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TABLE OF CONTENTS

• ORDER
• STATEMENT OF REASONS
• • INTRODUCTION
  • COMPENSATION FOR LOST PROFIT
  • • Profit Formula
    • Gross Revenue
    • Costs
    • Lost Profit Calculation
    • Profit Made on Local Projects
  • CONCLUSION

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

AND FURTHER TO a decision of the Canadian International Trade Tribunal, pursuant to subsections 30.15(2) and (3) of the Canadian International Trade Tribunal Act, recommending that Maritime Fence Ltd. be compensated for the profit that it lost in not being awarded the contract in question.

BETWEEN
MARITIME FENCE LTD.	Complainant
AND
THE PARKS CANADA AGENCY	Government Institution

The Canadian International Trade Tribunal hereby recommends that the Parks Canada Agency compensate Maritime Fence Ltd. in the amount of $346,573.62 for the profit that it lost in not being awarded the contract in question.

Dominique Laporte
Dominique Laporte
Secretary

INTRODUCTION

1. In a decision made on November 23, 2009, the Canadian International Trade Tribunal (the Tribunal), pursuant to subsection 30.14(2) of the Canadian International Trade Tribunal Act,¹ determined that the complaint filed by Maritime Fence Ltd. (MFL) was valid. Pursuant to subsections 30.15(2) and (3), the Tribunal recommended, as a remedy, that the Parks Canada Agency (Parks Canada) compensate MFL for the profit that it lost in not being awarded the contract in question—a contract for W-beam guardrail removal and installation and sign installation on wood posts on roads in Banff National Park, Kootenay National Park and Jasper National Park. The Tribunal recommended that the parties negotiate the amount of compensation, but reserved jurisdiction to establish the final amount of compensation.

2. As the parties were unable to reach an agreement on the amount of compensation, MFL filed a submission with the Tribunal on March 25, 2010. MFL’s submission was supported by an affidavit and a lost profit report prepared by Mr. Bradley McCormack, a professional engineer and employee of MFL, who was the assigned project manager for the intended work and prepared MFL’s proposal in response to Parks Canada’s solicitation. Parks Canada filed a response with the Tribunal on April 1, 2010. Its response was supported by a report prepared Mr. Steve Pittman, a chartered accountant and chartered business valuator. MFL filed additional comments on April 9, 2010.

3. MFL claims that it should receive $391,318 as compensation for the profit that it lost in not being awarded the contract in question. Parks Canada, for its part, is offering to pay MFL compensation in the amount of $195,763.

COMPENSATION FOR LOST PROFIT

4. The CITT Act and the Canadian International Trade Tribunal Procurement Inquiry Regulations ² do not provide any guidance regarding compensation matters.³ However, the Tribunal’s Procurement Compensation Guidelines (the Guidelines), revised in June 2001, read as follows:

2.2 Compensation awards will not be based on speculation or conjecture. The Tribunal recognizes that inherent in certain compensation recommendations will be the requirement to project into the future. However, in all circumstances, claims for compensation must be accompanied by credible economic, financial or other evidence.

. . .

3.1.2 In determining the amount of compensation to recommend, the Tribunal will attempt, insofar as is appropriate in the circumstances and bearing in mind any other relief that it recommended, to place the complainant in the position in which it would have been, but for the government’s breach or breaches.

3.1.3 Lost profit refers to the amount of profit that the complainant would have received pursuant to the designated contract, had it been awarded that contract. Compensation can be awarded for lost profit in situations where it is clear that the complainant would have won the contract, but for the government’s breach or breaches.

. . .

3.2.1 Compensation awards for lost profit and lost opportunity may be reduced in accordance with the principles outlined herein.

. . .

3.2.3 Mitigation of Damages – The Tribunal will also consider whether the claimant could have avoided losses suffered as a result of the government’s breach or breaches. This principle is often referred to as the plaintiff’s “duty to mitigate” loss. In deciding what amount of compensation to recommend, the Tribunal will require the complainant to describe the steps that it has taken to limit or mitigate the lost profit that it suffered or may suffer as a result of the government’s breach or breaches. The Tribunal’s compensation recommendation may be reduced where a complainant has not acted reasonably in this regard.

