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TABLE OF CONTENTS

• DETERMINATION OF THE TRIBUNAL
• STATEMENT OF REASONS
• • COMPLAINT
  • PROCUREMENT PROCESS
  • TRIBUNAL’S ANALYSIS
  • • Remedy
    • Costs
  • DECISION OF THE TRIBUNAL

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IN THE MATTER OF a complaint filed by Neosoft Technologies Inc. under subsection 30.11(1) of the Canadian International Trade Tribunal Act, R.S.C. 1985 (4th Supp.), c. 47;

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

BETWEEN
NEOSOFT TECHNOLOGIES INC.	Complainant
AND
THE DEPARTMENT OF PUBLIC WORKS AND GOVERNMENT SERVICES	Government Institution

Pursuant to subsection 30.14(2) of the Canadian International Trade Tribunal Act, the Canadian International Trade Tribunal determines that the complaint is valid.

Pursuant to subsections 30.15(2) and (3) of the Canadian International Trade Tribunal Act, the Canadian International Trade Tribunal recommends as a remedy that the Department of Public Works and Government Services compensate Neosoft Technologies Inc. for the profit that it lost in not being awarded the contract in question. The basis for calculating the lost profit will be the price submitted by Neosoft Technologies Inc. in its proposal in response to Solicitation No. K8A01-080193/A by the Department of Public Works and Government Services on behalf of the Department of the Environment for the acquisition of a control system for a dynamometer.

Using this as the basis, the Canadian International Trade Tribunal recommends that Neosoft Technologies Inc. and the Department of Public Works and Government Services negotiate the amount of compensation and, within 30 days of the date of this determination, report back to the Canadian International Trade Tribunal on the outcome. Should the parties be unable to agree on the amount of compensation, Neosoft Technologies Inc. shall file with the Canadian International Trade Tribunal, within 40 days of the date of this determination, a submission on the issue of compensation. The Department of Public Works and Government Services will then have 7 working days after the receipt of Neosoft Technologies Inc.’s submission to file a response. Neosoft Technologies Inc. will then have 5 working days after the receipt of the Department of Public Works and Government Services’ reply submission to file additional comments.

Pursuant to section 30.16 of the Canadian International Trade Tribunal Act, the Canadian International Trade Tribunal awards Neosoft Technologies Inc. its reasonable costs incurred in preparing and proceeding with the complaint, which costs are to be paid by the Department of Public Works and Government Services. In accordance with the Guideline for Fixing Costs in Procurement Complaint Proceedings, the Canadian International Trade Tribunal’s preliminary indication of the level of complexity for this complaint case is Level 1, and its preliminary indication of the amount of the cost award is $1,000. If any party disagrees with the preliminary indication of the level of complexity or the preliminary indication of the amount of the cost award, it may make submissions to the Canadian International Trade Tribunal, as contemplated by the Guideline for Fixing Costs in Procurement Complaint Proceedings. The Canadian International Trade Tribunal reserves jurisdiction to establish the final amount of the award.

Susanne Grimes
Susanne Grimes
Acting Secretary

Tribunal Member:	Ellen Fry, Presiding Member
Director:	Dominique Laporte
Senior Investigator:	Michael W. Morden
Investigator:	Josée B. Leblanc
Counsel for the Tribunal:	Eric Wildhaber
	Alain Xatruch
Complainant:	Neosoft Technologies Inc.
Government Institution:	Department of Public Works and Government Services
Counsel for the Government Institution:	Susan D. Clarke
	Ian McLeod
	Karina Fauteux
	Alex Kaufman

Please address all communications to:

COMPLAINT

1. On March 25, 2009, Neosoft Technologies Inc. (Neosoft) filed a complaint with the Canadian International Trade Tribunal (the Tribunal) under subsection 30.11(1) of the Canadian International Trade Tribunal Act.¹ The complaint concerned the procurement (Solicitation No. K8A01-080193/A) by the Department of Public Works and Government Services (PWGSC) on behalf of the Department of the Environment (EC) for a control system for a dynamometer.

2. Neosoft alleges that its proposal was improperly evaluated. More specifically, it alleges that its proposal was not evaluated based on the criteria set out in the Request for Proposal (RFP). As a remedy, Neosoft requests that the Tribunal recommend that it be compensated for lost profits relating to this procurement. It also requests that it be compensated for costs incurred in filing the complaint and preparing its proposal in response to the RFP.

