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What Happens When the Lowest Priced Compliant Bidder Can’t Follow Through?

YOU BE THE JUDGE

Medi+Sure Canada Inc. v. DPWGS, 2016 CITT 031

In March 2016, the Department of Public Works and Government Services (“DPWGS”) issued an RFP for diabetic test strips and glucometers; the RFP was issued on behalf of the Correctional Service of Canada (“CSC”). The RFP contained only mandatory criteria and a bid price submission requirement.

The RFP included, as requirement 12 of the mandatory criteria for the diabetic test strips, that the container for them be tamper-proof to disallow the removal of the dessicant (a hygroscopic substance used as a drying agent). Further, the RFP made it clear that the onus was on the bidder to demonstrate their understanding of the criteria along with how they plan to meet it. Technical data for stores had to be submitted at the time of bidding in order to verify compliance with the RFP’s mandatory criteria.

Ten proposals were submitted, and the CSC – who was the technical authority reviewing the mandatory criteria – determined that six of them were valid, including one from Medi+Sure Canada Inc. (“Medi+Sure”) and one from Felix Technology Inc. (“Felix”). As Felix had submitted the bid with the lowest price, DPWGS awarded them the contract in July. However, that contract was terminated by mutual consent a month later, as Felix was unable to secure the product it had proposed.

Medi+Sure argued that the CSC had incorrectly determined Felix’s bid compliant when in actuality it failed to account for the requirement that the container for the insulin test strips be tamper-proof, in order to ensure the dessicant was not removed. DPWGS offered to re-issue the RFP, but Medi+Sure requested that the Canadian International Trade Tribunal (“CITT”) award the contract to them, as they were the lowest-priced compliant bidder.

Felix submitted a letter from manufacturer of the vials for storing the test strips, which DPWGS argued was reasonably relied upon by the evaluators at the CSC, but Medi+Sure argued that since Felix was not ultimately able to supply the containers for test strips, the CSC had improperly determined its bid to be compliant. The letter stated that the vials were designed to prevent dessicant removal, and the additional relevant information sheet stated only a warning to keep the vials away from children, as the dessicants would be toxic. No information was provided describing how the vials were tamper-proof.

DPWGS argued that since the contract with Felix had been cancelled, there was no contract that “has been or is proposed to be awarded,” thus making it not a “designated contract” that is subject CITT review:

“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” (s. 30.1 of the CITT Act).

Medi+Sure responded that since, as it argued, the CSC should have offered the contract to Medi+Sure rather than Felix, since Felix’s bid was non-compliant, the Tribunal did have the authority to oversee the complaint. The CITT determined that it did have jurisdiction to inquire into this RFP, as the purpose of section 30 was to ensure that the Tribunal did not conduct large and open-ended investigations into government procurement, not to restrict it from inquiring into complaints that reasonably indicate a potential lack of accordance with the trade agreements.

Should the Tribunal award the contract to Medi+Sure or allow the CSC to re-tender the requirements? You Be The Judge.

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Answer

Medi+Sure’s complaint was determined to be valid and the CITT ordered the Department to accept their bid (or re-tender the request if Medi+Sure no longer wants to offer the services at that price). This is because when an RFP contains only mandatory criteria and a bid price submission, the supply contract must be awarded to the lowest-priced compliant bid. Should the DPWGS re-issue the proposal instead of awarding it to Medi+Sure, Medi+Sure would be subject to additional time, expense and uncertainty.

Further, both the CITT and the Federal Court have held that the Agreement on Government Procurement and the North American Free Trade Agreement require that governments must, in situations where a compliant bidder is present, award the contract to that bidder unless there is a sound public policy reason to cancel the RFP.

In this case, the Tribunal found that Felix did not explain how it met the requirement to provide tamper-proof containers for the diabetic test strips and did not provide any evidence to suggest it had met that requirement. Thus the Tribunal held that the CSC was unreasonable in determining that Felix’s information regarding the test strips was compliant.

Because the CSC evaluated Felix’s bid without maintaining compliance to the RFP’s criteria, the CSC breached the trade agreements and Medi+Sure’s complaint was held to be valid. By cancelling the bid and re-issuing it, DPWGS did ameliorate some of the negative effect experienced by Medi+Sure, but in order to provide a satisfactory remedy the CITT held that Medi+Sure should be awarded the contract at the bid it originally proposed, although Medi+Sure is not obligated to accept the contract since the bidding period has expired. Should Medi+Sure choose not to accept the contract, the RFP will be re-issued.

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.

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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.