ECLIPSYS SOLUTIONS INC.
v.
SHARED SERVICES CANADA
File No. PR-2015-039

Order issued
Thursday, February 4, 2016

Reasons issued
Tuesday, February 16, 2016

TABLE OF CONTENTS

• ORDER
• STATEMENT OF REASONS
  • BACKGROUND
  • TRIBUNAL’S ANALYSIS
    • Authority to Invoke the NSE
    • Is the Procurement Within the Scope of the NSE
    • The Timing of When the NSE Was Invoked
    • Government of Canada Security Clearance
    • Conclusion
    • Additional Comments
  • COSTS
  • ORDER

 

IN THE MATTER OF a complaint filed by Eclipsys Solutions 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 motion filed by Shared Services Canada pursuant to rule 24 of the Canadian International Trade Tribunal Rules requesting that the Canadian International Trade Tribunal dismiss the complaint on the grounds that it does not have jurisdiction to conduct an inquiry.

BETWEEN

ECLIPSYS SOLUTIONS INC. Complainant

AND

SHARED SERVICES CANADA Government Institution

ORDER

The motion is denied. However, pursuant to paragraph 10(a) of the Canadian International Trade Tribunal Procurement Inquiry Regulations, the Canadian International Trade Tribunal ceases its inquiry and orders the dismissal of the complaint on the grounds that Shared Services Canada has excluded the procurement from the application of the obligations under the relevant trade agreements.

Serge Fréchette
Serge Fréchette
Presiding Member

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

STATEMENT OF REASONS

BACKGROUND

1. On November 2, 2015, Eclipsys Solutions Inc. (Eclipsys) 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 provision of data centre server and storage infrastructure services (Solicitation No. 10040747/A).
2. Eclipsys alleged that it was unfairly excluded from the solicitation by SSC. The solicitation documents for the initial Invitation to Qualify (ITQ) phase of this procurement, issued on October 6, 2014, originally included a form that would allow an original equipment manufacturer (OEM) to certify that a bidder was authorized to supply and maintain the OEM’s hardware, thus allowing bidders to include hardware that they did not manufacture themselves in their bids. Eclipsys intended to bid infrastructure hardware manufactured by Oracle ULC (Oracle), as it had in many previous procurements. However, through Amendment 003 to the ITQ, SSC removed the OEM form and stated that it had been included in error.
3. According to Eclipsys, the removal of this form effectively prevented it from submitting a response to the ITQ, since as a result it could not meet the mandatory criterion of demonstrating experience in manufacturing infrastructure contained in mandatory requirement 4.1.1 M01.^[2] Although requested to do so, SSC confirmed in Amendment 007 to the ITQ that it would not remove this mandatory requirement. The Tribunal notes that Oracle, as the OEM of the equipment Eclipsys intended to bid, ended up being a supplier that submitted a response to the ITQ; Oracle was determined to be a qualified respondent on December 15, 2014. According to Eclipsys, the list of qualified respondents resulting from the ITQ process includes bidders that are not OEMs.
4. The Request for Supply Arrangement (RFSA) phase of the procurement commenced on July 7, 2015. The OEM certification form was re-introduced into the solicitation documents for the RFSA. On July 15 and August 10, 2015, Eclipsys (with Oracle’s support) met with SSC to request that Oracle be permitted to sign the OEM certification form and that Eclipsys be permitted to be the primary respondent for the RFSA.
5. On September 25, 2015, this request was denied on the grounds that SCC could not introduce a new supplier so late in the procurement process, and that it is SSC’s policy not to allow a “reseller” to be a prime respondent for a new supply arrangement.
6. On October 9, 2015, Eclipsys filed its first complaint regarding this procurement process. This complaint was rejected because the solicitation documents indicated that the procurement was subject to a national security exception (NSE).^[3]
7. In filing the current complaint, Eclipsys argued that the NSE should not be used as a means for SSC to avoid demonstrating that it had conducted a fair procurement process.
8. On November 6, 2015, the Tribunal informed the parties that it had accepted the complaint for of the Canadian International Trade Tribunal Procurement Inquiry Regulations.^[4]
9. On November 27, 2015, SSC filed a motion for an order dismissing the complaint, pursuant to rule 24 of the Canadian International Trade Tribunal Rules. It submitted that this procurement was subject to the NSE and was therefore exempt from all otherwise applicable trade agreements. SSC submitted that, as a result, the Tribunal does not have jurisdiction to consider this complaint as it does not concern a “designated contract” as defined in the CITT Act.
10. As an attachment to its motion, SSC provided a letter from SSC’s Senior Assistant Deputy Minister and Chief Financial Officer of Corporate Services, dated July 12, 2012, specifically stating 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 [SSC]” [emphasis added].^[5]
11. Eclipsys filed comments on the motion on November 27, 2015. Eclipsys stated that, in its view, the existence of the NSE should not exempt SSC from its duty to act fairly towards those companies that “do not introduce risk into the supply chain”,^[6] and that Eclipsys does not pose a risk since it is a Canadian company with a Government of Canada security clearance.