3.2.4 Amount for Contingency – Despite the fact that complainants anticipate earning a profit in performing a designated contract, few, if any, business undertakings are without risk and few have a guaranteed level of profit. The Tribunal’s recommendation may be adjusted downwards to reflect a variety of risks that might be involved in the performance of the contract, including contractual, business and human resource risks, for example. The amount of this downward adjustment will depend on the relative risk associated with the performance of the designated contract in question.

. . .

4.1 The complainant bears the onus of proof in establishing a compensation claim.⁴

5. Thus, the goal of the compensation exercise is to attempt to place MFL in the situation in which it would have been if it had been awarded the contract. As the Tribunal has stated in previous compensation orders, recommendations should not represent a windfall, but should reflect the actual loss suffered as a result of the government’s breach.⁵

Profit Formula

6. In its decision made on November 23, 2009, the Tribunal noted that the basis for calculating the lost profit was to be the total bid amount submitted by MFL in its proposal in response to the solicitation and the total value of the actual work performed for Parks Canada under the contract that was awarded.

7. In order to calculate its lost profit, MFL estimated its gross revenue (which it calculated by multiplying the actual quantities of work performed by the bid prices in its proposal) and deducted all applicable costs (which it calculated by multiplying the unit costs on which it based its proposal by the actual quantities of work performed), including overhead.

8. Parks Canada agreed with MFL’s overall approach to the calculation of its lost profit. However, it disagreed with some of the components of the calculation, including the applied overhead rate and the lack of any allowance for the profit earned by MFL on local projects that it would not have earned had it been awarded the contract in question. The Tribunal notes that the nearly $200,000 difference in the parties’ respective lost profit calculations is largely accounted for by these two components.

9. The Tribunal will proceed by first estimating the amount of revenue that MFL would have earned if it had been awarded the contract. It will then estimate the total costs that it would have incurred in order to earn this revenue. Finally, it will determine whether the resulting lost profit amount should be reduced to account for profits made on local projects that it would not have performed had it been awarded the contract.

Gross Revenue

10. The Invitation to Tender (ITT) issued by Parks Canada required bidders to complete a “Bid and Acceptance Form” and Appendix 1 to the “Bid and Acceptance Form” (Appendix 1). Appendix 1 required bidders to fill in a “Unit Price Table” with unit and extended prices for four parcels of work identified in the ITT. To these prices was added an ITT-defined, fixed $100,000 “Prime Cost Sum” amount to arrive at the bidder’s “Total Estimated Amount”. Bidders were then required to transfer the total estimated amount to a pre-defined field of the “Bid and Acceptance Form”, to which a lump-sum amount for work that was not designated in the “Unit Price Table” was added to arrive at the bidder’s “Total Bid Amount”. The ITT also provided for the payment, by Parks Canada, of early completion bonuses when work identified in each of the three stages of the contract was completed ahead of specified completion dates.

11. In order to estimate the amount of revenue that MFL would have earned if it had been awarded the contract, the Tribunal will examine the amounts submitted by MFL in its proposal and the work actually performed for Parks Canada under the contract that was awarded.

Lump-sum Amount

12. The “Bid and Acceptance Form” specified that the lump-sum amount was for work that was not designated in the “Unit Price Table” found at Appendix 1. According to the note found below the “Unit Price Table”, such work included, but was not limited to, mobilization and demobilization to and from the project site.

13. In its proposal, MFL included a lump-sum amount of $40,000.⁶ This amount was not contested by Parks Canada and was also not subject to change depending on the work actually performed for Parks Canada under the contract that was awarded.

14. Therefore, the Tribunal accepts that MFL would have received a lump-sum amount of $40,000 if it had been awarded the contract.

Unit Price Work

15. The “Unit Price Table” found at Appendix 1 of the ITT reads as follows:

16. According to a cost breakdown report provided to MFL by Parks Canada,⁷ the actual quantities of work performed under the contract for each of the four unit price items listed in the “Unit Price Table” were as follows: item No. 1 (Removal—Highway 93 South)—0; item No. 2 (Removal—Highway 93 North)—8,367.22 m; item No. 3 (Supply and Installation—Highway 93 North)—7,747.90 m; and item No. 4 (Supply and Installation—Norquay Road)—815 m.

