Files No. PR-2019-054 and PR‑2019-055 Newland Canada Corporation v. Department of National Defence

Determination and reasons issued Wednesday, April 29, 2020

 

TABLE OF CONTENTS

DETERMINATION  i

STATEMENT OF REASONS  1

SUMMARY OF THE COMPLAINT  1

PROCUREMENT PROCESS  1

COMPLAINT PROCEEDINGS  2

PRELIMINARY ISSUE—TRIBUNAL’S JURISDICTION  3

Coverage under Canada’s International Trade Agreements  5

Coverage under the CFTA  5

ANALYSIS  9

Ground 1: Did Newland Submit the Lowest-priced Compliant Bids?  10

Ground 2: Did the Hotel Accommodations Offered by MTI Comply with the Requirements of the Solicitations?  11

Conclusion  11

REMEDY  11

COSTS  13

DETERMINATION  13

 

IN THE MATTER OF two complaints filed by Newland Canada Corporation 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 complaints pursuant to subsection 30.13(1) of the Canadian International Trade Tribunal Act.

BETWEEN
NEWLAND CANADA CORPORATION	Complainant
AND
THE DEPARTMENT OF NATIONAL DEFENCE	Government Institution

DETERMINATION

Pursuant to subsection 30.14(2) of the Canadian International Trade Tribunal Act, the Canadian International Trade Tribunal determines that the complaints are 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 National Defence compensate Newland Canada Corporation for the profits that it lost in not being awarded the contracts at issue. The Canadian International Trade Tribunal recommends that, using the total bid amounts submitted by Newland Canada Corporation in response to Solicitations No. W6775-20-0054 and W6775-20-0055 as a base, Newland Canada Corporation and the Department of National Defence negotiate the amount of compensation and, within 60 days of the date of this determination, report back to the Canadian International Trade Tribunal on the outcome of the negotiations.

Should the parties be unable to agree on the amount of compensation, Newland Canada Corporation shall file with the Canadian International Trade Tribunal, within 70 days of the date of this determination, a submission on the issue of compensation. The Department of National Defence will then have seven working days after the receipt of Newland Canada Corporation’s submission to file a response. Newland Canada Corporation will then have five working days after the receipt of the Department of National Defence’s reply submission to file any additional comments. The parties are required to serve each other and file with the Canadian International Trade Tribunal simultaneously. The Canadian International Trade Tribunal reserves jurisdiction to establish the final amount of compensation.

Each party will bear its own costs.

 

Tribunal Panel:	Jean Bédard, Q.C., Presiding Member
Support Staff:	Alain Xatruch, Lead Counsel Zachery Shaver, Counsel
Complainant:	Newland Canada Corporation
Government Institution:	Department of National Defence
Counsel for the Government Institution:	Roy Chamoun Nicholas Howard Benjamin Hiemstra
Intervener:	Military Travel Inc.

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

SUMMARY OF THE COMPLAINT

[1]  Newland Canada Corporation (Newland) filed two complaints with the Canadian International Trade Tribunal (the Tribunal), pursuant to subsection 30.11(1) of the Canadian International Trade Tribunal Act, [1] concerning Requests for Proposal (Solicitations No. W6775-20-0054 and W6775-20-0055) (the RFPs) issued by the Department of National Defence (DND) for the provision of hotel accommodations in Cologne, Germany, for Canadian Armed Forces (CAF) members returning from operations in the Middle East and undergoing third-location decompression prior to their return to Canada.

[2]  Newland alleged that it should have been awarded the contracts as it submitted the lowest-priced compliant bids. It also alleged that the hotel accommodations offered by Military Travel Inc. (MTI), the successful bidder in both instances, did not meet the location requirements set out in the RFPs and that its bids were therefore non-compliant. As a remedy, Newland requested that it be awarded the contracts.

[3]  Having determined that the conditions set out in subsection 7(1) of the Canadian International Trade Tribunal Procurement Inquiry Regulations [2] had been met in respect of the complaints, the Tribunal decided, pursuant to subsection 30.13(1) of the CITT Act, to conduct an inquiry into the complaints.

[4]  The Tribunal conducted the inquiry into the validity of the complaints as required by sections 30.14 and 30.15 of the CITT Act. For the reasons provided below, the Tribunal finds that the complaints are valid.

