Rapiscan Systems, Inc. v. Canada (Attorney General)

Rapiscan Systems, Inc. v. Canada (Attorney General)
Court (s) Database
Federal Court Decisions
Date
2014-02-06
Neutral citation
2014 FC 68
File numbers
T-1856-10
Decision Content
Date: 20140206
Docket:
T-1856-10
Citation: 2014 FC 68
Ottawa, Ontario, February 6, 2014
PRESENT: The Honourable Mr. Justice Annis
BETWEEN:
RAPISCAN SYSTEMS, INC.
Applicant
and
ATTORNEY GENERAL OF CANADA
Respondent
PUBLIC REASONS FOR JUDGMENT AND JUDGMENT
(Confidential Reasons for Judgment and Judgment issued January 21, 2014)
TABLE OF CONTENTS
PARA.
I. Introduction ............................................................................................................ 1
II. Statement of Facts .................................................................................................. 7
A. CATSA............................................................................................................. 7
B. Rapiscan and Smiths Rivalry.......................................................................... 13
C. 2009 Procurement Process.............................................................................. 15
D. Board’s 2009 Decision................................................................................... 21
E. CATSA Contracting Policy and Procedures.................................................. 22
F. The White Paper............................................................................................. 23
G. 2010 Procurement Process – Strategy Document........................................... 26
H. Contract Review Committee.......................................................................... 28
I. Contents of the RFS....................................................................................... 32
J. Rapiscan Invited to Participate....................................................................... 37
K. Briefing Note for Board................................................................................. 38
L. Board Decision............................................................................................... 42
III. Issues..................................................................................................................... 44
IV. Analysis................................................................................................................. 45
A. Standard of Review........................................................................................ 45
B. Is the matter coloured with a public element, flavour or character sufficient to
bring it within the purview of public law?...................................................... 48
(1) Breach of Statutory Duty....................................................................... 55
(2) Undermining the Integrity of the Government Procurement Process.... 63
(a) Misleading the Board.................................................................... 64
(i) Failure to Adhere to the Contracting Procedures.............. 64
(ii) Board’s Lack of Knowledge that Contracting Procedures
Not Followed..................................................................... 69
(iii) No Duty of Fair and Equal Treatment............................... 79
(iv) Failure to state requirements or provide evaluation criteria 81
(v) Undisclosed Minimum Requirements................................ 84
(vi) Three Views was not a Proper Minimum Requirement..... 89
(vii) Bad Faith of CATSA........................................................ 92
(viii) Unreasonable Dispensation of Smiths from TSA
Certification....................................................................... 95
(ix) “Highest Performing Technology that Exists Today”....... 98
(b) Should Public Law Remedies Apply?......................................... 108
(i) Maintaining the Integrity of the Government Procurement
Process............................................................................. 109
(ii) No effective Alternative Remedy................................... 119
(iii) Contracting Out of the Contract “A” Duty of Fair and Equal Treatment 122
(iv) Did the Board’s decision meet the standards of legality, reasonableness and fairness required to meet the overall
objective of good governance?........................................ 127
V. Remedy................................................................................................................ 132
I. Introduction
[1] This is an application by Rapiscan Systems Inc [Rapiscan] pursuant to section 18.1 of the Federal Courts Act, RSC 1985, c F-7, for judicial review of a procurement decision made by the Canadian Air Transport Security Authority [CATSA] on October 4, 2010 [the 2010 procurement process].
[2] Rapiscan originally sought to set aside and declare invalid or unlawful the decision of the Board of CATSA authorizing the award of a contract for the provision of Checkpoint Multi-View X-Ray Screening Equipment and related services [Equipment] to Smiths Detection Montreal Inc [Smiths].
[3] In its final written submissions, Rapiscan requests an order (i) declaring CATSA’s decision unlawful and unfair, and (ii) directing CATSA to refresh its procurement process in respect of the Equipment for the years 2012/13 through 2014/15 in compliance with its statutory obligations and Contracting Procedures so as to allow Rapiscan and other suppliers a fair and equal opportunity to supply the Equipment to CATSA.