17. The parties agree that, in principle, the revenue that MFL would have earned from the unit price work should be calculated by multiplying the unit prices submitted by MFL for each of the four items listed in the “Unit Price Table” by the actual quantities of work performed under the contract that was awarded. However, the parties disagree as to how item No. 1 (Removal—Highway 93 South) should be treated.

18. Parks Canada noted that, while the ITT included guardrail removal work on Highway 93 South, it turned out that this work was not required and was not actually performed by the successful bidder. It therefore submitted that, if MFL had been awarded the contract, it would not have performed the work either and would not have earned any revenue under this item.

19. MFL submitted that it understood that the successful bidder did not perform this work because the deadline for the completion of the first stage of the contract had passed by the time the contract was ultimately awarded. It submitted that the delay had been created by Parks Canada when it initially advised MFL that it was the lowest bidder and then improperly awarded the contract to its competitor. It further submitted that, while Parks Canada had the work performed by another contractor using a different solicitation process, MFL would have performed the work had it been properly awarded the contract.

20. While the Tribunal did recommend that compensation for lost profit be calculated in part on the basis of the total value of the actual work performed for Parks Canada under the contract that was awarded, the Tribunal’s reasons for its decision issued on November 23, 2009, make it clear that this was to ensure that MFL would be compensated for the value of any additional work arising during the performance of the contract.⁸ It was not intended to deprive MFL of compensation for work that was not actually performed by the successful bidder due to a delay that was ultimately caused by Parks Canada’s breach. To deprive MFL of such compensation would run counter to the objective of the compensation exercise and the Tribunal’s Guidelines, which state that, in determining the amount of compensation to recommend, the Tribunal attempts to “. . . place the complainant in the position in which it would have been, but for the government’s breach or breaches.”

21. On the basis of the evidence on the record, the Tribunal is reasonably convinced that, but for Parks Canada’s breach, MFL would have performed the guardrail removal work on Highway 93 South. The specifications attached to the ITT divided the work to be completed under the contract in three distinct stages. According to these specifications, stage 1 of the work, which covered the guardrail removal work on Highway 93 South, was to be completed by June 12, 2009.⁹ The Tribunal notes that, on the basis of MFL’s estimated productivity rates, this work would have taken less than a day to complete.¹⁰ The tender opening took place on May 27, 2009, and on May 28, 2009, MFL was advised that its tender was the lowest priced. However, on June 5, 2009, Parks Canada contacted MFL to advise it that the contract was to be awarded to its competitor. Further, according to MFL, it was informed by Parks Canada on June 9, 2009, that the contract had not yet been awarded. Therefore, in the Tribunal’s view, had the contract been properly awarded to MFL shortly after the tender opening, MFL would have had sufficient time to mobilize its personnel and equipment to the project site and complete the stage 1 work well ahead of the June 12, 2009, completion deadline.

22. Therefore, for purposes of estimating the revenue that MFL would have earned from the unit price work, the Tribunal will multiply the unit prices submitted by MFL for each of the four items listed in the “Unit Price Table” by the actual quantities of work performed under the contract that was awarded for item Nos. 2, 3 and 4 and by the estimated quantity of work for item No. 1. This results in an estimated revenue amount of $877,871.

“Prime Cost Sum”

23. The specifications attached to the ITT provided the following definition of the term “Prime Cost Sum”:¹¹

1.3 PRIME COST SUM

.1 Include in Contract Price a total Prime Cost Sum of $100,000.00.

.2 Do not include in the Contract Price, additional contingency allowances for products, installation, overhead or profit.

.3 Prime Cost Sum provided for in the unit price table is not a sum due the Contractor. Rather, payment will be made against it for miscellaneous work not included in the unit price table under the General Conditions of the Contract.

.4 Such work may include, but not be limited to:

.1 Removal of existing signs and posts

.2 Additional guardrail installation

.3 Additional sign installation

.5 The Contract Price, and not Prime Cost Sum, includes Contractor’s overhead and profit in connection with the Work.

