Company sues government for $195m over lost deal
At the heart of the large contract lost last month by Le Groupe Conseil Bronson Consulting of Ottawa was a strange anomaly.
Bronson and its partner, Cox & Kings Ltd., were prepared to charge nothing for the right to operate the government’s visa application networks around the globe. Instead, the government awarded this lucrative business to VF Worldwide Holdings and subsidiary TT Visa Services — which last month signed a five-year deal worth nearly $30 million.
This counter-intuitive result has produced a fascinating legal battle, now 13 months long. The latest instalment came earlier this week when Bronson and its partner sued the federal government for lost profits, alleging that Immigration, Refugees and Citizenship Canada improperly steered the contract to VF Worldwide, which had been managing Canada visa application services network for years.
It’s a sprawling piece of business. The Immigration Department created the network to help foreigners apply for Canadian visas. The idea was to ease bottlenecks in regions such as India, with high numbers of applicants. VF Worldwide collects photographs and fingerprints, and helps applicants correctly fill out the proper documents.
Under the previous contract, VF Worldwide would bill the Canadian government directly for its services — including $15 million in the fiscal year ended March 31, 2017. But the lion’s share of the revenue came from charging fees for services provided to visa applicants.
In its statement of claim, Bronson Consulting estimated total fees over the life of the new contract would top $1 billion — generating a potential profit of more than $200 million.
Bronson Consulting and its partner are seeking general damages of $195 million.
The time frame is a little unclear. The original bid documents referred to a six-year contract with two years’ worth of extensions that may or may not be exercised.
Nevertheless, this sizable income stream gave Bronson Consulting an opportunity to steal a march on VF Worldwide when the government first invited bids two years ago. Bronson Consulting reckoned it could charge nothing for its services directly but would be able to recoup its costs and then some through visa applicants. The taxpayer was off the hook.
Bronson Consulting in its statement of claim said that in 2016 it was the top-ranked bidder in both technical merit and financial strength. But the government on Oct. 5, 2016 informed the company it was cancelling the procurement and would conduct a second competition with new rules.
The court document cites an email in which Immigration official Angela Gawel instructed a procurement official to re-launch the contest because Bronson Consulting ’s proposal didn’t offer the “best value to Canada” and could affect the number of people “willing to apply for a visa to come to Canada.”
This was an apparent reference to a concern within the Immigration department that Bronson Consulting and its partner would raise fees for visa application services to recoup costs for declining to bill the Canadian government directly.
Bronson Consulting countered in its statement of claim that under its proposals, the average cost to visa applicants would actually drop compared to the fees then in place. It’s not clear how Bronson Consulting would achieve this, perhaps through smaller profits or a more efficient operation.
The government launched a second competition early in 2017, and declared VF Worldwide Holdings the winner last month.
Bronson Consulting in its suit alleges the government tweaked the requirements in the second competition to steer the award to VF Worldwide.
The Ottawa company appealed first to the Canadian International Trade Tribunal — the independent body that handles disputes over contracts. However, the tribunal ruled government procurement officials had addressed many of Bronson Consulting’s concerns. And that, further, the government was within its rights to define “legitimate” operational requirements as it sees fit, as long as it does not “establish conditions that are impossible (for bidders) to meet.”
The tribunal in previous rulings has spelled out that “while certain bidders may have a competitive advantage regarding a particular procurement process, it does not necessarily follow that the solicitation is biased.” The issue, the tribunal continued, is whether the government “deliberately ” favoured a particular supplier.
Similar arguments are likely to be heard in Ontario’s Superior Court of Justice, the jurisdiction that will deal with Bronson Consulting’s lawsuit, barring an out-of-court settlement in the months ahead.