3. On March 31, 2009, the Tribunal informed the parties that the complaint had been accepted for inquiry, 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.² On April 2, 2009, PWGSC acknowledged receipt of Neosoft’s complaint and confirmed that a contract had been awarded to Innosiv Engineering Inc. (Innosiv).

4. On May 15, 2009, PWGSC filed the Government Institution Report (GIR) with the Tribunal along with two confidential documents. On May 22, 2009, Neosoft filed its comments on the GIR. On June 8, 2009, the Tribunal forwarded the two confidential documents to Neosoft, after having received PWGSC’s approval. On June 11, 2009, Neosoft filed its comments on these documents.

5. Given that there was sufficient information on the record to determine the validity of the complaint, the Tribunal decided that a hearing was not required and disposed of the complaint on the basis of the information on the record.

PROCUREMENT PROCESS

6. On November 19, 2008, PWGSC made the RFP available through MERX.³ The closing date for bids was January 14, 2009. According to PWGSC, three bidders, including Neosoft and Innosiv, submitted proposals in response to the RFP, but only Innosiv’s bid was deemed compliant.

7. On January 28, 2009, Neosoft sent an e-mail to PWGSC requesting the results of the procurement. On January 29, 2009, PWGSC sent Neosoft questions on two occasions regarding its bid, which it answered on the same day. On February 5, 2009, Neosoft sent an e-mail to PWGSC to request an update on the procurement and to ask whether its bid was the lowest. On the same day, PWGSC replied to Neosoft that the contract had been awarded to Innosiv, without stating whether its bid was the lowest. On March 10, 2009, Neosoft sent an e-mail to PWGSC asking the value of the contract awarded to Innosiv. On March 12, 2009, PWGSC informed Neosoft of the value of the contract ($48,200 plus taxes). On the same day, Neosoft asked PWGSC for an explanation, since its bid was $35,280 plus taxes, therefore lower than that of Innosiv, and the RFP stated: “[t]he responsive bid with the lowest aggregate price will be recommended for award of a contract.” Again on the same day, PWGSC replied that Neosoft’s bid failed to meet the technical evaluation criteria. On the same day, Neosoft asked PWGSC to indicate the exact criteria that its technical bid had failed to meet and to send it the list of the evaluation criteria that were used and the results of its evaluation. On March 13, 2009, PWGSC informed Neosoft of the two evaluation criteria that it had failed to meet. On the same day, Neosoft informed PWGSC that it did not find the two evaluation criteria in the RFP and asked if they had been available during the solicitation period.

8. On March 16, 2009, having received no reply from PWGSC, Neosoft made an objection to PWGSC and informed it that there was a serious problem since the two evaluation criteria used by PWGSC were not included in the RFP and that, moreover, it met them both. It also asked that it be awarded the contract or that it be compensated for its losses. On March 18, 2009, PWGSC sent Neosoft a reply, prepared by EC, outlining the characteristics and advantages of Innosiv’s bid compared to that of Neosoft. On March 25, 2009, having tried one last time to clarify the situation with PWGSC, Neosoft filed its complaint with the Tribunal.

TRIBUNAL’S ANALYSIS

9. Subsection 30.14(1) of the CITT Act requires that, in conducting an inquiry, the Tribunal limit its considerations to the subject matter of the complaint. Furthermore, at the conclusion of the inquiry, the Tribunal must determine whether the complaint is valid on the basis of whether the procedures and other requirements prescribed in respect of the designated contract have been observed. Section 11 of the Regulations further provides that the Tribunal must determine whether the procurement was conducted in accordance with the applicable trade agreements, which, in this instance, are the Agreement on Internal Trade ⁴ and the North American Free Trade Agreement.⁵ According to the information in the complaint, the contract applied to goods with an estimated value below the applicable monetary thresholds under the Agreement on Government Procurement ⁶ and the Canada-Chile Free Trade Agreement.⁷ Accordingly, the Tribunal considers that the agreements in question do not apply in this case.

10. Article 506(6) of the AIT provides that “[t]he tender documents shall clearly identify the requirements of the procurement, the criteria that will be used in the evaluation of bids and the methods of weighting and evaluating the criteria.”