[4] The case ultimately turns on whether there are sufficiently significant issues pertaining to the good governance of CATSA to permit a public law remedy in respect of those issues in a matter that is based on a commercial procurement contract. These questions arise from circumstances of CATSA’s Board being misled by management’s advice. The Board authorized an award of a contract that resulted from an unfair and non-competitive procurement process. The Board was unaware of these circumstances. Given its mandate and policies, it would seem unlikely that CATSA’s Board would have authorized the contract had the proper information been presented.
[5] I conclude that the reviewing court has jurisdiction, firstly because the issues relate mostly to the integrity of government procurement processes and secondly because the design of the procurement process was intended to prevent resort to alternative contract remedies that otherwise normally would be available to the applicants.
[6] For the reasons that follow, the application is allowed. However, no final order is made at this time so as to permit parties to make further submissions to clarify the remedy sought by the applicant and to ensure that CATSA’s operational requirements are not interfered with by the Court’s order.
II. Statement of Facts
A. CATSA
[7] CATSA was created in 2002 by the Canadian Air Transport Security Authority Act, SC 2002, c 9, s 2 [the Act]. Its mandate includes screening passengers and their carry-on and checked baggage:
6. (1) The mandate of the Authority is to take actions, either directly or through a screening contractor, for the effective and efficient screening of persons who access aircraft or restricted areas through screening points, the property in their possession or control and the belongings or baggage that they give to an air carrier for transport. Restricted areas are those established under the Aeronautics Act at an aerodrome designated by the regulations or at any other place that the Minister may designate.
(2) The Authority is responsible for ensuring consistency in the delivery of screening across Canada and for any other air transport security function provided for in this Act. It is also responsible for air transport security functions that the Minister may assign to it, subject to any terms and conditions that the Minister may establish.
(3) The Authority must carry out its responsibilities under this section in the public interest, having due regard to the interest of the travelling public. Those responsibilities are a governmental function.
6. (1) L’Administration a pour mission de prendre, soit directement, soit par l’entremise d’un fournisseur de services de contrôle, des mesures en vue de fournir un contrôle efficace des personnes — ainsi que des biens en leur possession ou sous leur contrôle, ou des effets personnels ou des bagages qu’elles confient à une compagnie aérienne en vue de leur transport — qui ont accès, par des points de contrôle, à un aéronef ou à une zone réglementée désignée sous le régime de la Loi sur l’aéronautique dans un aérodrome désigné par règlement ou dans tout autre endroit désigné par le ministre.
(2) L’Administration veille à ce que le niveau de contrôle soit uniforme partout au Canada et exécute également les autres fonctions liées à la sûreté du transport aérien que prévoit la présente loi et celles que le ministre, sous réserve des modalités qu’il détermine, lui confère.
(3) L’Administration exerce les attributions qui lui sont confiées sous le régime du présent article dans l’intérêt public et en tenant compte des intérêts des voyageurs; ces attributions sont exercées à titre de fonctions administratives.
[8] CATSA is also responsible for authorizing contracting with screening companies and for procuring screening equipment:
7. (1) The Authority may authorize the operator of an aerodrome designated by the regulations to deliver screening on its behalf at that aerodrome, either directly or through a screening contractor, subject to any terms and conditions that the Authority may establish.
[…]
8. (1) The Authority must establish criteria respecting the qualifications, training and performance of screening contractors and screening officers, that are as stringent as or more stringent than the standards established in the aviation security regulations made under the Aeronautics Act.
[…]
(4) The Authority may establish contracting policies specifying minimum requirements respecting wages and terms and conditions of employment that persons must meet in order to be awarded a contract by or on behalf of the Authority for the delivery of screening. The Authority must establish such policies if required to do so by the Minister.
(5) The Authority must establish policies and procedures for contracts for services and for procurement that ensure that the Authority’s operational requirements are always met and that promote transparency, openness, fairness and value for money in purchasing.
[…]
27. The provision of screening at an aerodrome is conclusively deemed for all purposes to be a service that is necessary to prevent immediate and serious danger to the safety of the public.
28. (1) The Authority may enter into contracts, agreements or other arrangements with Her Majesty as if it were not an agent of Her Majesty.