TRIBUNAL’S ANALYSIS

12. The Tribunal is of the view that the analytical framework previously set out in the Tribunal’s case law when examining cases where the NSE has been invoked requires clarification.
13. 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.
14. Section 30.1 of the CITT Act defines “designated contract” as “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.”
15. 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],^[[7]] in Article 502 of the Agreement on Internal Trade,^[[8]] in Article II of the Agreement on Government Procurement,^[[9]] in Article Kbis-01 of Chapter Kbis of the [Canada-Chile Free Trade Agreement],^[[10]] in Article 1401 of Chapter Fourteen of the [Canada-Peru Free Trade Agreement],^[[11]] in Article 1401 of Chapter Fourteen of the [Canada-Colombia Free Trade Agreement],^[[12]] in Article 16.02 of Chapter Sixteen of the [Canada-Panama Free Trade Agreement],^[[13]] in Article 17.2 of Chapter Seventeen of the [Canada-Honduras Free Trade Agreement]^[[14]] or in Article 14.3 of Chapter Fourteen of the [Canada-Korea Free Trade Agreement],^[[15]] that has been or is proposed to be awarded by a government institution, is a designated contract.

16. None of the provisions of the trade agreements cited in subsection 3(1) of the Regulations make explicit reference to an exclusion from the coverage of these agreements based on national security. For example, Article 1001 of NAFTA, entitled “Scope and Coverage”, provides, in part, that Chapter Ten, “Government Procurement”, applies to measures adopted or maintained by a party relating to procurement by the government entities set out in Annexes 1001.1a-1, 1001.1a-2 or 1001.1a-3, of goods, services or construction services in accordance with Annexes 1001.1b-1, 1001.1b-2 or 1001.1b-3, where the value of the contract to be awarded is estimated to be equal to or greater than certain monetary thresholds. The remaining paragraphs of Article 1001 set out additional conditions that must be met in order for a procurement to be within the scope of the chapter; again, nothing relating to national security is referred to therein.^[16] The scope provisions of the other trade agreements are similarly structured.
17. However, the trade agreements contain separate exclusion provisions relating to national security in respect of the disciplines of the agreements.^[17] For example, Article 1018 of NAFTA, a general provision that provides for certain specific exceptions, states as follows:

1. Nothing in this Chapter shall be construed to prevent a Party from taking any action or not disclosing any information which it considers necessary for the protection of its essential security interests relating to the procurement of arms, ammunition or war materials, or to procurement indispensable for national security or for national defense purposes.

18. There is no reference in this provision, explicit or implicit, to the exclusion of procurements from the scope of the government procurement chapter where national security concerns are involved. Therefore, it is not correct to pretend that the invocation of the NSE automatically removes a solicitation from the scope of the definition of “designated contract” for the purposes of subsection 3(1) of the Regulations and subsection 30.11(1) of the CITT Act. The Tribunal sees no connection between the existence of this exception provision and the scope of application of the trade agreement. Therefore, contrary to what is alleged by SSC, the Tribunal retains its jurisdiction in accordance with subsection 30.11(1) of the CITT Act. For this reason, SSC’s motion is denied.
19. Furthermore, the terms of Article 1018 (and the other national security exception clauses) do not automatically remove a solicitation from all the disciplines of the trade agreements when national security considerations are involved. Specifically, they allow the government to i) refuse to disclose information (for example, not disclose mandatory requirements, the identity of contract awardees, etc.) and to ii) take any action that it considers necessary to protect national security. This action may, as in the current instance, include the invocation of a complete exception from the competitive disciplines of the procurement chapters of the relevant trade agreements, but the government may also not consider it necessary to exempt the procurement from all of the substantive or procedural requirements of the trade agreements in order to achieve its legitimate objective.
20. In fact, the language of Article 1018 suggests that the government should limit the application of the disciplines of the trade agreements only to the extent necessary for the protection of the national security concern that is at play with respect to the particular procurement at issue. This may, for example, involve for the government to discriminate against certain categories of suppliers and therefore require an exception against the non-discrimination disciplines but keeping all the remaining protections in the trade agreements intact for suppliers that may qualify.
21. On the basis of the above considerations, the Tribunal finds that, rather than assuming that the invocation of the NSE automatically outs its jurisdiction to review a procurement process, it must look at the exact terms of the invocation to determine its scope and the extent to which the Tribunal’s ability to exercise its jurisdiction has been accordingly curtailed.
22. In this case, according to the letter of July 12, 2012, SSC has invoked 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” [emphasis added]. The Tribunal finds that the action that SSC has identified as necessary to protect national security is to except the procurement from all of the disciplines of the trade agreements. As a result, the Tribunal is forced to conclude that it cannot assess the conformity of any aspect of this procurement against any of the disciplines of the trade agreements. The practical effect of this finding is the same as if the Tribunal had no jurisdiction, but it is not proper to cast it as a jurisdictional matter because the Tribunal’s jurisdiction should not be confused with the non-application of trade disciplines resulting from an exception.
23. Nothing in the trade agreements, the CITT Act or the Regulations provides guidelines as to how the NSE is to be invoked and what parameters, if any, apply to its invocation. Furthermore, the applicable language in the various NSE provisions of the agreements leaves the identification of the actions necessary to take in order to protect national security to the sole discretion of the party (or federal government in the case of the AIT), i.e. to the responsible government institution. As a consequence, the Tribunal is left with no legislative mandate to assess the reasons for the invocation of the NSE or to review the decision to invoke it.^[18]
24. In this instance, the Tribunal is therefore left to examine whether the NSE has in fact been invoked from a procedural standpoint only. The questions that the Tribunal examines in that regard are as follows:
    • Did a duly authorized person in a relevant government institution invoke the NSE?^[19]
    • Are the goods and services being procured those that are indicated in the NSE?^[20]
    If either of these questions is answered in the negative, the Tribunal will enquire into the complaint. The Tribunal also examines the timing of when the NSE was invoked, but has previously stated that the NSE could be invoked at any time.^[21]

