Date: 20061013
Citation: 2006 FC 1223
Ottawa, Ontario,
October 13, 2006
PRESENT: The Honourable Mr. Justice Harrington
Docket: T-2093-05
BETWEEN:
I.M.P. GROUP LIMITED
Applicant
and
THE MINISTER OF PUBLIC WORKS AND
GOVERNMENT SERVICES,
CASCADE AEROSPACE INC. and SPAR AEROSPACE
LIMITED
Respondents
and
L-3 COMMUNICATIONS CANADA INC. ON BEHALF OF
L-3 COMMUNICATIONS AIR MOBILITY SYSTEMS
CONTRACTUAL JOINT VENTURE
Intervener
Docket:
T-2087-05
AND BETWEEN:
SPAR AEROSPACE LIMITED, L-3
COMMUNICATIONS CANADA INC.,
L-3 COMMUNICATIONS MAS (CANADA) INC.,
L-3 COMMUNICATIONS ELECTRONIC SYSTEMS
INC.,
L-3 COMMUNICATIONS VERTEX AEROSPACE LLC
Applicants
and
THE MINISTER OF PUBLIC WORKS
AND GOVERNMENT SERVICES,
CASCADE AEROSPACE INC.
Respondents
and
I.M.P. GROUP LIMITED
Intervener
REASONS FOR ORDERS
[1]
The Minister
of Public Works and Government Services was interested in awarding a contract to
private industry for the supply of airframe maintenance and support services to
the Canadian Forces fleet of CC130 Hercules Aircraft. He issued a Request for
Proposal (RFP). Three parties submitted bids. In October 2005, the Minister
awarded the contract to Cascade Aerospace Inc. The two unsuccessful bidders
have applied to this Court for a judicial review of that decision. They both
want the award set aside.
[2]
One of the
unsuccessful bidders was I.M.P. Group Limited. It challenges the award of the
contract on the ground that Cascade did not meet the mandatory requirement of
being in the aircraft maintenance repair and overhaul business for at least
five of the eight years preceding its proposal. Cascade was only incorporated
some four years earlier.
[3]
The other unsuccessful
bidder was an unincorporated joint venture of five corporations. They called
themselves the L-3 Communications Air Mobility Systems Contractual Joint
Venture, which I will refer to as “L-3 AMS”. The names of the five individual
corporations are set out in the T-2087-05 style of cause. Their technical and
pricing proposals were not even considered because it was a condition precedent
thereto that eighteen mandatory requirements set out in the RFP had to be met. The
Minister’s evaluators determined that they did not meet two of them. These
related to the ability to convert hard copy drawings to an electronic format
and to proving that they held Quality System certification from the
International Standards Organization, Transport Canada or equivalent. The joint venturers
submit they met those two requirements so that therefore the Minister’s decision
to eliminate them from the competition should be set aside and the matter
reopened in order that their technical and pricing proposals be considered.
[4]
The three
mandatory requirements in issue were to be found in a part of the RFP titled “Mandatory
Certification Evaluation”. They are known as MC.2 - Bidder’s Experience
Certification, MC.9 - Technical Publications Technology, and MC.15 - Quality
System Certification.
[5]
Although
not formally consolidated, the I.M.P. and the L-3 AMS applications are so
closely interrelated that this one set of reasons applies to both.
[6]
My
intention is to first emphasize some of the salient aspects of the Government
procurement process. I will then set out the key features of both the Request
for Proposal and the responding proposals, deal with the general principles of
judicial review applicable to this case, and analyze the record concerning
MC.2, MC.9 and MC.15.
GOVERNMENT PROCUREMENT PROCESS
[7]
Unless a
statute provides otherwise, it is the Minister of Public Works and Government
Services who purchases goods and services for various government departments.
The Department of Public Works and Government Services Act charges the
Minister with the responsibility to continually consider the efficiency and economy
of public administration and to enhance integrity and efficiency in the
contracting process. As a matter of policy, the Minister often considers
himself a smart buyer by seeking competitive bids. Sections 20 and 21 of the
Act authorize him to fix the terms and conditions and other documentation
relating to contract formation, as well as to enter into contracts on behalf of
Government. The Act authorized the Minister to do exactly what he did in this
case, namely to solicit bids by means of a request for proposal and to set down
the terms and conditions of that proposal as well as those of the resulting
contract.
[8]
Although
the Minister had considerable discretion in determining the rules, once they
were set down, the integrity of the process, the reasonable expectations of
interested parties and basic fairness required that he and all prospective
bidders abide by them. (Martel Building Ltd. v. Canada, 2000 SCC 60, [2000]
2 S.C.R. 860 at paragraphs 83 and following.
[9]
In this
area where contract law and administrative law merge, in order to ensure that
all prospective bidders are treated fairly, the Courts have developed a
double-contract philosophy. The first contract comprises an offer by the Minister
as contained in the request for proposal. The acceptance is the submission of a
compliant bid. There may be many compliant bids and so many initial contracts
(contract A). Then the compliant bids are analyzed and a formal contract for
the work itself is concluded with the successful bidder (contract B) (Ontario
v. Ron Engineering & Construction (Eastern) Ltd., [1981] 1 S.C.R. 111; M.J.B.
Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619).
Fairness to the bidders requires that each be treated equally and that there be
no “bid repair”.
[10]
A great
deal of Canada’s trade is governed by
international agreements, such as the North American Free Trade Agreement (NAFTA),
the World Trade Organization Agreement and also by the Agreement on Internal Trade
between the federal and provincial governments.
[11]
The
Canadian International Trade Tribunal (CITT) pursuant to its enabling statute
has a broadly based jurisdiction to inquire into various complaints arising out
of those agreements such as dumping, unfair subsidization, and the imposition
of certain excise taxes and custom duties. It also conducts inquiries into
complaints by bidders in the evaluation and award of federal government
contracts.
[12]
The normal
recourse for disgruntled bidders in a case such as this would be to complain to
the CITT. Its decisions in turn are subject to judicial review by the Federal
Court of Appeal under Section 28 of the Federal Courts Act, rather than by
the Federal Court. However, in this case the Minister invoked certain national
security exemptions in those agreements, which had the effect of ousting the
CITT’s jurisdiction. The bidders were left with the recourse of seeking judicial
review from this Court. As will be seen later on in these reasons, the role of
the Federal Court in judicial review is quite different from that exercised by the
CITT.
[13]
Finally,
and although not specifically set out in the RFP, the Minister often puts a
Fairness Monitor in place. Although the Monitor has no decision-making
authority, it reports its observations to the Minister, who may take action. In
this case there was a Fairness Monitor in place, at least most of the time.
REQUEST FOR PROPOSAL
[14]
The
Request for Proposal contemplated a “CC130 primary air vehicle optimized
weapons systems management contract”, to provide support services for the
Hercules aircraft. It was the government’s intention to retain certain
functions it defined as “in-house” and to contract the balance out to private
industry. It was said that the contract would last for a minimum of five years
and nine months, but could be extended through the life of the last of these
aircraft; estimated to be the year 2035. The RFP applied only to the Hercules
as a primary air vehicle. Second and third contracts, not covered by the RFP,
were to be led out for avionics and the propulsion system. The contracting party
would be expected to have support capability and responsibility including
Program Management, Engineering Support, Aircraft Maintenance Support, Material
Support and Technical Information Support. Needless to say millions upon
millions of dollars are involved, not even taking into account the optional
extensions, and advantageous positioning for the other two contracts.
[15]
The RFP,
as initially issued, was a very complex document which comprised seven parts,
which in turn included various annexes and schedules. Not counting other
documents which were incorporated by reference, the RFP ran to close to 700
pages. It could be, and was, amended from time to time so that the RFP as
contained in the Certified Record, together with its amendments, was more than
3000 pages in length. Given its intended readership, it was extremely technical
in parts. Other parts, if not readily comprehensible to laymen, dealt with
contractual and corporate issues more readily understood by lawyers (and
judges).
[16]
Prospective
bidders were entitled to seek clarification. To the extent the Minister
considered it appropriate to answer, the questions and answers were circulated
to all prospective bidders in such a way that none of them knew who posed the
question, and none had actual notice against whom it was bidding. It is
accepted by all that these answers constituted amendments to the RFP, whether
or not they necessitated replacement pages to be issued to the original
proposal. (See, for example, the determination of the CITT in IT/NET Consultants
Inc. (Re), [1999] C.I.T.T. No. 60).
[17]
The RFP
contained a clause through which the Minister reserved the right to, among
other things, cancel the RFP, reissue it or not, request clarification or
verification of any point, reject any proposal that did not comply with one or
more of the mandatory requirements, and reject or eliminate any proposal at any
time from further consideration.
[18]
The manner
in which proposals would be evaluated was spelled out. They would be scored or
rated on more than 500 aspects of the price and technical submissions. However,
the proposal first had to meet 18 mandatory requirements. If not, it would be
disqualified without taking into consideration the pricing and technical
features. L-3 AMS was eliminated at this stage, but not notified until the
contract was awarded to Cascade.
[19]
The two who
went on to the next stage, Cascade and I.M.P., were then evaluated on their
pricing and technical submissions. Bids were required to be below a price ceiling
and to achieve a minimum score in technical issues. Both did. It did not follow
that the contract would necessarily be awarded to the lowest bidder. There was
a conversion formula intended to give the Minister overall best value. In this
particular case, however, Cascade had the lowest bid and also outscored I.M.P.
technically.
[20]
In issue
in this case are three requirements of Annex A to Part 3 of the RFP, which is
entitled “Proposal Selection”. Annex A is entitled “Mandatory Certifications”.