24. According to the cost breakdown report provided to MFL by Parks Canada,¹² the actual work performed under the contract included work done for three items that were not included in the “Unit Price Table”. A total amount of $26,137.79 was paid by Parks Canada against the “Prime Cost Sum” for these work items.

25. In its lost profit report, MFL appears to claim that, in addition to the revenue that would have been generated by the additional work performed under the contract and not included in the “Unit Price Table”, it would have also earned $100,000 in revenue for the installation of signs and miscellaneous work indicated against the “Prime Cost Sum”.

26. Parks Canada submitted that the “Prime Cost Sum” was intended to cover unexpected additional work that may have had to be performed once the project was underway and that it was not a guaranteed amount that would be paid to the contractor. It submitted that to include both the revenue that MFL would have earned on the actual additional work performed under the contract (i.e. work that was not included in the “Unit Price Table”) and an amount of $100,000 is double counting and should not be allowed.

27. As evidenced by the definition provided above, the “Prime Cost Sum” was not a sum due to the contractor but rather a sum against which payment was to be made for miscellaneous work not included in the “Unit Price Table”. Therefore, the Tribunal agrees that including revenue for the actual work performed that was not included in the “Unit Price Table” and an amount of $100,000 is double counting. It is clear that, in this case, the only payment actually made by Parks Canada against the “Prime Cost Sum” for work not included in the “Unit Price Table” was the amount of $26,137.79 noted above. To assume that additional payments would have been made by Parks Canada against the “Prime Cost Sum” if MFL had been awarded the contract would be purely speculative.

28. In its lost profit report, MFL calculated that it would have earned $25,218.16 in revenue for the actual work performed under the contract that was not included in the “Unit Price Table”.¹³ The Tribunal accepts that MFL would have received this amount if it had been awarded the contract.

Early Completion Bonuses

29. The specifications attached to the ITT provided for the payment of early completion bonuses when work identified in each of the three stages of the contract was completed ahead of specified completion dates.¹⁴ Articles 1.4.1c), 1.4.2c) and 1.4.3c) of section 01 29 01 of the specifications read as follows:

If the Contractor has completed the work identified in Stage 1 of the contract . . . prior to June 12, 2009, Parks Canada will pay the Contractor . . . $2,000.00 per calendar day times the number of days the Contractor has completed the work and is no longer occupying the sites prior to the specified completion date of June 12, 2009. The maximum amount payable by Parks Canada to the Contractor shall be $6,000.00. . . .

If the Contractor has completed the work identified in Stage 2 of the contract . . . prior to June 25^th, 2009, Parks Canada will pay the Contractor . . . $2,000.00 per calendar day times the number of days the Contractor has completed work and is no longer occupying the sites prior to the specified completion date of June 25^th, 2009 The maximum amount payable by Parks Canada to the Contractor shall be $6,000.00. . . .

If the Contractor has completed the work identified in Stage 3 of the contract . . . prior to August 27, 2009, Parks Canada will pay the Contractor . . . $2,000.00 per calendar day times the number of days the Contractor has completed work and is no longer occupying the sites prior to the specified completion date of August 27, 2009. The maximum amount payable by Parks Canada to the Contractor shall be $10,000.00. . . .

30. MFL submitted that, in light of anticipated efficiencies and given that it had received the full amount of available bonuses on a similar tender by Parks Canada in 2008, it fully expected that it would have received the full amount of available bonuses, i.e. $22,000, if it had been awarded the contract.

31. While Parks Canada did appear to concede that MFL would have earned the early completion bonuses had it been awarded the contract, it submitted that the maximum amount available was $20,000.

32. As can readily be seen by articles 1.4.1c), 1.4.2c) and 1.4.3c) of section 01 29 01 of the specifications, the maximum amounts payable for each of the three stages of the contract were $6,000, $6,000 and $10,000, for a total of $22,000. The Tribunal is of the view that, on the basis of MFL’s estimated productivity rates for the project,¹⁵ it would likely have completed all the stages of work in the time required to obtain the maximum amount of bonuses had it been awarded the contract. Therefore, the Tribunal accepts that MFL would have received $22,000 in bonuses if it had been awarded the contract.

