FRANCIS H.V.A.C. SERVICES LTD.

FRANCIS H.V.A.C. SERVICES LTD.
v.
DEPARTMENT OF PUBLIC WORKS AND GOVERNMENT SERVICES
File No. PR-2016-003

Determination and reasons issued
Friday, September 2, 2016

TABLE OF CONTENTS

 

IN THE MATTER OF a complaint filed by Francis H.V.A.C. Services Ltd. pursuant to subsection 30.11(1) of the Canadian International Trade Tribunal Act, R.S.C., 1985, c. 47 (4th Supp.);

AND FURTHER TO a decision to conduct an inquiry into the complaint pursuant to subsection 30.13(1) of the Canadian International Trade Tribunal Act.

BETWEEN

FRANCIS H.V.A.C. SERVICES LTD. Complainant

AND

THE DEPARTMENT OF PUBLIC WORKS AND GOVERNMENT SERVICES Government Institution

DETERMINATION

Pursuant to subsection 30.14(2) of the Canadian International Trade Tribunal Act, the Canadian International Trade Tribunal determines that the complaint is not valid.

Each party shall bear its own costs in relation to these proceedings.

Ann Penner
Ann Penner
Presiding Member

Tribunal Member: Ann Penner, Presiding Member

Counsel for the Tribunal: Peter Jarosz
Jessica Spina

Senior Registrar Officer: Julie Lescom

Complainant: Francis H.V.A.C. Services Ltd.

Counsel for the Complainant: Paul K. Lepsoe

Government Institution: Department of Public Works and Government Services

Counsel for the Government Institution: Kathleen McManus
Susan D. Clarke
Ian G. McLeod
Roy Chamoun

Intervener: Modern Niagara Ottawa Inc.

Counsel for the Intervener: Nigel McCready

Please address all communications to:

The Registrar
Secretariat to the Canadian International Trade Tribunal
333 Laurier Avenue West
15th Floor
Ottawa, Ontario  K1A 0G7

Telephone: 613-993-3595
Fax: 613-990-2439
E-mail: citt-tcce@tribunal.gc.ca

STATEMENT OF REASONS

  1. On April 25, 2016, Francis H.V.A.C. Services Ltd. (Francis) filed a complaint with the Canadian International Trade Tribunal (the Tribunal) pursuant to subsection 30.11(1) of the Canadian International Trade Tribunal Act[1] concerning a Request for Proposal (RFP) (Solicitation No. EJ196-162173/A) by the Department of Public Works and Government Services[2] (PWGSC) for the provision of maintenance services on heating, ventilation, air-conditioning, commercial refrigeration and boiler equipment located at the Department of National Defence’s Connaught Range in Ottawa, Ontario.
  2. The Tribunal accepted the complaint for inquiry on April 26, 2016, as it met the requirements of subsection 30.11(2) of the CITT Act and the conditions set out in subsection 7(1) of the Canadian International Trade Tribunal Procurement Inquiry Regulations.[3]
  3. The Tribunal conducted an inquiry into the validity of the complaint as required by sections 30.13 to 30.15 of the CITT Act.
  4. For the reasons set out below, the Tribunal finds that the complaint is not valid and that each party shall bear its own costs.

SUMMARY OF COMPLAINT

  1. Francis complained that the successful bid from Modern Niagara Building Services (MNBS) was not compliant with the security requirements of the RFP at the time of bid closing. Specifically, it alleged that MNBS did not hold a facility security clearance at the “secret” level.
  2. Furthermore, Francis argued that PWGSC improperly allowed MNBS to engage in bid repair by re-evaluating the status of its security clearance. For Francis, the status of the security clearance was unclear because MNBS was a registered business under the name of Modern Niagara Ottawa Inc. (MNO), a corporation that was amalgamated with various other entities in January 2016.[4]
  3. Francis also argued that MNBS did not have the capacity to submit a bid because MNBS was a registered business name as opposed to a corporate name and that MNBS was not registered to the post-amalgamation entity.
  4. In its reply to the Government Institution Report (GIR), Francis added to its allegations of bid repair, arguing that MNBS improperly submitted a revised and unsigned version of its financial bid after the time of bid closing.