They read:
MC.2:
BIDDER’S EXPERIENCE CERTIFICATION
|
Evaluation
Factors
|
Compliance
Requirements
|
Scoring
Criteria
|
|
Demonstrate
experience in providing aircraft Maintenance, and R&O services.
|
Provide a
certification that the Bidder has been in the aircraft maintenance/R&O
business for a minimum of 5 years in the past 8.
|
Does the certification demonstrate that
the Bidder has been in the aircraft maintenance/R&O business for a
minimum of 5 years in the past 8?
|
MC.9:
TECHNICAL PUBLICATIONS TECHNOLOGY
|
Evaluation
Factors
|
Compliance
Requirements
|
Scoring
Criteria
|
|
Demonstrate a
capability to convert 100 paper-based drawings into a Class III Integrated
Electronic Technical Manual format within a six-month period.
|
Provide at
least one recent example where the Bidder or team member was required to
convert at least 100 paper-based drawings into a Class III Interactive
Electronic Technical Manual within a six-month period.
|
Does the
example demonstrate the Bidder’s or team member’s ability to convert at least
100 paper-based drawings into a Class III Interactive Electronic Technical
Manual within a six-month period?
|
MC.15:
QUALITY SYSTEM CERTIFICATION
|
Evaluation
Factors
|
Compliance
Requirements
|
Scoring
Criteria
|
|
Demonstrate
the possession of a current and valid ISO 9001:2000, or Transport Canada, or equivalent, certified Quality
System.
|
Provide a
copy of the Bidder’s current and valid Quality System certification, and last
system audit documentation.
|
Does the
documentation demonstrate that the Bidder possesses a current and valid ISO
9001:2000, or Transport Canada, or equivalent, certified Quality System?
|
STANDARD OF REVIEW
[21]
It has
been established in countless decisions of the Supreme Court that judicial
review of an administrative decision is approached pragmatically and
functionally. See for instance Pushpanathan v. Canada (Minister of
Citizenship and Immigration), [1998] 1 S.C.R. 982; Dr. Q v. College of
Physicians and Surgeons of British Columbia, 2003 SCC 19, [2003] 1 S.C.R.
226; Law Society of New Brunswick v. Ryan, 2003 SCC 20, [2003] 1 S.C.R.
247; and Voice Construction Ltd. v. Construction and General Workers’ Union,
Local 92, 2004 SCC 23, [2004] 1 S.C.R. 609. As mentioned by
Chief Justice McLachlin in Dr. Q at paragraph 26, this approach draws
out the information needed to determine the degree of deference to which the
original decision maker is entitled.
[22]
There are
four contextual factors to take into account under the pragmatic and functional
approach:
a. The presence or absence of a
privative clause or statutory right of appeal;
b. The relative expertise of the
tribunal compared with that of the Court;
c. The purpose of the legislation
in general and the challenged provisions in particular;
d. And finally, the nature of the
question: law, fact or mixed law and fact.
[23]
As stated
in Ryan and Dr. Q, above, there are currently three standards of
review. If the analysis of the four contextual factors suggests considerable
deference, the decision is not to be set aside unless patently unreasonable. If
little or no deference is called for, the decision will not stand unless
correct. Finally, if a balancing of the factors suggests a middle ground, the
decision stands unless unreasonable.
[24]
This
approach was applied to the Government procurement process by the Federal Court
of Appeal in H B Lynch Investments Inc. v. Canada (Minister of Public Works),
2005 FCA 237, 339 N.R. 261. Generally speaking, no deference is owed in interpreting
the RFP itself. The correctness standard applies. However, considerable
deference is owed when it comes to considering the proposals or bids submitted.
The standard of patent unreasonableness applies. The patent unreasonableness
standard has been explained in a variety of ways. One way of putting it is that
“…a patently unreasonable defect, once identified, can be explained simply and
easily, leaving no real possibility of doubting that the decision is defective” (Ryan, above, per Mr. Justice
Iacobucci at paragraph 52). The Supreme Court had earlier noted in Martel, above,
at paragraph 76 that tender documents and bids involve different considerations.
To be safe however, it may be that a reasonableness simpliciter standard
applies as there was a privitive clause in H B Lynch which is not
present here.
[25]
However,
the Federal Court of Appeal has also pointed out that the pragmatic and
functional approach must be applied to each decision, because the review
standard as applied to a particular decision maker may vary depending on the
matters involved (Sketchley v. Canada (Attorney General), 2005 FCA 404,
263 D.L.R. (4th) 113). H B Lynch, above, specifically dealt with the
nature of the question to be decided. The question is most important in that
interpretation of the RFP is a matter of law subject to the correctness
standard, while an assessment of the proposal or bid is discretionary and to be
assessed against a patent unreasonableness standard. This is because the
relative expertise of the decision maker (in this case, six team leaders from
the Department of National Defence) unquestionably exceeds that of the Court on
technical matters. Legal training was not a requirement. Their expertise was in
ascertaining whether the bidders could do the job, which was to maintain,
repair and overhaul the Hercules fleet, and to carry out other related matters.
[26]
The
purpose of the legislation in general and the RFP in particular, is to guide
the Minister in the procurement process. I consider this to be a neutral
factor.