PROCUREMENT PROCESS

[5]  On January 17, 2020, DND issued the first RFP (Solicitation No. W6775-20-0054), which was for the provision of hotel accommodations for 90 people from February 21, 2020, to February 24, 2020. [3] The solicitation closed on January 20, 2020.

[6]  On January 20, 2020, DND issued the second RFP (Solicitation No. W6775-20-0055), which was for the provision of hotel accommodations for 19 people from February 13, 2020, to March 5, 2020. [4] The solicitation closed on January 21, 2020.

[7]  Three suppliers, including Newland and MTI, submitted bids in response to the RFPs. [5]

[8]  On January 21, 2020, DND informed Newland in two separate emails that it would not be issued contracts as its bids had been evaluated as non-compliant. DND also indicated that it intended to award contracts in the amounts of €76,947.70 and €82,445.00 to MTI. [6]

[9]  On January 22, 2020, Newland responded to DND’s emails and challenged its determinations that its bids were non-compliant, claiming that it had been awarded many other contracts using the same technical bid. It also noted that its bid prices were lower than the amounts of the contracts that were to be awarded to MTI.

[10]  On the same day, DND replied to Newland and indicated that, after a review of the bids, it had determined that an error had been made in the evaluation and that, for both solicitations, Newland’s bids should have been deemed the successful bids. As the two contracts had already been awarded, DND proposed to enter into a settlement agreement with Newland to cover its lost profits and offered that, with similar contracts, 10% of the bid price is usually a reasonable assessment.

[11]  Newland replied to DND that, since it was the successful bidder for both solicitations, it wanted to be awarded the contracts and that, failing this, it would seek legal advice.

[12]  DND replied to Newland and agreed that it had made a mistake but indicated that operational decisions had been made based on the hotel offered by MTI and that it was therefore hoping it could negotiate a mutually acceptable settlement. DND also indicated to Newland that if its lost profits were higher than 10% or if it had other out-of-pocket expenses, this could be discussed to ensure that it was fairly compensated.

[13]  On January 23, 2020, Newland informed DND that it had considered its settlement offer but that, since it had submitted the lowest-priced compliant bids, it was maintaining its request to be awarded the contracts.

[14]  On the same day, DND replied to Newland that it could not simply award it the contracts as it had already entered into contracts with MTI. It again recognized that an error had been made in the evaluation of the bids and indicated that it was open to negotiating a settlement.

COMPLAINT PROCEEDINGS

[15]  On January 29, 2020, Newland submitted its complaints to the Tribunal.

[16]  On the same day, the Tribunal, pursuant to subsection 30.12(2) of the CITT Act, notified Newland that its complaints did not meet the requirements set out in subsection 30.11(2) and that additional information was required before its complaints could be considered to have been filed. [7]

[17]  On January 30 and 31, 2020, Newland provided the Tribunal with the requested information. Accordingly, its complaints were considered to have been filed on January 31, 2020.

[18]  On February 6, 2020, the Tribunal informed the parties that the complaints had been accepted, in part, for inquiry. The Tribunal indicated that Newland’s allegation that the hotel accommodations offered by MTI likely did not meet the location requirements set out in the RFPs had not been accepted for inquiry as the information provided did not disclose a reasonable indication that MTI had failed to meet those requirements. The Tribunal added that it required more than mere allegations in order to inquire into a specific ground of complaint.

[19]  On February 7, 2020, Newland provided the Tribunal with additional information relating to its allegation that was not accepted for inquiry. More specifically, it provided the name and address of the hotel offered by MTI, which it explained it had only received from DND two days earlier.

[20]  On February 11, 2020, the Tribunal informed the parties that, upon consideration of the new and additional information provided by Newland on February 7, 2020, it had decided to now inquire into this allegation as part of the inquiry already underway regarding Newland’s other allegation. The Tribunal was of the view that the new information provided by Newland, which could not, by reasonable diligence, have been produced earlier, disclosed a reasonable indication that MTI had failed to meet the location requirements set out in the RFPs. [8]

[21]  On February 24, 2020, MTI requested leave to intervene in this inquiry. After having canvassed the parties, the Tribunal granted intervener status to MTI on March 2, 2020. [9]

[22]  On March 3, 2020, DND filed its Government Institution Report (GIR).