11. Similarly, Article 1015(4)(d) of NAFTA provides that “awards shall be made in accordance with the criteria and essential requirements specified in the tender documentation”.

12. The issue is therefore whether PWGSC evaluated the bids in accordance with the criteria set out in the RFP.

13. The relevant provisions of the RFP read as follows:

PART 4 – EVALUATION PROCEDURES AND BASIS OF SELECTION

. . .

1.1.1 Mandatory Technical Criteria

In order for a bid to be considered responsive, the bidder must comply with the applicable terms and conditions of this RFP and comply with Annex “A” - Requirement.

. . .

2. Basis of Selection

2.1 Basis of Selection – Mandatory Technical Criteria Only

A bid must comply with the requirements of the bid solicitation and meet all mandatory technical evaluation criteria to be declared responsive. The responsive bid with the lowest aggregate price will be recommended for award of a contract.

. . .

ANNEX “A” – REQUIREMENT

All work is to be carried out in accordance with the following:

ENVIRONMENT CANADA REQUIREMENT SPECIFICATIONS FOR CONTROL SYSTEM FOR A 4WD CHASSIS DYNAMOMETER.

Chassis Dynamometer (4WD and 2 Wheel Drive) / Engine Dynamometer Control Software Specifications

The Emissions research and Measurement Division is upgrading the control systems on their chassis and engine dynamometers. The new system has to be a PC based controller programmable using National Instrument © components.

Allows for inertia simulation in case of controlling of chassis dynamometer.

Has the ability to control power absorption units based on AC motors, DC motors and Eddy Current brakes

Allows for PID control of speed, torque and throttle position of a tested engine.

Allows control by following a trace from a computer file

Provide multi-channel data acquisition at adjustable rates

Has a minimum of 32 digital inputs (5VDC to 250 VAC)

Has a minimum of 4 frequency inputs

Has a minimum of 16 digital outputs

Has a minimum of 8 thermocouples inputs

Has a minimum of 16 general inputs (<10VDC)

Allows for easy modification/channel addition for special instruments

Has a customizable user interface based on National Instruments Labview ©

Has built-in alarms which are customizable

Has a hardware based on National Instruments ©

14. According to PWGSC’s March 13, 2009, e-mail, the only two evaluation criteria that Neosoft failed to meet were the following:

Has significant process control experience or related dynamometer experience. This is a complex project, experience in this field is capital for this success (not compliant).

Has electrical engineering expertise on the team. Due to presence of high voltage/current, transformer, motors and extensive wiring, an electrical engineer needs to be part of the selected team as the main function of this project is to control all this equipment safely (not compliant).

15. Neosoft therefore maintains that its bid was evaluated on the basis of criteria that were not stated in the RFP. It is also of the opinion that it should have been awarded the contract, since its proposal met all the mandatory criteria of the RFP and its price was lower than that of the successful bidder.

16. In its GIR, PWGSC concedes that Neosoft’s complaint has merit with regard to the evaluation of proposals. According to PWGSC, Neosoft’s bid was rejected on the basis of criteria that should not have been used. Therefore, it is of the opinion that the Tribunal should determine that the complaint is valid. However, it maintains that Neosoft should not be compensated, since its proposal nonetheless failed to meet the technical requirements of the RFP. However, it concedes that Neosoft should be entitled to compensation for the costs involved in preparing and proceeding with the complaint.

17. The Tribunal agrees with Neosoft and PWGSC that Neosoft’s bid was evaluated on the basis of criteria that were not stated in the RFP. It is clear that the two criteria cited in PWGSC’s March 13, 2009, e-mail were not found in the RFP and should therefore not have been used to reject Neosoft’s proposal. The Tribunal therefore finds that PWGSC contravened Article 506(6) of the AIT and Article 1015(4)(d) of NAFTA by evaluating and rejecting Neosoft’s bid on the basis of criteria that were not stated in the RFP, as noted above.

18. In light of the foregoing, the Tribunal determines that Neosoft’s complaint is valid.

Remedy

19. Having found the complaint to be valid, the Tribunal must now recommend an appropriate remedy to compensate Neosoft for the prejudice that it suffered.

