DAVCO WELDING LTD.

DAVCO WELDING LTD.
File No. PR-2017-018

Decision made and issued
Thursday, June 29, 2017

Reasons issued
Wednesday, July 12, 2017

TABLE OF CONTENTS

 

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

BY

DAVCO WELDING LTD.

AGAINST

DEFENCE CONSTRUCTION CANADA

DECISION

Pursuant to subsection 30.13(1) of the Canadian International Trade Tribunal Act, the Canadian International Trade Tribunal has decided not to conduct an inquiry into the complaint.

Jean Bédard
Jean Bédard
Presiding Member

The statement of reasons will be issued at a later date.

STATEMENT OF REASONS

1.Subsection 30.11(1) of the Canadian International Trade Tribunal Act[1] provides that, subject to the Canadian International Trade Tribunal Procurement Inquiry Regulations,[2] a potential supplier may file a complaint with the Canadian International Trade Tribunal (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. Subsection 30.13(1) of the CITT Act provides that, subject to the Regulations, after the Tribunal determines that a complaint complies with subsection 30.11(2) of the CITT Act, it shall decide whether to conduct an inquiry into the complaint.

BACKGROUND

2.This complaint by Davco Welding Ltd. (Davco) concerns a request for standing offers (RFSO) (Solicitation No. WR16ST08) for heavy lifting services at the Wainwright Garrison in Alberta, issued by Defence Construction Canada (DCC).

3.On March 20, 2017, DCC issued the RFSO. The bid closing date was April 11, 2017.

4.On March 31, 2017, DCC issued Amendment No. 2 to the RFSO, which stated that “mobilization and demobilization costs will be negotiated after award of the Standing Offer. Costs will include all preparation and transportation costs including hauling, permits, pilot vehicles, etc. from place of business to Wainwright Garrison and return.”

5.On or about the week of April 17, 2017, Davco became aware that it had not been awarded a standing offer. On or about the week of May 1, 2017, Davco became aware that a standing offer had been awarded to a company located in Cold Lake, Alberta, which is located approximately 230 km away from Wainwright Garrison.[3]

6.On May 11, 2017, Davco contacted DCC with several questions. Most relevantly, Davco asked DCC why Amendment No. 2 had been issued, as it had removed a potentially substantial cost from the calculation of the total offer price, and how negotiations for mobilization and demobilization costs could be conducted in a fair, open and transparent manner after the award of the standing offer.[4]

7.On May 26, 2017, after two follow-up requests by Davco, DCC responded to Davco’s questions. With respect to Amendment No. 2, DCC replied that mobilization and demobilization costs were removed because their inclusion unreasonably inflated the hourly cost of any heavy lifting equipment that was required on site for extended periods of time, and that DCC staff would negotiate low and fair mobilization and demobilization costs.[5]

8.On May 29, 2017, Davco replied to DCC that mobilization and demobilization costs should not have been left out of the calculation of the offer price as this meant that the true cost of doing business is not reflected in the offer prices. According to Davco, the removal of the mobilization and demobilization costs means that a standing offer could be awarded on the basis of low hourly rates to a company located far away from the Wainwright Garrison, but this could ultimately result in significant extra costs to the government due to high mobilization and demobilization costs.[6]

9.On May 31, 2017, DCC responded that it would take Davco’s feedback into consideration for future procurements.[7]

10.On June 1, 2017, Davco requested that DCC retender the current standing offer because it had been awarded on an unfair basis as the offer prices did not reflect the full cost of the work.[8]

11.On June 19, 2017, DCC responded by telephone to Davco’s June 1 email. DCC stated that the standing offer had been awarded based on what was stated in the tender documents and that the procurement would not be retendered.[9]

12.On June 26, 2017, Davco filed its complaint with the Tribunal. Davco’s complaint is that it is contrary to standard practice to allow for the negotiation of mobilization and demobilization costs after the award of the standing offer and that this results in a contract that does not provide best value for the government. In addition, Davco submits that this practice provides an unfair advantage to contractors who are geographically distant. As a remedy, Davco requested that the standing offer be retendered in a manner that fully reflects all costs associated with the work. Davco also requested its bid preparation costs.

ANALYSIS

13.For the following reasons, the Tribunal has decided not to conduct an inquiry into this complaint.

14.Subsection 7(1) of the Regulations sets out three conditions that must be satisfied before the Tribunal may conduct an inquiry in respect of a complaint. One of these conditions is that the complaint be in respect of a designated contract.

15.To be considered as a designated contract, a contract for the supply of goods and services must, inter alia, meet the monetary thresholds prescribed by the trade agreements.

