WATERS CHROMATOGRAPHY
Determinations
Board File No: E91PRF6631-021-0002
IN THE MATTER OF:
A Complaint By Waters Chromatography Division of Millipore (Canada) Ltd. Mississauga, Ontario
Board File No: E91PRF6631-021-0002
Complaint upheld
AND IN THE MATTER OF:
The Free Trade Agreement Implementation Act, Part II, Sec. 15 S.C. 1988, Ch. 65.
29 April 1991
DETERMINATION BY THE BOARD
This complaint concerns the award of a contract in a government procurement that was intended to be competitive, but for which the required notice of the existence of the competition was, in fact, never given.
The complainant is Waters Chromatography (Division of Millipore Canada Ltd.) (Waters) of Mississauga, Ontario. They are suppliers of high performance liquid chromatography equipment, for which the Institute for Marine Biosciences (IMB) in Halifax, Nova Scotia, had a requirement (IMB is a branch of the National Research Council).
Waters' complaint is that because no Notice of Proposed Procurement (NPP) was ever published in the government's daily publication, Government Business Opportunities (GBO), they never had an opportunity to bid on the Institute's requirement.
IMB had indeed requested the Department of Supply and Services (DSS) (through their Atlantic Region Supply Centre in Dartmouth, N.S.) to acquire a set of this equipment, with specifically defined capabilities, and DSS proceeded to implement that request, and took steps to have a notice of the proposed procurement published in the GBO.
DSS has admitted to the complainant that indeed the NPP was never published at all. It is not clear how the oversight occurred, but it was a matter that the Department of Supply and Services very much regrets...indeed, when this was brought to their attention they acted quickly to revise their procedures with a view to ensuring that this should not happen again, and the Deputy Minister sent a letter of apology to the complainant (see Investigation Report (I.R.) appendix 13).
The intangible nature of a letter of apology is not, however, exactly what the complainant had in mind, and they have asked the Board either that the requirement be re-competed so that they can bid on it, or, if that is not possible, that they receive compensation, "including costs and loss of business."
The Issue of Jurisdiction: Late Filing
Before going into the details of the investigation of this case, however, it is necessary to deal with a point of jurisdiction raised by DSS in their Governmental Institution Report: they point out that the complaint was filed later than the limit allowed in the PRB Regulations ("...not later than 10 days after the basis of the complaint is known or should reasonably have been known.") [1] and they urge that the Board is, on that account, without jurisdiction.
The Board is satisfied that the complaint was filed late. The facts show that Waters, at the very latest knew by 23 January 1991 that the NPP had not in fact been published in the GBO...which was the information they needed to know to base this complaint that they had not been afforded an opportunity to compete.
Accepting that interpretation, the complainant would have had 10 days from 23 January 1991 to file. This period ends on a Saturday and by the Regulations they would have had until the following Monday (4 February 1991) to file. They did not file until 12 February 1991 and are, therefore, even on the most generous interpretation of the facts, at least eight days late.
The Board, however, has authority "...where good cause is shown or where it determines that a complaint raises issues significant to the procurement system, [to] consider any complaint that is not filed within the time limits set out in this section." [2]
DSS contends that this discretion should be exercised only where a significant issue exists, and "...not simply that the Complainant may be a diserving (sic) complainant or that an error was made by the Government Institution." (see I.R. Appendix 13)
The Board considered the matter at a meeting of the Board on 18 February 1991 and determined that the complaint raised an issue significant to the procurement process, namely, the initiation, conduct, and completion of a competitive procurement action without notice of such action having been given in the only official organ for such procurement, namely, the GBO.
The Board takes the view that this complaint ought to be investigated in order that the following questions that go to the integrity of an open bidding system, to which the government is committed under the terms of the FTA, be answered:
- If no NPP was published, how did competitors, who are encouraged to rely upon the GBO, learn of the existence of the competition?
- How could a contract be properly awarded in a competition of which no one had official notice?
A notice of this decision was sent to the complainant by letter of the same date (18 February 1991) and DSS was advised at the same time, by copy, which was sent to them under separate cover.
The Investigation
The allegations of this complaint, the government's response to those allegations and the complainant's comments on the government's response were investigated by means of interviews and the examination of documents.
