File No. PR-2018-029 Turbo Expert Québec Inc. v. Department of Public Works and Government Services

Determination and reasons issued Wednesday, February 6, 2019

 

TABLE OF CONTENTS

DETERMINATION  i

STATEMENT OF REASONS  1

BACKGROUND  1

RELEVANT PROVISIONS OF THE RFP  2

POSITION OF THE PARTIES  2

Turbo Expert  2

PWGSC  3

ANALYSIS  4

PWGSC should have awarded the contract to Turbo Expert  4

DETERMINATION  6

 

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

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

BETWEEN
TURBO EXPERT QUÉBEC INC.	Complainant
AND
THE DEPARTMENT OF PUBLIC WORKS AND GOVERNMENT SERVICES	Government Institution

DETERMINATION

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 30.15(3) of the Canadian International Trade Tribunal Act, the Tribunal recommends that the Department of Public Works and Government Services award the contract in issue to Turbo Expert Québec Inc. If, for any reason, the award of the contract is not feasible, the Tribunal recommends that the Department of Public Works and Government Services compensate Turbo Expert Québec Inc. for its lost profits as a result of not being awarded the contract.

Should the parties be unable to agree on the amount of compensation for lost profit, Turbo Expert Québec Inc. shall file with the 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 seven working days after the receipt of Turbo Expert Québec Inc.’s submission to file a response. Turbo Expert Québec Inc. will then have five working days after the receipt of the Department of Public Works and Government Services’ reply submission to file any additional comments. The parties are required to serve each other and file with the Tribunal.

Pursuant to section 30.16 of the CITT Act, the Tribunal awards Turbo Expert Québec Inc. its reasonable costs incurred in preparing and proceeding with this complaint, which costs are to be paid by the Department of Public Works and Government Services. In accordance with the Procurement Costs Guideline, the Tribunal’s preliminary indication of the level of complexity for this complaint is Level 1 and its preliminary indication of the amount of the cost award is $1,150. If any party disagrees with the preliminary level of complexity or indication of the amount of the cost award, it may make submissions to the Tribunal, as contemplated in Article 4.2 of the Procurement Costs Guideline. The Tribunal reserves jurisdiction to establish the final amount of the cost award.

 

Tribunal Panel:	Serge Fréchette, Presiding Member
Support Staff:	Laura Colella, Counsel
Complainant:	Turbo Expert Québec Inc.
Government Institution:	Department of Public Works and Government Services
Counsel for the Government Institution:	Benoît de Champlain

Please address all communications to:

The Registrar
Secretariat to the Canadian International Trade Tribunal
333 Laurier Avenue West
15th Floor
Ottawa, Ontario  K1A 0G7

Telephone: 613-993-3595
Fax: 613-990-2439
E-mail: citt-tcce@tribunal.gc.ca

 

STATEMENT OF REASONS

[1]  On September 26, 2018, Turbo Expert Québec Inc. (Turbo Expert) filed a complaint with the Canadian International Trade Tribunal (the Tribunal) concerning a Request for Proposal (RFP) related to a procurement (Solicitation No. W8482-168399/A) by the Department of Public Works and Government Services (PWGSC) on behalf of the Department of National Defence (DND) concerning a contract for the maintenance of turbochargers described as follows:

The Department of National Defence (DND) has a requirement for Repair and Overhaul Support, including Disposal, Mobile Repair Party (MRP), Field Service Representative (FSR), Technical Investigation and Engineering Support (TIES), and Special Investigations and Technical Studies (SITS) for the Napier Turbocharger/Cartridge assemblies fitted on the Halifax Class frigate propulsion diesel engines. The Halifax-class ship’s homeports are in Esquimalt, British Columbia, and Halifax, Nova Scotia. The period of the contract is for three (3) years with an option for two (2) periods of one (1) year.

[2]  Turbo Expert’s complaint can be summarized as follows:

1. Instead of cancelling the tendering process, PWGSC should have awarded it the contract, as its bid had been deemed compliant, while the bids by Wӓrtsilӓ Canada Incorporated (Wӓrtsilӓ) and Dynamic Engineering (Dynamic) had not.
2. PWGSC failed to notify Turbo Expert when the contract awarded to Wärtsilä was cancelled as the result of its error in evaluating the bid and of the fact that Dynamic’s bid was unsuccessful.
3. PWGSC allegedly failed to notify the Tribunal that there was a compliant bidder, i.e. Turbo Expert, when Dynamic filed a complaint with the Tribunal (File No. PR-2017-060).
4. PWGSC showed favoritism toward Wärtsilä, as no new RFP was issued after the contract awarded to Wärtsilä was cancelled in April. This suggests that PWGSC is waiting for Wärtsilä to complete its Napier certification process before retendering the procurement.

[3]  PWGSC argues that, when it realized that the Wärtsilä bid was non-compliant, the bid validity period had expired. PWGSC argued that it had no other choice but to terminate the contract awarded to Wärtsilä and to commit to retendering the procurement.

[4]  For the reasons provided below, the Tribunal finds that the complaint is valid.

