, the Canadian International Trade Tribunal diluted the right to rely on bidder representations. By raising a new “red flags” duty, the ruling contradicted the long-standing right established under prior Supreme Court of Canada precedent and imposed a positive duty on government institutions to investigate concerns raised by competing bidders about the representations made by other bidders.
By way of background, the dispute dealt with a request for standing offer issued by the Department of Public Works and Government Services for decontamination and demolition services. The complainant challenged the accuracy of the information submitted by the winning bidder, alleging that the competing bidder was non-compliant and should not have been awarded the contract. It also argued that the government failed to verify the information in the winning bid.
The government argued that it was not required to verify the information in a bid and that, according to prior case law, including Tribunal case law, it was “entitled to rely on the information provided in a bid to evaluate its conformity with the mandatory requirements of a solicitation.” As the Tribunal noted, its prior rulings on this issue “are consistent with the Supreme Court of Canada’s decision in Double N Earthmovers Ltd. v. Edmonton (City) (Double N Earthmovers), where it was held that procuring entities are under no obligation to verify the information and certifications submitted by potential suppliers.” However, the Tribunal’s new ruling parted company with that long-standing Supreme Court precedent.
For context, in its above-noted February 2007 Double N Earthmovers decision, the Supreme Court dealt with a bid compliance dispute involving a tender call for earthmoving equipment that specified the oldest permissible date for the machinery. The winning bidder’s bid confirmed that its equipment met the date requirement. After contract award, the City of Edmonton discovered that the equipment did not meet the specified date. However, the City made a contract administration decision to waive that requirement and proceeded with contract performance.
A competing bidder, who raised concerns about the date of its competitor’s equipment with the City prior to the contract award, challenged the procurement, arguing that the City was under a duty to investigate its allegations and reject the bid. Twenty years later the case culminated in a controversial 5-4 split decision at the Supreme Court of Canada. While the four-judge minority agreed with the losing bidder since the winning bidder was able to prevail based on a misrepresentation that called the integrity of the bidding process into question, the five-judge majority ruled that the City was not under a duty to investigate allegations raised by a competing bidder during its evaluation and award process.
On this specific point the five-judge majority expressly ruled that “allegations raised by rival bidders do not compel owners to investigate the bids made by others” since this would “encourage unwarranted and unfair attacks by rival bidders and invite unequal treatment of bidders by owners” which would “frustrate, rather than enhance, the integrity of the bidding process.” While the five-judge majority recognized an exception to this principle, noting that a purchasing institution cannot collude with a deceitful bidder and knowingly accept a non-compliant tender, it found no pre-award collusion between the winning bidder and the City of Edmonton in the award of the challenged contract.
From a practical perspective, this decision confirmed a purchasing institution’s right to accept bids at face value when making contract award decisions and the right to deal with any misrepresentations discovered after award as a contractual remedy, but it did not impose a duty to conduct pre-award compliance investigations based on allegations raised by competing bidders. Nor did it give competing bidders the right to challenge post-award contract administration decisions made by purchasing institutions since the scope of bid protests is limited to challenging events that occur during the pre-award bidding stage of the procurement process.
While the Supreme Court of Canada’s Double N Earthmovers ruling recognized a narrow “no collusion” exception to the general right to accept bids at face value, the Tribunal’s new “red flags” principle is more than an exception to the general rule, it expressly overrides the general rule with a directly contradictory duty to investigate allegations raised by bidders about the representations made competing bidders.
As the Tribunal stated in its new ruling, it “has previously found that when a government institution, such as PWGSC, becomes aware of red flags questioning the accuracy of the information that a bidder submitted, the government institution may be obligated to verify that information.” The Tribunal further stated that “it is a violation of the fair bidding process for the government institution not to correct errors when discovered” and that “if errors are discovered after red flags are raised during the procurement process, the government institution is then obligated to correct those errors.”
However, in attempting to shelter the duty to investigate under prior Tribunal case law, the Tribunal took an overly elastic approach to the concept of a “red flag” and failed to distinguish between internally generated “red flags” that are discovered directly by the purchasing institution, including suspected evaluation errors that should be rightfully investigated and corrected, and externally generated “red flags” that are based on allegations brought to the purchasing institution by a bidder against a competing bidders. While prior Tribunal case law recognizes the duty to investigate and correct internal evaluation errors, externally generated “red flags” raised by competing bidders clearly fall into the category of information that the Supreme Court expressly found to be beyond the duty to investigate.
However, the Tribunal’s decision is unequivocal in its expansion of the duty to investigate under its vague new “red flags” principle, stating that “PWGSC should have taken the correspondence from the losing bidder as a red flag that called into question the accuracy of the information submitted” by the competing bidder and “should have begun the verification process at that time.” This is in direct contradiction to the Supreme Court’s majority ruling on this issue in the Double N Earthmovers decision on what was the central issue of that precedent setting high court ruling.
Curiously, the issue proved to be a moot point since, notwithstanding the losing bidder’s allegations, the Tribunal found that the winning bidder was compliant and the contract award was valid. However, for some reason, the Tribunal still found that the government’s failure to investigate the losing bidder’s ultimately unsubstantiated allegations was a breach of applicable trade treaty duties. As the Tribunal stated, “PWGSC was obligated to start this verification the first time the issue was raised, consistent with Tribunal case law.”
While it is questionable whether the duty to investigate bidder allegations against other bidders is consistent with prior Tribunal case law, it is clearly in direct contradiction with long-standing Supreme Court precedent on the very same point. Why the Tribunal would find it necessary to contradict this fundamental long-standing principle in a case where the contract was ultimately awarded to a compliant bidder, where the losing bidder’s allegations went unsubstantiated, and where no remedy was ultimately awarded, remains unclear. However, what is clear is that imposing a duty to investigate bidder-raised “red flags” opens a Pandora’s Box of risk and uncertainty in future bid compliance assessments and creates unnecessary uncertainty in the validity of contract award decisions.
This ruling, which underscores the importance of adopting formal drafting protocols to ensure clear and defensible bid compliance requirements, will be covered in the Defining Mandatory Requirements module of our new RFx Drafting in the Canadian Public Sector certificate program that runs in May and returns in November. Please see our current training schedule for more details.