BACKGROUND

  1. PWGSC issued the RFP on February 5, 2016.[5] Francis and MNBS submitted bids before the bid closing date of March 21, 2016.
  2. On April 7, 2016, PWGSC informed Francis that it was the successful bidder.
  3. That same day, PWGSC informed MNBS that Francis was the successful bidder and that its bid was not compliant with the RFP. Immediately after receiving this news, a representative of MNO contacted PWGSC to protest the result of the solicitation and to state that MNBS did indeed meet the requirements of the RFP.
  4. PWGSC proceeded to re-evaluate the bid from MNBS against these claims by requesting Canadian Industrial Security Directorate (CISD) to re-visit the issue of security clearance; PWGSC was informed by the CISD that MNBS did indeed have the required clearance.
  5. On April 11, 2016, PWGSC informed Francis that it had been awarded the contract in error and that its bid was not the lowest responsive bid, but rather the second lowest responsive bid. PWGSC requested that Francis’s contract be terminated by mutual consent. Francis did not consent. PWGSC proceeded to cancel the contract at 11:59 p.m. that same day. PWGSC’s letter of cancellation included a request for Francis to submit a claim for costs reasonably incurred as a result of the termination.[6]
  6. On April 13, 2016, PWGSC concluded its re-evaluation of MNBS’s bid and awarded the contract to MNBS on the basis of that re-evaluation.
  7. On April 25, 2016, Francis filed its complaint with the Tribunal. On April 27, 2016, the Tribunal informed the parties that the complaint had been accepted for inquiry.
  8. On May 20, 2016, MNO requested intervener status; the request was granted by the Tribunal on May 25, 2016.
  9. PWGSC submitted the GIR on May 24, 2016. MNO made its submissions on May 31, 2016. Francis replied to the GIR on June 13, 2016.
  10. On June 15, 2016, the Tribunal requested an additional round of submissions from MNO and PWGSC regarding issues raised by Francis in its response to the GIR.[7] These were filed on July 7 and 11, 2016, respectively.
  11. On July 22, 2016, Francis submitted additional comments on PWGSC’s GIR and MNO’s submissions.
  12. Given that there was sufficient information on the record to determine the validity of the complaint, the Tribunal decided that an oral hearing was not required and disposed of the complaint on the basis of the written information on the record.

RELEVANT PROVISIONS OF THE RFP

  1. The complaint centers on the mandatory requirement that bidders had to hold a valid facility security clearance of “secret” at the time of bid closing. As such, the relevant provisions of the RFP are sections 6.1 and 7.3, which provide as follows:

6.1 Security Requirement

1. At the date of bid closing the following conditions must be met:

(a) the Bidder must hold a valid organization security clearance as indicated in Part 7 - Resulting Contract Clauses;

(b) the Bidder’s proposed individuals requiring access to classified or protected information, assets or sensitive work site(s) must meet the security requirement as indicated in part 7 - Resulting Contract Clauses;

(c) the Bidder must provide the name of all individuals who will require access to classified or protected information, assets or sensitive work sites;

. . . 

7.3 Security Requirement

7.3.1 The following security requirement (SRCL and related clauses) applies and [forms] part of the Contract.

1. The Contractor/Offeror must, at all times during the performance of the Contract/Standing Offer, hold a valid Facility Security Clearance at the level of SECRET, issued by the Canadian Industrial Security Directorate (CISD), Public Works and Government Services Canada (PWGSC).

2. The Contractor/Offeror personnel requiring access to sensitive work site(s) must EACH hold a valid personnel security screening at the level of SECRET, granted or approved by CISD/PWGSC.

3. Subcontracts which contain security requirements are NOT to be awarded without the prior written permission of CISD/PWGSC.

4. The Contractor/Offeror must comply with the provisions of the:

(a) Security Requirements Check List and security guide (if applicable), attached at Annex B

(b) lndustrial Security Manual (Latest Edition).

[Bold and italics in original]

ANALYSIS

  1. At issue in this complaint is the reasonableness of PWGSC’s re-evaluation of the bid from MNBS (i.e. the steps that PWGSC took in order to determine that the bid from MNBS was indeed the lowest-priced, compliant bid) and the manner in which the re-evaluation reflected the relevant provisions of the applicable trade agreements. If the Tribunal determines that PWGSC`s re-evaluation was reasonable and in keeping with those trade agreements, it must then find that the complaint is not valid.
  2. When considering the reasonableness of bid evaluations, the Tribunal has consistently accorded a large measure of deference to evaluators. It has stated that a government entity’s determination will be considered reasonable:

30. . . . if it is supported by a tenable explanation, regardless of whether the Tribunal itself finds that explanation compelling.