Authority to Invoke the NSE

25. In the past, the Tribunal has found^[22] in similar circumstances that SSC’s Senior Assistant Deputy Minister and Chief Financial Officer of Corporate Services has the necessary authority to invoke the NSE, as a result of the authority delegated by the Government of Canada to the Minister of the Department of Public Works and Government Services under section 7 of the Shared Services Canada Act^[23] in conjunction with paragraph 24(2)(d) of the Interpretation Act.^[24]
26. 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.

Is the Procurement Within the Scope of the NSE

27. As cited above, the letter dated July 12, 2012, from SSC’s Senior Assistant Deputy Minister and Chief Financial Officer of Corporate Services indicates that the NSE applies to “electronic mail (email), network and data centre infrastructure, systems and services”. The data centre server and storage infrastructure services that are the subject of this procurement fall within the ambit of this description. Therefore, the Tribunal finds that the NSE was properly invoked because of that nexus.
28. Nevertheless, the Tribunal has serious concerns in regard to SSC’s reliance on the letter of July 12, 2012, and the manner in which the NSE was invoked. Although these concerns do not affect the outcome of this matter, they do raise important issues with respect to the integrity and fairness of the procurement process. The Tribunal comments on these issues below.

The Timing of When the NSE Was Invoked

29. The solicitation documents for both the ITQ and RFSA included a statement that the NSE applied. Potential bidders were therefore notified that the NSE applied to this procurement from the outset.
30. While the Tribunal has previously found that there is no requirement in the trade agreements to explicitly publish the invocation of the NSE,^[25] the early invocation and publication of the exception in the solicitation documents may have an impact on the Tribunal’s assessment of potential costs, as it can prevent potential bidders from accruing substantial damages through the pursuit of a complaint where ultimately they have no remedy.^[26]

Government of Canada Security Clearance

31. As noted above, Eclipsys argued that the invocation of the NSE should not exempt SSC from its duty to act fairly towards companies that do not pose a risk to government security, such as Eclipsys because it is a Canadian company with a Government of Canada security clearance.
32. The fact that Eclipsys is a Canadian supplier with a Government of Canada security clearance does not alter the fact that the Tribunal cannot review the fairness of the procurement process at issue, as the terms of SSC’s invocation of the NSE has removed the Tribunal’s ability to review any aspect of this procurement process. 

Conclusion

33. In light of the above, the Tribunal cannot but cease its inquiry and dismiss the complaint on the grounds that SSC has excluded the procurement from the application of all of the obligations under the relevant trade agreements.

