This article is an extract from the 5th edition of Government Procurement.
When compared to the well-established bid protest mechanisms that have operated for decades at the federal level in Canada under the Canadian International Trade Tribunal, sub-federal bid protest mechanisms remain a relatively new and evolving area under Canada’s international and domestic trade treaty rules. This article summarizes how provincial-level jurisdictions in Western Canada have implemented trade treaty enforcement mechanisms at the sub-federal level.
In January 2019 British Columbia, Alberta, Saskatchewan, and Manitoba adopted a new bid protest mechanism that superseded a previous arrangement promulgated under the regional New West Partnership Trade Agreement. Like its predecessor, the new bid protest mechanism allows suppliers to challenge the decisions of procuring entities falling within those jurisdictions. The new bid protest mechanism serves to enforce the rules flowing from procurement-related international and domestic trade treaties that apply to public institutions in Western Canada. The section below summarizes recent rulings that have been rendered through the arbitration processes established under the prior and current bid protest mechanism.
In an April 2017 ruling in PMH Insights Inc. v. Parkland County, an arbiter found that Parkland County’s software sole-source breached the New West Partnership Trade Agreement. The dispute dealt with the direct acquisition of management software. The award was challenged by another software provider. The municipality maintained that the acquisition fell under the open tendering thresholds, however, the arbiter ruled that the municipality failed to properly document its expenditure to establish that the award fell below the thresholds. The arbiter found the municipality in breach of the treaty and ordered it to pay the complainant $10,000 in fees and costs.
In a March 2018 ruling in Parkland Geotechnical Consulting Ltd. v. The City of Red Deer, an arbiter found that the municipality breached the New West Partnership Trade Agreement by introducing unnecessarily restrictive conditions in a pre-qualification process for land development consulting services. The arbiter ruled that reducing the prequalification list to only five consultants and extending the duration of the closed framework arrangement to five years was too restrictive to competition and was therefore in violation of the trade treaty. The arbiter directed the municipality to rectify the breach and ordered it to pay the complainant $28,000 in fees and costs.
In an April 2019 Canadian Free Trade Agreement (“CFTA”) arbitration ruling in the matter of Parkland Geotechnical Consulting Ltd. v. Alberta Infrastructure, an arbiter ruled that the treaty did not apply to purely local public procurements involving suppliers located within the same jurisdiction as the challenged purchasing entity. The dispute involved an Infrastructure Alberta bidding process for geotechnical consulting services for the Red Deer Justice Centre. The complainant’s bid was disqualified by Alberta Infrastructure due to conflict of interest concerns.
The complainant brought a bid protest, challenging its disqualification as a breach of the CFTA. Alberta Infrastructure argued that the scope of the CFTA did not allow Alberta suppliers to challenge Alberta public institutions since the treaty was created to prevent discrimination between provinces, not within them. The complainant countered by asserting that this interpretation of the scope of the CFTA would amount to reverse discrimination against Alberta suppliers, who would enjoy fewer protections than out-of-province suppliers. The complainant also argued that prior arbiter rulings in Alberta under the same bid protest mechanism had dealt with Alberta suppliers challenging Alberta public institutions. However, the arbiter ruled against the complainant, finding that the CFTA regulated inter-provincial procurement but did not apply to intra-provincial procurement.
To support this ruling, the arbiter distinguished the prior Alberta bid protest rulings, noting that they may have involved local suppliers, but that those local suppliers had raised inter-provincial issues relating to general barriers to competition, while in this case the local complainant challenged a specific conflict of interest ruling that related to a single project.
As this case illustrates, the scope of the trade treaties, and the standing of suppliers to bring challenges under trade treaty bid protest mechanisms, remains subject to uncertainty. While this ruling may stand for the proposition that purely intra-provincial procurement matters involving a single local supplier may not be captured by the inter-provincial trade treaty rules, in practice, drawing the line between a purely local matter that only impacts a specific local supplier, and a general inter-provincial procurement issue that impacts both local and out-of-province suppliers, creates unnecessary complexity in administering the day-to-day public tendering process. Notwithstanding this ruling, moving forward, Canadian public institutions should continue to maintain common fair process standards that apply to all suppliers, while also avoiding local preferences and other restrictive practices that breach the trade treaties.
