In an interesting legal twist, the Federal Court of Canada recently waded into an application for judicial review of the process leading up to award of a contract for the purchase of 15 light-lift helicopters, a contract potentially worth $172 million. As procurement professionals know, the courts in Canada have traditionally limited their role on judicial review to assessing the “reasonableness” of public-sector contract award decisions.

Background

Following the federal budget announcement in March 2012 that funds had been set aside for this purchase, a user group was formed. It was composed of officials from different units within the Canadian Coast Guard and Transport Canada. The technical requirements were drafted by this group and then forwarded to Public Works and Government Services Canada (PWGSC), the organization responsible for conducting the procurement process.

Airbus (“Eurocopter” during the relevant period) and Bell Helicopter are well-known competitors in the aerospace industry. Both companies participated in an industry consultation process initiated by PWGSC, in advance of a procurement process for these helicopters. During this consultation process, the technical requirements document was modified. It was ultimately used as the basis for a draft Request for Proposals (RFP) that was circulated after a second round of one-on-one meetings with interested companies.

Allegations and Evidence

During and after the consultation meetings, Airbus repeatedly raised allegations that these technical requirements had been tailored to enable Bell to win the contract. The allegations went even further, alleging that the federal government had favoured Bell from the outset, and that these requirements had actually been designed based on the specifications for the aircraft provided by Bell – the Bell 429.

It is clear from the evidence presented at trial that Airbus knew early in the process that it would have difficulty meeting the onerous technical requirements imposed by PWGSC, and on numerous occasions, it had offered alternative requirements based on profiles of the missions to be conducted by the Coast Guard.

While the alternatives proposed by Airbus reduced the technical requirements, the evidence showed that the mission profiles supported the more stringent standards set by the user group and PWGSC.

The Airbus Application

Ultimately, due to perceptions of biased specifications, Airbus declined the opportunity to respond to the RFP process and brought this application when Bell – the only respondent left to the RFP – was awarded the helicopter contract. The court application focused on the process leading up to the procurement, and in particular, the design and subsequent minor modifications to the technical requirements. In Airbus’s view, PWGSC’s refusal to reconsider the technical requirements rendered the exercise of discretion to award the contract to Bell both unreasonable and incorrect, as contrary to federal government statutory commitments to promote fairness, openness and transparency in the bidding process for contracts.

Not surprisingly, the Crown vigorously attacked the allegations made by Airbus and sought to demonstrate that the technical requirements criticized by Airbus were based on operational requirements and were fair and reasonable. Also not surprisingly, Bell fully supported the Crown’s position and argued that, if for some reason the Court agreed with Airbus, the appropriate remedy would not be to cancel the contract.

The Decision

In seeking to understand the outcome of Airbus Helicopters Canada Limited v. The Attorney General of Canada, the Minister of Public Works and Government Services, Bell Helicopter Textron Canada Ltd., 2015 FC 257, it is important to note the Court’s conclusion that the numerous working documents presented by Airbus suggested that the Airbus aircraft was less efficient and would result in a decrease from the desired level of performance. The Court accepted the Crown’s evidence that the onerous technical requirements were necessary for the wide variety of missions conducted by the Coast Guard.

The Court also accepted evidence that an appropriate governance structure was in place for the procurement process, an external fairness monitor had been engaged, and the Ontario Ministry of Natural Resources and Forestry had provided an independent review of the technical requirements.

The Legal Analysis

As noted at the outset of this article, the legal analysis in this case is particularly relevant to public-sector procurement professionals in Canada. Airbus did not respond to the RFP, so could not seek a remedy in contract law. This led to the question of whether judicial review is available to assess the reasonableness of the process leading up to a procurement itself. The Court concluded that judicial review is indeed a possibility under the circumstances, because the minister chose to hold a consultation process before launching the RFP. This choice, in the Court’s view, prevented him from acting arbitrarily, which in turn, required that judicial review of the exercise of discretion was to be available. Ultimately, it was up to Airbus to prove that the refusal to make changes to the technical requirements was unreasonable.

The Court referred to a number of cases outlining the standard of reasonableness to be applied upon judicial review, concluding that the standard is rooted in the concept of deference, which “therefore implies that courts will give due consideration to the determinations of the decision makers” (Dunsmuir v New Brunswick, [2008] 1 SCR 190).

Given that conclusion and the evidence presented in this case, the Court held that Airbus did not meet the burden of establishing that the government’s failure to reconsider the technical requirements (which led to award of the contract to Bell) was unreasonable. The application for judicial review was dismissed, with the issue of costs to be dealt with between the parties.

The Broader Implications

What does this mean for other public-sector organizations? Does the choice to conduct pre-procurement consultations with industry open the door to judicial review applications traditionally not entertained? Can a public body now be subject to scrutiny about the reasonableness of decisions it makes in the early stages of procurement planning and RFx drafting? Is the door now wide open for legal challenges to allegedly biased specifications from non-bidders – an avenue of challenge historically reserved for the Canadian International Trade Tribunal (CITT)?

As with any decision that appears to expand the reach of the courts, only time will tell. It certainly seems as though this case makes it a lot easier for disgruntled vendors and suppliers to challenge the structure and conduct of a procurement, even if they don’t directly participate.

This article was originally published in The Legal Edge on April 4, 2016

Readers are cautioned not to rely upon this article as legal advice nor as an exhaustive discussion of the topic or case.  For any particular legal problem, seek advice directly from your lawyer or in-house counsel.  All dates, contact information and website addresses were current at the time of original publication.