News flash: The provincial government has given new ‘teeth’ to bidders in public procurement that could change the public procurement landscape in BC.
As of February 15, 2016, BC legislation came into effect to implement an amendment to the New West Partnership Trade Agreement (NWPTA) that introduced a new ‘Bid Protest Mechanism’ (BPM) under NWPTA. The BPM empowers unsuccessful bidders on qualifying procurements to make claims directly against the public procuring authority on the basis of non-compliance with NWPTA procurement requirements. The BPM has the potential to profoundly change public procurement in the province.
NWPTA is the interprovincial trade agreement between the provinces of British Columbia, Alberta, Saskatchewan and, as of November 2016, Manitoba. It follows on from the Agreement on Internal Trade (AIT), the parent internal Canadian trade agreement that the provinces and Canada have signed. Both AIT and NWPTA specify procurement rules and requirements that apply to public procurement over defined thresholds. These agreements prohibit one province from running a procurement which has the effect of denying to a contractor or supplier from another province fair and equal access to that procurement. NWPTA includes general obligations, which are interpreted through the more specific obligations of AIT, so in most cases a breach of the AIT rules would likely also constitute a breach of the NWPTA rules. AIT and NWPTA make these prohibitions applicable to provincial Crown entities such as Crown corporations and municipalities; an important extension considering that such a significant portion of public procurement is undertaken by these entities.
Clearly the public policy objective of AIT and NWPTA is to facilitate trade and economic development in Canada. In the past, however, the agreements were largely toothless mainly because only the senior levels of government, as the signatories to AIT and NWPTA, had any standing to advance a claim in the event of a breach of the procurement rules. At a practical level, most often the aggrieved bidder was a private sector contractor or supplier who was a bidder under a procurement issued by a Crown corporation or municipality. Pursuit of a complaint required the aggrieved bidder to convince its provincial government, as its “representative” signatory to the trade agreement, to take action under the trade agreement on its behalf. In practice AIT/NWPTA procurement regulations were frequently ignored, particularly by Crown corporations and municipalities, for example when schedule pressures made a sole-source award attractive because it avoided the time required by an open procurement, or when an award to a local contractor with known and reliable capabilities seemed less likely to lead to cost overruns. An aggrieved bidder had no practical legal recourse against a procuring authority that acted in violation of AIT or NWPTA procurement rules.
The BPM has changed this landscape. The BPM gives aggrieved bidders a right to pursue complaints directly against a procuring authority for NWPTA violations on specific procurements, with the opportunity to win a monetary award (enforceable under provincial legislation) against the procuring authority if the aggrieved bidder establishes that the procurement violated the NWPTA procurement rules.
Applicability of the BPM
Given the potential impact of the BPM on public procurement, all procurement participants should be aware of when the NWPTA procurement rules apply and what obligations procuring authorities are held to.
- Applicability thresholds: NWPTA applies to procurements issued by the provincial government entities listed in Article 14 of NWPTA if the procurements exceed the applicable procurement thresholds, subject to express and limited exceptions. As examples, for government ministries, Crown corporations and municipalities, the respective thresholds are:
- Ministries: $10,000 (goods); $75,000 (services); $100,000 (construction)
- Crown corporations: $25,000 (goods); $100,000 (services); $100,000 (construction)
- Municipalities: $75,000 (goods); $75,000 (services); $200,000 (construction)
- Exceptions under NWPTA: NWPTA does include defined ‘procurement exceptions’, which allow for procurements to be exempt from the procurement rules in specific circumstances. These exceptions are limited, and do not, for example, permit non-compliance with NWPTA procurement rules for reasons of convenience or economics, including to meet a specific deadline, or to save costs, or simply to maintain consistency with previously procured items. The procuring authority must go further and, for example, establish that such factors go to public safety, or amount to an emergency.
- Procurement obligations under NWPTA: NWPTA requires procuring authorities to run procurements and maintain procurement policies in an open, non-discriminatory and transparent manner. Procurements that violate any of these requirements may be grounds for a BPM complaint.
- ‘Open’ means that all eligible bidders that meet the essential requirements for a specific procurement must be given the opportunity to bid.
- ‘Non-discriminatory’ means that a procuring authority must not extend a preference for local or domestic goods, services or bidders; impose conditions that are based on the location of a bidder’s business; or engage in other practices designed to prevent certain bidders from being able to submit a bid.
- ‘Transparent’ means that a procuring authority’s procurement documentation must include all information necessary to permit bidders to prepare and submit responsive bids, including, for example:
- All criteria that will be used in evaluating the bids and the relative importance of such criteria;
- Any technical specifications, and any requirements for servicing or warranty;
- Any requirements related to submission of bids; and
- Any and all other requirements to be fulfilled, or terms or conditions applicable to the procurement.
- Procuring authorities must also make their procurement documentation accessible on the province’s electronic tendering system (i.e. BC Bid), make procurement policies available upon request, and provide any information necessary for a bidder to determine whether a procurement was conducted fairly, impartially and in accordance with applicable obligations.
