DALIAN ENTERPRISES INC.
v.
SHARED SERVICES CANADA
File No. PR-2015-001

Order and reasons issued
Wednesday, May 27, 2015

TABLE OF CONTENTS

• ORDER
• STATEMENT OF REASONS
  • COMPLAINT
  • TRIBUNAL’S ANALYSIS
    • Was the NSE Properly Invoked in this Procurement?
    • Did a Duly Authorized Person Invoke the NSE?
    • The Timeliness of the NSE Invocation
  • CONCLUSION
  • COSTS
  • ORDER OF THE TRIBUNAL

 

IN THE MATTER OF a complaint filed by Dalian Enterprises Inc. 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;

AND FURTHER TO a notice of motion filed by Shared Services Canada on April 29, 2015, pursuant to rule 24 of the Canadian International Trade Tribunal Rules, S.O.R./91-499, for an order dismissing the complaint on the basis that the Canadian International Trade Tribunal does not have jurisdiction to continue its inquiry.

BETWEEN

DALIAN ENTERPRISES INC. Complainant

AND

SHARED SERVICES CANADA Government Institution

ORDER

Pursuant to paragraph 10(a) of the Canadian International Trade Tribunal Procurement Inquiry Regulations, the Canadian International Trade Tribunal hereby dismisses the complaint.

Ann Penner
Ann Penner
Presiding Member

STATEMENT OF REASONS

COMPLAINT

1. On April 8, 2015, Dalian Enterprises Inc. (Dalian) 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] The complaint relates to a procurement by Shared Services Canada (SSC) for the supply and delivery of load balancer equipment (Solicitation No. RFQ 14-24570).
2. Dalian alleged that SSC improperly evaluated its bid on the basis of undisclosed criteria. Specifically, Dalian alleged that SSC improperly interpreted mandatory technical requirement 1.99 as importing an undisclosed requirement that bidders must meet the 24-hour hardware replacement time frame 7 days a week.
3. On April 14, 2015, the Tribunal informed the parties that it had accepted the complaint for inquiry, as it met the requirements of subsection 30.11(2) of the CITT Act and the conditions of subsection 7(1) of the Canadian International Trade Tribunal Procurement Inquiry Regulations.^[2]
4. On April 29, 2015, SSC filed a motion for an order dismissing the complaint, pursuant to rule 24 of the Canadian International Trade Tribunal Rules.^[3] It submitted that this procurement was subject to a national security exception (NSE) and was therefore exempt from all otherwise applicable trade agreements. SSC acknowledged that it had not indicated the NSE in the solicitation documents, but it maintained that it had properly invoked the NSE pursuant to correspondence from SSC’s Senior Assistant Deputy Minister and Chief Financial Officer of Corporate Services.
5. On May 1, 2015, Dalian requested that the Tribunal issue an order compelling the production of certain documents by SSC, including all documentation related to SSC’s invocation of the NSE and all policies, directives and guidelines applicable to SSC’s invocation of the NSE in relation to this procurement.
6. SSC responded to Dalian’s request on May 6, 2015, indicating that the NSE request and invocation letters included in its motion constituted complete documentation of the NSE’s invocation in respect of this procurement. Moreover, SSC submitted that government policies, guidelines and directives were not relevant to the Tribunal’s consideration of the motion for an order dismissing the complaint. In its view, the issue of whether the NSE was invoked in compliance with government policies was a separate issue from, and not determinative of, the issue that was before the Tribunal, i.e. whether the invocation of the NSE in this procurement was in compliance with the trade agreements.
7. On May 8, 2015, the Tribunal denied Dalian’s request for an order compelling the production of documents because the documents furnished by SSC in its April 29, 2015, motion were sufficient to determine whether SSC had properly invoked the NSE. Moreover, the Tribunal agreed with SSC that its policies, guidelines and directives were unnecessary to determine whether the NSE had been invoked in respect of this procurement in accordance with the trade agreements.
8. Dalian responded to SSC’s motion for an order dismissing the complaint on May 11, 2015. It argued that SSC’s manner of administering the solicitation process did not demonstrate that the NSE was to be invoked. It also characterized the correspondence from SSC’s Senior Assistant Deputy Minister and Chief Financial Officer of Corporate Services as a “blanket invocation” that pre-dated this procurement by approximately three years. As such, it claimed that the blanket invocation was not sufficient to show that the NSE had been invoked for this specific procurement. Moreover, Dalian submitted that SSC did not follow proper procedures when attempting to invoke the NSE. It pointed to Supply Manual policies to suggest that the contracting officer should have noted the NSE in the solicitation documents. It maintained that SSC did not follow this procedure and that the solicitation documents merely stated that the procurement would be subject to certain trade agreements.
9. SSC replied to Dalian’s submission on May 19, 2015. It reiterated that the letters from its Senior Assistant Deputy Minister and Chief Financial Officer of Corporate Services were sufficient to show that the NSE had been properly invoked for this procurement. SSC emphasized that the letters referred to “. . . ‘goods and services related to the Government of Canada’s electronic mail (email), network and data centre infrastructure’ . . .” [emphasis in original] and detailed how national security concerns were directly related to those types of goods and services.