[…]
7. (1) L’Administration peut autoriser l’exploitant d’un aérodrome désigné par règlement à fournir, en son nom, soit directement, soit par l’entremise d’un fournisseur de services de contrôle, les services de contrôle à l’aérodrome qu’il exploite, sous réserve des modalités qu’elle peut fixer.
[…]
8. (1) L’Administration établit des critères de qualification, de formation et de rendement, applicables aux fournisseurs de services de contrôle et aux agents de contrôle, qui sont au moins aussi sévères que les normes qui sont établies dans les règlements sur la sûreté aérienne pris sous le régime de la Loi sur l’aéronautique.
[…]
(4) L’Administration peut — mais est tenue de le faire si le ministre le lui ordonne — établir une politique contractuelle qui précise les normes minimales que la personne qui souhaite conclure un contrat de fourniture de services de contrôle doit respecter quant aux salaires et conditions de travail applicables aux agents de contrôle embauchés.
(5) L’Administration établit les règles et méthodes à suivre concernant les contrats de fourniture de biens et de services qui garantissent l’importance primordiale de ses besoins opérationnels et qui favorisent la transparence, l’ouverture, l’équité et l’achat au meilleur prix.
[…]
27. La fourniture des services de contrôle à un aérodrome est réputée, de façon concluante et à toutes fins, être un service nécessaire pour prévenir des risques imminents et graves pour la sécurité du public.
28. (1) L’Administration peut conclure des contrats, des ententes ou d’autres accords avec Sa Majesté comme si elle n’en était pas mandataire.
[…]
[9] However, the Act provides that CATSA is not subject to the Treasury Board contracting policy established under section 7(1) of the Financial Administration Act, RSC 1985, c F-11 or that statute’s Government Contracts Regulations, SOR/87-402. The Act states:
3. (3) In the event of any inconsistency between the provisions of this Act and the provisions of Part X of the Financial Administration Act, the provisions of this Act prevail.
4. (1) The Minister is the appropriate minister for the Authority for the purposes of Part X of the Financial Administration Act.
(2) The Minister may issue a written direction to the Authority, addressed to the Chairperson, on any matter related to air transport security.
(3) The Authority and its directors, officers and employees of the Authority must comply with a direction issued under this section.
(4) Compliance with the direction is deemed to be in the best interests of the Authority.
(5) A direction is not a statutory instrument for the purposes of the Statutory Instruments Act.
3. (3) Les dispositions de la présente loi l’emportent sur les dispositions incompatibles de la partie X de la Loi sur la gestion des finances publiques.
4. (1) Le ministre est le ministre de tutelle de l’Administration pour l’application de la partie X de la Loi sur la gestion des finances publiques.
(2) Le ministre peut donner des directives écrites à l’Administration sur toute question liée à la sûreté du transport aérien; les directives sont adressées au président du conseil.
(3) L’Administration et ses administrateurs, dirigeants et employés sont tenus de se conformer aux directives.
(4) Toute personne qui se conforme aux directives est réputée agir au mieux des intérêts de l’Administration.
(5) Les directives ne sont pas des textes réglementaires pour l’application de la Loi sur les textes réglementaires.
[10] The Act provides that CATSA shall have a Board of Directors which has a chairperson and ten other directors, and a chief executive officer. The Board is empowered to hire staff and constitute committees, and it is responsible for managing CATSA’s affairs and passing by-laws concerning contracting policies.
10. (1) There shall be a board of directors of the Authority consisting of eleven directors, including the Chairperson, appointed by the Governor in Council on the recommendation of the Minister.
[…]
16. The Chairperson must preside at meetings of the board and exercise any powers and perform any duties and functions that are assigned by the by-laws of the Authority.
17. The chief executive officer of the Authority is to be appointed by the Governor in Council to hold office during pleasure for any term that the Governor in Council considers appropriate.
[…]
23. The board is responsible for the management of the activities and affairs of the Authority.
24. The board may make by-laws respecting the management and conduct of the activities and affairs of the Authority and the carrying out of the duties and functions of the board, including by-laws establishing
(a) a code of ethics for the directors, officers and employees of the Authority;
(b) committees of the board, including a human resources committee and an audit committee; and
(c) contracting policies for the Authority.