In the event of a potential NWPTA violation, any “supplier” can invoke the BPM to make a complaint directly against a public procuring authority. “Supplier” is defined as any “person that provides or could provide goods or services” in the context of a covered procurement. This language is similar to language in other trade agreements’ bid protest rules, where standing has come to be restricted to bidders who actually submitted a bid for the applicable procurement, or who can establish that it would have submitted a bid except for the procuring authority’s violations of the procurement rules.
The BPM process includes various stages, which are subject to strict timelines as described below:
- Complaints must be submitted within 10 days after the day the bidder first knew (or reasonably should have known) that the procurement violated an NWPTA procurement rule.
- A complaint initiates a 20-day consultation period during which the bidder and the procuring authority have the opportunity to resolve the complaint.
- If these consultations are unsuccessful, the bidder may, within 14 days of the end of consultations, send a written request (including all relevant details of the complaint) to an appointed “NWPTA administrator” to appoint an independent arbiter (selected from a standing list established by the provinces) to adjudicate the complaint.
- The procuring authority is required to deliver a written response to the complaint within 14 days of delivery of the bidder’s written request.
- The bidder has seven days to submit a reply.
- The arbiter is required to adjudicate the matter solely based on the written statements submitted by the parties, and deliver a final report within 10 days of the last submission, including a determination as to whether the procurement was consistent with NWPTA.
- If the arbiter finds that the procurement was inconsistent with NWPTA, the arbiter has the authority to:
- Make recommendations as to how a procuring authority can bring itself into compliance; and
- Order the procuring authority to reimburse the bidder for its costs of preparing a bid (up to a maximum of $50,000).
- The arbiter also has the authority to award costs, typically against the unsuccessful disputant, up to a maximum of $50,000.
- The arbiter’s decision is binding and enforceable on the parties, but can be subject to judicial review.
Is the BPM being used?
We understand from BC government representatives that through January 1, 2017, only five BPM complaints have been filed across NWPTA provinces, all of which were resolved in the consultation stage. None proceeded to arbitration.
The public policy objective of our Canadian internal trade agreements—to encourage internal trade and economic development within Canada generally—is not always directly in line with a procuring authority’s interest in achieving its own local interests. There can be strong reasons supported by local taxpayers and electors to favour a procurement, such as a sole-source award or an award to a local contractor, that is not permitted by the internal trade agreements. The BPM now offers a mechanism by which affected bidders can demand that the national policy take priority over such local interests, and that procuring authorities must abide by the AIT and NWPTA procurement rules.
With the implementation of the BPM, it has become more important that both bidders and procuring authorities know what their procurement rights and obligations are under NWPTA. Understanding these rights and obligations, and what constitutes an infringement of NWPTA, is not a simple task, and we urge bidders and procuring authorities to consult with their legal advisors to ensure they are properly interpreting the provisions of NWPTA.
At some level, we are surprised at the low number of complaints that have been filed in the months since the BPM has come into effect, and we can only speculate on the reasons. It may be that procuring authorities are being more mindful of AIT/NWPTA procurement rules. It also may be that bidders are not yet generally aware of the BPM’s implementation. A third reason may be that potential claims are being settled under the threat or risk of BPM proceedings. Perhaps contractors and suppliers are cognizant that, even in arms-length procurements, good on-going relationships and demonstrated ability to be constructive are essential, and so are reluctant to advance formal procurement claims.
What does the implementation of the BPM mean on a broader scale for procurement players in Canada?
- We understand that the BPM was intended, in part, to harmonize NWPTA’s dispute resolution processes with existing trade agreement dispute processes both within Canada (federal Canadian International Trade Tribunal (CITT) complaint processes, NAFTA) and abroad (European Union’s procurement directives), and also with those proposed for the future (Comprehensive Economic Trade Agreement (CETA), Trans-Pacific Partnership (TPP)).
- Considering the BPM as a whole, the consequences of NWPTA infringement are still relatively tame by modern trade agreement standards, as there is no requirement for a contract award to be delayed pending resolution of a BPM complaint or for an illegally awarded contract to be set aside, as is the case under the existing and proposed treaties mentioned above.
- Notwithstanding US President Trump’s withdrawal from TPP and promise to renegotiate NAFTA, we expect that the number of trade agreements that Canadian procuring authorities are subject to will continue to increase, and the style of dispute process implemented through the BPM is likely indicative of enforcement mechanisms we can expect to see under future treaty-based procurement rules. Further, future trade agreements may give standing to foreign entities to bring complaints directly against local procuring authorities as is now the case for local Canadian bidders under the BPM (much like is the case, for example, under CETA’s proposed procurement rules).
For the present, what is clear is that with the implementation of the BPM, the duty on procuring authorities to comply with AIT/NWPTA the procurement rules, and the risk of sanction for failing to comply, has risen dramatically.