[27]
Finally,
as regards the presence or absence of a privative clause or right of appeal,
the Minister has submitted that the reservation clause in the RFP is akin to a
privative clause, which lends itself to greater deference. The Minister also
suggests that since National Defence issues were invoked, greater deference
need be shown the decision makers. I find the reservation clause in question is
not a privative clause (M.J.B. Enterprises, above). The purpose of
invoking National Defence was to take the RFP out of certain national and
international agreements such as NAFTA. It was a consequence of that
characterization, but not the intended purpose, that the CITT lost its
jurisdiction, a jurisdiction much broader than this Court’s superintending
power by way of judicial review. However, this Court’s power to grant remedies by
way of judicial review was in no way diminished. This factor is also neutral.
MC.2 BIDDER’S EXPERIENCE CERTIFICATION
[28]
The
requirement was that the bidder demonstrate experience in providing aircraft
maintenance, repair and overhaul services. It would satisfy the requirement by
certifying that it had been in that business for a minimum of five of the past
eight years.
[29]
In its
proposal Cascade certified that it had in fact been in the business for a
minimum of five years out of the past eight. It went on to say that it was
incorporated less than five years earlier as a sister company to Conair Group
Inc. Conair, in turn, had been incorporated in 1969 and had been in the
business since its inception. Cascade was incorporated to carry out the third
party maintenance, repair and overhaul services previously performed by Conair.
The evaluators took Conair’s experience into account and were satisfied that
Cascade met this mandatory requirement.
[30]
It has to
be determined whether the issue before the evaluators was the interpretation of
the RFP itself or the assessment of the proposal. I am satisfied that the
matter has to be characterized as interpretation of the RFP itself. Although it
might well be that the interpretation of some of the more technical
requirements set out therein might be subject to greater deference, the issues
here are to construe an offer and the legal status of certain entities. The
Court owes no deference, and the standard of review is correctness as per H
B Lynch, above.
[31]
I.M.P.,
supported by L-3 AMS, takes the position that the bidder was Cascade, not
Cascade and Conair. Since it had been incorporated less than five years before
it submitted its proposal, it was impossible for it to certify that it had been
in business for five of the last eight years. This argument is bolstered by
answers the Minister gave to questions posed before the deadline to submit
proposals. As aforesaid, the questions and answers form part of the RFP, as
amended. Question 8.008 (which had seven parts), noted that the RFP sometimes
referred to the term “bidder or team member” and sometimes to “bidder”. As
regards mandatory certification, when the term “bidder” was used the question
was whether the experience and attributes of wholly owned subsidiaries, affiliates
and subcontractors could be used. The question went on to call for confirmation
that a bidder could be a contractual joint venture made up of two or more
companies.
[32]
The reply was
in the form of a preamble leading up to specific answers to the seven questions
posed. The preamble began by saying: “Generally, the interpretation of Bidder means
the Contractor or legal entity submitting the bid.” It continued, “For example,
to be compliant with MC.2 ‘Provide a certification that the Bidder has been in
the aircraft maintenance/R&O business for a minimum of 5 years in the past
8’, the Bidder (the legal entity submitting the Bid) himself must have been in
the R&O business for a minimum of 5 years in the past 8.”
[33]
Unfortunately
this answer created considerable ambiguity.
[34]
The
evaluators later explained in a letter following a post-contract debriefing
session that they had relied on the decision of the Federal Court of Appeal in Canada
(Minister of Public Works and Government Services) v. MaxSys Professionals
& Solutions Inc., 2003 FCA 214, [2003] F.C.J. No. 721 (QL). Although I
am of the opinion that the evaluators reached the correct solution, their
reliance on MaxSys, above, was misplaced. The Court of Appeal upheld a CITT
decision which recommended that Public Works re-evaluate a proposal submitted
by MaxSys with respect to mandatory experience requirements. The CITT was of
the view that experience gained by another company had to be considered as
experience gained by MaxSys. However, I.M.P. correctly points out that the
issue in that case was whether MaxSys had completed similar projects within the
last ten years. It completed the projects, although it had not started them.
The contracts had been signed by others, and later assigned. The Court of
Appeal was of the view that the issues were essentially factual, related to the
quality of MaxSys as a bidder, and that the appropriate standard of review was
patent unreasonableness. MaxSys did not really deal with the question
raised in this case: the length of time the entity had been in business.
[35]
Since the
RFP specifically contemplated that the bidder could take the form of an
incorporated joint venture, how could one suppose joint venturers would have had
the foresight to incorporate a company more than five years before an RFP was
issued, and to be carrying out business throughout that time. More importantly,
however, I note that Part 2 of the RFP entitled “Proposal Requirements” requires
a bidder to provide financial information to establish its financial capability
to perform the contract. This information included “audited financial
statements for the Bidder’s last three Fiscal Years, or for the years that the
Bidder has been in business, if this is less than three years…”
[36]
In
interpreting statutes, the Court must take into account their purpose (Bell
ExpressVu Limited Partnership v. Rex, 2002 SCC 42, [2002] 2 S.C.R. 559).
