Executive Summary: Key Legal and Evidentiary Issues

• The Canadian International Trade Tribunal treated RHEA/Paladin’s post-award personnel substitutions as contract administration outside its jurisdiction, rather than assessing them under the procurement framework.

• ADGA alleged a “bait and switch,” claiming RHEA/Paladin’s certification of personnel availability under section 5.2.3.1 of the RFP was false, relying on the proposed substitution of 44 of 45 resources after contract award.

• The Tribunal held RHEA/Paladin’s certifications were true at the time of bidding and that there was no intention to engage in a bait and switch, relying in part on express contractual provisions permitting substitutions.

• In drawing a line between procurement and contract administration, the Tribunal distinguished this services contract from previous “different procurement” cases involving goods, but the Federal Court of Appeal found this goods/services distinction erroneous in the circumstances.

• The Federal Court of Appeal held that the Tribunal failed to address ADGA’s argument that certain substituted personnel may not have met the RFP’s mandatory minimum qualifications and remitted that specific issue to the Tribunal.

• ADGA’s challenge to PSPC’s evaluation of one of its reference contracts failed, as the Tribunal reasonably upheld the evaluators’ decision not to allocate points where preventative maintenance on both hardware and software was not explicitly demonstrated, and the Federal Court of Appeal found no reviewable error in that reasoning.

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Facts of the case

ADGA Group Consultants Inc. filed a complaint with the Canadian International Trade Tribunal after the Department of Public Works and Government Services (also known as Public Services and Procurement Canada or PSPC) awarded contracts to RHEA Inc. and Paladin Technologies Inc. (RHEA/Paladin). The contracts concerned the provision of technical resources and services for electronic security systems used by Correctional Service of Canada. The Tribunal dismissed ADGA’s complaint, and ADGA then applied to the Federal Court of Appeal for judicial review of the Tribunal’s decision.

The Tribunal’s reasons set out the facts and chronology of the procurement, the evaluation of competing tenders, the contract award, and the transition from ADGA as incumbent supplier to RHEA/Paladin. It observed that poor planning and tender design, as well as failed negotiations between ADGA and PSPC to extend the incumbent contract, resulted in a much abbreviated transition period between the old and new contracts. After winning three of five contracts in the Request for Proposal (RFP), RHEA/Paladin then proposed to PSPC that 44 of the 45 personnel previously certified in its winning bid as available to fulfill the contract requirements be replaced with different personnel.

ADGA characterized this as a “bait and switch.” It argued that section 5.2.3.1 of the RFP imposed a continuous obligation on bidders to certify the availability of proposed resources throughout the RFP process up to contract award, and that RHEA/Paladin’s certification of availability was false, as shown by the post-award substitution of 44 out of 45 proposed personnel.

Alleged bait and switch and the specific substitution example

Before the Federal Court of Appeal, ADGA focused on several individuals as evidence of a bait and switch. These individuals were former ADGA employees whom ADGA had itself proposed in its own bid to fill certain positions. After the award and implementation of the contract, they were occupying positions under RHEA/Paladin that ADGA said did not meet the RFP’s minimum mandatory requirements.

One example concerned the role of regional supervisor. The RFP required that a person certified for that role have 60 months’ experience delivering maintenance to specified systems and 24 months’ experience managing a team of five. According to ADGA, at the time bidding closed, the individual substituted into that role had only 20 months of relevant systems maintenance experience and less than 24 months of management experience.

RHEA/Paladin was required to justify its proposed substitutions to PSPC. Its justifications included the accelerated transition timeframe, staff attrition, the highly competitive labour market for information technology employees, and the availability of more qualified personnel.

The Tribunal’s characterization of substitutions as contract administration

The Tribunal accepted the evidence of a RHEA/Paladin representative that RHEA/Paladin’s certifications were correct at the time of its RFP submission and that there was no intention to engage in a bait and switch. It also noted that the terms of the resulting contract explicitly permitted substitution of resources during the term of the contract. On that basis, the Tribunal concluded that the substitutions of replacement personnel by RHEA/Paladin, occurring after contract award, were matters of contract administration rather than matters concerning the procurement process, and that the Tribunal therefore had no jurisdiction to consider whether the substitutions complied with the RFP.

The Tribunal directed itself to subsection 30.11(1) of the Canadian International Trade Tribunal Act and to the definition of “any aspect of the procurement process.” It defined the procurement process, with reference to WTO-AGP materials, as beginning after an entity has decided on its requirement and continuing through to and including contract award. It also considered its own jurisprudence distinguishing procurement from contract administration and noted the Federal Court of Appeal’s description of its mandate in Canada (Attorney General) v. Almon Equipment Limited to ensure fairness, competition, efficiency, and integrity in the procurement system.

In identifying where the procurement process ended and the contract began, the Tribunal found that substitutions made after award fell on the contract administration side of the line. It also accepted the Attorney General’s characterization of the evidence and determined that the potential compromise of mission critical systems warranted acceptance of the replacements.

The goods versus services distinction and mandatory criteria

The Tribunal then considered whether PSPC’s acceptance of RHEA/Paladin’s proposed substitutions altered the contract from what was required by the RFP. It referred to previous cases in which a government entity had been found to have conducted a different procurement after award where tenders for goods with specific, objective specifications resulted in the supply of goods that did not comply or that varied distinctly from those specifications. The Tribunal distinguished those cases on the basis that they related to goods, whereas the present case related to services. It noted that, in this case, the RFP specifications were not tied to particular individuals but rather to qualifications and work experience, which it said were not inherently reproducible between individuals.