20. In recommending a remedy, the Tribunal is governed by subsections 30.15(2), (3) and (4) of the CITT Act, which read as follows:

(2) Subject to the regulations, where the Tribunal determines that a complaint is valid, it may recommend such remedy as it considers appropriate, including any one or more of the following remedies:

(a) that a new solicitation for the designated contract be issued;

(b) that the bids be re-evaluated;

(c) that the designated contract be terminated;

(d) that the designated contract be awarded to the complainant; or

(e) that the complainant be compensated by an amount specified by the Tribunal.

(3) The Tribunal shall, in recommending an appropriate remedy under subsection (2), consider all the circumstances relevant to the procurement of the goods or services to which the designated contract relates, including:

(a) the seriousness of any deficiency in the procurement process found by the Tribunal;

(b) the degree to which the complainant and all other interested parties were prejudiced;

(c) the degree to which the integrity and efficiency of the competitive procurement system was prejudiced;

(d) whether the parties acted in good faith; and

(e) the extent to which the contract was performed.

(4) Subject to the regulations, the Tribunal may award to the complainant the reasonable costs incurred by the complainant in preparing a response to the solicitation for the designated contract.

21. Therefore, to recommend an appropriate remedy in this case, the Tribunal considered all relevant factors in the procurement in question, including those set out in subsection 30.15(3) of the CITT Act. In so doing, the Tribunal also took into account the comments of PWGSC and Neosoft concerning the appropriate remedy.

22. The Tribunal considers the application of criteria that were not stated in the RFP to be a serious deficiency in the procurement process. It is of the view that such a major deficiency with respect to the evaluation of bids seriously prejudices the integrity and efficiency of the competitive procurement system as a whole. The Tribunal notes that if the technical experts had felt that additional technical criteria were required to select the best bidder, they could simply have included them when drafting the RFP. While evidence in this case does not lead to the conclusion that the evaluators acted in bad faith, there was nonetheless a serious deficiency in the process.

23. Concerning the prejudice caused to Neosoft, PWGSC maintains that the procedure caused no harm to Neosoft other than complaint-related costs, since its proposal failed to meet several of the technical criteria of the RFP. PWGSC therefore argues that Neosoft is not entitled to compensation, since it would not have been awarded the contract. PWGSC submitted documentation from its technical experts that indicated that Neosoft’s proposed solution would not be achievable and provided examples of problems that might have occurred had it been accepted.⁸ It also states that, for reasons not mentioned in its March 13, 2009, e-mail, Neosoft’s proposed solution failed to meet four of the technical criteria set out in Annex A of the RFP.

24. Neosoft alleges that the so-called points of technical non-compliance cited by PWGSC in its GIR are details of minor importance and were presented only after it had filed its complaint with the Tribunal. It argues that since its bid was rejected solely on the basis of criteria that were not stated in the RFP, it is reasonable to believe that it would have been awarded the contract had these criteria not been used. It argues that its proposal met the technical requirements of the RFP in any case, since its proposal indicated that certain elements of the proposed solution could be modified after a detailed review of existing systems. In a worst-case scenario, Neosoft argues that it would have assumed the additional cost of certain components that represented only a small percentage of the proposed price.

25. The Tribunal must consider whether the results of the evaluation process would have been different if the evaluators had not applied the two disputed criteria to Neosoft’s technical proposal. On March 12, 2009, Neosoft asked PWGSC for a detailed explanation of the evaluation results. Specifically, it asked the following questions: “Could you tell me exactly what in our technical proposal was unsatisfactory? Could you send me the list of criteria that were used, along with the result of our evaluation?”⁹ [translation]. On March 13, 2009, PWGSC informed Neosoft clearly of the grounds on which its bid had been rejected.

26. In view of Neosoft’s request for a detailed explanation, the Tribunal considers that, if there had been other significant criteria contributing to PWGSC’s decision to reject Neosoft’s proposal, PWGSC would have indicated them in its e-mail.

27. Based on the information on the record, it is therefore the Tribunal’s opinion that, if the evaluators had understood that these two criteria were not to be used, PWGSC would have concluded that Neosoft’s bid was compliant. Even if there were serious technical deficiencies in Neosoft’s bid, as PWGSC alleges, the fact remains that these were not motivating factors in the decision to reject Neosoft’s proposal, which would accordingly have been accepted as compliant. The Tribunal therefore concludes that Neosoft suffered prejudice by losing the opportunity to win and profit from the contract.

