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Procurement
Determinations
EDS CANADA INC.
v.
DEPARTMENT OF PUBLIC WORKS AND GOVERNMENT SERVICES
File No. PR-2006-042
Determination and reasons issued
Tuesday, May 1, 2007
TABLE OF CONTENTS
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IN THE MATTER OF a complaint filed by EDS Canada Inc. under subsection 30.11(1) of the Canadian International Trade Tribunal Act, R.S.C. 1985 (4th Supp.), c. 47;
AND FURTHER TO a decision to conduct an inquiry into the complaint under subsection 30.13(1) of the Canadian International Trade Tribunal Act.
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BETWEEN |
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EDS CANADA INC. |
Complainant |
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AND |
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THE DEPARTMENT OF PUBLIC WORKS AND GOVERNMENT SERVICES |
Government Institution |
DETERMINATION OF THE TRIBUNAL
The Canadian International Trade Tribunal finds that it does not have jurisdiction to inquire into the complaint. Consequently, the complaint is dismissed.
Pursuant to section 30.16 of the Canadian International Trade Tribunal Act, the Canadian International Trade Tribunal awards the Department of Public Works and Government Services its reasonable costs incurred in responding to the complaint, which costs are to be paid by EDS Canada Inc. The Canadian International Trade Tribunal’s preliminary indication of the level of complexity for this complaint case is Level 3, and its preliminary indication of the amount of the cost award is $4,100. If any party disagrees with the preliminary indication of the level of complexity or the preliminary indication of the amount of the cost award, it may make submissions to the Canadian International Trade Tribunal, as contemplated in its Guideline for Fixing Costs in Procurement Complaint Proceedings. The Canadian International Trade Tribunal retains jurisdiction to establish the final amount of the award.
Ellen Fry
Ellen Fry
Presiding Member
Pierre Gosselin
Pierre Gosselin
Member
Zdenek Kvarda
Zdenek Kvarda
Member
Hélène Nadeau
Hélène Nadeau
Secretary
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Tribunal Members: |
Ellen Fry, Presiding Member |
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Pierre Gosselin, Member |
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Zdenek Kvarda, Member |
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Director: |
Randolph W. Heggart |
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Senior Investigator: |
Michael W. Morden |
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Counsel for the Tribunal: |
Alain Xatruch |
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Complainant: |
EDS Canada Inc. |
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Counsel for the Complainant: |
Rajeev Sharma |
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Ivan Whitehall |
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Judith Parisien |
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Intervener: |
Resolve Corporation |
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Counsel for the Intervener: |
Paul Conlin |
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Gregory Sommers |
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Jason Mackenzie |
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Government Institution: |
Department of Public Works and Government Services |
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Counsel for the Government Institution: |
Susan D. Clarke |
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Christianne M. Laizner |
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Ian McLeod |
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David D’Angela |
Please address all communications to:
The Secretary
Canadian International Trade Tribunal
Standard Life Centre
333 Laurier Avenue West
15th Floor
Ottawa, Ontario
K1A 0G7
Telephone: 613-993-3595
Fax: 613-990-2439
E-mail: secretary@citt-tcce.gc.ca
STATEMENT OF REASONS
COMPLAINT
1. On February 1, 2007, EDS Canada Inc. (EDS) filed a complaint with the Canadian International Trade Tribunal (the Tribunal) pursuant to subsection 30.11(1) of the Canadian International Trade Tribunal Act. 1 The complaint concerned the procurement by the Department of Public Works and Government Services (PWGSC) (Solicitation No. G7462-040002/D), on behalf of the Department of Human Resources and Skills Development, for the provision of services in support of the Canada Student Loans Program (CSLP).
2. EDS alleged that PWGSC evaluated its proposal using secret, undisclosed or unexplained criteria. In the alternative, it alleged that, to the extent that disclosed criteria were applied, the application and interpretation of those criteria was arbitrary, unfair and unreasonable.