Total Revenue

33. Taking into consideration the amounts indicated above, i.e. a lump-sum amount of $40,000, an amount of $877,871 for unit price work, an amount of $25,218.16 for miscellaneous work not included in the “Unit Price Table” and an amount of $22,000 in early completion bonuses, the Tribunal finds that, had MFL been awarded the contract, it would have earned $965,089.16 in revenue.

Costs

34. The Tribunal must now estimate the total costs that MFL would have incurred in order to earn the above revenue amount. In order to do so, it will examine the costs upon which MFL based its proposal.

35. MFL included as part of its lost profit report a copy of a spreadsheet detailing its expected costs for the project, which it prepared in the normal course of business for purposes of responding to the solicitation.¹⁶ According to MFL, its experience with similar contracts, including a 2008 contract with Parks Canada for the removal and installation of guardrails on the Icefields Parkway in Banff National Park (the 2008 contract), and stable prices meant that it could predict most costs with a high degree of certainty.

36. Parks Canada indicated that, with the exception of the overhead costs, its loss calculation was based on the costs as estimated by MFL for purposes of responding to the solicitation. However, it did comment on a number of discrepancies that it observed between some of the costs incurred by MFL for the 2008 contract and its corresponding estimates for the contract in question. These will be addressed by the Tribunal in the appropriate sections below.

Costs Relating to the Lump-sum Amount¹⁷

37. MFL submitted that costs for mobilization and demobilization to and from the project site would have consisted of costs for return flights, wages paid to employees for travel time, wages, meals and lodging for drivers carrying the equipment to the project site and truck permits necessary for the transport of the equipment. These costs, as submitted by MFL, would have totalled $24,164.68.

38. Parks Canada commented that MFL’s actual travel costs for the 2008 contract were significantly higher than MFL’s estimated travel costs of $10,000 for the contract in question. However, the Tribunal notes that MFL only estimated that return flights for its employees would cost $10,000 and not total travel costs. All travel costs relating to the provision of traffic control services by a third party were included as part of MFL’s unit cost calculations for the unit price work. Therefore, the Tribunal believes that MFL’s estimated travel costs are reasonable and do not require any adjustment.

39. The Tribunal notes that, although MFL mentioned the cost for truck permits in its lost profit report,¹⁸ it did not include this cost in its spreadsheet and its calculation of lost profit. While MFL actually purchased the truck permits after Parks Canada had first informed it that it was the lowest bidder, the Tribunal is of the view that their cost should nonetheless be taken into consideration for purposes of calculating lost profit. In its decision made on November 23, 2009, the Tribunal had refused to recommend that MFL be compensated for expenses that it had actually incurred upon being informed by Parks Canada that it was the lowest bidder.¹⁹ The Tribunal reasoned that MFL was not obligated to incur costs on a contract that it had not yet been awarded. If the cost for truck permits was not included as part of the lost profit calculation, it would effectively result in the imposition upon Parks Canada of an expense that the Tribunal determined MFL was not obligated to incur.

40. Therefore, the Tribunal finds that MFL would have incurred costs of $24,164.68 for mobilization and demobilization to and from the project site.

Costs Relating to Unit Price Work

41. In order to estimate the costs that it would have incurred in relation to the unit price work, MFL first determined unit costs for each of the four work items in the “Unit Price Table” on the basis of the estimated quantities of work contained in the solicitation. It then multiplied these unit costs by the actual quantities of work performed under the contract that was awarded.

42. MFL’s starting point for determining unit costs was the average productivity rates that it achieved in respect of guardrail removal and installation for the 2008 contract. On the basis of these productivity rates, it estimated the number of days that it would have required to complete the work for the contract in question. It then used the number of days to determine labour, equipment (depreciation and fuel) and traffic control costs. A larger number of days were used to determine meal and lodging costs in order to account for the fact that such costs would still be incurred on Sundays when MFL’s employees would not have worked. However, these costs were then distributed over the estimated number of work days in order to obtain accurate unit costs. As for material costs, MFL based its estimate on historical pricing and quotations that it received. It also took into account material shipping costs from its location in New Brunswick to the project site in Alberta.