[23]  On March 10, 2020, MTI confirmed that it had no comments on the GIR and the complaints.

[24]  On March 15, 2020, Newland requested access to Exhibits 1 and 2 of the GIR, which were designated as confidential by DND. On March 18, 2020, the Tribunal denied Newland’s request as it was satisfied that the exhibits, which contained MTI’s bids and DND’s evaluation documents for the two solicitations at issue, were properly designated as confidential in accordance with section 46 of the CITT Act. The Tribunal remarked that confidential documents in an inquiry are made available to independent counsel, when retained by a party, and once the proper forms have been filed.

[25]  On March 16 and 20, 2020, Newland filed its comments on the GIR.

[26]  Given that there was sufficient information on the record to determine the validity of the complaint, the Tribunal decided that an oral hearing was not required and disposed of the complaint on the basis of the written information on the record.

PRELIMINARY ISSUE—TRIBUNAL’S JURISDICTION

[27]  In its GIR, DND submitted that Canada’s international trade agreements do not cover the procurements at issue as the agreements specifically exclude services procured or purchased in support of military forces located overseas. It submitted that the procurements are also excluded from coverage under Canada’s internal trade agreement, the Canadian Free Trade Agreement, [10] as they do not constitute “covered procurement within Canada”. Therefore, according to DND, since none of Canada’s trade agreements cover the procurements at issue in these complaints, there are no designated contracts and the Tribunal is without jurisdiction to conduct an inquiry into the complaints.

[28]  Newland did not address any of DND’s arguments regarding the Tribunal’s jurisdiction.

[29]  Although the Tribunal agrees with DND that the solicitations at issue are excluded from coverage under Canada’s international trade agreements, it has not been persuaded that they are also excluded from coverage under the CFTA. The Tribunal’s analysis follows.

[30]  Subsection 30.11(1) of the CITT Act provides that “a potential supplier may file a complaint with the Tribunal concerning any aspect of the procurement process that relates to a designated contract and request the Tribunal to conduct an inquiry into the complaint.”

[31]  Section 30.1 of the CITT Act defines the term “designated contract” as “a contract for the supply of goods or services that has been or is proposed to be awarded by a government institution and that is designated or of a class of contracts designated by the regulations”.

[32]  Subsection 3(1) of the Regulations reads as follows:

For the purposes of the definition designated contract in section 30.1 of the Act, any contract or class of contract concerning a procurement of goods or services or any combination of goods or services, as described in Article 1001 of NAFTA, in Article II of the Agreement on Government Procurement, in Article Kbis-01 of Chapter Kbis of the CCFTA, in Article 1401 of Chapter Fourteen of the CPFTA, in Article 1401 of Chapter Fourteen of the CCOFTA, in Article 16.02 of Chapter Sixteen of the CPAFTA, in Article 17.2 of Chapter Seventeen of the CHFTA, in Article 14.3 of Chapter Fourteen of the CKFTA, in Article 19.2 of Chapter Nineteen of CETA, in Article 504 of Chapter Five of the CFTA, in Article 10.2 of Chapter Ten of CUFTA or in Article 15.2 of Chapter Fifteen of the TPP, that has been or is proposed to be awarded by a government institution, is a designated contract.

[33]  Therefore, in order for the Tribunal to have jurisdiction to conduct an inquiry into a complaint by a potential supplier, the complaint must be in respect of a designated contract. This means, inter alia, that it must concern a procurement of goods or services, or any combination thereof, as described in the provisions of the trade agreements that are listed in subsection 3(1) of the Regulations. These provisions are the “scope and coverage” articles of the agreements. The Federal Court of Appeal and the Supreme Court of Canada have analogized the trade agreements as “doors” into the jurisdiction of the Tribunal. [11]

Coverage under Canada’s International Trade Agreements

[34]  All international trade agreements cited in subsection 3(1) of the Regulations similarly exclude from the scope of their respective procurement chapters the provision of services purchased or procured “in support of military forces located overseas”. [12] There is no guidance on the application of this particular exclusion as it has never been the subject of consideration by the Tribunal. Nevertheless, a plain reading of the exclusion leads to the conclusion that it applies in the present case.

