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Procurement
Determinations
File No.: PR-95-039
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Ottawa, Thursday, August 8, 1996
IN THE MATTER OF a complaint filed by Conair Aviation, A division of Conair Aviation Ltd. under subsection 30.11(1) of the Canadian International Trade Tribunal Act, R.S.C. 1985, c. 47 (4th Supp.), as amended by S.C. 1993, c. 44;
AND IN THE MATTER OF a decision to conduct an inquiry into the complaint under subsection 30.13(1) of the Canadian International Trade Tribunal Act.
DETERMINATION OF THE TRIBUNAL
Pursuant to section 30.14 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 (3) of the Canadian International Trade Tribunal Act, the Canadian International Trade Tribunal recommends, as a remedy, that the Department of Public Works and Government Services pay the complainant compensation that recognizes that the complainant should have been awarded the contract and would have had the opportunity to profit therefrom. The basis for the calculation of profit will be the price tendered by the complainant in its offer of March 4, 1996, less the costs for the option year.
Finally, the Canadian International Trade Tribunal recommends that the Department of Public Works and Government Services not exercise the option to extend the contract for an additional year and, instead, should the requirement continue to exist, reissue a competitive solicitation for the requirement in accordance with the provisions of the applicable agreements.
Pursuant to subsection 30.16(1) of the Canadian International Trade Tribunal Act, the Canadian International Trade Tribunal awards the complainant its reasonable costs incurred in relation to filing and proceeding with its complaint.
Anthony T. Eyton
_________________________
Anthony T. Eyton
Member
Michel P. Granger
_________________________
Michel P. Granger
Secretary
File No.: PR-95-039
Date of Determination: August 8, 1996
Tribunal Member: Anthony T. Eyton
Investigation Manager: Randolph W. Heggart
Counsel for the Tribunal: Shelley Rowe
Complainant: Conair Aviation, A division of Conair Aviation
Ltd.
Counsel for the Complainant: Richard A. Wagner
Intervener: First Nation of Nacho Nyak Dun
Government Institution: Department of Public Works and Government
Services
FINDINGS OF THE TRIBUNAL
Introduction
On March 26, 1996, Conair Aviation, A division of Conair Aviation Ltd. (the complainant) filed a complaint under subsection 30.11(1) of the Canadian International Trade Tribunal Act [1] (the CITT Act) concerning the procurement by the Department of Public Works and Government Services (the Department) (Solicitation No. A7331-6-0201/A) of air tanker services, including pilot services, for fire bombing activities for the Department of Indian Affairs and Northern Development (DIAND), to be based at Whitehorse, Yukon Territory, and operating from different points in the Yukon Territory, the Northwest Territories, adjacent provinces and Alaska.
The complainant alleges that, having been verbally advised by the Department that it had been awarded the contract, the Department has now indicated that the solicitation has been cancelled and that it will be reissued. The complainant submits that there is no reasonable basis to withdraw the contract that it was awarded and that, to do so, inter alia, violates Article 1015 of the North American Free Trade Agreement [2] (NAFTA). Moreover, the complainant submits that significant pricing and strategy information concerning its offer has been obtained by the only other bidder, Air Spray (1967) Ltd. (Air Spray), contravening the requirement in Article 1014(3) of NAFTA to treat all tenders in confidence and making the reissuance of the solicitation improper and in contravention of, inter alia, Articles 1015 and 1016 of NAFTA. The complainant requested, as a remedy, that it be awarded the contract and compensation for all costs incurred in relation to filing and proceeding with its complaint to the Canadian International Trade Tribunal (the Tribunal). In the alternative, it requested that it be compensated for all damages caused by the failure of the Department to award it the contract.
Inquiry
The Tribunal, having determined on the basis of the record that the conditions for inquiry set forth in section 7 of the Canadian International Trade Tribunal Procurement Inquiry Regulations [3] (the Regulations) had been met in respect of the complaint, decided to conduct an inquiry into whether the procurement was conducted in accordance with the requirements set out in Chapter Ten of NAFTA.
On April 30, 1996, the Department filed with the Tribunal a Government Institution Report (GIR) in accordance with rule 103 of the Canadian International Trade Tribunal Rules. [4] The complainant filed its comments on the GIR with the Tribunal on May 13, 1996. By letter dated June 27, 1996, the First Nation of Nacho Nyak Dun filed with the Tribunal a request for leave to intervene in the inquiry. The Tribunal granted intervener status to the First Nation of Nacho Nyak Dun on July 2, 1996. On July 10, 1996, a Staff Investigation Report (SIR) was sent to all parties for comments. On July 17, 1996, the complainant and the Department filed comments on the SIR with the Tribunal.
Given that there was sufficient information on the record to determine the validity of the complaint, the Tribunal decided that a hearing was not required and disposed of the complaint on the basis of the information on file.
Procurement Process
On January 19, 1996, a requisition was received by the Department from DIAND. The requirement for air tanker services, including pilot services, for fire bombing activities was published in the February 19, 1996, edition of Government Business Opportunities (GBO), with a closing date for receipt of proposals of March 4, 1996. The GBO notice reads, in part, as follows: “Solicitation Type: COMPREHENSIVE LAND CLAIM AGREEMENT Tendering Procedures.”
The Request for Proposal (RFP) included a clause entitled “Enquiries Solicitation Stage” which reads, in part, as follows:
All enquiries regarding the bid solicitation must be submitted in writing to the Contracting Authority named on page one (1) of this document as early as possible within the bidding period.
To ensure consistency and quality of information provided to bidders, the Contracting Authority will provide, simultaneously to all companies to which this solicitation has been sent, any information with respect to significant enquiries received and the replies to such enquiries without revealing the sources of the enquiries.