BACKGROUND

[5]  On December 8, 2017, [1] PWGSC issued an RFP for repair and overhaul support for the turbochargers fitted on DND’s Halifax Class frigate propulsion diesel engines.

[6]  The RFP was issued for certain potential bidders, including the complainant, who are recognized as authorized agents of the turbocharger manufacturer, Napier Turbochargers (Napier).

[7]  PWGSC received three bids before the bid closing date of January 24, 2018. In addition to Turbo Expert, the two other bidders were Wärtsilä and Dynamic.

[8]  On February 9, 2018, PWGSC informed the bidders that the contract had been awarded to Wärtsilä.

[9]  According to Turbo Expert, on February 12, 2018, it sent an e-mail to PWGSC to inquire about its ranking in the process and to ask PWGSC about Wärtsilä because Turbo Expert claimed that Wärtsilä was not a company authorized by Napier.

[10]  On April 10, 2018, by mutual agreement with Wärtsilä, PWGSC cancelled the contract awarded to it. Turbo Expert only became aware of this on September 18, 2018.

[11]  Pursuing its research, Turbo Expert learned of the Tribunal’s decision in File No. PR-2017-060, in which Dynamic, the other bidder, had filed a complaint concerning the same procurement process. That was when Turbo Expert realized that it had not been mentioned by PWGSC as another bidder, even though it had been successful in the process and had not been chosen because it was not the top-ranked bidder, presumably because of a higher price.

RELEVANT PROVISIONS OF THE RFP

[12]  The RFP included two sections: the first was a technical bid and the second a financial bid. To be selected for the process, the bidders had to meet all the mandatory technical criteria.

[13]  The mandatory criteria set out in Annex I of the RFP specified, among other things, that the bidder had to be a Napier Turbocharger Authorized Agent (Service Centre) and have overhauled Napier turbochargers in the last five-year period.

POSITION OF THE PARTIES

Turbo Expert

[14]  Turbo Expert is of the view that, if the evaluation had been conducted correctly at the outset, it would have been awarded the contract.

[15]  Turbo Expert also argues that it seemed “peculiar” [translation] that PWGSC erred in evaluating the first criterion, that of providing a certificate issued by Napier, which can “raise doubts about the entire evaluation process” [2] [translation].

[16]  Turbo Expert alleges that issuing a new solicitation instead of awarding it the contract would be unfair because it would give Wärtsilä the time to become a Napier Authorized Agent, when it was not at the time of the solicitation. [3]

PWGSC

[17]  PWGSC does not deny that Turbo Expert submitted a bid that complied with the criteria of the RFP.

[18]  According to PWGSC, when it realized that Wärtsilä’s bid was non-compliant, the bid validity period had expired. PWGSC argues that it had no other choice but to terminate the contract awarded to Wärtsilä and to issue a new solicitation.

[19]  PWGSC indicates that, according to the RFP, the bids remained valid for 60 days from the bid closing date on January 24, 2018, i.e. until March 25, 2018. [4] The RFP incorporated by reference the Standard Instructions – Goods or Services – Competitive Requirements (Standard Instructions), by virtue of section 2.1 of the RFP, which provides as follows:

4. Bids will remain open for acceptance for a period of not less than 60 days from the closing date of the bid solicitation, unless specified otherwise in the bid solicitation. Canada reserves the right to seek an extension of the bid validity period from all responsive bidders in writing, within a minimum of 3 days before the end of the bid validity period. . . .

[20]  PWGSC states the following:

Under the circumstances, PWGSC decided to terminate the Wärtsilä contract and to issue a new solicitation.

[Translation]

[21]  It was not until Dynamic filed the complaint with the Tribunal that PWGSC analyzed the complaint and re-examined the Wärtsilä bid. In doing so, PWGSC submits that it realized its error, as the “qualifications of Wärtsilä Global had been considered” [translation], but the bidder was Wärtsilä Canada, not Wärtsilä Global.

[22]  Regarding Turbo Expert’s other allegations, PWGSC states that bidders can register on the “Buy and Sell” site to receive e-mail notifications of invitations that interest them. In that way, Turbo Expert could have received the notice regarding the cancellation of the contract awarded to Wärtsilä. PWGSC also mentions that the Tribunal’s decision regarding Dynamic’s complaint was also published shortly after it was made on May 16, 2018.

[23]  PWGSC also alleges that the delay in publishing a new solicitation was due to the fact that the amount bid by Wärtsilä was made public when the contract was awarded to it and therefore that “it seemed fair to let a few months pass before issuing a new solicitation to mitigate the harm caused by the fact that its competitors knew the amount it had bid” [5] [translation].

ANALYSIS

PWGSC should have awarded the contract to Turbo Expert

[24]  As mentioned above, PWGSC claims that it could not award the contract to Turbo Expert when it learned that the Wärtsilä bid was non-compliant because the 60-day bid validity period had expired. That date was March 25, 2018.

[25]  The Wärtsilä contract was cancelled on April 10, 2018, apparently after the period ended.

[26]  However, Turbo Expert indicates that, on February 12, 2018, it wrote to PWGSC [6] and informed it that Wärtsilä, the Canadian company, was not on the list of authorized centres and therefore could not meet the mandatory criteria of the RFP.