25. The Authority may employ any officers, employees or agents and retain the services of any technical or professional advisers that it considers necessary for the proper conduct of its activities and affairs and may fix the terms and conditions of their engagement.
10. (1) Est constitué le conseil d’administration de l’Administration composé de onze administrateurs, dont son président, nommés par le gouverneur en conseil sur la recommandation du ministre.
[…]
16. Le président du conseil en dirige les réunions et exerce les autres attributions que lui confèrent les règlements administratifs de l’Administration.
17. Le premier dirigeant de l’Administration est nommé à titre amovible par le gouverneur en conseil pour le mandat que celui-ci estime indiqué.
[…]
23. Le conseil est chargé de la gestion des activités de l’Administration.
24. Le conseil peut prendre des règlements administratifs sur la gestion des activités de l’Administration et l’exercice des attributions que la présente loi confère au conseil, notamment en ce qui concerne:
a) l’établissement d’un code de déontologie pour les administrateurs, les dirigeants et les employés de l’Administration;
b) la constitution de ses comités, y compris un comité des ressources humaines et un comité de vérification;
c) la formulation de la politique contractuelle de l’Administration.
25. L’Administration peut engager le personnel et les mandataires et retenir les services des conseillers professionnels et techniques qu’elle estime nécessaires à l’exercice de ses activités et peut fixer les conditions d’emploi.
[11] At present, the Board’s website indicates that it maintains four committees (see CATSA, Board of Directors (30 September 2013), online: http://www.catsa-acsta.gc.ca/Page.aspx?ID=30&pname=BoardDirectors_ConseilAdministration&lang=en), an Audit Committee, a Corporate Governance and Human Resources Committee, a Strategy Committee, and a Pension Committee. CATSA notes on its website (http://www.catsa-acsta.gc.ca/Page.aspx?ID=30&pname=BoardDirectors_ConseilAdministration&lang=en) that:
The Board has responsibility for the overall stewardship of CATSA. It has a duty to protect the long-term interests of the corporation, safeguard CATSA's assets and to practice due diligence in its decision-making. The Board's key functions and responsibilities are to provide strategic direction, financial oversight, corporate oversight and good governance.
[Emphasis added]
[12] In regard to legislation governing the Authority’s procurement processes, subparagraph 8(5) of the Act requires CATSA to establish policies and procedures that promote transparency, openness, fairness and value for money in purchasing:
8. (5) The Authority must establish policies and procedures for contracts for services and for procurement that ensure that the Authority’s operational requirements are always met and that promote transparency, openness, fairness and value for money in purchasing.
[Emphasis added]
8. (5) L’Administration établit les règles et méthodes à suivre concernant les contrats de fourniture de biens et de services qui garantissent l’importance primordiale de ses besoins opérationnels et qui favorisent la transparence, l’ouverture, l’équité et l’achat au meilleur prix.
[Je souligne]
B. Rapiscan and Smiths Rivalry
[13] CATSA is familiar with the manufacturers of x-ray screening equipment which includes Rapiscan. Rapiscan’s products are used to inspect baggage, cargo, vehicles, and other objects for weapons, explosives, drugs, and other contraband, and to screen people. In the global x-ray systems market, Rapiscan is, at any given time, either the largest or the second-largest provider (Smiths being its main competition).
[14] Since its creation in 2002, CATSA has purchased baggage screening equipment exclusively from Smiths. Rapiscan claims that Canada is the only major country with a single supplier of airport x-ray screening equipment. On December 15, 2006, an Office of the Auditor General’s Special Examination Report on CATSA criticized sole-sourcing and the award of contracts before selection procedures are put into place. Nonetheless, on June 2, 2009, CATSA requested approval to sole-source a screening equipment contract with Smiths. On June 18, 2009, a sole-source procurement was duly made from Smiths. Testimony from Mr. Corrigan indicates that in September 2009, funding approval would have been requested for regular 2010 procurement. In November 2009, Smiths publicly announced the sole-source contract and the Smiths equipment arrived. On December 22, 2009, CATSA put new contracting procedures into place. Mr. Corrigan’s testimony indicated that in May or June 2010, funding would have been approved for 2010 procurement.