The same approach is to be applied to the interpretation of regulations (Glykis
v. Hydro-Québec, 2004 SCC 60, [2004] 3 S.C.R.
285). I adopt the same approach to a unilateral document emanating from the
Minister. In any event, this approach is consistent with the objective standard
to be applied in interpreting a contractual offer.
[37]
This
approach is hardly new. Consider the decision of the Privy Council in Citizens
Insurance Company of Canada v. Parsons (1881), 7 App. Cas. 96, [1881-85]
All E.R. Rep. 1179. The question there was whether a provincial legislature had
jurisdiction to legislate fire insurance policies. Sir Montague E. Smith had
this to say (at page 110), on the division of powers set out in Sections 91 and
92 of the Constitution:
It becomes obvious, as soon as an attempt
is made to construe the general terms in which the classes of subjects in sects.
91 and 92 are described, that both sections and the other parts of the Act must
be looked at to ascertain whether language of a general nature must not by necessary
implication or reasonable intendment be modified and limited.
[38]
In
deciding the matter did not fall within the regulation of trade and commerce, a
federal legislative subject matter, he added (at page 112): “The words
‘regulation of trade and commerce,’ in their unlimited sense are sufficiently
wide, if uncontrolled by the context and other parts of the Act…” (Emphasis
added).
[39]
It is also
worthwhile to keep in mind the decision of the House of Lords in Lennard’s
Carrying Company, Limited. v. Asiatic Petroleum Company, Limited, [1915] A.C. 705. The issue there was
whether a fire onboard a ship occurred without the actual fault or privity of
her owners. The owners were a corporation.
[40]
Viscount Haldane
said at page 713:
[D]id
what happened take place without the actual fault or privity of the owners of
the ship who were the appellants? My Lords, a corporation is an abstraction. It
has no mind of its own any more than it has a body of its own; its active and
directing will must consequently be sought in the person of somebody who for
some purposes may be called an agent, but who is really the directing mind and
will of the corporation, the very ego and centre of the personality of the
corporation.
Lord Dunedin added at page 715:
But before your Lordships' House
the chief argument has been, admitting that it was the fault of J. M. Lennard,
whether that was actual fault or privity in the sense of s. 502 of the Merchant
Shipping Act. The real question therefore turns upon what is to be the
application of the words there used to a metaphysical conception like an
incorporated company who cannot act directly themselves.
My Lords, I do not know that a
case will ever arise in which that will need to be treated as a purely abstract
proposition. I do not think it arises in this case, and I certainly incline to
the opinion that it will be found always to depend upon the particular facts of
the case.
[41]
I.M.P.
emphasizes that incorporation has both benefits and shortcomings. It relies on
the decision of the Supreme Court in Kosmopoulos v. Constitution Insurance
Co. of Canada, [1987] 1 S.C.R. 2, 34 D.L.R.
(4th) 208. In that case, Madam Justice Wilson repeated the oft stated rule that
the corporation is a legal entity distinct from its shareholders (Salomon v.
Salomon & Co., [1897] A.C. 22 (HL)). She added at paragraph 13:
There is a persuasive argument that
“those who have chosen the benefits of incorporation must bear the
corresponding burdens, so that if the veil is to be lifted at all that should
only be done in the interests of third parties who would otherwise suffer as a
result of that choice.”
[42]
What
happened in that case was that Mr. Kosmopoulos incorporated his business and
became sole shareholder and director thereof. A fire broke out in the company premises.
The insurance policies showed Mr. Kosmopoulos, rather than his company, as the
insured. Nevertheless, Mr. Kosmopoulos was found to have an insurable interest.
[43]
On
balance, the RFP was not interested in the corporate vehicle used, but rather
whether Cascade had the knowledge and experience to do the job; an experienced
directing mind, arms and legs, Cascade was simply a reincarnation of the Conair
division which had been engaged in the business for years.
[44]
As Mr.
Justice Robertson said in Siemens Westinghouse Inc. v. Canada (Minister of
Public Works and Government Services) et al., (2000), 260 N.R. 367, [2000]
F.C.J. No. 999 (F.C.A.)(QL) at paragraph 18:
My conclusions hinge on the proper construction
of "Section C - Evaluation Criteria" of the Request for Proposal. Like
the Tribunal, this court recognizes that ensuring compliance by potential
suppliers with all mandatory requirements of solicitation documents is one of
the cornerstones of the integrity of any tendering system: see IBM Canada
Ltd., Re, [1999] C.I.T.T. No. 87 (F.C.A.), at paras. 34-35. I also accept
that procuring entities must evaluate a bidder's conformance with mandatory
requirements thoroughly and strictly. But this is not to suggest
that mandatory requirements should be construed in an isolated and disjunctive
manner. As was held in R.E.D. Elections Inc., Re, [1995]
C.I.T.T. No. 44 (F.C.A.), at para. 13, they should "be interpreted as a
whole with consideration of the overall purpose and objectives of the [Request
for Proposal]" […]
[45]
The
evaluators were correct in their understanding of what the RFP called for. Their
evaluation of the evidence was not unreasonable, much less manifestly so.
