BOXED IN BY BUREAUCRACY
For a decade, Bruce Atyeo has battled the federal government over a multimillion-dollar contract he says bureaucrats steered away from his company.
Bruce Atyeo has spent millions of dollars and a decade of his life in an unprecedented legal battle to prove federal bureaucrats cheated him out of a mega-million-dollar contract that’s destined to be a case study on government procurement.
Atyeo’s company, Envoy Relocation Services, is suing the government for $62 million in lost profits and damages over its handling of a 2004 contract to relocate the thousands of military, RCMP and public servants moved to new postings every year. It accuses the government of “intentional infliction of economic harm by unlawful means,” breach of contract and negligence.
The contract was already one of the most scrutinized procurement disputes in years when a civil trial, scheduled for seven weeks, ballooned into more than a year of hearings. More than 3,000 documents were gathered for trial, 800 exhibits tabled and at least two dozen witnesses called.
Atyeo, 65, never missed a day of the proceedings and doesn’t hesitate to say that regardless what the court decides in his lawsuit, he is more convinced than ever that the government steered the contract to Royal LePage Relocation Services, which has become the second largest relocation company in the world. In 2009, it was renamed Brookfield Global Relocation Services.
“Let’s say, the evidence I saw in court established in my mind, beyond a shadow of a doubt, the bids were done in such a way that it was pretty hard for LePage to lose,” said Atyeo in an interview.
The government completely dismisses Envoy’s claims as “extreme” and rife with “speculation and innuendo.” Federal lawyers claim the process was fair, public servants followed the rules and Atyeo’s complaints are those of a sore loser.
In 2003, the contract grabbed headlines across the country amid rumours and accusations of rigged bids, corruption, conflict of interest and cronyism during the bidding process. The contract, first awarded in 2002, was cancelled and re-tendered in 2004.
The headlines disappeared as complaints got bogged down in process — two Canadian International Trade Tribunal probes, a pair of Federal Court of Appeal hearings and an internal fraud unit investigation — until Auditor-General Sheila Fraser concluded in 2006 the bidding process was stacked in Royal LePage’s favour and put the issue back on the national stage.
For Atyeo, a 43-year veteran of the relocation business, Fraser’s report toughened his resolve to sue and get to the bottom of a bidding process he believed was biased from the start.
He alleges bureaucrats deliberately turned a “blind eye” to a property management “scam” that was at the heart of a sophisticated scheme to steer the biggest relocation contract in North America to LePage, their preferred supplier.
He alleges the scheme was planted in the request for proposal, or bid documents, for both the 2002 and 2004 contracts, instructing bidders to use grossly inflated business volumes to price property management services. As the incumbent supplier, Royal LePage used inside knowledge that hardly any transferees use that service, submitted a zero bid and gained a $48-million price advantage over its closest contender, Envoy.
LePage won the contract and then turned around and charged federal employees who were moving for the property management services it promised to provide for free.
Evidence at the trial suggests that some public servants overseeing the bidding process and running the program knew, or should have known, within weeks of awarding the 2002 contract that LePage was charging nine-per-cent fees for property management, not its contracted price of zero.
It’s unclear why public servants would let this happen and it’s still a mystery how such inflated business volumes found their way into the RFP.
The trial heard no evidence of kickbacks, bribes or influence-peddling. There was no memo or email proving bureaucrats at the top or bottom of the hierarchy hatched a scheme with LePage. Nor were there accusations of bureaucrats dutifully following politicians’ directions, as in the federal sponsorship scandal.
Envoy lawyers argued that the bureaucrats grew too close with LePage after working with the company for so many years. They talked regularly, lunched or dined together, sometimes played golf and in one case were on the same cruise. As a consequence, Envoy argued, the bureaucrats preferred the contract go to people they knew and were comfortable working with and were willing to bend the rules to ensure it did.
Alan Williams, a retired senior bureaucrat who spent much of his career in procurement, said human nature and the preferences of those working on bids can affect the process, but there are plenty of safeguards to ensure it doesn’t happen.
