Executive Summary: Key Legal and Evidentiary Issues

• Heiltsuk/Horizon challenged the Canadian International Trade Tribunal's Remedies Decision, which recommended only $5,000 in compensation for Public Works' procurement breach.

• Public Works permitted Atlantic Towing to substitute all four ship masters post-contract award without adequately documenting whether the replacements met the RFP's technical requirements.

• The Federal Court of Appeal in Heiltsuk 1 (2023 FCA 88) had previously declared the complaint valid due to insufficient contemporaneous evidence supporting the substitution decision.

• Applicants argued the breach amounted to a de facto sole-source procurement, warranting contract cancellation and lost opportunity compensation.

• The Tribunal characterized the breach as a documentation deficiency rather than a substantive failure of the substitute masters to meet RFP requirements.

• No reviewable error was found in the Tribunal's Remedies Decision, and the Federal Court of Appeal dismissed the application with no award as to costs.

Background and the procurement process

In 2018, Public Works and Government Services Canada released a request for proposal for the supply of two emergency towing vessels in support of Canadian Coast Guard operations on the west coast of Canada. In August 2018, Atlantic Towing Limited was awarded the contract as the successful bidder, while Heiltsuk Horizon Maritime Services Ltd. and Horizon Maritime Services Ltd. ranked last out of the seven compliant bidders.

The substitution and the initial complaint

Several weeks following the awarding of the contract and as provided for by section 7.46 of the RFP — known as the substitution clause — Public Works permitted Atlantic Towing to substitute all four masters originally proposed in its winning bid with new masters. Upon becoming aware of the substitution and suspecting a bait-and-switch on the part of Atlantic Towing, Heiltsuk/Horizon filed a complaint with the Canadian International Trade Tribunal. The applicants asserted that the substitute masters did not meet the technical requirements of the RFP under the substitution clause and challenged Public Works' decision to allow the substitution on the basis that, by failing to enforce key terms of the solicitation, Public Works effectively conducted a de facto sole-source procurement — i.e., a modified solicitation for which Atlantic Towing was the only bidder. Before the Tribunal, Heiltsuk/Horizon argued that Public Works should have submitted documentation showing how the substitute masters were evaluated and scored in comparison to the original masters. Notably, no issue was taken by Heiltsuk/Horizon with respect to the applicability of the substitution clause in the circumstances.

The Merits Decision (May 2021)

In May 2021, the Tribunal determined that Public Works did not proceed with modifying the contract in a manner that contravened the RFP, as alleged by Heiltsuk/Horizon. The Tribunal did find, at paragraph 60, that Public Works and the Canadian Coast Guard "ought to have better documented their evaluation of the substitute masters" and in particular "should have documented efforts to ensure that the substitute masters would meet the mandatory requirements and that they would receive equivalent scores to the original masters under the rated requirements." However, notwithstanding the lack of "contemporaneous documentation" before Public Works at the time the decision to allow the substitutions was made, the Tribunal found at paragraphs 57 and 61, based upon documents submitted during the course of the litigation, that it was nonetheless reasonable for Public Works to have determined that all four of the substitute masters fulfilled the technical requirements of the RFP and that they would have earned the same top score under the proposed bid scoring system as did the masters originally proposed by Atlantic Towing. The Tribunal proceeded to find Heiltsuk/Horizon's complaint not to be valid.

The first judicial review — Heiltsuk 1 (May 2023)

In May 2023, the Federal Court of Appeal allowed Heiltsuk/Horizon's application for judicial review of the Merits Decision in Heiltsuk Horizon Maritime Services Ltd. v. Atlantic Towing Limited, 2023 FCA 88. The Court determined at paragraph 21 that it was not open to the Tribunal to disregard the flawed basis for Public Works' decision and to substitute its own rationalization for the decision to allow the substitution of masters by Atlantic Towing. As there was no contemporaneous evidence to support the conclusion that the substitute masters complied with the technical requirements of the RFP and merited full points under the bid scoring system as did the masters originally proposed by Atlantic Towing, the Court determined that "there was no bridge" between the evidence and the Tribunal's conclusion on those issues. The Court also disagreed with the assertion of Public Works that "equivalency of experience could be inferred from the type of vessels on which the substitute masters had served, as described in their resumes." Having found that only one result was open to the Tribunal on account of the "limitations in the evidence" before it and that therefore "no purpose would be served in remitting the matter to" the Tribunal, the Court set aside the Merits Decision and declared Heiltsuk/Horizon's complaint to be valid.