In a May 2019 Canadian Free Trade Agreement arbitration ruling in the matter of Parker Johnston Industries Ltd. v. The Calgary Board of Education, an arbiter struck down The Calgary Board of Education local warranty requirement as unnecessarily restrictive. The dispute involved a roofing replacement project at two Calgary schools. The complainant challenged the process as being discriminatory against out-of-province suppliers and unfairly favouring Alberta suppliers due to the specification that required an Alberta Roofing Contractor’s Association (“ARCA”) warranty. The complainant, a British Columbia contractor, attempted to register for certification under the Alberta warranty program but its application was rejected.
The complainant sought a pre-bid clarification, seeking approval for providing a substitute warranty that was as good or better than the specified local ARCA warranty. The school board issued an addendum confirming that it would accept substitute warrantees with the bids. The complainant challenged this addendum, asserting that the school board failed to provide pre-bid guidance to bidders regarding the requirements for those substitute warranties, and therefore left out-of-province bidders at a disadvantage in the bidding process.
As the arbiter noted, the school board failed to respond to the complainant’s request for pre-bid consultations to address the issue and this non-responsiveness was not conducive to resolving the issue. The arbiter also ruled that the school board’s vague commitment to accepting equivalent warranties was not clear enough to allow potential bidders to assess whether they could meet the requirements before deciding to bid.
The arbiter noted that Alberta Infrastructure had recently addressed this discriminatory practice by removing the local warranty requirements from its provincial guidelines. However, the arbiter found that the school board had chosen to ignore those guidelines. Going forward, the arbiter recommended that the school board comply with Alberta Infrastructure directions and drop its reference to ARCA warrantees, and instead “specify in detail its warranty and certification roof requirements, much as it does in other aspects of its project manual for roofs.”
The complainant sought a redirect remedy, asserting that it should be awarded the tendered contract due to the treaty breach. The arbiter rejected that remedy since the work was already started with another bidder. As alternative remedies, the complainant sought a retender order or lost profits. However, the arbiter rejected those remedies as well, ruling that the warranty issue had no impact on the outcome of the bidding process since the complainant submitted an uncompetitive bid that ranked seventh out of nine bidders. However, the complainant was able to obtain a ruling directing the school board to discontinue the warranty practice moving forward, as well as complaint-related costs.
As this case illustrates, unfair local preference practices breach applicable procurement treaty standards and are subject to legal rulings that can nullify those practices. However, to obtain a specific remedy under procurement rules, complainants must typically show that the challenged breach directly impacted the outcome and cost them a contract award. In this case, the arbiter confirmed that the local preference practice was in contravention of the treaty and should be discontinued moving forward, but refused to grant any other remedies since the breach was immaterial to the outcome in the specific bidding process.
In a May 2019 Canadian Free Trade Agreement arbitration ruling in the matter of Parker Johnston Industries Ltd. v. The Calgary Board of Education, an arbiter determined that the complainant filed the complaint after the applicable ten-day limitation period and ruled that the complainant was time-barred from advancing the protest.
The dispute involved a British Columbia contractor’s challenge to local warranty requirements contained in a roof repair solicitation issued by The Calgary Board of Education. However, the school board brought a procedural challenge, asserting that the complainant had failed to file a timely complaint. The arbiter agreed. After ruling that the limitation period under the bid protest mechanism begins to run from the point in which the complainant knows or ought to have known about the treaty infraction, the arbiter found that the complainant failed to file within ten days of knowing of the alleged infraction.