3. As a remedy, and in addition to requesting its costs of bringing the complaint before the Tribunal, EDS requested that the contract awarded to its competitor, Resolve Corporation (Resolve), be cancelled and awarded to EDS. In the alternative, EDS requested that it be compensated for the profit that it would have earned, had it been awarded the contract.
4. On February 8, 2007, the Tribunal informed the parties that it had accepted the complaint, as it met the requirements of subsection 30.13(1) of the CITT Act and the conditions set out in subsection 7(1) of the Canadian International Trade Tribunal Procurement Inquiry Regulations. 2 On February 22, 2007, Resolve Corporation requested, and was granted, intervener status. On March 6, 2007, PWGSC filed the Government Institution Report (GIR). On March 19, 2007, EDS and Resolve filed their respective comments on the GIR. On March 27, 2007, EDS filed its response to Resolve’s comments on the GIR. On March 28, 2007, PWGSC requested the Tribunal’s permission to address new arguments contained in EDS’s comments on the GIR. Permission was granted, and PWGSC’s response to the new arguments was added to the record. On April 2, 2007, EDS filed its comments on PWGSC’s response to EDS’s comments on the GIR.
PROCUREMENT PROCESS
5. The procurement at issue is for services in support of the CSLP for loans made pursuant to several federal and provincial student loans programs, as outlined in the Tribunal’s analysis section below.
6. The Request for Proposal (RFP) was made available through MERX on February 24, 2006, with a closing date of April 5, 2006, which was eventually extended to June 13, 2006. According to PWGSC, it received three proposals by June 13, 2006. On December 21, 2006, PWGSC awarded a contract to Resolve and informed the non-successful bidders, by facsimile, of the award. EDS requested a debriefing, which was held on January 22, 2007.
7. On February 1, 2007, EDS filed its complaint with the Tribunal.
TRIBUNAL’S ANALYSIS
Jurisdictional issue
8. In its response to the complaint, PWGSC submitted that the Tribunal does not have jurisdiction to conduct an inquiry in regard to this complaint. It submitted that “. . . the procurement process at issue is for the comprehensive delivery of federal and provincial student client financial assistance services . . . .” PWGSC submitted that “. . . [s]uch ‘student loan services’, which were provided by Canadian Banks, Credit Unions, and other banking and financial institutions prior to August 1, 2000, are properly classified as ‘financial services’ and are therefore exempt from coverage under [the North American Free Trade Agreement 3 ], Chapter 10, the WTO-[Agreement on Government Procurement 4 ], and the [Agreement on Internal Trade 5 ], Chapter 5 . . . .” EDS, on the other hand, argued that the central requirement was for an experienced administrator with key information technology and administrative management capabilities rather than for financial services.
9. After examining the evidence and the submissions, the Tribunal concluded that it does not have jurisdiction to inquire into this complaint. The Tribunal’s analysis follows.
10. Section 1.3 of the Statement of Work (SOW) outlines the duties that the service provider (i.e. the successful bidder) was to provide as follows:
1.3 SCOPE OF THE WORK
. . .
The Service Provider will administer accounts from the processing of the loan agreement to full repayment of the loan, while ensuring the privacy and security of borrowers’ personal information. The Service Provider will also be responsible for managing the disbursement of Canada Access Grants. The Service Provider will perform financial and related services, including verification of the loan agreement, management of the In-study interest-free period, and management of loan repayment. The Service Provider will be responsible for communicating with borrowers throughout the loan lifecycle, including but not limited to:
• notifying them of debt consolidation,
• debt management measures, and
• detailing their repayment responsibilities.
The Service Provider will also perform case management activities, including responding to borrowers’ inquiries, administering debt management activities, and rehabilitating delinquent loans. The Service Provider will also provide on-line client services, services in both of Canada’s official languages, service to borrowers with special needs, and service to borrowers studying outside Canada.
Further, the Service Provider will provide administrative services for some aspects of previous loan regimes (Guaranteed and Risk-Shared, which are described in Section 1.8, “Canada Student Loans Program Overview”).