The RFP also included a clause entitled “Basis of Selection” which reads as follows:
To be considered responsive, a bid must meet all of the mandatory requirements of this solicitation. Bids not meeting all of the mandatory requirements will be given no further consideration. The lowest priced responsive bid will be recommended for award of a contract or issuance of a standing offer, as the case may be.
The requirement of the RFP is defined as providing the government “with the services as outlined in Appendix ‘A’.” The referenced Appendix “A” begins on page 6 of Part 2 of the RFP and contains the word “(MANDATORY)” under the heading “APPENDIX ‘A’.” The first article of the appendix is entitled “REQUIREMENT” and reads, in part, as follows:
To provide the Department of Indian Affairs and Northern Development, Northern Affairs Program with the exclusive services of five (5) Douglas A-26/B-26 or S2F Firecat Air Tanker aircraft and two (2) Aerostar 600 “Bird Dog” aircraft (twin engine) during the periods specified herein.
On page 8 of Part 2 of the RFP, articles 7.2.3 and 7.2.5 under the heading “AIRCRAFT REQUIREMENTS” and the subheading “GENERAL” read as follows:
7.2.3 The Air Tanker aircraft must be able to carry 750 Imperial gallons of fire retardant.
7.2.5 The Air Tankers aircraft shall have a two (2) door hydraulic or two (2) door air drop system on their fire retardant tanks.
On February 20, 1996, a request for clarification was received by the Department from the complainant. This request reads, in part, as follows:
7.2.3 The aircraft must be able to carry 750 Imperial gallons of fire retardant.
The RFP document provides for the provision of either 5 Douglas A-26/B-26 or S2F Firecat Air Tanker aircraft. Although the Firecat has a total tank capacity of 750 imperial gallons, the actual fire retardant payload is 725 imperial gallons. The tank design of the Firecat provides for a more efficient use of the payload, which is well documented. Will the Firecat payload of 725 imperial gallons of fire retardant be deemed compliant with the RFP mandatory requirements?
7.2.5 The Air Tankers aircraft shall have a two (2) door hydraulic or two (2) door air drop system on their fire retardant tanks.
This requirement is a description of the A-26/B-26 drop system only. The Firecat has an updated computer controlled four (4) door drop system which provides increased flexibility and a more efficient use of the fire retardant payload. Will the Firecat four (4) door drop system be deemed compliant with the RFP mandatory requirements?
On February 29, 1996, a facsimile containing answers to the request for clarification was sent to the complainant by the Department. With respect to the two items identified above, the facsimile reads, in part, as follows:
7.2.3 Retard[a]nt Tank Size - The Crown would be satisfied, from an operational perspective, to accept the payload on the [Firecat] ... 725 imperial gallons as being acceptable.
7.2.5 Retard[a]nt Tank Doors - The Crown would be satisfied to accept the Firecat 4 door drop system as being compliant.
The above request was treated by the Department as a clarification only and was not sent to Air Spray, which had also requested and was sent a set of tender documents.
Two proposals were received. An evaluation of the proposals was performed by the contracting officer. The complainant’s bid was determined by the Department to offer the best value. Once the contracting officer received concurrence from DIAND about the result of the evaluation, both the complainant and Air Spray were contacted and advised of the results of the evaluation and informed that the complainant would be recommended for contract award. At that time, the total value of the complainant’s bid was provided to Air Spray, and the total value of Air Spray’s bid was provided to the complainant.
On March 14, 1996, the Department received a letter from counsel for Air Spray that questioned the compliance of the complainant’s bid to articles 7.2.3 and 7.2.5 under the heading “AIRCRAFT REQUIREMENTS” in the RFP.
The Department, at that point, determined that what had originally been thought of as clarifications had been amendments to the specification and that Air Spray had not been advised of these changes and, therefore, had been unfairly treated. Accordingly, the Department decided not to award the contract to the complainant as originally contemplated and decided to cancel and reissue the solicitation. On March 15, 1996, the solicitation was reissued with a closing date of April 3, 1996. After lowering its price dramatically, Air Spray was awarded the contract on the reissued solicitation.
Jurisdictional Issue
The Tribunal will first address an issue pertaining to its jurisdiction to consider this matter. 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.”
On March 29, 1996, the Tribunal informed the complainant and the Department that it had decided to conduct an inquiry into the complaint. In the same letter, the Tribunal asked the parties to provide submissions concerning the issue of whether the solicitation at issue was a “designated contract” within the meaning of subsection 3(1) of the Regulations. In particular, the Tribunal requested submissions as to whether the RFP was exempt from coverage under Chapter Ten of NAFTA on the basis that the services being procured, which were identified by the Department as “V204,” “Specialty air Services including Aerial Fertilization, Spraying and Seeding,” were exempt from coverage pursuant to Section B of Annex 1001.1b-2 of NAFTA and/or whether the procurement fell within the description of “set-asides for small and minority businesses” which are also exempt from coverage under NAFTA pursuant to subparagraph 1(d) of the Schedule of Canada under the General Notes to Annex 1001.2b.
In its letter to the Tribunal, dated April 4, 1996, counsel for the complainant submitted that the services being procured should be identified as “F001,” which includes water bombing and which is not specifically excluded from Chapter Ten of NAFTA.
With respect to the issue of whether the procurement at issue constitutes a set-aside for small and minority businesses, counsel for the complainant submitted that the statements on page 5 of Part 2 of the RFP do not make the procurement a set-aside for small and minority businesses. The statements on page 5 read as follows:
COMPREHENSIVE LAND CLAIMS SETTLEMENT AREA (CLCSA):
Carrier’s [sic] are advised that the services required under this solicitation will be provided in an area covered by a [comprehensive land claims agreement] between the Aboriginal peoples of that area and Her Majesty the Queen in right of Canada.
It is the Carrier’s responsibility to obtain [permission] (if required) to land on, or work from any lands covered by these agreements.
Carrier’s [sic] shall agree to provide where possible:
- employment of aboriginal labor from the CLCSA.