As a factual question, the arbiter rejected the complainant’s assertion that the parties were in ongoing “warranty discussions” and that the limitation period therefore did not begin to run during that period of uncertainty. Rather, the complainant knew of the school board’s warranty requirements during those ongoing written communications and should have brought a challenge within ten days of first knowing about the restrictive practice. As this case illustrates, bid protest rules are typically subject to strict limitation periods designed to encourage proactive in-process resolutions and in-process rectifications of alleged treaty infractions. While these strict limitation periods put potential complainants under strict time pressures to file complaints, they also place purchasing institutions under strict time pressures to respond to those complaints while balancing the demands of an ongoing tendering process.
In a July 2021 decision In the Matter of a Complaint by Commercial Truck Equipment Corporation Against Beaver Emergency Services Commission, an arbiter dismissed a bid protest filed against an Alberta municipal firefighting agency after rejecting allegations of bias and improper scoring in the evaluation of water tank bids. While the complainant alleged that the purchasing institution used inconsistent scoring criteria, the arbiter rejected the complaint after finding that the evaluators had followed the established scoring criteria. Further, the arbiter found no evidence of bias in the specifications or in the evaluation process. In fact, the arbiter found that the complainant had breached the single-point-of-contact protocols by circumventing the official contact person and directly lobbying the fire chief to attempt to influence the outcome of the bidding process. While the protest was ultimately rejected, this case illustrates how public entities face the risk of bid protest challenges and must be prepared to defend themselves against allegations of improper evaluations and bias.
In its February 2022 decision in Ministry of Highways for the Province of Saskatchewan v. West-Can Seal Coating Inc., the Saskatchewan Court of Queen’s Bench rejected the Saskatchewan government’s judicial review application after finding no reason to set aside an arbitration ruling that found the government in breach of the Canadian Free Trade Agreement.
Turning first to the arbitration in question, in a March 2021 decision in New West Partnership Bid Protest Mechanism Arbitration HWY-20126, Saskatchewan, an arbiter determined that the Saskatchewan provincial government breached the Canadian Free Trade Agreement by improperly evaluating past performance criteria and applying improper local labour requirements. The arbitration was conducted pursuant to the bid protest mechanism established by the four western Canadian provinces for the adjudication of trade treaty bid protests.
After considering the competing arguments, the arbiter ruled that West-Can was not treated fairly and equally and that the government had breached the procurement rules under the Canadian Free Trade Agreement. Turning first to the workplace safety audits, the arbiter ruled that government’s retroactive inclusion of a pre-November 2018 contract in the West-Can’s bid evaluation was unfair since the scoring process used prior to that date was substantially different than the process used under the new scoring scheme. Further, the arbiter found that government’s treatment of the complainant in scoring that category was markedly different than the treatment the government afforded the local bidder Morsky. The arbiter also found that it was unreasonable for the government to ignore evidence of Morksy’s problematic past performance simply because the contract in question was subject to ongoing litigation, concluding that this contrary to the equal treatment rules under the Canadian Free Trade Agreement. The arbiter also ruled that the government’s community benefits scheme breached the Canadian Free Trade Agreement local preference prohibitions by improperly penalizing non-local contractors.
The arbiter ruled that the government should rectify its evaluation by: (i) removing West-Can’s contested prior performance score, include the winning bidders score under a litigated contract, and remove “community benefits” local preference scoring and penalties from all future procurements. The arbiter also ruled that the government should revise its general approach to the above-noted practices to better ensure compliance with its trade treaty duties. While lost profit damages were not an available remedy under the arbitration process, the arbiter ordered costs against the government in the amount of $45 000.00 to compensate the complainant for its bid preparation costs and bid protest costs.
The Saskatchewan government brought an application to the Saskatchewan Court of Queen’s Bench seeking that the court either set aside the arbiter’s decision or order a new arbitration with a new arbiter. However, in its above-noted February 2022 decision in Ministry of Highways for the Province of Saskatchewan v. West-Can Seal Coating Inc., the court rejected the government’s application after finding no basis to set aside the arbiter’s decision.
As these cases illustrate, the implementation of bid protest mechanisms in Western Canada puts public institutions in those provinces under heightened scrutiny when it comes to complying with their procurement obligations under the trade treaties.