The Federal Court of Appeal held that this was an error. It stated that, in this context, there is no such goods/services distinction. It observed that the provision of services can be assessed on objective, mandatory criteria such as certifications, training, or years of experience. The Court noted that in this case, although the RFP pertained to services, it nonetheless contained both mandatory and rated criteria. Under the RFP, if a proposed resource did not meet mandatory criteria, the bid was disqualified.

The Court found that the Tribunal did not sufficiently analyze the argument that, by accepting substitutions which were alleged to lack the RFP’s mandatory requirements, the government might have conducted a new and different procurement. The Tribunal’s finding that RHEA/Paladin’s certifications were true at the time of tender did not answer the question of whether acceptance of those substitutions, post-award, changed the nature of what had been procured.

Failure to address whether substitutes met mandatory minimum qualifications

In its written submission, the Attorney General argued that ADGA was not entitled to challenge Canada’s acceptance of substitutions when those individuals were later proposed by RHEA/Paladin for different roles following award. It also suggested that the Court could assume that the individuals gained the necessary experience during the currency of the RFP. The Federal Court of Appeal rejected this, stating that such an assumption would go beyond filling a gap in the reasoning and instead require the Court to assume facts.

The Court emphasized the distinction between an RFP clause dealing with the availability of resources and a clause dealing with substitution of resources after award during contract performance. It accepted that government, as procuring entity, has the right to deploy contracted resources as it considers appropriate, but it also relied on the Tribunal’s own statement that the substitution power cannot be used to change the contract into something different from what was contemplated by the RFP.

The Tribunal had concluded that the large number of changes and substitutions was driven by exigent circumstances and the availability of newly released staff from ADGA, and therefore was a matter of contract administration. However, the Court found that the Tribunal’s reasons were silent on the specific argument that some individuals may have been substituted into positions for which they lacked the minimum objective qualifications of the RFP. The Court did not decide whether such substitutions occurred, stating that this was a factual determination for the Tribunal. It held that this was a key assertion made by ADGA and that, if the Tribunal finds that individuals without minimum qualifications were substituted into positions, it must then assess the implications for the RFP process—specifically, whether the substitutions, by their nature or quantity and in light of changed circumstances and operational concerns, changed the contract into something not contemplated by the RFP.

Challenge to the evaluation of ADGA’s reference contracts

ADGA also argued that PSPC failed to properly evaluate its bid. The RFP required that bids include reference contracts showing experience in “preventative” and “corrective” maintenance on both hardware and software systems. PSPC’s evaluators discounted one of ADGA’s proposed reference contracts on the ground that it did not demonstrate experience with conducting preventative maintenance on both hardware and software systems.

Before the Tribunal, ADGA argued that its bid did include evidence of preventative maintenance on hardware and software and that, even if not express in the language of the particular reference contract, the evaluators should have considered the bid as a whole. ADGA alleged it was unreasonable for PSPC not to allocate points for one of its four reference contracts under the first technical criterion in the RFP.

The Tribunal rejected this argument. It noted that the evaluators determined the disputed reference contract showed experience with preventative maintenance referable only to software, not hardware. The Tribunal recorded that, although there was reference to software maintenance, there was no explicit equivalent reference to hardware components.

The Tribunal identified reasonableness as the standard of review applicable to a bid evaluator’s decision, relying on Federal Court of Appeal authority, and described its task as determining whether PSPC’s evaluation was reasonable. It stated that bid evaluators’ decisions are only unreasonable where evaluators do not apply themselves, ignore vital information, wrongly interpret the scope of a requirement, base their evaluation on undisclosed criteria, or otherwise fail to conduct the evaluation in a procedurally fair manner. In this case, the Tribunal concluded that it would be beyond its role under reasonableness review to “place itself in the shoes of the evaluators, redo the assessment and substitute its own judgment for that of the evaluators,” even if ADGA had made a plausible argument.

The Federal Court of Appeal described its own task as a “second-order” reasonableness review, under which ADGA had to show that the Tribunal was unreasonable in concluding that PSPC’s bid evaluation was reasonable. The Court found no reviewable error in the Tribunal’s reasoning on this issue and did not disturb that part of the decision.

Ruling and overall outcome

The Federal Court of Appeal allowed ADGA’s application “in this limited respect” and remitted the matter to the Tribunal for redetermination. The limited respect was the Tribunal’s failure to address the argument that individuals may have been substituted into positions for which they did not have the minimum objective qualifications of the RFP, and the potential implications of such a finding for whether the substitutions changed the contract into something not contemplated by the RFP.

On the bid evaluation issue, the Court upheld the Tribunal’s conclusion that PSPC’s choice not to allocate points for one of ADGA’s reference contracts was reasonable. The Tribunal’s application of a deferential reasonableness standard to the evaluators’ decision and its refusal to substitute its own judgment were accepted by the Court.

The Court stated that it would allow the application with costs and remit the matter to the Tribunal for redetermination in accordance with its reasons. The judgment records that result but does not specify any monetary amounts.