31. Conversely, the Tribunal has been clear that it will find an evaluation to be unreasonable and will substitute its judgment for that of the evaluators when the evaluators have not applied themselves in evaluating a bidder’s proposal, have ignored vital information provided in a bid, have wrongly interpreted the scope of a requirement, have based their evaluation on undisclosed criteria or have otherwise not conducted the evaluation in a procedurally fair way.[8]

[Emphasis added, footnotes omitted]

  1. In order to determine the reasonableness of PWGC’s re-evaluation of MNBS’ bid, and thus the validity of Francis’s complaint, the Tribunal will proceed by considering whether (1) MNBS was a potential supplier, (2) MNBS held the required security clearance at the time of bid closing and (3) MNBS engaged in impermissible bid repair. All of this will be done within the context of the relevant provisions of the applicable trade agreements.

Was MNBS a Potential Supplier?

  1. In its complaint, Francis argued that MNBS was not in a position to submit a bid, given that MNBS was simply a registered business name, as opposed to a corporate entity.
  2. According to evidence provided by Francis, MNBS was a business name registered to MNO (Ontario Corporation No. 1847249) before it was amalgamated into a new entity on January 1, 2016. That new entity, bearing Ontario Corporation No. 1942170, was also incorporated under the name of MNO. However, the business name of MNBS was not registered to MNO following amalgamation on January 1, 2016. Given that MNO submitted its bid under the name of MNBS, Francis argued that MNO submitted a bid using a business name that was no longer legally registered.[9] As such, Francis alleged that MNBS could not properly submit a bid.
  3. Francis’s argument raises the issue of whether MNBS was indeed a “potential supplier” when it submitted its bid, in keeping with section 30.11 of the CITT Act. Section 30.11 provides that “. . . a potential supplier may file a complaint with the Tribunal concerning any aspect of the procurement process that relates to a designated contract and request the Tribunal to conduct an inquiry into the complaint.” Section 30.1 defines “potential supplier” as “. . . a bidder or prospective bidder on a designated contract.”[10]
  4. The Tribunal has consistently found that potential suppliers must be in a position to fulfill the terms of the contract.[11] In this case, no evidence was filed to demonstrate that MNO’s business name registration under the Business Names Act detracted from its ability to provide the requested services.
  5. Moreover, the lack of registration of the business name did not cause any uncertainty over the identity of the bidder or contravene any requirements of the RFP. The Tribunal’s record indicates that PWGSC accepted that the business name “MNBS” was intended to identify MNO as the bidder.
  6. In that regard, issues arising out of the lack of registration of the business name in question are primarily matters of private contract law to be resolved between the procuring entity and the bidder. Indeed, the Tribunal notes that post-amalgamation MNO retained all the rights of each of its constituent entities,[12] including those of MNO (Ontario Corporation No. 1847249) and its registered business name, MNBS. These issues do not therefore affect MNBS’s status as a potential supplier under the CITT Act or the applicable trade agreements.[13] As such, the Tribunal finds that MNBS was a potential supplier when it submitted its bid.

Did MNBS have the Required Security Clearance at the Time of Bid closing?

  1. The Tribunal will now consider whether MNBS had the necessary security clearance to meet the terms of the RFP at the time of bid closing.
  2. Francis submitted that security clearance is specific to a given corporation and that PWGSC did not provide any documentation supporting its conclusion that, post-amalgamation, MNBS and MNO (Ontario Corporation No. 1942170) had the required clearance.[14]
  3. In response, PWGSC stated that MNO did hold the required security clearance and that the amalgamation was considered by CISD in coming to this determination. In support of this assertion, PWGSC submitted the articles of amalgamation for MNO provided to CISD, as well as a copy of the security clearance certificate for MNO.
  4. PWGSC acknowledged that its evaluation team made an error in its initial evaluation of MNBS’s bid. However, upon re-evaluation, PWGSC was assured by CISD that MNO did indeed have the requisite clearance.
  5. The Tribunal finds no reason to conclude that the security clearance granted to MNO was not specific to Ontario Corporation No. 1942170. PWGSC and CISD were aware of the amalgamation of the predecessor company (Ontario Corporation No. 1847249), and this information was considered in the granting of a security clearance to post-amalgamation MNO (Ontario Corporation No. 1942170).
  6. Therefore, the Tribunal finds that PWGSC reasonably met its obligations under the trade agreements by concluding that MNO did hold the requisite security clearance. Evaluators corrected their initial errors, thus applying themselves and ensuring that vital information was not ignored.

Did MNBS Engage in Impermissible Bid Repair?

  1. The Tribunal will now consider Francis’s allegations that PWGSC permitted MNBS to engage in impermissible bid repair in the following two respects: (1) the security clearance; and (2) revisions to its financial bid. The Tribunal will examine these in turn.