[35]  As previously mentioned, the solicitations at issue were for the provision of hotel accommodations in Cologne, Germany, for CAF members returning from operations in the Middle East and undergoing third-location decompression prior to their return to Canada. Hence, the services at issue were clearly purchased or procured in support of military forces that were located overseas and are thus excluded from coverage under all of Canada’s international trade agreements.

[36]  DND submitted that the services at issue are also covered by an exclusion for “Transportation, Travel and Relocation Services” under some of Canada’s international trade agreements. Indeed, the agreements which use the Common Classification System for classifying services exclude most classes of services falling under Category V, “Transportation, Travel and Relocation Services” from their scope of coverage. [13] Hotel and similar accommodation services are properly classified under Code V502 [14] and are therefore excluded from coverage under all but one of these agreements. [15] However, this is of little significance given that the Tribunal has already found above that none of Canada’s international trade agreements apply.

Coverage under the CFTA

[37]  The CFTA is a domestic trade agreement between Canada’s federal government and its provincial and territorial governments, which entered into force on July 1, 2017. It is the successor agreement to the Agreement on Internal Trade, [16] which had been in effect since 1995.

[38]  Article 500 of the CFTA provides that the purpose of Chapter Five is to “establish a transparent and efficient framework to ensure fair and open access to government procurement opportunities for all Canadian suppliers.”

[39]  Article 504.1 of the CFTA stipulates that Chapter Five “applies to any measure regarding covered procurement within Canada.” In the French version of the agreement, the words “covered procurement within Canada” in this provision read as “marchés couverts passés au Canada”. Article 502(1) of the AIT also stipulated that Chapter Five of that agreement applied to measures relating to “procurement within Canada”.

[40]  Article 504.2 of the CFTA essentially defines “covered procurement” as a procurement, for governmental purposes, by a procuring entity, of a good or service, for which the value exceeds the relevant threshold, and that is not otherwise excluded from coverage.

[41]  There is no question here that the solicitations at issue qualify as “covered procurements” under the CFTA as the RFPs were issued by DND, the relevant monetary threshold is met and the services are not otherwise excluded from coverage. The question raised by DND’s position—and the issue before the Tribunal—is whether they are also “within Canada” (“passés au Canada”) as required by Article 504.1 of the CFTA.

[42]  The CFTA does not define or explain what makes a procurement “within Canada”. That being said, in Northtrop Grumman, the Supreme Court of Canada held that the procurements within Canada referred to in Article 502(1) of the AIT were procurements between an entity of the federal government (or a provincial or territorial government) and a Canadian supplier, i.e. a supplier with a place of business in Canada. [17] Given that the words “procurement within Canada” are found in both the AIT and the CFTA, and given that these agreements have essentially the same objective and operating principles, [18] the Tribunal can see no reason why the holdings of the Supreme Court would not equally apply to the CFTA.

[43]  While DND conceded that Newland is a Canadian supplier and that DND is an entity of the federal government within the meaning of the CFTA, it submitted that coverage under the CFTA is also dependent on a third condition: the procurement must be for goods or services that are required in Canada. It submitted that the Courts in Northrop Grumman did not directly address the issue of the geographical location of the procurement activity as they were dealing with circumstances in which the goods were delivered inside Canada. DND submitted that, in the present case, the requisite geographical nexus between Canada and the services in question is absent as the hotel accommodations are provided outside of Canada.

[44]  Simply put, according to DND, the fact that the subject matter of the procurements is services that are to be provided outside of Canada characterizes the transactions as international trade and prevents the procurements from being considered “within Canada”. The Tribunal disagrees with this view for several reasons.

[45]  As mentioned above, the Courts in Northrop Grumman clearly stated that a “procurement within Canada” is a procurement between the federal government and a Canadian supplier. No other requirements were imposed or implied despite their finding that the AIT pertained to domestic trade within Canada. [19] This could be interpreted to mean that the origin of the goods or services, or the location where they are delivered or provided, are not relevant considerations and that it is solely the identity and geographical location of the parties to the procurement that characterizes the nature of the transaction and makes a procurement “within Canada” for the purposes of the CFTA.