[46]
It follows
that I.M.P.’s application must be dismissed.
MC.9 TECHNICAL PUBLICATIONS TECHNOLOGY
[47]
The
mandatory requirement was to demonstrate the capability to convert paper based
drawings into an integrated electronic technical manual format. The bidder was
to provide a recent example emanating from it or from a “team member”. L3-AMS
provided a number of examples which apparently showed that one of their members,
Spar Aerospace Limited, was capable of and had indeed carried out such work. I
say “apparently” because the evaluators did not score the criteria. Rather,
they eliminated L3-AMS on the ground that their proposal indicated that the
conversion work was to be carried out by another member of the joint venture,
L-3 Communications Electronic Systems Inc. (L-3 ES). It was a clear requirement
of the original RFP with its follow-up questions and answers that whatever had
to be demonstrated, whatever certifications had to be possessed or whatever promises
had to be made, had to come from the member of the unincorporated joint venture
responsible for that particular part of the work - or in certain cases, a “team
member”, meaning a subcontractor.
[48]
The
evaluators reached their decision by taking into account all four volumes of
the proposal. In particular, they relied upon “a list of subcontractors” which
was to form part of the model contract to be executed by the successful bidder.
[49]
The bases of
L3-AMS’ application for judicial review with respect to MC.9 are twofold. They
submit that in assessing whether or not a proposal met the mandatory
requirements, the RFP required the evaluators to only consider volume 1 of the
proposal. The second submission is that there was no evidentiary basis which
allowed the evaluators to reach the decision they did. I disagree with the
first submission, but agree with the second.
[50]
Although
the RFP required bidders to put their proposal together in a certain manner so
as to make them more easily accessible, and understandable, no such constraint
was placed on the evaluators themselves. They were obliged to look at the
material as a whole. It would be pointless not to deal with inconsistencies at
the outset and to spend considerable time and effort scoring a proposal on more
than 500 criteria only at the end, in reviewing the last volume thereof, to
realize the bidder had failed to meet one of the initial 18 mandatory
requirements.
[51]
L3-AMS’
position is that they were perfectly aware that the RFP with question and
answer 8.008 required that the individual member of the joint venture who was
going to do the specific work have the required attributes and experience.
Consequently, the only conclusion open to the evaluators was that the
conversion of hard copy drawings into electronic format was to be carried out
by Spar Aerospace Limited (a corporation well known to them as it held the
predecessor contract for 44 years).
[52]
The
contrary indicia were that drawings fell within the overall scope of
technical publications, which were the responsibility of L-3 ES. Although MC.9
allowed that the work in question could be carried out by a “team member” or
subcontractor, Spar was not listed as a subcontractor on this part of the work.
As a matter of fact, another corporation was.
[53]
Although
the evaluators relied upon the “list of contractors” in reaching their decision,
they could not have fully considered the terms of the offer contained in the
RFP. Part 2 thereof entitled “Proposal Requirements” required that the proposal
be set out in four volumes. Volume 1 thereof stated that:
Schedule 5 entitled “List of Subcontractors”
found at Part 5 of this RFP shall be completed and included (refer to DSS-MAS
9601 General Conditions sections 1 and 8).
[54]
The RFP provided that
the terms and conditions so identified “shall be read and construed as if the
instructions, terms and conditions to which the reference is made, were expressly
set herein.”
[55]
Part 5 of the RFP is
entitled “Model Contract” and was designed to be the contract entered into with
the successful bidder. The “model contract” refers to subcontracting at clause
15 and in Schedule 5. Clause 15 is not particularly helpful in that it provides
that in the awarding of subcontracts in amounts greater than $25,000, the
contractor will apply an open, competitive, fair and transparent policy. It
also requires that the contractor maintain the list of subcontractors
contemplated in Schedule 5, which simply says, “this Schedule will be completed
by the bidders in accordance with the Proposal Requirements…”
[56]
This leads us to
DSS-MAS 9601, which are general conditions of Public Works and Government
Services Canada. Section 1 is the definition section and provides that a subcontract
includes a contract let by any subcontractor for the performance or supply of a
part of the work, and includes a purchase referred to in section 8.2(a). The
general requirement (8.1) is that the contractor shall obtain the Minister’s
consent in writing prior to subcontracting any portion of the work. However,
8.2 goes on to say that notwithstanding the general proviso, the contractor
may, without prior consent of the Minister, a) purchase off the shelf and similar
items; b) subcontract for such incidental services as might ordinarily be
subcontracted; and c) in addition to the purchases and services contemplated by
a) and b), subcontract any part of the work up to a total value in the
aggregate of 40 per cent of the contract price.
[57]
The issue
of subcontractors also came up during the question and answer phase of the RFP.