C. 2009 Procurement Process
[15] In 2009 CATSA took steps to replace its first-generation Smiths equipment with new advanced technology multi-view screening equipment. Management’s briefing note to the Board describes the background to the process as follows:
Both the TSA [U.S. Transportation Safety Authority] and the European Union (E.U.) initiated steps in 2007 to replace current single view x-rays with multiview x-rays. Multiview technology provides additional enhancements for the detection of weapons, knifes [sic], explosives and provides future capabilities for the detection of liquids and gels.
In 2007, the TSA conducted testing of 3 x-ray vendor’s [sic] multiview equipment and approved 2: Rapiscan and Smiths. This resulted in a subsequent procurement of 700 units divided between the two companies. Similarly, the UK DFT approved both the Rapiscan and Smiths multiview x-rays which resulted in the BAA procuring Smiths’ multiview x-ray and Manchester Airport Authority procuring Rapiscan’s multiview x-ray.
[Emphasis added]
[16] It should be noted that the term “views” is confusing in the documentation. Screening equipment has one or more view generators and provides one or more views to the screening operator. “Multiview” x-ray equipment describes systems which generate and provide more than one view, not those which have more than one view generator. For instance, the Smiths checkpoint equipment (7555 aTIX) used for carry-on baggage referred to in these procurement processes has four generators which are capable of producing four views for machine operators. However, the equipment only provides two views to operators, as beyond that number of views, the efficiency of the screening process by staff decreases (as noted in an internal study, Canadian Air Transport Security Authority, Relation of X-ray screening performance to number of views, NTA report 07072010 (7 July 2010) [the White Paper]). The Rapiscan equipment (620 DV) referred to in this proceeding has two generators and similarly provides two views for operators. Therefore, in most instances when comparing Rapiscan and Smiths equipment, where the term “views” is used the reference is to the number of generators of views, as opposed to actual views for physical screening purposes.
[17] Another factor in CATSA procurement is that Transport Canada, which is responsible for the security of the Canadian transportation system, requires equipment for use in Canada to be certified by the U.S. Transportation Security Agency. Among Transport Canada’s responsibilities is that of establishing equipment performance standards and establishing and maintaining a list of systems and equipment that have demonstrated a capacity to meet performance standards for screening to ensure harmonization to international standards.
[18] CATSA awarded Smiths the initial $30 million contract in 2009 for the replacement of Smiths single view screeners with multiview advanced technology [“AT”] equipment. For that purpose it used a closed, non-competitive sole-source process. Rapiscan was not asked to provide information on its equipment and states that it was unaware of the details of the 2009 process until provided with the certified record in these proceedings.
[19] Despite holding a closed non-competitive process, CATSA management carried out a comparative analysis of Smiths 7555 aTIX checkpoint equipment and the 620 DV Rapiscan model. The main difference between the equipment of the two manufacturers is that the Smiths screener has four view generators, while that of Rapiscan has only two. Rapiscan’s equipment is significantly less expensive than Smiths’. The same two models of equipment were submitted by these companies in the subsequent 2010 procurement process.
[20] The 2009 sole source procurement process is significant to that in 2010 because in 2009 a minimum requirement was established that the equipment provide three or more views. The same “minimum requirement” rationale would be applied to eliminate Rapiscan from consideration in the 2010 procurement process.
D. Board’s 2009 Decision
[21] On June 18, 2009, the Board of Directors awarded the sole-source contract to Smiths despite its higher cost based on Smiths equipment’s capability of being upgraded to achieve greater detection performance, stating as follows:
AND WHEREAS, while the Smiths product is higher in cost than the Rapiscan product, only the Smiths product has the built-in technology capable of being upgraded to achieve greater detection capabilities, with the potential to detect prohibited liquids and gels and therefore the potential to achieve future improved security effectiveness and cost efficiencies for CATSA;
AND WHEREAS it is believed that the incremental cost of the Smiths product represents value for money given the added capabilities and cost effectiveness that may be realized by the Smiths product,
[Emphasis added]
E. CATSA Contracting Policy and Procedures
[22] A few days later, on July 1, 2009, CATSA implemented a Contracting Policy, in accordance with section 8 (5) of the Act. On December 22, 2009, CATSA adopted detailed mandatory Contracting Procedures to implement the policy. Among relevant provisions in the Contracting Procedures are the following definitions and provisions with my emphasis:
1.1 These procedures apply to all Contracts and contracting activities conducted by CATSA. They are created in furtherance of the CATSA Contracting Policy approved by the Board.