[46]  In fact, the Federal Court of Appeal in Northrop Grumman rejected the argument that the “within Canada” requirement was met in that case because the goods and services were to be delivered to DND inside Canada. It reasoned that, if this argument were accepted, “a government entity could avoid the application of the AIT simply by specifying a non-Canadian delivery point for the goods that it wishes to acquire.” [20] Additionally, the Court held that nothing in the AIT imposed any requirement for procured goods to originate in Canada. [21] This seems to be the case with the CFTA as well. [22]

[47]  It is also noteworthy that there is at least one limited exclusion in the CFTA for certain types of goods and services that would normally be provided outside of Canada. Article 504.11(i)(vii) provides that Chapter Five of the CFTA does not apply to the procurement of goods or services “conducted for the specific purpose of providing international assistance, including development aid . . . .” The fact that there was a need to include this provision signals that there was an understanding on the part of the signatories to the agreement that goods or services provided outside of Canada were not otherwise going to be excluded from Chapter Five.

[48]  Finally, the Tribunal cannot ignore the French version of Article 504.1 of the CFTA, which speaks of “marchés couverts passés au Canada”. This appears to limit the concept of procurement within Canada to the solicitation process and the award of a contract, but not the actual performance of that contract. In his dissenting opinion in Northrop Grumman, Létourneau J.A. of the Federal Court of Appeal stated that the French words “passés au Canada” simply refer to a contract done or concluded in Canada which involves the government. [23] In its decision, the Supreme Court of Canada only added that, in the context of the scope and purpose of the AIT, the supplier also had to be Canadian for a procurement contract to be “pass[é] au Canada”. [24]

[49]  A plain reading of the French version of the provision suggests that, if one ventured to add to what has already been decided by the Courts in Northrop Grumman, the key requirement would be that the procurement contract be done or concluded in Canada, without regard for the origin of the goods or services, or the location where they are delivered or provided. Key considerations in determining whether a procurement contract is done or concluded in Canada could include where the solicitation originated, the location of the procuring entity and the procurement officer, the law governing the solicitation process as well as the law applicable to the resulting contract. [25]

[50]  DND also submitted that coverage under the CFTA for activities it considers as constituting international trade, including services in support of military forces located overseas, could undercut the exclusions that Canada has negotiated under its international trade agreements. It submitted that the present situation is akin to that in Northrop Grumman where the Supreme Court of Canada concluded that “[a]llowing non-Canadian suppliers to gain rights under the AIT where those rights were specifically excluded from agreements signed with their country’s government would undercut the exclusion.” [26] The Tribunal disagrees.

[51]  In Northrop Grumman, Northrop Grumman Overseas Services Corporation, a foreign supplier located in the United States, was attempting to gain access to the rights reserved for Canadian suppliers under the AIT in order to benefit from the fact that the goods being procured in that case were covered under that agreement but specifically excluded from coverage under NAFTA and the AGP (i.e. the agreements to which its country’s government, the United States, is a party).

[52]  In the present case, it is not disputed that Newland is a Canadian supplier and that it has standing to file a complaint before the Tribunal under the CFTA (i.e. that it has access to the rights reserved for Canadian suppliers under this agreement). The only question before the Tribunal is whether the solicitations at issue, which pertain to services that are to be provided outside of Canada, qualify as procurements within Canada and are therefore subject to the disciplines of the CFTA. This is simply a matter of defining the scope and coverage of the CFTA by interpreting its provisions. The fact that the services at issue are excluded from coverage under all of Canada’s international trade agreements has absolutely no bearing on this question. These exclusions were not negotiated with Canadian suppliers in mind.

[53]  Indeed, each trade agreement is the product of its own negotiations. As the Supreme Court of Canada noted in Northrop Grumman, access to the Tribunal for the resolution of disputes is “a concession that Canada can offer other countries in negotiating trade agreements with the intent of obtaining reciprocal concessions in the other country.” [27] While the trade agreements are generally structured in the same manner, the template has been adapted from one agreement to the other. The exclusions negotiated in one trade agreement are not meant to be imported by reference into another. They are negotiated and agreed upon by the parties for each trade agreement. If the federal government had intended to align the exclusions under the CFTA to those under its international trade agreements, it could have done so.