TRIBUNAL’S ANALYSIS

10. Subsection 30.11(1) of the CITT Act provides that, subject to the Regulations, 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. Paragraph 7(b) of the Regulations, in turn, provides that the Tribunal must determine whether the complaint is in respect of a designated contract before it can accept a complaint for inquiry.
11. Section 30.1 of the CITT Act defines “designated contract” as follows:

“designated contract” means a contract for the supply of goods or services that has been or is proposed to be awarded by a government institution and that is designated or of a class of contracts designated by the regulations.

12. As contemplated by the CITT Act, the Regulations set more precise parameters for the exercise of the Tribunal’s jurisdiction. Subsection 3(1) of the Regulations provides as follows:

For the purposes of the definition “designated contract” in section 30.1 of the Act, any contract or class of contract concerning a procurement of goods or services or any combination of goods or services, as described in Article 1001 of [the North American Free Trade Agreement],^[[4]] in Article 502 of the Agreement on Internal Trade,^[[5]] in Article II of the Agreement on Government Procurement,^[[6]] in Article Kbis-01 of Chapter Kbis of the [Canada-Chile Free Trade Agreement],^[[7]] in Article 1401 of Chapter Fourteen of the [Canada-Peru Free Trade Agreement],^[[8]] in Article 1401 of Chapter Fourteen of the [Canada-Colombia Free Trade Agreement],^[[9]] in Article 16.02 of Chapter Sixteen of the [Canada-Panama Free Trade Agreement],^[[10]] in Article 17.2 of Chapter Seventeen of the [Canada-Honduras Free Trade Agreement]^[[11]] or in Article 14.3 of Chapter Fourteen of the [Canada-Korea Free Trade Agreement],^[[12]] that has been or is proposed to be awarded by a government institution, is a designated contract.

13. One way of determining whether a particular solicitation is a designated contract is to inquire into whether the NSE has been properly invoked, given that the applicable trade agreements are clear that their provisions do not apply to procurements where and when national security considerations are involved.^[13]
14. To that end, the Tribunal has been clear that it must consider the following issues:

• Was the NSE properly invoked in this procurement?^[14]
• Was the NSE invoked by a duly authorized person in a relevant government institution?^[15]
• Was the NSE invoked in a timely manner?^[16]

15. The Tribunal will consider these issues, in turn, in the context of SSC’s motion for an order dismissing Dalian’s complaint.

Was the NSE Properly Invoked in this Procurement?

16. As noted, Dalian argued that the invocation letters provided by SSC in support of its motion did not specifically reference this procurement, either by solicitation number or some other specific indicator. In addition, Dalian stressed that the letters were written three years prior to this solicitation.
17. In response, the Tribunal finds that the letters make it clear that the government intended the goods, such as the load balancer equipment procured in this solicitation, to be subject to the NSE. The letter from SSC’s Senior Assistant Deputy Minister and Chief Financial Officer of Corporate Services, dated July 12, 2012, specifically stated the following: “I agree to invoke the national security exception for all purposes to exempt the procurement of goods and services related to the Government of Canada’s electronic mail (email), network and data centre infrastructure, systems and services from the application of Canada’s domestic and international trade agreements . . . .” In addition, the letter stated that “[t]his national security exception will apply to all such procurements conducted by Shared Services Canada . . .” [emphasis added].
18. Accordingly, the Tribunal is of the view that the load balancer equipment that is the subject of this solicitation falls within the scope of the goods covered by the NSE invocation letters. As such, it finds that the NSE was indeed properly invoked in this procurement.

Did a Duly Authorized Person Invoke the NSE?