[…]
2.1 Definitions
[…]
“Evaluation Criteria” means the specifications and other factors that have been established by CATSA prior to an Open Procurement Process and which are used to evaluate quotes, bids and proposals made by potential contractors in response to an Open Procurement Process.
[…]
“Non-competitive Contract” means a Contract which is or will be established under one of the exceptions in Section Section [sic] 5.6 (Exceptions Approvable By Other Approval Authorities) which will not be or has not been preceded by an Open Procurement Process.
[…]
“Open Procurement Process” means a contracting process involving any of an RFI, RFQ, RFP, RFSO, tender, Third Party Standing Offer, or a procurement process in which an ACAN is used and not validly challenged.
[…]
“Request for Information” and “RFI” mean an Open Procurement Process under which CATSA requests information from the market in accordance with these procedures.
[…]
“Request for Standing Offer” and “RFSO” mean an Open Procurement Process under which CATSA requests the provision of an offer that would form the basis of a Standing Offer.
[…]
5.1 Openness in Contracting
CATSA uses Open Procurement Processes to promote openness, transparency and fairness and to assist in obtaining and demonstrating that it obtains value for money in Procurement Contracts. Open Procurement Processes should be used in accordance with these procedures unless excepted in accordance with these procedures.
5.2 Open Procurement Processes
[…]
5.2.1 Requests for Information may be used in advance of initiating a procurement process to understand:
5.2.1.1 The number of potential or likely suppliers of the goods or services; and
5.2.1.2 The availability of goods or services to address a need of CATSA.
[…]
5.2.3 Requests for Standing Offer may be used where CATSA foresees purchasing quantities of goods and services repeatedly over a period of time but the likely quantity cannot be determined at the time of Effective Date of the Contract.
[…]
5.3 Evaluation Criteria in Open Procurements
Evaluation Criteria in any procurement shall be established prior to seeking the applicable approval to proceed with a procurement and the results of that evaluation shall be made available to the applicable Approval Authority as part of any approval request. Evaluation Criteria shall not knowingly be drafted where the effect of the Evaluation Criteria would unreasonably give preference to potential bidders. Evaluation Criteria should typically not be limited to only price but should be drafted to determine overall value for money and the ability for CATSA to meet its operational objectives.
[…]
5.6 Exceptions Approvable By Other Approval Authorities
[…]
5.6.1 Public Interest. The nature of the work or the circumstances surrounding the requirement is such that it may be prejudicial to the public interest or national security to solicit open submissions. This exception is normally reserved for dealing with security, safety or other considerations potentially prejudicial to passengers;
[…]
5.7 Transparency, Fairness and Value for Money Not Excepted
Subject to section 5.6.1 exceptions to an Open Procurement Process shall not limit CATSA’s statutory and policy obligations of transparency, fairness or value for money. […]
[…]
6.2 Standing Offer
A Standing Offer is a Contract which commits a Contractor to supply goods, services or both, at the prices specified in the Contract and subject to the other terms and conditions stated in the Standing Offer. […] The SO is generally established using a Request for Standing Offer. […]
[…]
7.1 Open Procurement Contract Process
[…] The Open Procurement Process may be established in either of two ways:
[…]
7.1.2 Traditional Competitive. […] where the market participants for the applicable good or service are known to CATSA, CATSA may issue an Open Procurement Process to a limited number of Contractors. […] Generally, this list shall identify a minimum of three (3) potential Contractors.