[54]  In addition to all of the foregoing, the Tribunal notes that the government’s position in previous inquiries relating to procurements for services to be provided outside of Canada has been inconsistent. For example, in Sunny Jaura d.b.a. Jaura Enterprises v. Department of Public Works and Government Services, [28] the Department of Public Works and Government Services (PWGSC), which conducted the procurement on behalf of DND, argued that the AIT did not apply as the procurement pertained to the provision of services in the United States. [29] Ultimately, this argument was not addressed by the Tribunal as it determined that the estimated value of the contract was below the monetary thresholds specified in all of the trade agreements, rendering the issue moot.

[55]  However, in at least two other inquiries into complaints relating to procurements for the provision of services outside of Canada, no such argument was raised by the government and the Tribunal simply concluded that the AIT applied. [30] The Tribunal also notes that there are tender notices posted on Buyandsell.gc.ca, the Government of Canada’s official procurement information Web site, relating to procurements for the provision of hotel accommodation services outside of Canada, that list the CFTA as being applicable. [31] Although the above is by no means dispositive of the issue, it serves to highlight the fact that, if it was commonly understood amongst federal procuring entities that the CFTA (and the AIT) only applied to goods and services delivered or provided in Canada, there would have been more consistency in their approach.

[56]  As mentioned previously, there is no dispute that Newland is a Canadian supplier and that DND is an entity of the federal government within the meaning of the CFTA. It is also beyond dispute that the procurement contracts were done or concluded in Canada. The evidence demonstrates that both the procuring entity and the procurement officer were located in Canada, [32] that the laws governing the solicitation process were those of Canada, and that it was intended that the resulting contract would be governed by the laws in force in Ontario or, at the bidder’s discretion, the laws of another Canadian province or territory. [33]

[57]  For the above reasons, the Tribunal concludes that, even if the solicitations at issue are for services that are to be provided outside of Canada, they nonetheless constitute covered procurements “within Canada” and are thus subject to the disciplines of Chapter Five of the CFTA. Accordingly, the Tribunal finds that Newland’s complaints are in respect of designated contracts as required by subsection 30.11(1) of the CITT Act. The Tribunal therefore has jurisdiction to conduct an inquiry into the complaints.

ANALYSIS

[58]  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. 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.

[59]  Section 11 of the Regulations specifies that the Tribunal must determine whether the procurement was conducted in accordance with the requirements set out in the applicable trade agreements, which, as determined above, is the CFTA.

[60]  Newland’s complaints contain two grounds. First, Newland alleged that it should have been awarded the contracts as it submitted the lowest-priced compliant bids. Second, it alleged that the hotel accommodations offered by MTI did not meet the location requirements set out in the RFPs. The Tribunal will address these two grounds in turn.

Ground 1: Did Newland Submit the Lowest-priced Compliant Bids?

[61]  Section 4.2 of the RFPs set out the basis upon which bids were to be selected for award of a contract. It reads as follows:

4.2  Basis of Selection

A bid must comply with all requirements of the bid solicitation to be declared responsive. The responsive bid with the lowest evaluated price will be recommended for award of a contract.

. . .

[62]  Newland submitted that it should have been awarded the contracts as the bids it submitted in response to the RFPs met all of the mandatory technical criteria and offered the lowest total price by a substantial margin. When Newland was first informed by DND that its bids had been evaluated as non-compliant, it responded by noting that it had previously been awarded a number of contracts using the same technical bid that it submitted in response to the solicitations at issue. [34]

[63]  DND acknowledged, both in its correspondence with Newland prior to the filing of the complaints and in its GIR, that, due to errors in the evaluation of the bids, the contracts were improperly awarded to higher-priced compliant bids. DND submitted that it apologized to Newland for the errors and attempted to reach a reasonable settlement to cover its lost profits, but to no avail.

[64]  Article 515.5 of the CFTA, which is relevant in this instance, reads as follows:

5.  Unless a procuring entity determines that it is not in the public interest to award a contract, the procuring entity shall award the contract to the supplier that the procuring entity has determined to be capable of fulfilling the terms of the contract and that, based solely on the evaluation criteria specified in the tender notices and tender documentation, has submitted:

(a)  the most advantageous tender; or

(b)  if price is the sole criterion, the lowest price.