[Footnote omitted]
11. Section 2.2 of the SOW breaks down the entire student loan process into seven distinct stages, with the service provider being responsible for processes 2 through 6:
Process 1 – Application and Confirmation
Process 2 – Loan Origination
Process 3 – In-study/Grace Period Account Management
Process 4 – Loan Consolidation and Repayment
Process 5 – Debt Management
Process 6 – Processes Across the Loan Lifecycle
Process 7 – Debt Collection
12. The Tribunal notes that figure 2.1 of the SOW breaks these processes down into sub-tasks. In the Tribunal’s opinion, some of the sub-tasks for processes 2 through 6 clearly could be considered financial services (e.g. 2.4 “Disburse Payment”, 4.1 “Perform Loan Consolidation”, 4.2 “Handle Loan Repayments”, 5.2 “Effect Revision of Loan Repayment Terms”), some could be considered information technology services (e.g. 2.3 “Create and Transmit Payment File”, 6.6 “Additional Reporting Requirements”), and some could be considered administrative or program management services (e.g. 2.2 “Validate Borrower Information”, 3.4 “Manage Account”, 5.1 “Borrower in Financial Distress Relationship Management”). In addition, there are some tasks that appear to encompass a combination of some or all of these types of services (e.g. 6.1 to 6.4 “Manage Special Cases”).
13. PWGSC submitted that a review of the solicitation documents in their entirety demonstrates that “financial and related administrative services” are being procured. It submitted that the ancillary administrative services required are standard in the context of any financial institutions’ or other organizations’ delivery of service. It argued that the Service Provider is primarily performing client loan account management services that are “financial services” akin to those provided by a bank, the only difference being that public funds are being managed and loaned, as opposed to private funds being disbursed.
14. EDS, on the other hand, submitted that the scoring schemes and SOW clearly indicate that the substance of the RFP relates to information technology, business process management and related administrative services. EDS submitted that, as an example, section 1.11 of the SOW, entitled “Service Delivery Vision for the Future”, outlines key building blocks that include the following: “On-line Service Window”; “On-line Services”; “Integrated Client File”; “Security and Privacy”; “Infrastructure”; and “Service Delivery Partners”. EDS submitted that these constitute information technology, business process management and related administrative services.
15. EDS also submitted that the SOW specifically carved out services that would be considered quintessentially financial in nature, such as loan applications, eligibility determination, confirmation, funding and debt collection. It also submitted that section 2.4.1.5.3 of the SOW specifically states that the Service Provider is not responsible for the provision of a payment and deposit facility or for funds remitted by borrowers. EDS noted that the actual funding of the program also remains the government’s responsibility.
16. Given this, EDS argued that the extent to which the SOW does refer to financial matters is very small compared to the overall services being procured and that it is impossible to conclude that the essence of the contract refers to financial and related services.
17. 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.”
18. Section 30.1 of the CITT Act defines the term “designated contract” as follows:
“designated contract” means 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.
19. Subsection 3(1) of the Regulations provides the following:
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 502 of the Agreement on Internal Trade or in Article I of the Agreement on Government Procurement, by a government institution, is a designated contract.
20. With respect to the AIT, Annex 502.1B provides that the following services are not covered by Chapter Five (and hence not covered by Article 502):
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(d) financial services respecting the management of government financial assets and liabilities (i.e. treasury operations), including ancillary advisory and information services, whether or not delivered by a financial institution; |
e) les services financiers se rapportant à la gestion de l’actif et du passif du gouvernement (par exemple les opérations sur le Trésor), y compris les services accessoires de consultation et d’information, qu’ils soient ou non fournis par une institution financière; |
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[...] |
21. Article 200 of the AIT, “Definitions of General Application”, provides a definition for the term “financial service”, which reads as follows:
financial service means any service or product of a financial nature that is subject to, or governed by, a measure adopted or maintained by a Party or by a public body that exercises regulatory or supervisory authority delegated by law and includes, but is not limited to:
(a) deposit-taking;
(b) loan and investment services;
(c) insurance;
(d) estate, trust and agency services;
(e) securities; and
(f) all forms of financial or market intermediation including, but not limited to, the distribution of financial products.