“I don’t think someone’s pockets are getting lined with money. In many cases, it’s easier to deal with a contractor you know and like and easier than reintegrating with a new supplier,” he said.
“It could be that subconsciously you set up criteria you know is in their interest but may be against someone else’s ... I don’t know if this was manipulated but if it was it is the antithesis of what you expect from the public service and cuts at the core principles of openness and transparency.”
Evidence at the trial raised disturbing questions about transparency, accountability and integrity of the procurement process that will linger long after Ontario Superior Court Justice Peter Annis renders his decision later this year.
Contracting is the oldest and most politically charged business of government, and a fair and open procurement system is the safeguard to prevent corruption and collusion. Accusations of rigged, bungled or fixed contacts are often at the core of political scandals, from the sponsorship scandal that felled the Liberals in 2006 to the escalating cost of a sole-source contract for F-35s that’s dogging the Conservatives.
The Conservatives’ answer to fixing the F-35 debacle is to put the fighter-jet purchase out to open tender — a process that the Envoy trial suggests may be tarnished, if not broken.
In fact, Envoy argued that confidence in the bidding process was shaken so badly by the government’s handling of these contracts that no other supplier but LePage would bid when the contract was tendered again in 2009.
The case is distinguished by more than its complexity. The government spends an estimated $500 million a year to move 18,000 military, RCMP and bureaucrats to new postings. The allegations are wrapped in mystery, political intrigue, corporate brinkmanship and unfolded in the Department of Public Works when it was knee-high in the sponsorship mess, one of the biggest political scandals in Canada’s history.
The case could stake new ground for bidders and offer new legal remedies other than the Canadian International Trade Tribunal for firms that feel a tender process is biased or unfair. Envoy argued it would have won the contract if public servants hadn’t stacked the bid, breached their obligation to bidders that they should be treated fairly, equally and all given the same information.
The government maintained it didn’t breach its contract with Envoy because it has no “duty of fairness” obligations with bidders until bids are evaluated to determine if they compliant. That argument challenges the Supreme Court’s concept of contract obligations that has shaped contract law and procurement practices since 1981.
As a result, firms doing business with the government will watching judge’s decision to see how he defines the scope of the government’s “duty of fairness” to the bidders. They will also be watching to see if he awards punitive damages, which are unusual in Canada.
Another lesson of the case is just how long getting a remedy takes, especially when dealing with the unlimited resources of government. Few firms would have the tenacity, conviction — and deep pockets — to stomach the string of probes, investigations and audits that Atyeo faced before even getting to court.
“The net result of all this litigation has been to provide the practitioner with a rare glimpse into the complete mechanics of a procurement file,” lawyer Joseph Griffiths wrote in Lawyer’s Weekly.
“If nothing else, having passed through every major step and obstacle a practitioner can expect to meet on the long road to trial in the procurement setting, the case is a testament to the tenacity, determination and resolve required of an aggrieved bidder who wishes to challenge the procurement process and exhaust all available remedies under the current legal framework. In short, the Envoy matter already serves as a case study for those involved in procurement litigation.”
At this point, Atyeo has no intention to bid again for the contract, which comes up for renewal in 2014.
But he argues the government can’t simply turn the page because he believes major damage has been done to the principles of “fairness, openness and transparency” that underpin the integrity of the procurement process and public trust in government. The Conservative government enshrined those principles when it passed its signature Federal Accountability Act.
“Isn’t it astounding that we had to spend millions and years of our lives to go to a trial to get the government to do what they are paid to do,” said Atyeo. “Why didn’t it own up … go public and say ‘we have a few bad apples and we’re going to make this right’. The lesson back to Johnson & Johnson’s Tylenol fiasco is to acknowledge a problem and come clean. Instead, the government goes to any length and expense to cover up a mistake and why? Because they can. They have the money, the time, no one gets fired and there’s and no accountability.”