- engage aboriginal firms in the CLCSA as subcontractors.
- purchase supplies from aboriginal firms in the CLCSA.
- rent equipment from aboriginal firms in the CLCSA.
The complainant submitted that the reference to a CLCSA in the RFP is to advise carriers that the services are to be provided in an area covered by a comprehensive land claims agreement (CLCA) and require carriers, where possible, to employ aboriginals, to subcontract to aboriginal firms and to rent equipment from aboriginal firms.
By letter dated April 9, 1996, the Department agreed that the services being procured should have been identified as “F001” of the Common Classification System as opposed to “V204” and that they were, therefore, services covered by NAFTA.
However, the Department submitted that, since the services being procured are to be provided in CLCSAs, the procurement constitutes a set-aside for small and minority businesses and is, therefore, excluded from Chapter Ten of NAFTA. The Department submitted that the granting of contracting priority to beneficiary groups in CLCSAs is required pursuant to Canada’s treaty obligations under various CLCAs. These agreements, where concluded, have been sanctioned by statutes of the federal parliament and have quasi-constitutional status by virtue of the Constitution Act, 1982. [5] As such, they are considered to take precedence over the laws of Canada and Canada’s international obligations and must be complied with. In the Department’s view, the statements on page 5 of Part 2 of the RFP qualify the procurement as a set-aside.
By letter dated April 10, 1996, the Tribunal requested comments from the respective parties on the submissions received. By letter dated April 12, 1996, the Department submitted that a “set-aside is a procurement reserved exclusively for a predefined group of suppliers who are given, whenever possible and consistent with best value, some form of first opportunity or preference to supply” and that the reason for set-asides is to make it possible for Canada to honour its treaty obligations to aboriginal peoples. The Department indicated that there are four CLCAs in effect which cover a considerable portion of the territory in which the services at issue are to be provided. These agreements are the Champagne and Aishihik First Nations Final Agreement, [6] the First Nation of Nacho Nyak Dun Final Agreement, [7] the Teslin Tlingit Council Final Agreement [8] and the Vuntut Gwitchin First Nation Final Agreement. [9] Moreover, the Department referred the Tribunal to section 35 of the Constitution Act, 1982 [10] and Treasury Board of Canada Contracting Policy Notice 1995-2 on “Implementation of Contracting Obligations under Comprehensive Land Claims Agreements” dated March 1, 1995.
Contracting Policy Notice 1995-2 provides, in part, as follows:
BACKGROUND
3. [W]here a contracting authority is engaged in a contract for the procurement of goods, services or construction in a settlement area, these activities are subject to the contracting obligations that are found in the applicable land claims agreement.
POLICY
8. Where practicable and consistent with sound procurement management and the spirit and intent of the land claims agreements, contracting authorities should enhance the capacity of aboriginal suppliers from the land claims settlement areas to fulfil a larger amount of government contract requirements.
IMPLEMENTATION OF CONTRACTING OBLIGATIONS
UNDER COMPREHENSIVE LAND CLAIMS AGREEMENTS
POLICY
1.00 GENERAL
Contracting authorities should also note that the North American Free Trade Agreement requirements do not apply to procurements subject to the Comprehensive Land Claims listed below.
For specific land claims contracting obligations refer to the appropriate section listed hereunder:
Section 1- James Bay and Northern Quebec Agreement
Section 2- Inuvialuit Final Agreement
Section 3- Gwich’in Comprehensive Land Claim Agreement
Section 4- Inuit of Nunavut Land Claim Agreement
Section 5- Umbrella Final Agreement, Council for Yukon Indians
Section 5.1- First Nation of Nacho Nyak Dun Final Agreement
Section 5.2- Champagne and Aishihik First Nations Final Agreement
Section 5.3- Teslin Tlingit Council Final Agreement
Section 5.4- Vuntut Gwitchin First Nation Final Agreement
Section 6- Sahtu Dene and Metis Comprehensive Land Claim Agreement
In counsel for the complainant’s letter dated April 12, 1996, counsel submitted that the RFP does not, by its wording or in substance, constitute a set-aside for small and minority businesses. Referring specifically to the language on page 5 of Part 2 of the RFP, counsel submitted that it does not limit the procurement to small or minority businesses and that the language is advisory, not mandatory. Counsel submitted that, if it were a set-aside, it would have to have included the following notice, as required in the Department’s Supply Manual: “This procurement is subject to a Comprehensive Land Claims Agreement” and would have to have been open only to bidders that are minority businesses. Moreover, he submitted that not all of the fire bombing services being procured are to be provided in an area covered by a CLCA and that the fact that some of the services are to be provided in an area covered by a CLCA does not make a procurement a set-aside for a minority business. Finally, counsel stated that there is a separate program for set-asides and that the procurement at issue does not fall within that program.
By letter dated April 19, 1996, the Tribunal informed the parties that it had determined that the procurement at issue was in respect of a “designated contract” covered by Chapter Ten of NAFTA, that it would continue its inquiry and that it would provide written reasons as part of its findings and recommendations.
The Department provided, in the GIR, further submissions on the question of whether the procurement at issue is a set-aside. The Department submitted that the provisions on page 5 of Part 2 of the RFP are fundamentally inconsistent with NAFTA, as they are provisions which would be considered as offsets. In addition, the special notification provisions as stipulated in Article 17.14.1 of each CLCA are fundamentally inconsistent with the NAFTA provisions on publication of notices. For example, Article 17.14.1 of the Umbrella Final Agreement, Council for Yukon Indians [11] stipulates that the “Government shall, at the time it publicly invites tenders for Forest Resources Management or forest protection within a Yukon First Nation’s Traditional Territory, give a written notice of the tender to that Yukon First Nation.”