19. Dalian questioned whether a duly authorized person invoked the NSE.
20. In the past, the Tribunal has found that the Assistant Deputy Minister of the Acquisitions Branch at the Department of Public Works and Government Services (PWGSC) has the necessary authority to invoke the NSE,^[17] as a result of the authority delegated by the Government of Canada to the Minister of PWGSC under section 6 of the Department of Public Works and Government Services Act^[18] in conjunction with paragraph 24(2)(d) of the Interpretation Act.^[19]
21. In this case, the Tribunal is satisfied that section 7 of the Shared Services Canada Act^[20] provides the Minister of PWGSC with the same powers in paragraphs 6(a), (b), (c) and (g) of the Department of Public Works and Government Services Act. The Tribunal is also satisfied, on the basis of paragraph 24(2)(d) of the Interpretation Act, that this authority has been delegated, in part, to SSC’s Senior Assistant Deputy Minister and Chief Financial Officer of Corporate Services.
22. The Tribunal therefore finds that SSC’s Senior Assistant Deputy Minister and Chief Financial Officer of Corporate Services had the necessary authority to invoke the NSE. The letters submitted by SSC dated July 6 and 12, 2012, indicate that the authority was exercised for procurements of the nature described above.

The Timeliness of the NSE Invocation

23. Dalian argued in part that SSC did not properly invoke the NSE, as “[t]here is no evidence before this Tribunal that anyone within SSC documented the invocation of the NSE in relation to [this specific procurement] for load balancers prior to the conclusion of the solicitation.”^[21] Dalian suggested that there was no evidence that SSC turned its mind to whether the NSE actually applied to this solicitation, based on its failure to reference the NSE in solicitation documents and its failure to invoke the NSE until after the solicitation period. In Dalian’s view, this timing suggested that the NSE was invoked in an attempt to avoid the continuation of this complaint.
24. The Tribunal disagrees. As it has found in previous cases of this nature, while the explicit publication of the NSE in a timely manner would be desirable, it is not required by the applicable the trade agreements.^[22] The Tribunal stated the following in Marcomm:

. . . The trade agreements do not prescribe the manner in which the national security exception must be invoked by the federal government. Furthermore, the Tribunal has held in the past that the national security exception can be invoked at any time during the procurement process and that it need not be announced publicly in the solicitation documents.^[23]

25. As an aside, the Tribunal is of the view that any procurement process would certainly be more transparent and fair if the NSE were published in a timely manner in the solicitation documents themselves. Indeed, as Dalian pointed out, SSC’s own Supply Manual calls for procurement officials to publish the NSE in solicitation documents, conceivably to ensure that fairness and transparency are promoted, to the greatest degree, in every procurement process.
26. Likewise, the timely publication of the NSE would almost certainly provide unsuccessful bidders with information that could assist them as they consider whether to even submit a complaint. Furthermore, it would also enable the Tribunal to respond to complaints more efficiently, as the Tribunal would be aware that the procurement was subject to the NSE from the outset.
27. Nevertheless, the Tribunal finds that SSC properly invoked the NSE by way of the letter dated July 12, 2012, signed by SSC’s Senior Assistant Deputy Minister and Chief Financial Officer of Corporate Services. That SSC did not communicate the existence of the NSE until after Dalian filed the present complaint has no impact on the validity of the NSE itself or the timeliness of its invocation.

CONCLUSION

28. Therefore, for the reasons set out above, the Tribunal finds that this procurement is exempt from the provisions of all trade agreements and that it does not have jurisdiction to inquire into the complaint as a result. By virtue of the NSE, this procurement does not constitute a “designated contract”, as required by subsection 30.11(1) of the CITT Act. As such, the Tribunal allows SSC’s motion and dismisses the complaint pursuant to paragraph 10(a) of the Regulations.

COSTS

29. In the event that its complaint was dismissed on the basis of SSC’s motion, Dalian requested that the Tribunal award Dalian its actual costs associated with filing the complaint and responding to this motion. According to Dalian, had the RFP explicitly referred to the NSE, it would not have incurred the expenses of filing its complaint with the Tribunal and/or responding to SSC’s motion. Dalian also noted that the Tribunal made a significant award of costs in Mistral on a similar basis.
30. Although there are a number of similarities between these proceedings and Mistral, the Tribunal notes that Mistral was a more complex case and the presence of the NSE was raised at a much later stage of the proceedings; indeed, in Mistral, the NSE was only mentioned after the GIR had been filed.
31. Therefore, given that this issue has been resolved in the early stages of the complaint process, the Tribunal is of the view that no costs are warranted in this matter.

ORDER OF THE TRIBUNAL

32. Pursuant to paragraph 10(a) of the Regulations, the Tribunal hereby dismisses the complaint.