National Post (National Edition)
‘LAW LITE’ GAINS WEIGHT
Little-known field of procurement in spotlight.
Judy Wilson fully admits that her chosen field of legal specialty — procurement law — is not well known. “It’s always been the ignored, poor sister of the legal profession,” said the Toronto-based partner with Blake, Cassels & Graydon LLP. The firm is listed in Band 1 for public procurement in the Chambers Global 2013 guide. “For a long time it was regarded as ‘law lite.’ ”
The shadow that has long hovered over procurement law is now retreating, however, thanks to a number of recent trends and developments in the field. Among them: a dramatic rise in procurement litigation, and the impact of Quebec’s Charbonneau Commission on public procurement policy.
And then there’s the looming Canada-European Union trade deal, which procurement lawyers say will open Canadian tendering more widely to foreign bidders — and thus to the potential for additional disputes.
It all makes for an eventful period in the field of procurement case law, which at its core sets out the rules for both tendering and bidding on contracts. “There is a lot going on,” Ms. Wilson concluded in an interview.
The genesis of procurement law in Canada can be traced back to a seminal Supreme Court of Canada case from 1981: The Queen (Ont.) v. Ron Engineering & Construction (Eastern) Ltd.
The court’s decision helped define the obligations of both the organization issuing a tender, as well as the bidder looking to secure the work.
Canadian law is unique in that it views the competitive procurement process as consisting of two separate contracts. Contract A sets out the rules for the bidding process, while Contract B is the actual goods or services contract agreed to by the two parties.
On top of that fundamental struc-
For a long time procurement law was regarded as
‘law lite’
ture sits a collection of trade agreements and government guidelines that help regulate Canada’s procurement practices. “It’s now quite a complex web of obligations that governments have to follow in purchasing goods and services,” said Gerry Stobo, a partner with Band 1 firm Borden Ladner Gervais LLP in Ottawa.
According to Mr. Stobo, Canadian business owners have traditionally been reluctant to challenge tendering decisions, particularly compared with their more litigation-inclined American peers.
Yet the past decade has delivered what Mr. Stobo calls an “explosion” of procurement litigation. So why are Canadian companies becoming more aggressive in fighting tender decisions? “U.S. litigation culture is creeping north,” he said.
Mr. Stobo also points to the “huge” stakes involved with procurement tendering. “These contracts can be worth many millions, if not billions, of dollars,” he said. “If someone feels that they wrongly lost a contract, there is a temptation to exercise all the legal remedies available.”
Successful challengers may eventually secure the contract in question. Or they could be awarded damages, such as lost profits.
Traditionally, disgruntled contract bidders have focused their challenge on the contents of Contract A, arguing the tender process was not carried out as originally stipulated.
But Ms. Wilson says a new trend is emerging with government contracts: Failed bidders are increasingly asking the courts to review the broader procurement conduct of the government in question.
That change in strategy shifts the challenge from a commercial lawsuit to the realm of administrative law. And the consequences of that shift are not fully known.
“It’s very early days,” said Ms. Wilson, who began her career with the city of Ottawa, drafting road, sewage, and garbage tenders. “We really have no idea how judicial review attacks by bidders are going to interact with the Contract A-Contract B framework.”
For their part, governments are also adjusting their approach in dealing with bidders. And it seems likely that public policy is being influenced by revelations from Quebec’s corruption inquiry, which is examining the questionable awarding of construction contracts.
Marianne Smith, a colleague of Ms. Wilson’s at Blakes who is listed by Chambers as an “up-and-coming individual” in the practice area, notes that Ottawa recently adopted changes to its bid submission rules, part of an effort to prevent corruption issues. For example, all companies submitting federal bids must consent to criminal background checks for their directors and officers. The firms must also disclose any previous corruption or fraud charges.
“We’re already seeing a tightening of the disclosure rules, and a potential impact on some companies’ ability to win government contracts,” she said.
And further changes to the Canada’s procurement landscape seem likely.
Denis Chamberland, a procurement lawyer with Baker & McKenzie LLP who is listed as a Band 1 practitioner, says the looming Canada-EU trade deal boosts the case for tribunals focused on provincial and municipal procurement disputes.
The trade agreement would provide European companies with unfettered access to provincial and municipal contract competitions. Yet Canada lacks a mechanism for quickly resolving provincial and municipal procurement disputes. Currently, failed bidders at the provincial and municipal levels have no choice but to launch a lawsuit.
Procurement disputes involving federal government contracts are resolved through the Canadian International Trade Tribunal, which was erected in 1995 to deal with NAFTA disputes. The point of CITT is to resolve disputes quickly and cheaply.
Mr. Chamberland suggests the CITT mechanism could be expanded to cover provincial and municipal procurement disputes. Or perhaps the provinces could set up equivalent bodies. Either way, he says, action is needed, particularly with the trade deal looming.
“There’s a lot of money at stake,” he said.