22. The Tribunal will first consider whether item (b), “loan . . . services”, could be applicable. The AIT does not define this term. The term “loan services” also does not appear to be a term in general usage, given that it does not appear in the technical dictionaries consulted by the Tribunal. 6
23. In the Tribunal’s opinion, “loan services” could be understood to mean either:
(a) only the actual granting of loans (on the premise that the loan would be a service to the borrower);
(b) financial services respecting loans (i.e. services regarding the substantive aspect of loans, consistent with the lead-in of the definition of “financial service” reproduced above); or
(c) all services respecting loans (i.e. a plain language interpretation of the phrase).
24. How widely the term “loan services” is interpreted is important. As indicated above, the SOW included many operations that are clearly financial operations of a type normally performed by a bank, but also included several types of non-financial work concerning the loans.
25. The Tribunal considered whether “investment services”, the other part of item (b) in the definition of “financial service” and a term more commonly used, would provide any guidance on how wide an interpretation should be given to “loan services”. Investment services would generally be understood to include services on both the substantive and administrative aspects of investments (e.g. advice on what investments to make, keeping track of an investor’s portfolio, giving the investor information concerning his/her investments). Similarly, estate, trust and agency services, item (d) of the definition, would normally be understood to include some non-substantive services (e.g. reporting on the status of assets).
26. Taking these terms into account, the Tribunal considers that “all services respecting loans” (i.e. the plain language interpretation) is the best interpretation of “loan services”. Accordingly, the Tribunal finds that the services being sought by the RFP are “financial services” as defined by Article 200 of the AIT. The Tribunal notes that, even though certain services associated with the delivery of the CSLP which are not the responsibility of the Service Provider could also be considered “financial services”, this does not take away from the fact that the services being delivered by the Service Provider are in and of themselves “financial services”.
27. The Tribunal then considered whether these “financial services” are covered by the exclusion in Annex 502.1B of the AIT. As indicated above, paragraph 1(d) of Annex 502.1B provides that “financial services respecting the management of government financial assets and liabilities (i.e. treasury operations), including ancillary advisory and information services, whether or not delivered by a financial institution” are not covered by Chapter Five.
28. In accounting terms, it is clear that the funds in the Consolidated Revenue Fund that are used to make the loans are “government financial assets”, as are the loans after they are made, given that the government has a right to receive repayment. Furthermore, the services in question are services “respecting the management” of these government financial assets. The Tribunal notes that, given the apparent inconsistency between the English and French language versions of paragraph 1(d) of Annex 502.1B of the AIT, the exclusion is not necessarily confined to “treasury operations”. 7 The Tribunal further notes that paragraph 1(d) of Annex 502.1B specifically indicates that excluded financial services need not be delivered by a financial institution.
29. The Tribunal is therefore of the opinion that these services are excluded from the AIT by virtue of Annex 502.1B.
30. EDS argued that the fundamental principle that exceptions are to be construed narrowly means that the Tribunal should take a narrow interpretation of “financial services”. EDS offered the Tribunal’s decision in IBM Canada Limited 8 as support for this proposition.
31. In previous cases 9 where it has been truly unclear whether an exemption should apply, the Tribunal has chosen a narrow interpretation as the interpretation most consistent with the intent of the trade agreements. However, the Tribunal considers that, in this case, there is sufficient clarity to make it inappropriate to apply such an approach.
32. The Tribunal will now consider its jurisdiction under NAFTA. Annex 1001.1b-2, Section B - Excluded Coverage, Schedule of Canada, provides a listing of the types of contracts that are excluded from coverage. That annex indicates that all contracts relating to Common Classification System code L, “Financial and Related Services”, are excluded. The Tribunal considers that the services being procured either are financial in nature or relate to financial services. Accordingly, the Tribunal finds that this procurement is excluded under NAFTA.