43. According to MFL, it also included additional costs as contingencies. It submitted that it used a conservative productivity rate (thereby increasing the number of days required to complete the work), a blended average hourly rate for labour that was higher than the wages that it actually pays, increased material costs and included an additional per diem for meals.

44. Parks Canada commented that MFL’s actual fuel costs for the 2008 contract were higher than MFL’s estimated fuel costs of $25,000 for the contract in question, which is a larger project. Although MFL’s estimated fuel costs are indeed lower than actual fuel costs for the 2008 contract, there could be a number of reasons for this difference, including price fluctuations for fuel, the type of equipment used, the distance from the work site, etc. Therefore, the Tribunal does not consider MFL’s estimate of $25,000 as unreasonable in the circumstances. Parks Canada also commented that, while MFL’s cost details for the 2008 contract show that bonuses were paid to workers, no such bonuses were added to MFL’s estimated labour costs for the contract in question. According to MFL, the cost entries for bonuses to workers for the 2008 contract were mislabelled and were only amounts paid as a result of its workers deferring part of their regular salaries until the end of that contract. The Tribunal considers this to be a reasonable explanation.

45. In reviewing MFL’s estimates, the Tribunal noticed that an error had been made with respect to lodging costs. Although MFL’s lost profit report indicates that seven rooms would have been required per night at a cost of $85 per night per room for the duration of the project, the amounts included in its spreadsheet indicate that only five rooms were used in estimating costs.²⁰

46. Therefore, after making an adjustment for lodging costs, recalculating units costs and multiplying these by the actual quantities of work performed under the contract that was awarded for item Nos. 2, 3 and 4 in the “Unit Price Table” and by the estimated quantity of work for item No. 1,²¹ the Tribunal finds that MFL would have incurred costs of $-------------- in relation to the unit price work.

Costs Relating to Additional Work (“Prime Cost Sum”)

47. In order to estimate the costs that it would have incurred in relation to additional work not included in the “Unit Price Table” and paid against the “Prime Cost Sum”, MFL essentially took the same approach and as it did to estimate costs relating to the unit price work.

48. The Tribunal agrees with this approach. However, it notes that MFL made errors with respect to lodging and meal costs. The amounts included in its spreadsheet indicate that only five rooms, instead of seven, were used in estimating costs.²² The amounts also indicate that only 9 per diems for meals, instead of 13, were used. MFL’s lost profit report clearly indicates that seven rooms per night and 13 per diems for meals were required.²³

49. Therefore, after making an adjustment for lodging and meal costs, the Tribunal finds that MFL would have incurred costs of $------------ in relation to additional work not included in the “Unit Price Table”.

Bid Bond Costs

50. In its lost profit report, MFL submitted that it had obtained a verbal quotation for the bid bond at a rate of $5.50 per $1,000 of contract value.²⁴ As its total bid amount was $836,288, it estimated that the bid bond would have cost $4,599.58.

51. The Tribunal notes that, in its spreadsheet, MFL appears to have used a bid bond rate of $7.50 per $1,000 of contract value.²⁵ It also converted the bid bond cost into a unit cost, which it then multiplied by the actual quantities of work performed under the contract that was awarded.

52. The Tribunal is of the view that bid bond costs should only be calculated in reference to the total bid amount and not the actual amount of revenue that would have been earned under the contract. Therefore, the Tribunal accepts that MFL would have incurred a bid bond cost of $4,599.58 as reported in its lost profit report.

Overhead Costs

53. MFL submitted that, on the basis of its gross revenue and administrative expenses in 2009 (which includes the revenue that it would have earned had it been awarded the contract), an overhead application rate of --- percent of the gross revenue that it would have earned is appropriate in the circumstances. It noted that, while it experienced an increase in revenue in 2009, its administrative expenses decreased slightly both in absolute and relative terms. It explained this occurrence by the fact that overhead is a “stepped cost” item and, thus, does not increase in direct proportion to revenue and that MFL had achieved substantial efficiencies over the past few years.

