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LEGAL NOTES 
"Fair play" ain't easy

by Robert C. Worthington

In the last column, I discussed briefly the most recent decision regarding fairness in competitive bidding from the Supreme Court of Canada (Martel Building v. Canada - 2000). In this column, we compare these obligations to the obligations of fairness placed upon a public purchaser under the Trade Agreements (specifically NAFTA).

With Martel, the Supreme Court of Canada (SCC) has finally created some limits to the duty of fairness owed to bidders in a competitive procurement. Those limits can be summarized as:

  • Only compliant bidders are owed any duty of fairness;
  • The duty of fairness is only owed once the process of competition starts, not prior to close of bidding as some have alleged;
  • The duty of fairness is only fairness of process, not fairness to a particular bidder (i.e., equal information, consistent treatment, no hidden preferences, etc.); and
  • Even if unfair treatment has occurred, the wronged bidder must still prove that unfairness caused them to lose the competition, otherwise no damages will be awarded.

And that is as far as the Canadian law is prepared to go to ensure a fair competition for everyone (public or private).

Compare this to the "fairness" requirements of the North American Free Trade Agreement (NAFTA) and you will see quickly why this column is titled as it is. Under NAFTA, not only must a public purchaser act lawfully as per Martel Building and the other decisions of the Courts (something the other NAFTA signatories aren't bound to do) but in addition the purchaser must:

Ensure the scope of work and tender requirements are performance-based and allow for equivalents in every case (unless rigorously justified in advance);

  • Avoid any discrimination based upon location, nationality or lack of past performance with the organization;
  • Provide all potential suppliers with equal access to information prior to issuing the Invitation;
  • Not cancel an Invitation or Request "unless it is not in the public interest" to make an award; and
  • After award, provide any aggrieved supplier with "…the characteristics and relevant advantages of the Tender selected" (not what was wrong with their bid but what was right with the successful bid).

If you actually offend these NAFTA rules and the complainant goes to the Canadian International Trade Tribunal (CITT), be prepared to disclose more, much sooner and to the same body who may ultimately adjudicate the merits of the dispute (the CITT). Finally, even if you are successful defending your procurement before the tribunal, that same complainant can still sue in court.

Canadian courts recognize the fact that any rule for competitive bidding (an essentially adversarial and unfair process) intrudes upon the general contract principles of Freedom of Contract) and Caveat Emptor (Buyer Beware). Thus, such rules must be minimal and process directed (i.e., only when the competition starts are the rules applicable). NAFTA and its little brother, the AIT (Agreement on Internal Trade), seek to control practices before and after the process of competition - a much greater burden on procurement of goods and services by public buyers.

Levelling the international playing field, ensuring freer trade and widening competition are laudable goals, which have the effect of making the job of the public purchasers doubly difficult. The public purchaser serves two masters - the courts and the trade agreements. Effective? Well, that depends upon the purpose and the person you're talking to. But if the purpose is "value for public dollars spent" and the person is a public purchaser, I suspect we'd find this regulation only really benefits the sellers and suppliers. The public might get better value for their tax dollars if a bit less time was spent creating and administering additional rules.

Buying the right goods or services for the best price at the most appropriate time is going to be perceived by some who lose as unfair, and it will always be so. It is competition and there will be losers in every competition. Threshold limits, level playing fields and easy complaint mechanisms aren't going to change that. Equal and consistent treatment? No problem. Fair result in every case? Unlikely and unachievable, which is why the courts focus on fairness of process, not fairness of result.


Robert C. Worthington is president of Worthington & Associates Ltd (www.purchasinglaw.com), a Vancouver-based company specializing in business education and training in purchasing law. He has lectured on law for public and private corporation in-house seminars, as well as at the University of British Columbia. He is the author of the Purchasing Law Handbook and several legal texts.


 

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