Security Clearance

  1. According to Francis, the security clearance certificate submitted by MNO after the contract had already been awarded to Francis was invalid and should not have altered the results of the solicitation process.
  2. PWGSC submitted that the evaluators’ initial conclusion that MNBS did not hold a facility security clearance at the level of “secret” was based on erroneous information received from CISD. When it became aware of this mistake and that correct security clearance information for MNO was confirmed, PWGSC corrected this error and determined that MNBS submitted the lowest responsive bid.
  3. The Tribunal has consistently upheld provisions of the trade agreements that government institutions are required to ensure that contracts are awarded pursuant to the terms set out in the tender documents. The Tribunal has also held that, upon discovery of errors in an evaluation process, the contracting authority must take appropriate steps “. . . to correct such errors . . . .”[15]
  4. As set out in Part 7, “Resulting Contract Clauses”, of the RFP, bidders were not required to submit proof of compliance with the security requirement. Rather, section 7.3.1 provides as follows: “1. The Contractor/Offeror must, at all times during the performance of the Contract/Standing Offer, hold a valid Facility Security Clearance . . . .”[16] The bidder was required to ensure that it held a security clearance, which MNO did. It was PWGSC’s responsibility to confirm with CISD whether bidders, and MNBS in particular, had the met the requirement.
  5. Section 4.2 of the RFP provides that the “. . . responsive bid with the lowest evaluated price will be recommended for award of a contract.”
  6. Upon discovery of the mistake relating to the security clearance, MNBS emerged as the successful bidder with the lowest evaluated price. Had PWGSC continued its contractual relationship with Francis under these circumstances, PWGSC would have been knowingly contravening section 4.2 of the RFP and would have committed a breach of the applicable trade agreements.
  7. Thus, given that MNBS submitted the lowest compliant bid and that it did have the required security clearance, PWGSC was under an obligation to rectify its error by retracting the contract award to Francis and issuing a contract to MNO. While unfortunate for Francis, this is indeed what was initiated and completed by PWGSC’s re-evaluation. Accordingly, there was no bid repair.
  8. In light of the evidence before it, the Tribunal concludes that PWGSC acted reasonably by re-evaluating the status of MNBS’s security clearance, terminating the contract initially awarded to Francis and subsequently awarding it to MNO.

Financial Bid

  1. In its reply to the GIR and MNO’s submissions, Francis alleged that MNBS engaged in bid repair by submitting a revised version of its financial bid following the bid closing date.
  2. In its submissions, PWGSC explained that MNBS’s bid contained arithmetic calculation errors and that, in the course of its evaluation of the bid, PWGSC reconciled the errors so that the revised subtotals reflected the correct total. It then proceeded to seek MNBS’s confirmation of the revisions.
  3. On the basis of the evidence before it, the Tribunal concludes that MNBS did not engage in bid repair by confirming the revisions made by PWGSC. All revisions to the financial bid were initiated by PWGSC and not by MNBS.
  4. The Tribunal has consistently held that contracting authorities may seek clarifications of the contents of a bid[17] and that such clarifications must refer or relate to a better understanding of the contents of a bid, as submitted. As such, contracting authorities cannot take into account new information intended to form a substantive part of a bid after it is submitted.[18]
  5. In this case, PWGSC sought MNBS’s clarification and confirmation to obtain a better understanding of the contents of the bid. PWGSC did not therefore consider new information not initially included in the bid. Instead, PWGSC asked MNBS to confirm that calculation errors had been made in the bid and that its revisions were indeed correct.
  6. Francis also contested the validity of MNBS’s bid on the basis that the calculations that it re-submitted to PWGSC on April 5, 2016, were not signed. The Tribunal finds that the revisions submitted by MNBS did not require a signature. While an authorized signature of the bidder was a mandatory requirement of the RFP for an entire bid, the revisions submitted by MNBS did not constitute a new or full bid—they merely confirmed PWGSC’s corrections to certain portions of the financial bid already signed and submitted by MNBS before the bid closing date.

Summary

  1. On the basis of the foregoing, the Tribunal finds that PWGSC’s re-evaluation was reasonable and in keeping with the applicable trade agreements. Consequently, the complaint is not valid.