The Department stated that, prior to the implementation of NAFTA, it consulted with the Department of Foreign Affairs and International Trade and concluded that the CLCAs constitute set-asides for minority businesses under NAFTA and that procurements affected by these CLCAs are excluded from NAFTA. The Department further stated that it has consistently applied these standards to procurements where the goods are to be delivered into or provided within a CLCSA.
The GIR includes a copy of Treasury Board of Canada Contracting Policy Notice 1996-2 on “Aboriginal Business Procurement Policy and Incentives” dated March 27, 1996. The first phase of the new policy came into effect on April 1, 1996, subsequent to the issuance of and closing of bids on the initial RFP at issue. Contracting Policy Notice 1996-2 provides, in part, as follows:
BACKGROUND
1. The Government has approved a program designed to increase Aboriginal business participation in supplying government procurement requirements through a program of mandatory and selective set-asides and supplier development activities.
[A]ny procurement set aside under this policy for Aboriginal businesses is excluded from the provisions of [NAFTA and the World Trade Organization Agreement on Government Procurement].
Comprehensive Land Claims Agreements take precedence over the trade agreements and the Aboriginal business set-aside program.
NEW POLICY
5. The new policy ... requires all Contracting Authorities, where a procurement is valued in excess of $5,000, and for which Aboriginal populations are the primary recipients, to restrict this procurement to qualified Aboriginal suppliers where operational requirements, best value, prudence and probity, and sound contracting management can be assured.
8. All departments and agencies are authorized and encouraged to voluntarily set aside other procurements under the set-aside program for Aboriginal business where practical and cost-effective.
9. [I]n other procurements, participation of Aboriginal business as subcontractors to the prime contractors should be encouraged.... Where a procurement is subject to one of the international trade agreements, any consideration of, or requirement to use Aboriginal subcontractors would be inconsistent with those agreements.
CERTIFICATION PROCESS
14. Bidders will be required to certify on each bid that they meet the eligibility criteria, will honour the Aboriginal content requirements, and are prepared to comply with eligibility auditing provisions. Prime contractors will have to secure certification from subcontractors where applicable.
Following the contents of the policy is a list of relevant definitions. An “Aboriginal Business” is defined, in part, as follows:
an enterprise that is:
a) a sole proprietorship, limited company, co-operative, partnership, or not-for-profit organization
- in which Aboriginal persons have majority ownership and control meaning at least 51 percent, and
- in which, in the case of a business enterprise with six or more full-time employees, at least 33 percent of the full-time employees are Aboriginal persons,
or
b) a joint venture or consortium in which an Aboriginal business or Aboriginal businesses as defined in (a) have at least 51 percent ownership and control,
and
c) which certifies in bid documentation that it meets the above eligibility criteria, agrees to comply with required Aboriginal content in the performance of the contract, and agrees to furnish required proof and comply with eligibility auditing provisions.
“Required Aboriginal Content” is defined, in part, as follows:
means at least 33 percent of the total value of the work to be performed under a contract is performed by an Aboriginal business contractor or by a combination of that contractor and other Aboriginal businesses.
The second phase of the policy, which sets out performance objectives for each department or agency, does not come into effect until January 1, 1997.
The GIR also included a copy of a list of the designated aboriginal contacts to whom the notice was sent. The list includes names of contact persons for the Umbrella Final Agreement, Council for Yukon Indians, the First Nation of Nacho Nyak Dun Final Agreement, the Champagne and Aishihik First Nations Final Agreement, the Teslin Tlingit Council Final Agreement and the Vuntut Gwitchin First Nation Final Agreement.
In its letter of June 27, 1996, the intervener supported the Department’s position that the procurement at issue is not subject to NAFTA and that it is subject to the contracting obligations found in the First Nation of Nacho Nyak Dun Final Agreement. The intervener stated that this CLCA is recognized and protected under section 35 of the Constitution Act, 1982 and, as such, is paramount to NAFTA. Finally, the intervener submitted that the federal government has a fiduciary obligation towards aboriginal people in Canada and that to make the services being procured subject to NAFTA would violate the essence of the CLCA.
Addressing, first, the question of the classification of the services being procured in the solicitation at issue, the Tribunal, after considering the submissions of counsel for the complainant and the agreement by the Department that the services being procured belong to class “F001,” determines that the services should be identified as “F001” of the Common Classification System (Forest/Range Fire Suppression/Presuppression Services [incl. Water Bombing]).
Turning to the issue of whether the procurement is a set-aside for small and minority businesses and whether it is, therefore, exempt from the coverage of NAFTA, the Tribunal observes that aboriginal rights have been recognized and affirmed under subsection 35(1) of the Constitution Act, 1982 and have been recognized by the courts. CLCAs are land claims agreements within the meaning of section 35 of the Constitution Act, 1982. These CLCAs generally clarify the rights of aboriginal groups concerning the ownership and use of specified lands and other resources in a manner that recognizes and protects their way of life and their interests in resource management and environmental protection, encourages and protects their cultural distinctiveness and social well-being and promotes their economic growth and self-sufficiency. These CLCAs define a wide range of rights and benefits which may include full ownership of certain lands, wildlife harvesting rights, participation in land and resource management, financial compensation, resource royalty sharing and economic development measures.