33. Regarding the Tribunal’s jurisdiction under the AGP, Canada’s Annex 4 to Appendix 1 provides a listing of the services that Canada offers for coverage. Annex 4 does not list either “financial and related services” or “loan services”, or any other category of services that the Tribunal considers would encompass the services in question. Accordingly, the Tribunal considers that the AGP does not apply to this procurement.
34. In light of the foregoing, the Tribunal finds that the complaint does not relate to a designated contract. Therefore, the Tribunal finds that it does not have jurisdiction to inquire into the complaint and hereby dismisses the complaint.
Costs
35. The Tribunal awards PWGSC its reasonable costs incurred in responding to the complaint.
36. The Tribunal’s Guideline for Fixing Costs in Procurement Complaint Proceedings (the Guideline) contemplates classification of the level of complexity of complaint cases based on three criteria: the complexity of the procurement; the complexity of the complaint; and the complexity of the complaint proceedings. The complexity of the procurement was high, as demonstrated by the extensive and technical RFP and SOW. The complexity of the complaint was high, in that, in addition to involving a difficult and complex jurisdictional issue, the grounds of complaint were fairly complex. Finally, the complexity of the complaint proceedings was also high, as there was an intervener, the parties were required to submit information beyond the normal scope of proceedings, and there has been a higher than usual exchange of correspondence concerning substantive and procedural issues. Accordingly, the Tribunal is of the preliminary view that this complaint case has an overall complexity level corresponding to the highest level of complexity referred to in Appendix A of the Guideline (Level 3). As contemplated by the Guideline, the Tribunal’s preliminary indication of the amount of the cost award is $4,100. The Tribunal reserves jurisdiction to establish the final amount of the award.
DETERMINATION OF THE TRIBUNAL
37. The Tribunal finds that it does not have jurisdiction to inquire into the complaint. Consequently, the complaint is dismissed.
38. Pursuant to section 30.16 of the CITT Act, the Tribunal awards PWGSC its reasonable costs incurred in responding to the complaint, which costs are to be paid by EDS. The Tribunal’s preliminary indication of the level of complexity for this complaint case is Level 3, and its preliminary indication of the amount of the cost award is $4,100. If any party disagrees with the preliminary indication of the level of complexity or the preliminary indication of the amount of the cost award, it may make submissions to the Tribunal, as contemplated in its Guideline. The Tribunal retains jurisdiction to establish the final amount of the award.
1 . R.S.C. 1985 (4th Supp.), c. 47 [CITT Act].
2 . S.O.R./93-602 [Regulations].
3 . North American Free Trade Agreement Between the Government of Canada, the Government of the United Mexican States and the Government of the United States of America, 17 December 1992, 1994 Can. T.S. No. 2 (entered into force 1 January 1994) [NAFTA].
4 . 15 April 1994, online: World Trade Organization <http://www.wto.org/english/docs_e/legal_e/final_e.htm> [AGP].
5 . 18 July 1994, C. Gaz. 1995.I.1323, online: Internal Trade Secretariat <http://www.ait-aci.ca/index_en/ait.htm> [AIT].
6 . Derek French, Dictionary of Accounting Terms (London: Financial Training Publications, 1985); Jerry M. Rosenberg, Dictionary of Banking and Financial Services, 2nd ed. (New York: Wiley & Sons, 1985); Dictionary of Banking Terms (Hauppauge: Barron’s Educational Series, 1997); Encyclopaedia of Banking Finance, 9th ed. (Pasadena: Salem Press, 1991).
7 . Paragraph 1(d) of Annex 502.1B of the French version of the AIT contains the phrase “par exemple”, which would be considered the equivalent of “e.g.”.
8 . Re Complaint Filed by IBM Canada Limited (10 April 2003), PR-2002-040 (CITT).
9 . See, for example, Re Complaint Filed by McNally Construction Inc. (6 December 2001), PR-2001-026 (CITT).