28. The Tribunal therefore considers that the appropriate remedy is one that recognizes the profit that Neosoft would have derived from the contract had it been the successful bidder. In view of the circumstances of this procurement, an important factor in this case is the fact that the goods have undoubtedly already been delivered.

29. Since PWGSC stated that only one other bidder submitted a compliant bid and since it is clear that Neosoft’s bid was lower than that of the other bidder, the Tribunal recommends that PWGSC compensate Neosoft for the profits that it lost in not being awarded the contract in question. The basis for calculating the lost profits will be the price submitted by Neosoft in its proposal in response to Solicitation No. K8A01-080193/A.

Costs

30. The Tribunal awards Neosoft its reasonable costs incurred in preparing and proceeding with the complaint.

31. In determining the amount of the cost award for this complaint case, the Tribunal considered its Guideline for Fixing Costs in Procurement Complaint Proceedings (the Guideline), which contemplates classification of the level of complexity of cases based on three criteria: the complexity of the procurement, the complexity of the complaint and the complexity of the complaint proceedings. The Tribunal’s preliminary indication is that this complaint case has a complexity level corresponding to the lowest level of complexity referred to in Annex A of the Guideline (Level 1). The complexity of the procurement was low, since it concerned only one product and involved one installation-related element. The complexity of the complaint was low, since it concerned an evaluation based on a list of specific characteristics determining success or failure. Finally, the complexity of the proceedings was also low, since PWGSC agreed that the complaint was valid, there were no motions or interveners, and a public hearing was not required. Accordingly, as contemplated by the Guideline, the Tribunal’s preliminary indication of the amount of the cost award is $1,000.

DECISION OF THE TRIBUNAL

32. Pursuant to subsection 30.14(2) of the CITT Act, the Tribunal determines that the complaint is valid.

33. Pursuant to subsections 30.15(2) and (3) of the CITT Act, the Tribunal recommends as a remedy that PWGSC compensate Neosoft for the profit that it lost in not being awarded the contract in question. The basis for calculating the lost profit will be the price submitted by Neosoft in its proposal in response to Solicitation No. K8A01-080193/A by PWGSC on behalf of EC for a control system for a dynamometer.

34. Based on this recommendation, the Tribunal recommends that Neosoft and PWGSC negotiate the amount of compensation and, within 30 days of the date of this determination, report back to the Tribunal on the outcome. Should the parties be unable to agree on the amount of compensation, Neosoft shall file with the Tribunal, within 40 days of the date of this determination, a submission on the issue of compensation. PWGSC will then have 7 working days after the receipt of Neosoft’s submission to file a response. Neosoft will then have 5 working days after the receipt of PWGSC’s reply submission to file additional comments.

35. Pursuant to section 30.16 of the CITT Act, the Tribunal awards Neosoft its reasonable costs incurred in preparing and proceeding with the complaint, which costs are to be paid by PWGSC. In accordance with the Guideline, the Tribunal’s preliminary indication of the level of complexity for this complaint case is Level 1, and its preliminary indication of the amount of the cost award is $1,000. If any party disagrees with the preliminary indication of the level of complexity or the preliminary indication of the amount of the cost award, it may make submissions to the Tribunal, as contemplated by the Guideline. The Tribunal reserves jurisdiction to establish the final amount of the award.

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

² . S.O.R./93-602 [Regulations].

³ . Canada’s electronic tendering service.

⁴ . 18 July 1994, C. Gaz. 1995.I.1323, online: Internal Trade Secretariat <http://www.ait-aci.ca/index_en/ait.htm> [AIT].

⁵ . 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 (entered into force 1 January 1994) [NAFTA].

⁶ . 15 April 1994, online: World Trade Organization <http://www.wto.org/english/docs_e/legal_e/final_e.htm>.

⁷ . Free Trade Agreement between the Government of Canada and the Government of the Republic of Chile, 1997 Can. T.S. No. 50 (entered into force 5 July 1997).

⁸ . Confidential version of the GIR, Tab A (technical experts’ confidential documents).

⁹ . Neosoft’s complaint at 4.