A number of individuals were interviewed by telephone to confirm various statements made and/or contained in the documentation. These include: Mr. Richard Blais (Montreal Regional Sales Office), Mr. Charles Gagné, (Technical Sales Representative, Ottawa Office), and Dr. Aaron Wolkoff (Division Manager, Mississauga Office), all of Waters; Mrs. M. Goldsmith, (Contracting Officer), and Mr. C. Prowse (Chief, Commercial Acquisitions), DSS-Atlantic Region Supply Centre; Mr. N. MacDowall (Project Manager), DSS - Statistical Information and Data Management Branch (SIDMB) of Hull, Quebec; Dr. J. Wright, (Scientist) and Mr. G.N. Wright (Supply Officer), NRC - IMB, Halifax, N.S.; and Mr. John MacFarlane, (President and Application Specialist) Axial Precision Instruments Corp., Oakville, Ontario (Contract Awardee).
Following a new procedure, of which notice was given by the Board in the GBO during the week of 18 February 1991, a copy of the draft Investigation Report was sent to both the government institution and the complainant for their comments, prior to submission to the Board. Both these parties submitted brief written comments, and these have been added to the Investigation Report. As well, upon examination of the draft Investigation Report, the Board raised an additional question that was answered in a document from the procurement file that was not included in the original draft Investigation Report circulated to the parties. This document was sent to the parties by facsimile, to afford them an opportunity for further comment. The document and the comments are now included in I.R. Appendix 17.
As well, the report of this investigation contains a number of other appendices relating to material and documents deemed relevant by the investigative staff as part of the basis of that report. Particular reference is not made to all of these supporting documents in this determination, but they have been made available to the parties and, subject to the provisions of the Access to Information Act, they are available to any other person.
Because the investigation produced sufficient information to enable the Board, in its opinion, to resolve the issues raised in this complaint, it was determined that no formal hearing was required in the present case. The Board, in reaching its conclusions, has considered the report of its investigative staff and the comments thereon by the parties, and has made its findings and determinations on the basis of the facts disclosed therein, the relevant portions of which are mentioned in this determination.
The Procurement
The investigation discloses that for some time prior to August of 1990, IMB had been conducting a market search for the sort of high performance liquid chromatography (HPLC) equipment they wanted.
The search included the examination of scientific journals and discussions with other scientists engaged in similar research, both directly and at scientific conferences. At one point, IMB believed that equipment with features they needed was only obtainable from Axial Precision Instruments Corp. (Axial) of Oakville, Ontario, and when they first sent their requisition for it to DSS, Dartmouth, they suggested it be sole sourced from Axial. Between 24 August 1990, when the requisition was sent to DSS, and 27 October 1990, discussions took place between DSS and IMB, and as a result IMB agreed that DSS should conduct the procurement under FTA procedures as an open competition. IMB had, during that time, become aware that at least three other suppliers had similar equipment to offer, and that one of them, Waters, had a product that might meet their needs, subject to evaluation of a specific offer. On 27 October 1990, IMB asked DSS Dartmouth to proceed with the procurement. They suggested tender packages be sent to both Axial and Waters, but were orally (and correctly) advised that FTA procedures required publication of an NPP in the GBO and that no supplier could properly be approached directly.
As a result of the activities that surrounded these discussions, and perhaps even before that time, it appears that both Axial and Waters (at least) became aware of IMB's requirement, and that procurement action by DSS was imminent.
The contract awardee, Axial, apparently found out about the procurement action by telephoning the customer department, which referred him to the contracting officer, on or about 21 November 1990. The contracting officer had prepared a Request for Proposals (RFP) and dated it 14 November 1990, and apparently believed that the publication date of the NPP would have been on or about 14 November 1990 to coincide with the date on the RFP. With that phone call from Axial (and later a letter dated the same date requesting a bid package), she believed the competition was officially underway and that the request was pursuant to the NPP, so the bidding documents were sent to Axial.
As it happens, Axial was not a subscriber to the GBO, and although aware that the publication of an NPP was the event that always marks the official start of an FTA competition, they did not rely upon it. Instead, at least in this case, they regularly telephoned the customer department to enquire about the status of the procurement action. Their call, directed onward to the contracting officer on or about 21 November 1990, was fortuitous.