The Minister was asked to confirm that the list need not include subcontractors
for routine repair and overhaul of aircraft components as being consistent with
Section 8, paragraph 2(c) of DSS-9601. The answer was:
The preparation of Schedule 5 in a
rigorous manner during bidding can potentially save a lot of administrative
work for Canada and the Contractor, otherwise
caused by Section 8 Para 4 of DSS 9601 and Article 15 of the Model Contract. If
subcontract work, in whatever form, exceeds 40% (Section 8 Para 4 and Article
15 of the Model Contract Para 2(c)) then all subcontractors shall be
identified, including subcontractors for routine R&O.
[58]
Nevertheless,
there is nothing in the record to show that any analysis was done to assess
whether the conversion of hard copy drawings to an electronic format might
ordinarily be subcontracted by the party in charge of the technical
publications, and no analysis was done as to whether the subcontracts as a
whole added up to 40 per cent of the contract price.
[59]
The
evaluators decided on pure speculation. Their decision does not stand up to the
slightest analysis and must be construed as being patently unreasonable. In Minister
of Employment and Immigration v. Satiacum (1989), 99 N.R. 171 (F.C.A.) at
paragraphs 34 and 35, Mr. Justice MacGuigan wrote:
The common law has long recognized the difference between
reasonable inference and pure conjecture. Lord Macmillan put the distinction
this way in Jones v. Great Western Railway Co. (1930), 47 T.L.R. 39, at
45, 144 L.T. 194, at 202, (H.L.):
“The dividing line between conjecture and inference is
often a very difficult one to draw. A conjecture may be plausible but it is of
no legal value, for its essence is that it is a mere guess. An inference in the
legal sense, on the other hand, is a deduction from the evidence, and if it is
a reasonable deduction it may have the validity of legal proof. The attribution
of an occurrence to a cause is, I take it, always a matter of inference.”
In R. v. Fuller (1971), 1 N.R. 112, at 114,
Hall, J.A., held for the Manitoba Court of Appeal that "[t]he tribunal of
fact cannot resort to speculative and conjectural conclusions".
Subsequently a unanimous Supreme Court of Canada expressed itself as in
complete agreement with his reasons: [1975] 2 S.C.R. 121 at
123; 1 N.R. 110, at 112.
[60]
Consequently,
the decision to eliminate L-3 AMS on the basis that they did not meet the
requirements of MC.9 must be set aside. However, it does not necessarily follow
that the decision to award the contract to Cascade must also be set aside. L-3
AMS were required to meet all 18 mandatory requirements, not just 17.
MC.15 QUALITY SYSTEM CERTIFICATION
[61]
L3-AMS were
required to “demonstrate the possession of a current and valid ISO-9001:2000,
or Transport Canada, or equivalent, certified
Quality System”. They could comply by “provid[ing] a copy of the Bidder’s
current and valid Quality System certification, and last system audit
documentation.” They provided certification for three of the five joint
venturers, not all five.
[62]
The joint
venture made two prime submissions to support the proposition that they met the
requirements of MC.15. The first is that the RFP only required that one of the
five joint venturers possess a current quality system certificate. The other
four, in accordance with the program implementation plan portion of the RFP, had
one year to obtain ISO 9001:2000 or equivalent. The second is that they were
treated unfairly considering a difference of opinion among the six evaluators,
the manner in which the tie was broken, and the fact that no Fairness Monitor
was in place when the critical decisions were made.
[63]
Before
considering these allegations, I must first consider whether the application
for judicial review was filed in time. This point was raised by I.M.P., and
supported by Cascade. The decision was announced on 24 October 2005, and the
application for judicial review was filed 22 November 2005. The filing appears
to be timely in that section 18.1 of the Federal Courts Act requires an
application for judicial review to be made within 30 days. However, I.M.P.
argues that L-3 AMS knew they were at risk as early as 1 April 2005, when the
Minister wrote to them saying:
…[W]e have interpreted that in order to
meet the mandatory criteria, a Bidder that is a contractual joint venture must
provide a current and valid certification and the documentation for the last
audit, for each member of the joint venture. Please advise Canada where in the Proposal this
might appear.
[64]
The joint
venture knew they were in difficulty, as they knew perfectly well that they had
only provided certificates and audits for three of the five of them. In their
reply, L-3 AMS argued they complied by providing a certificate and last system
audit for Spar, as it was the member who would be performing the engineering
and maintenance work. As a courtesy, they provided equivalent information for
two other members. It should also be noted in parenthesis that L-3 AMS’
proposal also contained an undertaking that the fourth and fifth members would
be certified within one year of the award of the contract.
[65]
I.M.P.
draws an analogy from the Federal Court of Appeal’s decision in IBM Canada
Ltd. v. Hewlett-Packard (Canada) Ltd., 2002 FCA 284, [2002] F.C.J. No. 1008
(QL). That case dealt with the jurisdiction of the CITT to investigate complaints.