7.2 Open Procurement
Generally accepted practices will be adopted in CATSA’s Open Procurement Process, generally described below:
7.2.1 Preparation of Documentation Procurement and Contracting will work with the Project Authority to prepare the applicable Statement of Work/Terms of Reference and Evaluation Criteria […]
[Emphasis added]
F. The White Paper
[23] On July 7, 2010, CATSA’s internal Technology Group produced a “White Paper” entitled “Relation of X-ray Screening Performance to Number of Views”. The relevant conclusion of the paper is as follows:
Scanners with more than two views
Multi-view scanners with three and four views will be able to increase accuracy of density measurements by 2.25 times and 4 times, respectively, as seen from Figure 3. This helps in automated detection of explosives from unique measurements of density and Zeff. […] So the potential accuracy of a three or four view scanner is higher than that of a dual view scanner, and the advantages rapidly increase since the dependence is on the square of the number of views.
[Emphasis added]
[24] It should be noted that the front page of the White Paper states as follows:
It is shown that the accuracy of a multi-view system increases with the number of views, which in turn improves the performance of automated explosives and liquids detection software.
[Emphasis added]
[25] In referring to multiview luggage scanners the report notes: “The image processing algorithms in these systems are critical in maximizing the capability of the systems.”
G. 2010 Procurement Process – Strategy Document
[26] On July 14, 2010, CATSA prepared a Procurement Strategy Document for the purchase of further multiview PBS [Pre-board screening] and HBS [Hold baggage screening] x-ray machines for an estimated contract dollar value of $40,508,829. The contract period was described as follows: “5 year Standing offer with renewal options for up to five additional years” [emphasis added]. The strategy further indicated that the intent was to establish standing offers with one or more suppliers of multiview x-ray machines for equipment, spare parts, etc. No non-competitive exception was designated.
[27] The Procurement Strategy Document indicated that the Technology Branch had performed an informal survey of the functionality of the three market participants (Rapiscan, Smiths and L-3 Communications Security and Detection Systems, Inc [L-3]) in multiview manufactures available at the time. It further indicated that CATSA would be relying on information disclosed to it by the U.S. TSA.
H. Contract Review Committee
[28] On July 14, 2010, the Contract Review Committee met to consider the procurement process for the additional equipment. The minutes included the following excerpt with respect to a decision not to follow the “generally accepted practices” specified at paragraph 7.2.1 in the Contracting Procedures described above, which called for an open procurement process based upon a pre-defined statement of work/requirements and weighted evaluation criteria:
A discussion took place regarding the proposed procurement strategy where CATSA does not publish rated requirements, but rather explains that the evaluation would be done based on specified factors, with no weighting. It was noted by one of the Committee Members in this case, it will be very important that CATSA document and develop its evaluation practices to demonstrate that the Committee has done its review fairly.
[Emphasis added]
[29] The minutes also contained the statement that “The Contract Review Committee approved to have an RFI (which is somewhat in the nature of an RFP) posted on MERX for this project” [emphasis added]. The Contracting Procedures indicate that an RFI may be used in advance of initiating a procurement process to understand the availability of goods and services to address the needs of CATSA.
[30] On August 16, 2010, a “Request For Submissions” (RFS) was issued. The RFS invited suppliers to submit information related to the technical capabilities and pricing of their equipment and related services. Based on a series of questions and information requirements, it was intended to be used to determine whether the participating suppliers could “meet or exceed CATSA’s business requirements”. These requirements were unspecified.
[31] Mr. Martin Corrigan, Director of Screening Technologies at CATSA, and a participant at the 2010 Board meeting authorizing the contract award to Smiths, was cross-examined on his affidavit in unsuccessful proceedings by Rapiscan to obtain an interlocutory injunction. He testified that he had no knowledge of how the proposal came to be described as an RFS, or what was meant by the designation. Counsel for the applicant at the time suggested that the document was intended to be a Request For Standing Offer (RFSO).
I. Contents of the RFS
[32] The RFS contained the following exemption clause in the body of its contract and the disclaimer:
This RFS does not constitute an offer by CATSA, nor is it intended to give rise to any legally binding obligations (sometimes referred to as a Contract “A” under Canadian law) on the part of CATSA. It is not a tender, request for tenders or a request for proposals.