16.The RFSO sought hourly rates for the provision of various types of heavy lifting equipment with operator as well as additional site personnel. Accordingly, the Tribunal finds that this procurement is for construction services.[10] Therefore, the applicable monetary thresholds are $100,000 under the Agreement on Internal Trade,[11] $8,500,000 under the Agreement on Government Procurement,[12] and $14,300,000 under the North American Free Trade Agreement[13] as well as all other potentially applicable bilateral trade agreements.[14]

17.In its complaint, Davco indicated that the contract value was $30,000.[15] However, it should be noted that Sections 1.2 and 1.3 of the RFSO provide that the maximum value that can be expended during the initial two-year contract term is $60,000, with an additional one-year option period of $30,000, for a total maximum contract value of $90,000. Even taking this approach to the calculation of the contract value, the value is still below the monetary thresholds for construction services for all of the trade agreements. As a result, the complaint is not in respect of a designated contract, and the Tribunal cannot conduct an inquiry into this complaint.

18.In addition to the above, the Tribunal also finds that Davco’s complaint is not timely.

19.Subsection 6(1) of the Regulations provides that a complaint shall be filed with the Tribunal “not later than 10 working days after the day on which the basis of the complaint became known or reasonably should have become known to the potential supplier.” Subsection 6(2) of the Regulations states that a potential supplier who has made an objection to the relevant government institution, and is denied relief by that government institution, may file a complaint with the Tribunal “within 10 working days after the day on which the potential supplier has actual or constructive knowledge of the denial of relief, if the objection was made within 10 working days after the day on which its basis became known or reasonably should have become known to the potential supplier.”

20.In short, in order to meet these prescribed deadlines, a complainant has 10 working days from the date on which it first became aware, or reasonably should have become aware, of its ground of complaint to either file a complaint with the Tribunal or object to the government institution.

21.Davco’s complaint relates to the terms of Amendment No. 2, which was published on March 31, 2017. Davco acknowledges in its complaint that it was aware of Amendment No. 2 at the time it was published, but that it did not file an objection at that time because it anticipated that DCC would exercise its option under the terms of the RFSO to award the contract to a bid that did not have the highest score, in order to obtain the best value.[16] In other words, Davco assumed, despite the plain wording of Amendment No. 2, that DCC would somehow factor mobilization and demobilization costs into the evaluation process.

22.Potential suppliers cannot delay filing their complaints on the basis of such assumptions, especially when, in order for Davco’s assumption to be correct, the government institution would have to ignore the terms of the solicitation documents.

23.The prescribed deadlines require that potential suppliers “keep a constant vigil and . . . react as soon as they become aware or reasonably should have become aware of a flaw in the process.”[17] The procurement review process does not provide for perceived grievances to be accumulated and then presented only when the contract is awarded.

24.Accordingly, Davco’s ground of complaint was known to it at the time that Davco acquainted itself with the amendment, and Davco should have made its objection to DCC within 10 working days of that date. However, the Tribunal has no evidence that Davco made any objection to the amendment until May 11, 2017, after Davco was informed it had not been awarded a standing offer. As a result, in addition to the fact that Davco’s complaint is not in respect of a designated contract, it is also not timely.

DECISION

25.Pursuant to subsection 30.13(1) of the CITT Act, the Tribunal has decided not to conduct an inquiry into the complaint.

 

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

[2].     S.O.R./93-602 [Regulations].

[3].     Complaint at 7.

[4].     Attachment C01 to the Complaint.

[5].     Attachment C04 to the Complaint.

[6].     Attachment C05 to the Complaint.

[7].     Attachment C07 to the Complaint.

[8].     Attachment C08 to the Complaint.

[9].     Attachment C09 to the Complaint.

[10].   The United Nations Central Product Classification (UN CPC) framework is used to define construction services in all the trade agreements except the Agreement on Internal Trade. Division 51 of the UN CPC covers construction work and contains the following code: 5180 – Renting services related to equipment for construction or demolition of buildings or civil engineering works, with operator. The Agreement on Internal Trade defines “construction” as follows: “construction means a construction, reconstruction, demolition, repair or renovation of a building, structure or other civil engineering or architectural work and includes site preparation, excavation, drilling, seismic investigation, the supply of products and materials, the supply of equipment and machinery if they are included in and incidental to the construction, and the installation and repair of fixtures of a building, structure or other civil engineering or architectural work, but does not include professional consulting services related to the construction contract unless they are included in the procurement” [emphasis added].

[11].    18 July 1994, C. Gaz. 1995.I.1323, online: Internal Trade Secretariat <http://www.ait-aci.ca/agreement-internal-trade/>.

[12].    Revised Agreement on Government Procurement, online: World Trade Organization <http://www.wto.org/english/‌docs_e/legal_e/rev-gpr-94_01_e.htm> (entered into force 6 April 2014).

[13].    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://international.gc.ca/trade-commerce/trade-agreements-accords-comme...‌nafta-alena/fta-ale/index.aspx?lang=eng> (entered into force 1 January 1994).

[15].   Complaint at 3.

[16].   Complaint at 6.

[17].   IBM Canada Ltd. v. Hewlett Packard (Canada) Ltd., 2002 FCA 284 (CanLII) at para. 20.

Case Number(s)

PR-2017-018

Attachment(s)

pr2r018_e.pdf (64.58 KB)

Status

Publication Date

Tuesday, July 18, 2017

Modification Date

Tuesday, July 18, 2017