[65]  Given DND’s acknowledgement that errors had been made with respect to the evaluation of Newland’s bids and that it should have been awarded the contracts, no further discussion or analysis is necessary to determine whether Newland’s bids complied with the requirements of the solicitations. The evidence on the record also clearly demonstrates that Newland’s bids were the lowest-priced. [35] In these circumstances, the Tribunal can only conclude that DND breached Article 515.5 of the CFTA by failing to award the contracts to Newland.

Ground 2: Did the Hotel Accommodations Offered by MTI Comply with the Requirements of the Solicitations?

[66]  Section 4.1.1.1 of the RFPs reads as follows:

4.1.1.1 Mandatory Technical Criteria

MT 1  The Contractor must ensure that facilities must be located within 1500 meters of the Cologne Cathedral (Kolner Dom) and West of the Rhein River, North of Richard-Wagner-Str., Pilgrim, Hahnerstr and Cacilien Str, (Extended road leading West from Deuzter Brucke) and South of Eberplatz.

[67]  Newland submitted that the hotel accommodations offered by MTI in response to the RFPs, the Steigenberger Hotel Köln, failed to comply with this mandatory technical criterion as it is located more than 1500 meters from the Cologne Cathedral when measured in terms of driving distance.

[68]  DND submitted that this ground of complaint is moot, given its acknowledgment that Newland should have been awarded the contracts. However, it submitted that its evaluation of MTI’s bids was reasonable as it was based on the distance between the proposed hotel and the Cologne Cathedral “as the crow flies”. It added that all bids were evaluated in this manner.

[69]  Given its conclusion regarding Newland’s first ground of complaint, and for reasons of judicial economy, the Tribunal will not make a finding with respect to the issue of whether or not DND’s evaluation of MTI’s bid was reasonable in the circumstances. That conclusion, along with the remedy recommended further below, effectively render Newland’s second ground of complaint moot.

[70]  Nonetheless, the Tribunal would like to point out that, in its comments on the GIR, Newland referred to another solicitation issued by DND (Solicitation No. W3162-20-010), in which the words “as the crow flies” were used, to support its argument that, for the solicitations at issue, compliance with the above mentioned criterion was to be established on the basis of the driving distance between the proposed hotel and the Cologne Cathedral. [36] The Tribunal notes that this solicitation was issued on February 2, 2020, after the solicitations at issue were published and, more importantly, after Newland had filed its complaints. If anything, this seems to indicate that DND is now attuned to the point raised by Newland and has sought to clarify its interpretation in subsequent procurements. [37]

Conclusion

[71]  In light of the foregoing, the Tribunal determines that Newland’s complaints are valid.

REMEDY

[72]  Subsection 30.15(2) of the CITT Act provides that, where the Tribunal determines that a complaint is valid, it may recommend such remedy as it considers appropriate, including one or more of the following: (1) the issuance of a new solicitation; (2) the re-evaluation of the bids; (3) the termination of the designated contract; (4) the award of the designated contract to the complainant; or (5) the payment of compensation to the complainant.

[73]  Subsection 30.15(3) of the CITT Act further provides that, in recommending an appropriate remedy, the Tribunal must consider all the circumstances relevant to the procurement in question, including the following: (1) the seriousness of the deficiencies found; (2) the degree to which the complainant and all other interested parties were prejudiced; (3) the degree to which the integrity and efficiency of the competitive procurement system was prejudiced; (4) whether the parties acted in good faith; and (5) the extent to which the contract was performed.

[74]  In its complaints, Newland requested that it be awarded the contracts. As the contracts have already been awarded to MTI and fully performed, the Tribunal cannot recommend that they be terminated or awarded to Newland. Having regard to the circumstances relevant to the solicitations at issue, the Tribunal is of the view that the only appropriate remedy in this case is that Newland be compensated for the profits that it lost in not being awarded the contracts. This will, in effect, place Newland in the position in which it would have been, but for DND’s breach of Article 515.5 of the CFTA.

[75]  DND acknowledged that, in the circumstances, Newland is entitled to its reasonable lost profits. However, it claimed that, despite its own numerous good faith attempts to reach an agreement on the quantum of compensation, Newland has been unwilling to engage in reasonable discussions and has refused to provide documentation supporting its claim for lost profits based on a 40% profit margin. DND therefore requested that the Tribunal recommend that Newland be compensated at a quantum for which it has already provided supporting documentation, [38] which DND calculated as being a profit margin of 12.5% for the first contract and 21.3% for the second.