[27]  We also know that Dynamic had notified PWGSC on February 14, 2018, that Wärtsilä could not meet the criteria of the RFP. [7]

[28]  In response to their objections, PWGSC informed Turbo Expert and Dynamic that Wӓrtsilӓ met the mandatory criteria and that their concerns would therefore not be considered.

[29]  PWGSC indicates that, on March 2, 2018, it received the Tribunal’s decision in the Dynamic case, indicating that it would conduct an inquiry into the complaint that Dynamic filed, and that, following that decision, PWGSC re-examined the Wӓrtsilӓ bid and found that it had erred in evaluating its bid. It therefore terminated the Wӓrtsilӓ contract on April 10, 2018.

[30]  PWGSC submits that, when it terminated the contract, it was too late to consider the next highest‑ranked bidder, i.e. Turbo Expert.

[31]  In February 2018, during the bid validity period, PWGSC did not consider that Wӓrtsilӓ Global was not an authorized agency and that it did not meet the mandatory criteria of the RFP, even though two bidders had informed it of that. PWGSC did not explain why it failed to act at that time to ensure that the successful bid complied with the solicitation requirements.

[32]  In any event, PWGSC also did not explain why over five weeks passed between the Tribunal’s decision to conduct an inquiry into Dynamic’s complaint, PWGSC’s finding following its internal audit, which found that the Wärtsilä bid was in fact non-compliant, and the cancellation of the Wärtsilä contract. Moreover, as set out in the Standard Instructions, incorporated into the RFP by reference, PWGSC also had the prerogative of asking the compliant bidders to extend the validity of their bids, which it failed to do under the circumstances described.

[33]  The Tribunal stated as follows in Francis H.V.A.C.: [8]

The Tribunal has consistently upheld provisions of the trade agreements that government institutions are required to ensure that contracts are awarded pursuant to the terms set out in the tender documents. The Tribunal has also held that, upon discovery of errors in an evaluation process, the contracting authority must take appropriate steps “to correct such errors”. [9]

[34]  Moreover, the Tribunal stated as follows in Agence Gravel, a case in which PWGSC, as in this case, had justified cancelling the RFSO because the bid validity period had expired: [10]

66.  . . . PWGSC allowed the bid validity period to expire through a series of errors and delays of its own making, that could in all likelihood have been avoided by carrying out its procedures with reasonable diligence.

73.  The Tribunal has already had the opportunity to state that “suppliers’ proposals must also be reviewed with diligence and thoroughness. After all, potential suppliers invest a significant amount of their own corporate resources to try to offer the government the best possible proposals under risky competitive conditions.” [11]  . . .

[35]  On appeal, the Federal Court of Appeal held that the Tribunal’s decision in this regard was reasonable. [12] In doing so, the Court of Appeal also confirmed that PWGSC’s argument in this case—that it had no other choice but to cancel the procurement process because the bid validity period had expired—was properly rejected. [13]

[36]  The Tribunal stated as follows in Medi-Sure, a case concerning the expiration of the bid validity period: [14]

However, that clause, which was incorporated by reference in the RFP by PWGSC, only operates to limit PWGSC’s discretion to award a contract after bids have expired when no award has yet been made. The clause does not prevent PWGSC from, when it has already made an award within the bidding period, remedying a breach of the trade agreements brought to its attention. This can be done even after the expiration of the bidding period, as long as it is accomplished consistent with the bidders’ rights as they had crystallized before the expiration of the bidding period.

[37]  The Tribunal therefore finds that PWGSC failed to act in a reasonable and diligent manner by letting the bid validity period expire. PWGSC cannot use the expiration of the bid validity period caused by its own lack of diligence to justify not awarding the contract to Turbo Expert.

[38]  In light of the Tribunal’s decision regarding the first allegation, it is not necessary for the Tribunal to address the complainant’s other allegations.

DETERMINATION

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

[40]  Pursuant to subsections 30.15(2) and 30.15(3) of the CITT Act, the Tribunal recommends that PWGSC award the contract in issue to Turbo Expert. If, for any reason, the award of the contract is not feasible, the Tribunal recommends that PWGSC compensate Turbo Expert for its lost profits as a result of not being awarded the contract.

[41]  Should the parties be unable to agree on the amount of compensation for lost profit, Turbo Expert 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 seven working days after the receipt of Turbo Expert’s submission to file a response. Turbo Expert will then have five working days after the receipt of PWGSC’s reply submission to file any additional comments. The parties are required to serve each other and file with the Tribunal.

[42]  Pursuant to section 30.16 of the CITT Act, the Tribunal awards Turbo Expert its reasonable costs incurred in preparing and proceeding with this complaint, which costs are to be paid by PWGSC. In accordance with the Procurement Costs Guideline (the Guideline), the Tribunal’s preliminary indication of the level of complexity for this complaint is Level 1 and its preliminary indication of the amount of the cost award is $1,150. If any party disagrees with the preliminary level of complexity or indication of the amount of the cost award, it may make submissions to the Tribunal, as contemplated in Article 4.2 of the Guideline. The Tribunal reserves jurisdiction to establish the final amount of the cost award.