Additional Comments

34. As indicated above, the Tribunal takes this opportunity to express some concerns in regard to the integrity of the competitive procurement system as it relates to the approach taken by SSC, in respect of the NSE.
35. Recognizing that none of the evidence presented in the complaint has been tested, and that some of it remains unsubstantiated assertion, the Tribunal nevertheless believes that the present case provides an example of where a government institution may have cast too wide an exclusion from the disciplines of the trade agreements for reasons seemingly unrelated to national security. For example, SSC could have limited the solicitation to only Canadian suppliers holding sufficient security clearance without subtracting the procurement from bid challenge review by the Tribunal.
36. To be clear, the Tribunal does not wish to comment on the legitimacy of the national security considerations that government institutions may have and how those considerations inform their decisions to invoke the national security exception.
37. However, the Tribunal invites government institutions to question whether wholesale exclusion of all of the disciplines of the trade agreements, including the AIT, is always truly necessary for national security reasons. In most instances, Canadian suppliers, such as Eclipsys, would understandably expect that not all of the disciplines of the trade agreements would have to be excluded in order to preserve Canada’s national security interests.
38. The Tribunal cannot but emphatically stress that, as noted above, the NSE provisions of the trade agreements require that government institutions limit the NSE only to the extent necessary to protect the national security interests. This means that government institutions should conduct an objective assessment and exclude only specific provisions of the trade agreements that cannot be upheld without compromising national security.
39. Chiefly, and perhaps exclusively, this may mean “surgically” excluding only certain specific provisions of the trade agreements. As mentioned above, the non-discrimination provisions are an example. By proceeding in this manner, government institutions would be able to protect national security concerns while still allowing suppliers to access the Tribunal’s bid challenge mechanism. In instances like the present complaint, the Tribunal does not see how the jettisoning of Canadian suppliers’ access to that mechanism is justified by security concerns, nor, more importantly, how the integrity, fairness and transparency of the competitive procurement system has been served by SSC’s actions.
40. In light of the above, the Tribunal invites SSC to question the appropriateness, in relation to the trade agreements, of its reliance on a generically worded letter invoking the NSE dating from 2012. Neither this letter nor any of the other documentation submitted by SSC in this case gives any indication that SSC considered whether or not the specific circumstances of this procurement justify the manner in which the NSE was invoked. Since the Tribunal could not pursue its inquiry, the Tribunal could not verify whether any attention was paid to the appropriateness of invoking a “blanket” NSE in the specific context of this solicitation, in light of considerations such as the nature of the goods and services in question, the restrictions associated with potential suppliers and the degree to which, for instance, it may or may not be necessary to discriminate between suppliers due to national security concerns. In short, the evidence in the Tribunal’s possession does not disclose any justification for why all of the disciplines of the trade agreements had to be excluded in order to protect national security.
41. The NSE remains an exception to the principle of open competition that is at the heart of the disciplines of the trade agreements. This imposes a burden to ensure that the exception is used with care and that it is restricted to only what is truly necessary to preserve national security interests. The Tribunal is concerned that relying on an authorization that is already several years old and is both “blanket” in nature and open-ended into the future (i.e. with no specified end date) increases the risk that the NSE will be invoked automatically or by rote, or without proper considered justification, or altogether inappropriately.
42. The Tribunal notes that SSC provided no meaningful information and justification in response to Eclipsys’ concerns as to why the NSE was invoked. Opposing nothing more than NSE applicability as a complete response to a supplier’s grounds of complaint is an empty and silent response indeed; it leaves potentially unanswered doubts lingering as to the transparency and fairness of the impugned procurement. When government institutions can provide insight into how suppliers’ grounds of complaint were taken into account (even unfavourably), everyone gains confidence in the integrity of the procurement system, and the overarching objectives of the trade agreements remain intact despite the effects of the NSE.
43. Fundamentally, because the NSE can be used to sidestep the application of the trade agreements altogether, its use should not be taken lightly, but rather with the appropriate degree of consideration and justification.
44. The Tribunal notes what appears to be more stringent U.S. federal government practices in regard to the manner in which this exception is invoked. For instance, in the United States, a written justification for invoking the NSE, with the appropriate approvals, is required to be published on the federal government’s procurement website.^[27] Although a justification can be submitted either for a single procurement or on a class basis, in contrast with the blanket NSE employed by SSC in this case, a class justification generally covers programs or sets of programs and has a dollar limit and time period for all actions taken under the authority.^[28]
45. Accordingly, the Tribunal is of the view that the NSE should not unnecessarily limit competition or subtract procurement processes from Tribunal scrutiny where these results are unnecessary. Had the NSE not been invoked in this instance, the Tribunal would have initiated an inquiry on the grounds that Eclipsys had established a reasonable indication of a breach of the trade agreements based on the alleged lack of consistency in applying the OEM criterion.

COSTS

46. Neither party made submissions regarding costs of the motion. Each party will bear its costs.

ORDER

47. The motion is denied. However, pursuant to paragraph 10(a) of the Regulations, the Tribunal ceases its inquiry and orders the dismissal of the complaint on the grounds that SSC has excluded the procurement from the application of the obligations under the relevant trade agreements.