The Remedies Decision (May 22, 2024)

On the strength of Heiltsuk/Horizon's complaint having been declared valid by the Court, the parties returned before the Tribunal to deal with the issue of remedies. In its Remedies Decision, the Tribunal noted at paragraphs 21 and 31 that the crux of what made Heiltsuk/Horizon's complaint valid was the finding by the Court in Heiltsuk 1 that the information provided by Atlantic Towing was insufficient for Public Works to conclude that the substitute ship masters had qualifications and experience that met or exceeded those of the ship masters submitted in its initial bid as required by the substitution clause. Accordingly, at paragraph 32, the Tribunal characterized the nature of the breach by Public Works as relating to its "lack of rigour…in validating the experience of the proposed substitute ship masters" which constituted "a deficiency in the procurement process." The Tribunal recommended, inter alia, that Public Works pay Heiltsuk/Horizon $5,000 as a remedy for its breach. The Tribunal also recommended that Public Works verify and document that the ship masters to be employed or proposed at the time of the next potential extension of the current contract have the qualifications and the experience that either meet or exceed the score obtained by the ship masters originally submitted by Atlantic Towing, and awarded Heiltsuk/Horizon its reasonable costs incurred in preparing and proceeding with its complaint.

Heiltsuk/Horizon's arguments on judicial review

On this second judicial review, Heiltsuk/Horizon argued that the Tribunal mischaracterized the nature of the "breach" by Public Works that was identified by the Court in Heiltsuk 1, and in doing so, rendered an unreasonable decision as regards appropriate remedies. According to Heiltsuk/Horizon, the breach of Public Works was to have conducted a de facto sole-source procurement — i.e., a modified solicitation for which Atlantic Towing was the only bidder. Heiltsuk/Horizon urged the Court to find that the unlawful substitution permitted by Public Works was serious, that Public Works directly undermined the integrity of the procurement process and breached its obligations under the Act, and that Heiltsuk/Horizon was denied the opportunity to profit from the contract. Heiltsuk/Horizon also asked that the Court restore the integrity of the procurement system by cancelling the contract awarded to Atlantic Towing, award compensation for lost opportunity, and denounce Public Works for its failure to preserve the integrity of the procurement process.

The Court's analysis and characterization of the breach

The Federal Court of Appeal could not agree with Heiltsuk/Horizon, as its arguments were based upon the premise that the substitute masters did not, as a matter of fact, meet the relevant technical requirements of the RFP and that they would not have achieved full points under the relevant scoring system as did the masters originally proposed by Atlantic Towing. Neither Public Works nor the Tribunal ever made such a finding. The Court found nothing unreasonable with the Tribunal's conclusion that the "breach" upon which the Court determined in Heiltsuk 1 that the complaint was valid was the failure by Public Works to keep proper records of its determination regarding the propriety of the substitution, rather than the substitute masters not having met the technical requirements of the RFP. The Court found no basis for Heiltsuk/Horizon's assertion that, in the Merits Decision, the Tribunal accepted its proposition that by permitting the substitution, Public Works was conducting a modified solicitation, nor that, in its Remedies Decision, the Tribunal disregarded the Court's determination in Heiltsuk 1 that the complaint was valid.

Ruling and outcome

The Federal Court of Appeal found no reviewable error in the way the Tribunal dealt with the issues raised by Heiltsuk/Horizon. The Tribunal had considered the circumstances relevant to the procurement and those listed in subsection 30.15(3) of the Canadian International Trade Tribunal Act. It then determined that cancellation of the contract was unjustified, in particular given the advanced stage of its execution and the concerns its interruption would have on the provision of an essential service, and that compensation for lost opportunity was inappropriate given that Heiltsuk/Horizon's bid ranked last out of the seven compliant bidders. The Court also was not convinced that the Tribunal's decision to recommend that $5,000 in compensation be paid to Heiltsuk/Horizon as a remedy for Public Works' shortcomings in protecting the integrity of the procurement process was unreasonable, considering the circumstances, the statutory framework, and the relevant case law relating to this head of compensation. On the whole, the Court found that the Tribunal's decision bore the hallmarks of reasonableness — justification, transparency, and intelligibility — and was justified in relation to the relevant factual and legal constraints. The application for judicial review was therefore dismissed, with no award as to costs given the nature of the complaint and the way the proceedings had unfolded.