The Court held that if a bidder was of the view that an answer in the bidding
process contradicted the procurement requirements, it should file a complaint then
and there, rather than adopt a wait and see attitude and make its challenge once
the contract was awarded.
[66]
That case
is distinguishable. The CITT’s jurisdiction to investigate complaints is quite
different from the Federal Court’s jurisdiction on judicial review. Generally,
a supplier must complain to the CITT within ten working days of when it
discovers or should reasonably have discovered a specific ground of complaint.
If the procurement contract has not yet been awarded, the CITT may order a
postponement until it makes its decision.
[67]
On the
other hand, the Federal Court reviews actual decisions and orders of federal
boards, commissions and tribunals. The letter from the Minister of 1 April was
not a decision or an order. True, the letter gave an interpretation of the
contract, but L-3 AMS were entitled to suggest a different interpretation,
which they did. The Minister could have changed his mind. The decision under
review was made on 24 October 2005, and so the application for judicial review
is timely.
[68]
Turning
now to L-3 AMS’ submission that they complied by providing an ISO certificate and
audit for Spar, the issue turns on the meaning of the RFP. As per H B Lynch,
above, the standard of review is correctness.
[69]
L-3 AMS
point out that the evaluators were of two minds and that in their internal
notes they conceded that the RFP and the questions and answers might be
ambiguous.
[70]
No matter
the route taken to reach the final decision, that decision was correct. There
was nothing unfair about it as L-3 AMS had the opportunity to give their own
interpretation. All five joint venturers were performing parts of the work, and
therefore all five had to demonstrate the possession of a current and valid
certified quality system.
[71]
The 18
mandatory compliance requirements broke down into two time frames: the present,
and the future. Thirteen were in the present in that they required the bidder
to “demonstrate” or “possess”. MC.15 fell into this category i.e. “demonstrate
the possession…” Five contained promises i.e. “will perform” or “carry out”. To
comply, the bidder was required to promise or provide its own certification
that it would do or not do something. As to the apparent contradiction between
MC.15 and the one year window in the program implementation plan, a close
analysis resolves that ambiguity, an analysis in fact carried out by one of the
evaluators. In the case of a contractual joint venture, all joint venturers, in
this case five, had to have certification from ISO, Transport Canada, or equivalent at the time of
the proposal. In accordance with the program implementation plan, within a year
of the awarding of the contract, all five were required to have ISO or
equivalent. A Transport Canada certificate would no longer be good enough. The
evaluators correctly interpreted the contract offer (RFP), and were not
unreasonable (much less patently so) in determining that L-3 AMS fell short. In
fact, they were correct.
[72]
In the
light of the forgoing remarks, I consider the allegations of procedural
fairness to be irrelevant. However, as this point took up a great deal of
argument, some comment is appropriate.
[73]
The six
evaluators each considered MC.15 separately, met and failed to reach a
consensus. They obtained further information from L-3 AMS, and again considered
the RFP and the proposal independently. In a further consensus meeting they split
three-three. To break the tie, Colonel Foster, the chair, cast a second and
deciding vote.
[74]
He
justified his decision on the basis of another part of the RFP which
contemplated this procedure in evaluating some of the scoring criteria. That procedure
may or may not by analogy apply to the mandatory requirements. The decision had
to be correct, and in my opinion it was. This is not an instance of contra
proferentum or an evenly split vote in an appellate court which would
result in the decision below standing. If L-3 AMS had been found to be
compliant with MC.15, and had been awarded the contract, no doubt Cascade and
I.M.P. would have applied for judicial review, and would have been successful.
[75]
Although
the decision was taken when one Fairness Monitor was being replaced by another,
the issue was the correct interpretation of the RFP, not how the bidders were treated.
Fairness had nothing to do with it.
CONCLUSION
[76]
In the
circumstances, the application for judicial review by I.M.P. under Court Docket
T-2093-05 shall be dismissed as the evaluators’ decision with respect to MC.2
should not be disturbed.
[77]
The
application by L-3 AMS under Court Docket No. T-2087-05 shall likewise be
dismissed as the decision on MC.15 should stand.
COSTS
[78]
The I.M.P.
application proceeded first and lasted the scheduled one day. This was
immediately followed by the L-3 AMS application, which lasted the scheduled two
days. However, and as evidenced by this one set of reasons, the overall
approach was common.
[79]
Both
Cascade and the Minister shall have their costs. The only direction I give is
with respect to preparation for hearing and the hearing. They should be
calculated on the basis of a single hearing of three days, with I.M.P.
responsible for one third of the costs and L-3 AMS for two thirds.
[80]
L-3 AMS’
intervention in the I.M.P. application was not successful, but no costs shall
be awarded against it in that connection. The fact that Spar had been named as
a respondent is of no consequence.
[81]
Although
I.M.P.’s intervention in the L-3 AMS application was successful in the sense
that the application for judicial review was dismissed, Cascade and the
Minister did not need its help. Indeed, it was not successful on the time bar
issue. It shall be awarded no costs as an intervener.
“Sean Harrington”
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