The Tribunal acknowledges that the courts have, through common law, set out certain guiding principles for the interpretation of legislation governing aboriginals, which, in the Tribunal’s view, apply to the interpretation of CLCAs and their implementing legislation. In particular, in Gene A. Nowegijick v. Her Majesty the Queen, [12] the Supreme Court of Canada stated the following:
treaties and statutes relating to Indians should be liberally construed and doubtful expressions resolved in favour of the Indians. If the statute contains language which can reasonably be construed to confer tax exemption that construction, in my view, is to be favoured over a more technical construction which might be available to deny exemption. In Jones v. Meehan, ... it was held that Indian treaties “must ... be construed, not according to the technical meaning of [their] words ... but in the sense in which they would naturally be understood by the Indians.” [13]
In Mitchell v. Peguis Indian Band, the Supreme Court of Canada stated that “if legislation bears on treaty promises, the courts will always strain against adopting an interpretation that has the effect of negating commitments undertaken by the Crown. [14] ”
The Tribunal also acknowledges that it is well established that there is a fiduciary duty owed by the federal government to aboriginals. The Supreme Court of Canada has stated that, where an Indian band surrenders its interest in land to the federal government, the federal government assumes a fiduciary obligation towards that Indian band. [15] This fiduciary duty “is trust-like, rather than adversarial, and contemporary recognition and affirmation of aboriginal rights must be defined in light of this historic relationship. [16] ” The Supreme Court of Canada stated that treaties are to be interpreted in a manner that maintains the integrity of the federal government, particularly the federal government’s fiduciary duty towards aboriginal groups. [17]
The Tribunal observes that, in applying these general principles in the context of a proceeding before an administrative agency, the Supreme Court of Canada has stated that the fiduciary duty owed by the federal government to aboriginal groups does not impose a duty on an administrative agency to make its decision in the best interests of aboriginal groups. [18] However, an administrative agency may be obliged to evaluate the impact of the decision on aboriginal groups, which may involve reference to and interpretation of an aboriginal treaty, including a CLCA and its implementing legislation. [19]
In light of the Supreme Court of Canada’s findings concerning the obligations of administrative agencies, the Tribunal is of the view that it is obliged, in this inquiry, to consider the provisions of the relevant CLCAs in determining whether the procurement at issue is a set-aside for small and minority businesses. The Tribunal observes that the CLCAs which cover part of the area to be serviced through the procurement at issue are the Umbrella Final Agreement, Council for Yukon Indians, the Champagne and Aishihik First Nations Final Agreement (CAFA), the First Nation of Nacho Nyak Dun Final Agreement, the Teslin Tlingit Council Final Agreement and the Vuntut Gwitchin First Nation Final Agreement. The provisions of each of these agreements are generally the same since they are based on the provisions of the Umbrella Final Agreement, Council for Yukon Indians. Therefore, the provisions of the CAFA are referred to by way of illustration of the provisions in all of the agreements.
The CAFA is a land claims agreement within the meaning of section 35 of the Constitution Act, 1982. [20] Where there is any inconsistency or conflict between any federal, territorial or municipal law or any other legislation and the CAFA, the CAFA shall prevail to the extent of the inconsistency or conflict. [21] The CAFA further provides, in part, that the “Government may determine, from time to time, how and by whom any power or authority of Government or a Minister set out in a Settlement Agreement ... shall be exercised. [22] ”
With respect to forest resources specifically, the CAFA provides that the “Government shall, at the time it publicly invites tenders for Forest Resources Management or forest protection within a Yukon First Nation’s Traditional Territory, provide a written notice of the tender to that Yukon First Nation. [23] ”
In addition, the Champagne and Aishihik First Nations (CAFN) are to have the first opportunity to accept any fixed term contract offered by the government associated with silviculture within the CAFN traditional territory, [24] and the government is to include a criterion for the employment of CAFN persons in any contract opportunities associated with silviculture within the CAFN traditional territory. [25]
In addressing economic development measures, generally, the CAFA provides that the objectives are to provide Yukon Indian people with opportunities to participate in the Yukon economy, [26] to develop economic self-reliance for Yukon Indians [27] and to ensure that Yukon Indians obtain economic benefits that flow directly from the CAFA. [28] For the purpose of contracting, the government is to include qualified Yukon First Nations on contract lists, [29] to provide information on how to access government supply and services contracts and to ensure that aboriginals and aboriginal corporations are on any lists or inventories that the government uses for contracting purposes. [30]
The CAFA, along with the other three CLCAs, was approved, given effect and declared valid by the Yukon First Nations Land Claims Settlement Act. [31] Section 6 of this act provides that the agreements are land claims agreements within the meaning of section 35 of the Constitution Act, 1982. Subsection 13(2) of the same act provides that, in the event of a conflict or inconsistency between the agreements and any federal or territorial law, the agreements prevail to the extent of the conflict or inconsistency. Subsection 13(3) provides that, in the event of a conflict or inconsistency between the said act and any other enactment, the said act prevails to the extent of the conflict or inconsistency.
In the Tribunal’s view, the general principles for the interpretation of treaties and legislation affecting aboriginals, as well as the provisions of the relevant CLCAs and their implementing legislation, impact on how the Tribunal should interpret the phrase “set-asides for small and minority businesses” as it may apply to the procurement at issue. It is acknowledged that the RFP is not a legislative instrument and, therefore, may not be subject to the same principles as would legislation or regulations. However, the phrase “set-asides for small and minority businesses” is incorporated into the CITT Act through the definition of a “designated contract” in the Regulations. Section 30.1 of the CITT Act provides that a “designated contract” is “designated by the regulations.” Section 3 of the Regulations states that a “designated contract” is described in Article 1001 of NAFTA, and paragraph 2 of that article refers, in part, to the General Notes set out in Annex 1001.2b. It is in Annex 1001.2b, General Notes, Schedule of Canada that “set-asides for small and minority businesses” are not covered by Chapter Ten of NAFTA.
On its face, the phrase “set-asides for small and minority businesses” seems to refer to procurements that are reserved for or open only to bidders that are small and minority businesses. However, the CAFA provides for aboriginals to be treated preferentially in certain procurement processes in terms of notice and participation, notwithstanding certain provisions in Chapter Ten of NAFTA relating to non-discrimination [32] and equal access. [33] This suggests, in the Tribunal’s view, that the procurements referred to in the CAFA may, by virtue of the preferential treatment accorded to the CAFN, be considered to be “set-asides for small and minority businesses.” However, neither the CAFA nor NAFTA provides guidance as to whether all procurements to be carried out on lands covered by the CAFA, even if only in small part, are to be treated as “set-asides” simply because of the existence of the preferential treatment provisions in the CAFA.