54. Parks Canada submitted that, on the basis of its analysis of MFL’s historical financial statements and the statements for the nine-month period ended December 31, 2009, the overhead rate applied by MFL was understated. It submitted that it was unlikely that the significant increase in revenue in 2009 would not have required additional overhead costs. It further submitted that the period used by MFL to calculate its overhead rate excluded the winter months when overhead expenses continue but there is likely less revenue. It therefore submitted that --- percent would be a more appropriate rate, as it is lower than the rate in the full year ended March 31, 2009, but higher than the rate for the nine-month period ended December 31, 2009.

55. On the basis of the information on the record, it is clear that MFL experienced a significant increase in revenue in 2009.²⁶ While the Tribunal recognizes that overhead is a “stepped cost” item and, therefore, does not increase in direct proportion to revenue and that MFL may have achieved substantial efficiencies over the past few years, it also recognizes that the overhead rate that MFL claims should apply was not calculated over a full-year period (i.e. it excluded the winter months) and is lower than its historical rates. In addition, the Tribunal notes that the overhead rate suggested by Parks Canada is slightly lower than MFL’s rates in the full years ended March 31, 2007, 2008 and 2009. However, the Tribunal also notes that only some specific types of administrative expenses would have been directly associated with the contract in question. As the Tribunal has previously stated, “. . . fixed expenses should not be deducted from revenues for the purpose of calculating lost profit.”²⁷ Therefore, in these circumstances, the Tribunal finds that an overhead application rate of --- percent is appropriate. Applying this rate to the total revenue that MFL would have earned had it been awarded the contract in question (excluding the early completion bonuses) results in overhead costs of $--------------.

Total Costs

56. Taking into consideration the costs indicated above, i.e. $24,164.68 for mobilization and demobilization to and from the project site, $-------------- incurred in relation to the unit price work, $------------ incurred in relation to additional work not included in the “Unit Price Table”, $4,599.58 for a bid bond and $-------------- in overhead, the Tribunal finds that, had MFL been awarded the contract, it would have incurred total costs of $618,515.54.

Lost Profit Calculation

57. In light of the above, the Tribunal considers that revenues of $965,089.16 less total costs of $618,515.54, or $346,573.62, reasonably represent the profit that MFL lost in not being awarded the contract in question.

Profit Made on Local Projects

58. Parks Canada submitted that MFL’s loss calculation did not allow for the profit made on local projects that it would not have earned had it been awarded the contract in question. According to Parks Canada, MFL informed it that the workers who would have worked on the contract in question were assigned to contracts in New Brunswick and Nova Scotia. It therefore assumed that, had MFL been awarded the contract in question, it would not have been able to take on the same number of local projects.

59. Parks Canada estimated the revenue that MFL earned on local projects that it would not have earned had it been awarded the contract in question as being the same as it would have earned under the contract in question. It then applied the profit rate reported by MFL in its internally prepared financial statements for the nine-month period ended December 31, 2009, and an overhead rate of 15 percent to arrive at a profit of $108,830, which it argued should be deducted from the profit that MFL would have earned under the contract in question.

60. MFL submitted that the applicable principle in this case is that, if a complainant could have performed the contract in question in addition to concurrent or subsequent contracts, the value of the other contracts should not be deducted from the amount to be awarded. It submitted that, in the present case, the amount of MFL’s lost profit on the contract in question should not be reduced, as it maintained sufficient capacity in terms of workers, equipment and time to perform the contract in question as well as other work.

61. In its lost profit report, MFL indicated that the contract in question would only have required that it use 9 of its approximately 65 seasonally employed workers and that, because the project was scheduled to be completed in June and July, which are slower months in terms of work for MFL, it would have fit perfectly into its overall schedule. It submitted that, had it been awarded the contract, it would have hired additional workers to complete any New Brunswick or Nova Scotia contracts. It added that, instead, these workers were not hired until August when work picked up. In terms of equipment, MFL indicated that the contract in question would only have required the use of 2 of the company’s 10 drill trucks and that, because it did not perform the contract in question, it had 3 or 4 drill trucks at the shop during June and July for lack of work.

62. As stated above, the goal of the compensation exercise is to attempt to place the complainant in the position in which it would have been, but for the government’s breach. Therefore, the Tribunal is of the view that MFL’s lost profit amount should only be reduced if it can be shown that, but for Parks Canada’s breach, MFL would have performed less local work.