On the other hand, Waters did subscribe to the GBO but, as we now know, the NPP never appeared. Eventually, they too called the contracting officer, but unfortunately for them, this was not until 15 January 1991 -- five days after the contract had been let to Axial. Between 26 November 1990, when the bid-set was sent to Axial, and the closing date of 4 January 1991, no other enquiries appear to have been received by DSS.
DSS has conducted their own investigation to find out why the NPP did not get published even though they thought it had been. In the Deputy Minister's letter to the complainant, expressing the Department's regret at what had happened here, he says:
"...Unfortunately, it was found that, although the Notice of Proposed Procurement (NPP) had been transmitted from our Halifax office, it was not published in the GBO because a systems problem blocked the final transmission of the NPP information to our editing staff."
The Board's own investigation has found nothing inconsistent with that explanation of these events, and the failure to publish appears to have been accidental.
On the other hand, the procedural requirements relating to this procurement -- to be found in the GATT Code which is made applicable by Article 1303 of the Free Trade Agreement, and the expanded procedural obligations set out in Article 1305 of the FTA, which are to guide determinations made by the Board, [3] -- require that procuring government institutions "...shall publish a notice of each proposed procurement [in the GBO]. Such notice shall constitute an invitation to participate in...open...tendering procedures." [4] If no such notice is actually published, then it cannot properly be said that a competition of the sort that these procedural requirements are intended to secure, has ever begun.
The consequence in this particular case was that there was no competition at all, and the action should not have led to the award of a contract. As noted earlier, the logical consequence of a failure to publish is that nobody learns of the solicitation and no bids are received. If bids are received in such circumstances, it can only mean that the existence of the competition was communicated in some other way than the way agreed to be used by Canada under the Free Trade Agreement. If the means of communication is not in fact the agreed means of communication, then the supplier community which has been invited to participate in this procurement system, and which has been assured it may rely on the GBO has been unfairly treated, and they are entitled to an appropriate redress.
In this particular case, the Board finds that this complaint is well founded in that DSS failed, in fact, to comply with the procedural requirements of Article 1305 of the Free Trade Agreement in that the failure to publish the NPP resulted in a failure to provide all potential suppliers equal opportunity to be responsive to the requirements of the procuring entity in the tendering and bidding phase, and the Board will award the complainant its reasonable costs of filing and proceeding with the complaint.
However, just as the failure to publish ought logically to result in the receipt of no bids, similarly, that failure, without more, ought not to have resulted in any material unfairness to potential suppliers, since its effect could be expected to be that the competition did not begin at all.
But, as with other things in the real world, there was more: one of the competitors learned of the existence of the solicitation in the manner described above and submitted a bid. Likewise, DSS, through a system failure that left the contracting officer ignorant of the failure to publish, concluded that only one bid had been received, and, when the bids closed on 4 January 1991, they proceeded to award that bidder a contract.
It was the combined effect of these two actions that created the unfairness to other potential suppliers which has been found by the Board.
Obviously, the right that was infringed could be corrected by, in effect, giving it back...by placing the complainant back at the starting line and running a fresh competition. But doing that now would seem to respect the rights of the complainant at the expense of those acquired by the contract awardee, who, so far as they know, won the contract fair and square. The balancing of these rights may not, in a practical sense, be easy.
On the other hand, the Board is not satisfied that the matter should be left there, with an award of costs and no other redress than a letter of apology from the Department.
The Board observes that by 21 January 1991, the Department knew that in fact no publication of the NPP had occurred, and it knew of the unfairness that resulted.
If they had been prepared to move quickly at that time, they might have still been able to rectify that situation by terminating the faulty action and running a proper competition. The file shows (see I.R. Appendix 17) that this point was understood and considered by DSS management...at least shortly after the complaint was filed on 12 February 1991. An interoffice memorandum dated 15 February 1991 shows that the possibility of cancellation and re-competition was indeed considered...but the Department also noted that: (a) the contract was by then (15 February 1991) already five weeks into performance; (b) re-competition could not be accomplished within the then current fiscal year, hence there was concern about lapsing the client department's funds; and (c) the delay and lapse of funds might impair good client relations.
For these reasons, the Department came down on the side of administrative convenience, and decided to let matters take their course. If the consideration had taken place over three weeks earlier, when they first knew of the error, the costs of cancellation at that point might or might not have been modest, but, at least, back at that time, the contract awardee might have been able to enter the proper competition and would have been accorded a fair chance to compete...the most it was originally entitled to in any case, despite its "windfall" success in the actual procurement action.