The Tribunal concludes that the procurement at issue will be performed, to some extent, in areas covered by CLCAs. The Tribunal further concludes that there exists in land claims agreements a commitment by the Government of Canada, inter alia, to further the advancement of aboriginal groups in CLCSAs through various means, including preferential access to certain federal government procurements being performed in or relating to CLCSAs. The Tribunal also notes that the procurement at issue is a procurement made on behalf of DIAND, an entity covered by NAFTA. The procurement concerns services identified as “F001,” a class of services covered by NAFTA. Also, the procurement’s estimated value is well above the NAFTA monetary threshold for services. In summary, subject to the Tribunal’s determination on the issue of “set-aside,” the procurement is a “designated contract.”
The Tribunal is of the view that Canada has, through the “small and minority businesses” set-aside provision in NAFTA protected and preserved its ability to deliver on its procurement commitments in the CLCAs. The Tribunal, nevertheless, is of the opinion that the procurement commitments entrenched in the CAFA, as well as in the other relevant CLCAs, do not create a “set-aside” by their mere existence. Moreover, indicating that a solicitation is a CLCA tendering procedure does not by itself make the procurement subject to objective requirements, such as aboriginal ownership, employment and subcontracting preferences, which are provided for under the CLCAs and which, in the Tribunal’s view, are necessary for the establishment of a set-aside for small and minority businesses under NAFTA. To conclude differently would, in the Tribunal’s view, be contrary to the logical and sensible interpretation of NAFTA and the RFP in the context of the CLCAs and the relevant government contracting policies.
Though the procurement at issue was represented in the notice in the GBO as a CLCA tendering procedure, in substance, it is only partly related to CLCSAs, and it only requires the contract awardee “to provide where possible” employment of aboriginal labour and aboriginal firms as subcontractors. The Tribunal observes that no quantity of work nor amounts of supplies or equipment are expressly reserved or set aside for aboriginal people or firms in the RFP. In addition, the two bidders are not aboriginal firms, the bidders do not represent having set labour, managerial, financial or technical aboriginal contents, and such contents were not factored in the evaluation of the bids. In light of these facts, the Tribunal is of the view that the procurement at issue does not constitute a set-aside for small and minority businesses within the meaning of NAFTA and is, therefore, covered by NAFTA.
If the Tribunal were to accept the Department’s position, the Department or any contracting authority could avoid the provisions of Chapter Ten of NAFTA simply by stating that a solicitation is subject to a CLCA, even though, as is the case here, the procurement only relates, in part, to territories covered by a CLCA and the contract awardee is only to employ or subcontract “where possible” to aboriginals. Moreover, to accept the Department’s position could, in the Tribunal’s view, lead to an abuse of the contracting process and create an unpredictable commercial environment, circumstances which NAFTA expressly sets out to eliminate.
Accordingly, the Tribunal determines that this procurement is not a set-aside for small and minority businesses and is, therefore, covered by NAFTA pursuant to subparagraph 1(d) of the Schedule of Canada under the General Notes to Annex 1001.2b. The Tribunal concludes that the procurement is a “designated contract” and will proceed to consider the merits of the complaint.
Validity of the Complaint
Complainant’s Position
In his comments on the GIR and the SIR, counsel for the complainant submitted that the solicitation at issue was wrongfully withdrawn and that its re-tendering was manifestly unfair, given that confidential pricing information was revealed. Counsel submitted that the information requested by the complainant during the bidding process dealt only with clarifications and that the information given by the Department to the complainant did not create a material amendment to the RFP.
Specifically, counsel for the complainant argued that the RFP names the S2F Firecat aircraft and, therefore, explicitly accepts that aircraft with all its specifications. The S2F Firecat is an aircraft which is unique to the complainant. It has a type approval from the Department of Transport and, therefore, its capacity and specifications are public knowledge and widely known. Counsel submitted that specification by aircraft type, as is the case here, and acceptance of compliance on that basis have priority over any technical requirements found in the remaining paragraph of the RFP. Any other interpretation would render the reference to the S2F Firecat in article 1 of Appendix A to the RFP meaningless.
Moreover, counsel for the complainant submitted that the clarifications at issue were only sought out of an abundance of caution. Indeed, in 1994, on the occasion of the previous solicitation for the same services, the complainant queried the same issues and was provided substantively the same answers by the Department which then, as now, did not send the responses to the other bidder, Air Spray. The Department, in 1994, did not reject the complainant’s bid of the S2F Firecat as non-compliant. The reason for this behaviour, counsel submitted, was that the Department in 1994 and 1996 did not consider the enquiries to be significant. Not being significant, the enquiries cannot, in any way, constitute a material or substantial amendment to the RFP. In the alternative, counsel submitted that the tank capacity and the air drop requirements are not essential requirements within the meaning of Article 1015(4) of NAFTA. Indeed, the S2F Firecat being compliant cannot then be discarded as non-compliant on the basis of two non-significant, non-material and non-essential requirements.
Counsel for the complainant further submitted that the Department had no justification to withdraw the award of the contract. Indeed, the clarifications did not amend the RFP. These were determined by the Department not to be significant and, consequently, the Department judged that it was not necessary to communicate these clarifications to Air Spray. Further, the complainant gained no particular advantage because of the clarifications, since the specification relates to the aircraft and the aircraft could not be altered. In summary, counsel submitted that the Department was bound by Article 1008(1)(a) of NAFTA to apply its procedures in a non-discriminatory manner. Further, given that the complainant’s proposal met all the essential requirements of the RFP at the time of bid opening, the Department, short of a public interest reason, had to award the contract to the lowest responsive bidder pursuant to Article 1015(4)(c) of NAFTA. In this respect, counsel submitted that the Department cannot use the public interest ground indiscriminately and stated: “The Department should not have exercised its extraordinary power of re-tendering the RFP in the absence of a clear public policy reason.”