COSTS

  1. In most cases, the Tribunal generally awards costs to the successful party in keeping with the Procurement Costs Guideline. In this case, however, the Tribunal will not award PWGSC its costs incurred in responding to the complaint. This is in keeping with the Tribunal’s discretion as a court of record and master of its own procedure, when awarding or not awarding costs.
  2. The present case is not within the ambit of the typical situation for awarding costs to the successful party for three reasons, as explained below.
  3. First, the genesis of the case at hand was an error by PWGSC in verifying the security clearance of the winning bidder. While PWGSC acknowledged and remedied that error, its consequent communication with Francis was patently insufficient in explaining its actions and the subsequent re-awarding of the contract to MNO. This lack of communication understandably incited Francis.
  4. Second, the Tribunal notes that PWGSC invited Francis to submit a claim for costs reasonably incurred as a result of the termination even though PWGSC was entitled to exercise its right to cancellation.[19]
  5. Third, PWGSC only filed other relevant correspondence with MNO and extensive underlying documents in its last submissions on July 11, 2016, after the lack of documentation was noted by Francis in its response to the GIR and specifically requested to do so (to reinforce PWGSC’s pre-existing disclosure obligation) by the Tribunal prior to filing its GIR. In addition, PWGSC failed to address major arguments raised by Francis even though it was invited to so by the Tribunal. This unnecessarily prolonged and complicated the proceedings through no fault of Francis.
  6. In light of these circumstances, PWGSC is not entitled to its costs.

DETERMINATION OF THE TRIBUNAL

  1. Pursuant to subsection 30.14(2) of the CITT Act, the Tribunal determines that the complaint is not valid.
  2. Each party shall bear its own costs in relation to these proceedings.
 

[1].      R.S.C., 1985, c. 47 (4th Supp.) [CITT Act].

[2].      On November 4, 2015, the Government of Canada gave notice that the name of the Department of Public Works and Government Services Canada will be changed to Public Services and Procurement Canada.

[3].      S.O.R./93-602 [Regulations].

[4].      The new entity was also named Modern Niagara Ottawa Inc. All references to MNO are to the post-amalgamation corporation unless stated otherwise.

[5].      Over the course of the solicitation period, PWGSC issued four amendments to the RFP in response to questions from potential bidders. None of the amendments were relevant to the issues in this inquiry.

[6].      Exhibit PR-2016-003-10A (protected), Exhibit 12, Vol. 2.

[7].      Exhibit PR-2016-003-21, Vol. 1A. These issues related to the status of MNBS/MNO and their ability to submit a valid bid in the procurement process.

[8].      CAE Inc. v. Department of Public Works and Government Services (26 August 2014), PR-2014-007 (CITT).

[9].      Francis relied on subsection 2(1) of the Business Names Act, R.S.O. 1990, c. B.17, provides that “[n]o corporation shall carry on business or identify itself to the public under a name other than its corporate name unless the name is registered to that corporation.”

[10].    These definitions reflect the provisions in the trade agreements. For example, article 1025.1 of the North American Free Trade Agreement between the Government of Canada, the Government of the United Mexican States and the Government of the United States of America, 17 December 1992, 1994 Can. T.S. No. 2, online: Global Affairs Canada <http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-... (entered into force 1 January 1994), defines supplier as “. . . a person that has provided or could provide goods or services in response to an entity’s call for tender”.

[11].    Flag Connection Inc. v. Department of Public Works and Government Services (3 September 2009), PR-2009-026 (CITT) at para. 21.

[12].    R. v. Black & Decker Manufacturing Co., [1975] 1 SCR 411 at 422, 1974 CanLII 15 (SCC).

[13].    As outlined further below, the conclusion that MNBS was a potential supplier means that PWGSC, after it discovered its initial evaluation error, had the responsibility of performing a re-evaluation of MNBS’s bid. MNBS had a right to such a re-evaluation under the relevant trade agreements.

[14].    Exhibit PR-2016-003-21 at 7, Vol. 1A; Exhibit PR-2016-003-38 at 6, Vol. 1A. It is not disputed that MNBS held the required level of security clearance prior to the amalgamation.

[15].    Madsen Power Systems Inc. v. Department of Public Works and Government Services (29 April 2016), PR-2015-047 (CITT) at para. 64.

[16].    Exhibit PR-2016-003-01 at 50, Vol. 1.

[17].    As noted by the Tribunal in Bell Canada (26 September 2011), PR-2011-031 (CITT) at para. 36, “. . . a procuring entity may, in some circumstances, seek clarification of a particular aspect of a proposal, but it is generally not under any obligation to do so.”

[18].    Survival Systems Training Limited v. Department of Public Works and Government Services (3 September 2015), PR-2015-010 (CITT) at para. 31.

[19].    As set out earlier, this was contained in the April 11, 2016, letter from PWGSC to Francis. Exhibit PR-2016-003-10A (protected), Exhibit 12, Vol. 2.

Case Number(s)

PR-2016-003

Attachment(s)

pr2q003_e.pdf (121.84 KB)

Status

Publication Date

Tuesday, September 20, 2016

Modification Date

Tuesday, September 20, 2016