But, the memorandum of 15 February 1991 also shows that this was not the first instance in which NPPs -- and Contract Award Notices (CAN's) -- that had been sent by Atlantic Region for publication in the GBO, had not been received by SIDMB, which publishes the GBO. It records that a late January system-wide notice (called a Friendly Reminder) drew attention to a new report that would serve to verify that NPPs transmitted to SIDMB had been received. Thus, DSS, was, contemporaneously with these events, engaged in working out a solution to the system problem that occurred here (and previously).
It shows, too, that they had, at least after the complaint came in, considered the unfairness involved as a result of the error -- and thought about correcting the injustice by cancelling the abortive competition and re-running it correctly. However, considerations of a financial nature (the desire not to lapse funds at the end of the fiscal year), and of detriment to client relations seem to have carried more weight than the complainant's plight.
Considerations of this kind lead the Board to feel, as noted above, that an award of protest costs alone may not be the only compensation to which the complainant is entitled for the unfairness that actually occurred in this case.
There are some difficulties, however, in the way of determining the proper compensation in a case of this kind. The Board recognizes that what the complainant lost here was an opportunity to learn when this competition would begin, and thus, an opportunity to send for a bid set and ultimately to compete in a fair competition. In this particular case, we know that the complainant fully intended to bid -- so the loss of opportunity to learn when the competition began was probably tantamount to losing an opportunity to bid. In other words, the complainant lost an opportunity to become a member of that small class of individuals who would have had an opportunity to win the contract.
The issue now will be over the value of that lost opportunity.
On this issue, there are many contingencies that stand between the high likelihood that the complainant would have bid, and the unknown likelihood of their winning the contract.
The Board recognizes that it is not possible to say with any assurance that the complainant would have won in the competition that was intended to be run in this case -- so it cannot properly be said it has lost any business as a result. Nor can it be said that the Department is in breach of any contractual duty to the complainant, along the lines set out by the Supreme Court in the Ron Engineering case [5] (where, in any case, the disappointed bidder had at least been able to submit a bid -- such that the "contract A" therein referred to could be said to have come into being).
As well, it cannot be known how many other potential suppliers might have bid, so no proportional assessment of the value of the lost opportunity can be worked out with any assurance.
The Board believes that to embark upon an estimate of how good the complainant's chances were of winning the contract would be little more than an exercise in speculation given the present state of the facts. We don't know if the complainant's bid would have been responsive. If it had been, we don't know if it would have been the low bid. We don't know how many other bidders there would have been. We don't know how much the complainant would have profited if they had won the contract, or if they would have made a profit at all.
Hence, the number of contingencies and the lack of any real way of knowing how they might have turned out, is such that it is not possible to determine with any assurance what the probability of winning the contract really was.
In the circumstances, the Board concludes that the loss of this particular opportunity would, in law, entitle the complainant to only nominal damages, and it will assess these at $450, being equivalent to the value of a year's subscription to the GBO at the first class mail rate, which is, after all, a known cost the complainant incurred to obtain something which, in this instance, the government's error rendered useless to them.
DETERMINATION
The Board has determined, on the basis of its investigation, that this procurement by the Department of Supply and Services did not comply with the requirements referred to in Section 17 of the Free Trade Agreement Implementation Act, in that, by failure to publish a Notice of Proposed Procurement required by the procedures applicable under that Act to this procurement, and by awarding a contract in respect thereof anyway, it did not "provide all potential suppliers equal opportunity to be responsive to the requirements of the procuring entity in the tendering and bidding phase."
The Board has also decided:
1. To award the complainant reasonable costs relating to filing and proceeding with the complaint; and
2. To recommend that the Government compensate the complainant in the amount of $450.
Gerald A. Berger
_________________________
Gerald A. Berger
Chairman
Procurement Review Board of Canada
1. Procurement Review Board Regulations, subsection 23(1)
2. Procurement Review Board Regulations, subsection 23(4)
3. by virtue of Section 17 of the Free Trade Agreement Implementation Act
4. GATT Code, Article V.4
5. The Queen et al v. Ron Engineering & Construction Eastern Ltd. 119 DLR (3rd) 268 (SCC)
Initial publication: August 28, 1997