Counsel for the complainant also added that, given that the complainant’s bid was compliant, the Department could not rely on the provision of the RFP which states that “the lowest or any bid will not necessarily be accepted” since the Tribunal previously determined, in another case, [34] that, in the face of NAFTA, the power to reject bids is limited to the power to reject non-compliant bids.
On the question of the disclosure by the Department of the bidder’s total bid price, counsel for the complainant submitted that, in the present case, this information is sufficient to calculate the details of the bid price. In so doing, counsel submitted that the Department breached its obligation under Article 1014(3) of NAFTA to treat all tenders in confidence. Furthermore, the release of the said information had the practical effect of precluding true competition on the reissued RFP, thereby also constituting a breach of Article 1008(2)(a) of NAFTA.
In conclusion, counsel for the complainant asserted that the actions of the Department were “manifestly unfair” as the complainant “has been penalized by the loss of the contract due to a purported ‘error’ by the Department.”
Department’s Position
In its response to the complaint, the Department submits that it had no choice but to cancel the solicitation. In the Department’s view, the clarification provided to the complainant on February 29, 1996, materially and substantially amended the RFP specifications in a matter which allowed the complainant to submit a responsive bid. This information was not communicated to Air Spray. This, according to the Department, resulted in the complainant and Air Spray being compliant bidders on different RFPs. In this situation, the only way to be fair to all bidders, the Department submitted, was “to cancel the original solicitation, revise the RFP to remove the inconsistencies between Articles 1. and 7. of Appendix A, clearly state the Crown’s requirement as previously stated in Article 1. of Appendix A, and reissue the RFP to allow bidders to submit bids on the revised requirement and specifications.”
The Department stated that it never advised the complainant that it was awarded the contract. In fact, the Department advised the complainant “that its bid was being recommended to the requisite approval authority for award of contract.” Therefore, as there was no contract award, the Department submitted that it had not withdrawn a contract, but had simply cancelled the original solicitation. The Department stated that the procedure whereby bidders are advised of the status of the approval process was instituted at the request of the aviation industry. Indeed, early notification of the approval process allows unsuccessful bidders to release their aircraft earlier, thus, not foregoing other business opportunities, as could be the case otherwise.
Concerning the release of certain price information, the Department stated that “[e]ach bidder was advised of the assessed bid total of each bid. No detailed pricing was released.” Moreover, the Department asserted that it did not release any technical information on the complainant’s proposal or strategy to anyone in the private sector. In addition, the Department submitted that the information made available to bidders is the same information that was made available subsequent to the previous tendering of this requirement in 1994. Competition, the Department asserted, “was possible subsequent to those events and competition is possible subsequent to the foregoing events.”
Tribunal’s Decision
Section 30.14 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 a “designated contract” have been observed. Section 11 of the Regulations provides, in part, that the Tribunal is required to determine whether the procurement was conducted in accordance with the requirements set out in NAFTA.
Essentially, the complainant alleges that the Department improperly cancelled the contract that it had been awarded and, having released certain key pricing information to the two bidders, the Department also improperly reissued the solicitation. The Tribunal, having examined the evidence and arguments presented by the parties and considered the obligations specified in NAFTA, concludes that the complaint is valid.
The evidence before the Tribunal indicates, in the Tribunal’s view, that no contract had been awarded by the Department to the complainant in respect of the procurement at issue. However, the Tribunal observes that the Department acted as if the contract had been awarded when it disclosed the pricing information of each bidder. Article 1008(2)(a) of NAFTA provides that entities shall not provide to any supplier information with regard to a specific procurement in a manner that would have the effect of precluding competition. In the Tribunal’s view, the effect of the disclosure by the Department was to make it practically impossible in the circumstances for there to be a fair re-bid of the solicitation. As a result, the Tribunal finds that such disclosure by the Department had the effect of precluding competition and constitutes a violation of Article 1008(2)(a) of NAFTA.
With respect to the issue of the contract award, the Department’s decision not to award the contract to the complainant and to issue a new solicitation arises from the fact that the Department responded to certain queries by the complainant concerning the fuel tank capacity and air drop requirements in the RFP and did not convey its responses to Air Spray. The Tribunal observes that Article 1010(7) of NAFTA requires that “[a]ny significant information,” not all information, given by the Department to a bidder be given simultaneously to all other interested bidders. It is clear to the Tribunal that the Department did not consider the communications between it and the complainant to be “significant.” In the Tribunal’s view, this was reasonable given the circumstances of the procurement at issue. In particular, the Tribunal notes that it was obvious from the RFP that the Douglas A-26/B-26 and the S2F Firecat aircraft were acceptable alternatives as set out in article 1 of Appendix “A” of the RFP. In the Tribunal’s view, the complainant’s bid met the requirements set out in that section of the RFP. Moreover, the Tribunal notes that the relationship between the complainant and Air Spray was such that they had previously competed against each other and were well aware of the specifications of each company’s aircraft. This fact was demonstrated to the Tribunal by Air Spray’s submission of a specification sheet for the S2F Firecat, as well as by the statements in Air Spray’s letter of February 27, 1996, to the Department. In that letter, Air Spray compares its aircraft to the S2F Firecat and, at no time, mentions that it considered the S2F Firecat to be non-compliant.
The Tribunal observes that Article 1015(4)(c) of NAFTA provides that “unless the entity decides in the public interest not to award the contract, the entity shall make the award to the supplier that has been determined to be fully capable of undertaking the contract and whose tender is either the lowest-priced tender or the tender determined to be the most advantageous in terms of the specific evaluation criteria set out in the notices or tender documentation.” In the Tribunal’s view, the Department considered both bids to be responsive and, having made its assessment that the complainant’s offer was the lowest bid and indicated its intention to award the contract to the complainant, the Department could only have decided not to award the contract “in the public interest” pursuant to Article 1015(4)(c) of NAFTA.