[76]  The Tribunal notes that the evidence on the record does indicate that, following the filing of its complaints, Newland engaged with DND on the issue of the quantum of compensation for its lost profits. [39] While Newland did provide DND with some documentation in support of its claim for lost profits, it failed to adequately substantiate its claimed profit margin of 40%. To be fair, Newland did explain to DND that the documentation provided were pro forma invoices that did not include additional discounts typically received when negotiating final prices with the hotels. [40] However, it refused to provide DND with any documents to prove that such additional discounts are actually received. [41]

[77]  Despite Newland’s refusal to adequately substantiate its claimed profit margin of 40%, the Tribunal is not prepared to recommend a final amount of compensation at this juncture as it is of the view that a negotiated settlement between the parties is preferable and still achievable. Accordingly, the Tribunal recommends that, using the total bid amounts submitted by Newland in response to the solicitations at issue as a base, the parties negotiate the amount of compensation. The parties are to refer to the Tribunal’s Procurement Compensation Guidelines for guidance.

[78]  The Tribunal reminds parties that the compensation exercise can vary from case to case. The Tribunal does not necessarily expect the same level of sophistication from a small or medium-sized enterprise as it would from a large multinational organization, particularly to the extent that to do so would prevent smaller bidders from recovering legitimate losses. To be sure, some substantiation of the costs and income projection is absolutely required, but the Tribunal maintains flexibility and discretion to determine what is appropriate and sufficient on a case-by-case basis. There is also an element of proportionality which should be taken into consideration and which is commensurate both with the amount claimed and the level of sophistication of the bidder.

[79]  Newland should take note that, when negotiating with DND, it is expected to present the best available evidence having regard to the conditions of proportionality described above. The best evidence is preferably in the form of documentary evidence. Affidavits can also be presented and supported by documents that are available.

[80]  Should both parties be of the view that a settlement conference, presided by a Member of the Tribunal who is not involved in the adjudication of this matter, could prove helpful in achieving a negotiated settlement, they are invited to contact the Registrar.

COSTS

[81]  Pursuant to section 30.16 of the CITT Act, the Tribunal may award costs of, and incidental to, any procurement complaint proceedings.

[82]  Newland did not request the reimbursement of its complaint costs. Therefore, each party will bear its own costs.

[83]  The Tribunal notes that, prior to the filing of the complaints, DND had already acknowledged that it had made errors in the evaluation of Newland’s bids and that it should have been awarded the contracts. It had also offered to compensate Newland for its reasonable lost profits. The intervention of the Tribunal by way of the present inquiry did not change this outcome. The parties have now been requested to go back and negotiate the amount of compensation with the benefit of some guidance from the Tribunal. Other than enlisting the Tribunal to recommend the final amount of compensation should the negotiations fail, these complaint proceedings have not achieved any meaningful result. For these reasons, the Tribunal would not have awarded Newland its complaint costs even if it had made the request.

DETERMINATION

[84]  Pursuant to subsection 30.14(2) of the CITT Act, the Tribunal determines that the complaints are valid.

[85]  Pursuant to subsections 30.15(2) and (3) of the CITT Act, the Tribunal recommends, as a remedy, that DND compensate Newland for the profits that it lost in not being awarded the contracts at issue. The Tribunal recommends that, using the total bid amounts submitted by Newland in response to Solicitations No. W6775-20-0054 and W6775-20-0055 as a base, Newland and DND negotiate the amount of compensation and, within 60 days of the date of this determination, report back to the Tribunal on the outcome of the negotiations.

[86]  Should the parties be unable to agree on the amount of compensation, Newland shall file with the Tribunal, within 70 days of the date of this determination, a submission on the issue of compensation. DND will then have seven working days after the receipt of Newland’s submission to file a response. Newland will then have five working days after the receipt of DND’s reply submission to file any additional comments. The parties are required to serve each other and file with the Tribunal simultaneously. The Tribunal reserves jurisdiction to establish the final amount of compensation.

[87]  Each party will bear its own costs.