[Emphasis added]
[33] The RFS further described Phase I of the process as follows:
During Phase I of the Process […] following a review of the Submissions […], if CATSA determines that one (1) or more Suppliers are able to provide the required Equipment and related goods and services at a price which offers the best value to CATSA, in CATSA’s sole discretion, then CATSA may create a short list of Suppliers with whom to enter into further discussions regarding the Supplier’s Submission and/or negotiate a Standing Offer Agreement.
[Emphasis added]
[34] The RFS further reserved the right not to proceed to a competitive bid in respect of the award of contract in the following terms:
CATSA reserves the right not to proceed to a competitive bid or other form of selection process and may select one (1) or more Suppliers to establish a Standing Offer Agreement with (in the form attached at Schedule “C” as may or may not be negotiated with a Supplier) based on their respective Submission, other information provided by the Supplier under this RFS, and other information obtained by CATSA from third parties, including without limitation, other agencies.
[Emphasis added]
[35] Even though the contract contained no requirements, the RFS contained a further exception not requiring it to comply with requirements, stated as follows:
3.5 TERMS. Notwithstanding anything to the contrary in this RFS, CATSA reserves the right in its sole and absolute discretion, without any liability whatsoever to any Supplier to:
(i) Accept submissions which fail in any respect to comply with the requirements of the RFS; […]
[Emphasis added]
[36] The Schedule “A” Statement of Requirements in the RFS consisted of a series of requests to provide information on available checkpoint multiview advanced technology x-ray products, including product technical information and information on accessories, maintenance, training and documentation. It did not contain any requirements, mandatory or otherwise, that CATSA demanded be met by the RFS. It also did not include any selection criteria, weighted or otherwise.
J. Rapiscan Invited to Participate
[37] Having posted a summary of the RFS on the electronic tendering service MERX, Ron McAdam, the General Manager of New Technology at CATSA, noticed that Rapiscan was not among the list of suppliers on MERX. After some internal discussion, CATSA decided to contact Rapiscan and notify it of the RFS. CATSA accordingly contacted Rapiscan and drew Rapiscan’s attention to the 2010 RFS, inviting it to participate in the procurement process. Rapiscan subsequently responded to the RFS along with Smiths, L-3 Communications, and Reveal. Rapiscan was the only party submitting a bid that was not an existing supplier of CATSA.
K. Briefing Note for Board
[38] Shortly after, on October 1, 2010, a Contract Approval Request with an attached Briefing Note was provided to the CATSA Board, recommending that a standing offer be awarded to Smiths. The purpose of the note was given as being to describe “the process CATSA used to obtain competitiveness, openness, fairness, transparency and value for money” in the selection of Smiths.
[39] The 2010 briefing note made reference to the 2009 purchase of multiview x-ray equipment, stating as follows:
[…] It was also decided that CATSA’s preference was to invest in multi-view X-ray technology that had a built in technology capable of being upgraded to provide better detection. For this requirement, the multi-view X-ray machines required 3 or more views which is again a factor in this year’s evaluation.
In June 2009, only the Smiths multi-view X-ray machine satisfied that criteria and it was felt that the benefits to be gained by investing in Smith’s multi-view X-ray machine with 3 views was worth the incremental cost to CATSA over the second-best machine. While the approach in 2009 was made necessary in order to meet the timelines for the Olympics, Management did reassure the Board that it was a one-time exception and that future purchases would be done under an open procurement process.
Procurement Requirement and Process for Selection of Multi-view X-ray Supplier(s)
For current and future requirements for multi-view X-ray machines (based on the 5 year plan as set out in the Contract Approval Request) CATSA recently undertook an open process to obtain competitiveness, openness, fairness, transparency and value for money in the selection of multi-view X-rays by publishing a Request for Submissions on MERX, requesting technical, operational and pricing information.
[40] The briefing note indicated that Rapiscan had not met the requirements of having three views or a large tunnel size, although it was TSA certified and had good reliability and throughput. The Note further indicated:
• Only the Smiths multi-view X-ray satisfied all the criteria above and Smiths rated highest i