The evidence on the record indicates that the Department cancelled the solicitation based on its determination that the bidders were bidding on two separate requirements and the conclusion that the “only way to be fair to all potential bidders ... was to cancel the original solicitation.” The Tribunal notes that the Department did not make this determination until after it had found both bidders compliant and disclosed confidential bid price information. Furthermore, this determination was only made after Air Spray, with the knowledge that the Department intended to award the contract to the complainant, alleged that the Department had changed the requirements in the RFP and had not notified it of those changes. In light of these facts, the fact that the RFP referred to the aircraft of both bidders, the fact that both bidders were aware of the specifications of both aircraft and the fact that they both had previously bid on similar procurements involving those aircraft, the Tribunal cannot conclude that the Department decided in the public interest not to award the contract to the complainant. Accordingly, the Tribunal is of the view that the Department’s decision not to award the contract to the complainant constituted a violation of Article 1015(4)(c) of NAFTA and that, but for the actions of the Department, the contract would have been awarded to the complainant.
Determination of the Tribunal
In light of the foregoing, the Tribunal determines, in consideration of the subject matter of the complaint, that the procurement was not conducted according to NAFTA and that, therefore, the complaint is valid.
Pursuant to subsections 30.15(2) and (3) of the CITT Act, the Tribunal recommends, as a remedy, that the Department pay the complainant compensation that recognizes that the complainant should have been awarded the contract and would have had the opportunity to profit therefrom. The basis for the calculation of profit will be the price tendered by the complainant in its offer of March 4, 1996, less the costs for the option year.
Finally, the Tribunal recommends that the Department not exercise the option to extend the contract for an additional year and, instead, should the requirement continue to exist, reissue a competitive solicitation for the requirement in accordance with the provisions of the applicable agreements.
Pursuant to subsection 30.16(1) of the CITT Act, the Tribunal awards the complainant its reasonable costs incurred in relation to filing and proceeding with its complaint.
1. R.S.C. 1985, c. 47 (4th Supp.).
2. Done at Ottawa, Ontario, December 11 and 17, 1992, at Mexico, D.F., on December 14 and 17, 1992, and at Washington, D.C., on December 8 and 17, 1992 (in force for Canada on January 1, 1994).
3. SOR/93-602, December 15, 1993, Canada Gazette Part II, Vol. 127, No. 26 at 4547, as amended.
4. SOR/91-499, August 14, 1991, Canada Gazette Part II, Vol. 125, No. 18 at 2912, as amended.
5. R.S.C. 1985, Appendix II, No. 44.
6. Signed on May 29, 1993, by representatives of the Champagne and Aishihik First Nations, Her Majesty the Queen in right of Canada and the Government of the Yukon Territory.
7. Signed on May 29, 1993, by representatives of the First Nation of Nacho Nyak Dun, Her Majesty the Queen in right of Canada and the Government of the Yukon Territory.
8. Signed on May 29, 1993, by representatives of the Teslin Tlingit Council, Her Majesty the Queen in right of Canada and the Government of the Yukon Territory.
9. Signed on May 29, 1993, by representatives of the Vuntut Gwitchin First Nation, Her Majesty the Queen in right of Canada and the Government of the Yukon Territory.
10. Subsection 35(1) of the Constitution Act, 1982 provides that "[t]he existing aboriginal and treaty rights of the aboriginal peoples of Canada are hereby recognized and affirmed." Subsection 35(3) provides that "[f]or greater certainty, in subsection (1) 'treaty rights' includes rights that now exist by way of land claims agreements or may be so acquired."
11. Signed on May 29, 1993, by representatives of the Yukon First Nations, Her Majesty the Queen in right of Canada and the Government of the Yukon Territory.
12. [1983] 1 S.C.R. 29.
13. Ibid. at 36. See also R. v. Sparrow, [1990] 1 S.C.R. 1075 at 1107; and Mitchell v. Peguis Indian Band , [1990] 2 S.C.R. 85 at 98 and 143-44.
14. Mitchell v. Peguis Indian Band , ibid . at 143.
15. Guerin v. The Queen , [1984] 2 S.C.R. 335.
16. R. v. Sparrow , supra note 13 at 1108.
17. R. v. Badger , unreported, File No. 23603, April 3, 1996, Cory J. at 31-32 and Sopinka J. at 5.
18. See Quebec (Attorney General) v. Canada (National Energy Board) , [1994] 1 S.C.R. 159 at 184.
19. Ibid. at 186.
20. Article 2.2.1 of the CAFA.
21. Articles 2.6.2.2 and 2.6.2.4 of the CAFA.
22. Article 2.11.8 of the CAFA.
23. Article 17.14.1 of the CAFA.
24. Article 17.14.2.3 of the CAFA.
25. Article 17.14.2.6 of the CAFA.
26. Article 22.1.1.1 of the CAFA.
27. Article 22.1.1.2 of the CAFA.
28. Article 22.1.1.3 of the CAFA.
29. Article 22.5.4 of the CAFA.
30. Article 22.5.6 of the CAFA.
31. S.C. 1994, c. 34, s. 4.
32. Article 1008(1)(a) of NAFTA provides that tendering procedures will be applied in a "non - discriminatory manner."
33. Article 1008(2)(b) of NAFTA provides that all suppliers are to have "equal access to information with respect to a procurement during the period prior to the issuance of any notice or tender documentation."
34. Mechron Energy Ltd. , File No. PR-95-001, Determination of the Tribunal and Findings of the Tribunal , August 18, 1995.
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Initial publication: January 31, 1997