63. Parks Canada simply assumed that, because the workers who would have been assigned to the contract in question were reassigned to contracts in New Brunswick and Nova Scotia, MFL could not have performed this local work had it been awarded the contract in question. However, the Tribunal is of the view that the information provided by MFL reasonably indicates that the number of workers that it employed did not represent an obstacle to the obtainment of additional work. The number of workers that would have been required for the contract in question was relatively small and, in any event, MFL could have, as it stated, simply hired additional workers earlier instead of waiting until August. As for the equipment required to perform the contract in question, MFL has reasonably demonstrated that it had more than enough capacity to complete the contract in question and any additional local work. In light of the foregoing, the Tribunal is of the view that MFL had sufficient capacity in terms of workers, equipment and time to perform the contract in question as well as other local work. Hence, the amount of profit that MFL lost in not being awarded the contract in question will not be reduced.

CONCLUSION

64. The Tribunal hereby recommends that Parks Canada compensate MFL in the amount of $346,573.62 for the profit that it lost in not being awarded the contract in question.

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

² . S.O.R./93-602.

³ . Subsection 30.15(2) of the CITT Act simply provides that, where the Tribunal determines that a procurement complaint is valid, it may recommend any remedy that it considers appropriate, including payment of compensation to the complainant in an amount specified by the Tribunal.

⁴ . In its order in Re Complaint Filed by Spacesaver Corporation (27 April 1999), PR-98-028 (CITT), the Tribunal stated that the burden on the complainant was to “. . . establish and prove the loss of profit for which compensation is claimed ‘on a reasonable preponderance of evidence’” [footnote omitted].

⁵ . See, for example, the Tribunal’s order in Re Complaint Filed by Douglas Barlett Associates Inc. (7 January 2000), PR-98-050 (CITT).

⁶ . Exhibit B to the public affidavit of Mr. McCormack at para. 37.

⁷ . Ibid., tab 17.

⁸ . See paragraph 42 of the Tribunal’s statement of reasons.

⁹ . See article 1.10.3 of section 01 11 00 of the specifications.

¹⁰ . Exhibit B to the confidential affidavit of Mr. McCormack at paras. 31; tab 18.

¹¹ . See article 1.3 of section 01 21 00 of the specifications.

¹² . Exhibit B to the public affidavit of Mr. McCormack, tab 17.

¹³ . Exhibit B to the confidential affidavit of Mr. McCormack, tab 18.

¹⁴ . See article 1.4 of section 01 29 01 of the specifications.

¹⁵ . Exhibit B to the confidential affidavit of Mr. McCormack at para. 31, tab 18.

¹⁶ . Ibid., tab 6.

¹⁷ . The Tribunal notes that costs relating to overhead and the obtainment of a bid bond are addressed separately and are therefore not included as part of the costs relating to the lump-sum amount, unit price work or additional work paid against the prime cost sum.

¹⁸ . Exhibit B to the public affidavit of Mr. McCormack at para. 42.

¹⁹ . See paragraph 43 of the Tribunal’s statement of reasons.

²⁰ . Exhibit B to the public affidavit of Mr. McCormack at para. 49; exhibit B to the confidential affidavit of Mr. McCormack, tab 6.

²¹ . The Tribunal notes that, in its spreadsheet, MFL calculated a unit cost for work item No. 1, but disregarded this figure in arriving at a profit amount. The Tribunal relied on the unit cost (adjusted for lodging costs as noted above) when determining total costs in relation to the unit price work.

²² . Exhibit B to the confidential affidavit of Mr. McCormack, tab 18.

²³ . Exhibit B to the public affidavit of Mr. McCormack at paras. 49-50.

²⁴ . Ibid. at para. 55.

²⁵ . Exhibit B to the confidential affidavit of Mr. McCormack, tab 18.

²⁶ . Ibid., tabs 1-3, 19.

²⁷ . Re Complaint Filed by Immeubles Yvan Dumais Inc. (7 June 2010), PR-2007-079 (CITT) at para. 72.