Feds and SNC-Lavalin: taxpayers beware
Just when it seems that the SNCLavalin scandal could not get much worse, the federal government may have another trick up its sleeve. First, some background.
The federal government’s procurement website states that: “in 2015, we introduced a regime to ensure the government does business only with ethical suppliers….”
Federal procurement policies include an integrity regime to “help foster ethical business practices, ensure due process and uphold the public trust. It is transparent and rigorous and is consistent with best practices in Canada and abroad.”
As if attempts to secure a deferred prosecution agreement (DPA) for SNC-Lavalin weren’t enough, it has been reported that the government now wants to change the ineligibility and suspension policy under the integrity regime.
That policy sets out the circumstances in which a criminal conviction will result in an organization becoming ineligible to bid on federal contracts. The list of offences that result in ineligibility include bribery, lobbying offences, fraud, false or deceptive statements, and money laundering. The ineligibility period is five or 10 years, depending on the crime.
The proposed changes would give the government more flexibility to decide whether a ban should apply, and if so, for how long.
The federal government is determined to ensure that SCN Lavalin remains eligible to bid on federal government contracts.
The stated reason is to protect jobs. Quebec jobs, to be specific.
The unstated reason may be to protect votes in Quebec.
Why the steely determination to protect this company?
Even considering possible political motives, it still seems to defy logic.
After all, it is possible that a corporation’s unsavoury conduct may contribute to its growth and stifle competition. Would it be so “successful” without it?
If SNC-Lavalin goes under, surely someone else will fill the void, and employees will find work elsewhere.
Albeit, this may not all happen before election day on Oct. 21.
It is perhaps finally obvious to the federal government that it will be difficult to invite SNC-Lavalin to enter a DPA.
So instead, it plans to change the criteria for awarding federal contracts.
This could prove problematic. And possibly rather expensive.
An important Supreme Court of Canada decision many years ago, known as Ron Engineering, made clear that bidders in a competitive contracting situation have rights, even before the “main” contract is entered. Specifically, a contract automatically arises between the organization issuing a request for competitive bids, and each of the bidders who submit a compliant bid. These automatic contracts are each referred to as a “Contract A.”
Contract A includes several duties of the tendering organization. These include full disclosure, no misrepresentations, and fair and equal treatment.
The latter generally means treating bidders fairly in evaluating bids, and not applying hidden policies or preferences.
The winning bidder, selected in accordance with previously defined criteria, is ultimately awarded the “main” contract to provide goods or services, which is “contract B.”
The B.C. government was found to have breached its Contract A obligations in the 2010 decision in Tercon Contractors Ltd. v. British Columbia (Transportation and Highways). This case indirectly involved a participant with operations in the Okanagan. Because of the government’s problematic decisions, Tercon was not awarded the contract.
The B.C. government was liable to pay Tercon more than $3.3 million in lost profits.
Other cases have found that political interference in the competitive contracting process breaches contract A duties.
Clear wording in the competitive documents is required to affect Contract A obligations.
Courts can decline to follow attempts to change these obligations, for example if the attempt contravenes public policy.
More discretion brings with it the potential for increased liability by the federal government to bidders who are not awarded a contract, as a result of an exercise of this discretion.
This change may be great for Canadian lawyers who represent shady corporate clients.
Whether it is great for taxpayers remains to be seen.
Perhaps it is time for the federal government to stop trying to protect SNC-Lavalin and let the chips fall where they may.