ATTORNEY GENERAL OF CANADA V. RAPISCAN SYSTEMS INC.: REFLECTIONS ON THE CHALLENGE OF JUDICIAL REVIEW IN GOVERNMENT PROCUREMENT.

• Author: Greene, Samuel

Canadian governments spend vast sums of money purchasing goods and services. As of 2008-2009, Public Works and Government Services Canada stated that it was a party to contracts worth some $18 billion, many of which were entered into following competitive bid processes. (1) Consequently, it is unsurprising that government procurement decisions frequently result in litigation. (2) Troublingly, however, recent jurisprudence from the Federal Court and Federal Court of Appeal threatens to make that litigation more complicated and unpredictable.

In particular, the Federal Court and Federal Court of Appeal decisions in Attorney General of Canada v Rapiscan Systems Inc. (3) have raised the following question: when should unsuccessful participants--or, indeed, non-participants--in government tendering processes be entitled to administrative law remedies against a government agency? This is a vexing question to which Canadian courts have given various and contradictory answers. No clear or consistent answer can be found in the jurisprudence of the Supreme Court of Canada. An answer, however, is clearly needed. Government agencies must know the scope of their liability in order to structure their affairs. Bidders and other market participants must know their rights and potential remedies. Indeterminacy in this arena--and the complex and protracted litigation associated with it--is costly for all involved, particularly taxpayers. In short, this is an issue ripe for clarification by our highest court.

In this comment, I use Rapiscan as to illustrate how and why Canadian courts have lost their way in using administrative law to review government tendering. I then propose a means of getting back on track. My ultimate argument is simple: the principles of contract law--and only those principles--should govern public procurement disputes except in very particular and limited circumstances (which this comment will outline). Such a result is right in principle. It is also right as a matter of policy. Since administrative law review exists to uphold the rule of law and to encourage good governance, the central challenge I must address is this: is contract law, on its own, sufficient to achieve these goals in the context of government tendering?

I argue that contract law is up to that challenge. In Part 1,1 will briefly review the concurrent administrative law and contract law framework for government procurement litigation. In Part 2, I will review recent jurisprudence, with a focus on Rapiscan, to illustrate the problems caused by administrative law review of government procurement, and then trace these problems to confusion in the jurisprudence of the Supreme Court of Canada. In Part 3, I will argue that a primarily private law approach to government procurement litigation is preferable.

I OVERVIEW OF GOVERNMENT TENDERING LITIGATION

As mentioned above, government procurement decisions are frequently the subject of complicated, high stakes litigation. There are multiple legal avenues through which such decisions can be litigated. This paper, however, will focus on the relationship between two primary avenues: contract law and administrative law. (4) It is helpful to briefly review the basic structure of these two types of actions in order to then delineate where they overlap and conflict with one another.

1. THE CONTRACT LAW FRAMEWORK FOR TENDERING LITIGATION

   Canadian courts have developed a special contract law framework for assessing tendering. Under a traditional contractual analysis, a call for bids would be a mere invitation to treat insufficient to create legal rights and obligations. In Ron Engineering, (5) however, the Supreme Court of Canada took a different view, holding that the submission of a bid in response to a tendering call could in some circumstances create a form of contract ("Contract A").

   Since Ron Engineering, the Supreme Court has clarified the meaning and content of this "Contract A" (as distinct from "Contract B", the contract awarded to the ultimately successful bidder). Contract A will exist where "the parties intended to initiate contractual relations by the submission of a bid." (6) The tender call is an offer and the submission of the bid constitutes acceptance. Contract A is an agreement about process, not result. It will generally include an implied term of equal and fair treatment for bidders. More specifically, it will require that the successful bid be chosen in accordance with--and only with--disclosed, pre-set criteria. (7) Such implied terms can be ousted by the specific terms of the tender call, but only by clear and explicit language. (8) After the formation of Contract A, "[w] here a bid is accepted, the terms of the tender and bid documents become the terms and conditions of Contract B." (9)

   A cause of action will lie, therefore, with unsuccessful bidders when the tendering agency awards Contract B (i) to a non-compliant bidder or (ii) without fair and equal consideration of all bidders, unless those duties have been explicitly ousted. The remedy available to the unsuccessful bidder will generally be expectation damages. (10) No cause of action, however, will lie with those who do not participate by submitting a bid. They are not in privity with the parties to Contract A.

   All of this will be true of both private tendering and government tendering. The analytical approach to Contract A and Contract B remains the same in both cases.

2. THE ADMINISTRATIVE LAW FRAMEWORK FOR TENDERING LITIGATION

   The involvement of government agencies in tendering opens up the possible alternative route of judicial review through administrative law. A disappointed bidder can rely on statutory avenues of judicial review such as s. 17 of the Federal Courts Act. (11) Alternatively, she can plead for relief based on the prerogative jurisdiction of the Superior Courts, including writs of certiorari, mandamus or prohibition. Because the cause of action is not framed in contract, the applicant for judicial review need not be a bidder (a point to which we will return later).

   Two types of judicial review are available: procedural review and substantive review. First, where applicants can demonstrate that their "rights, privileges or interests" may have been impacted by the decision, they will be entitled to procedural fairness. (12) The content of that duty will vary based on the context in accordance with the factors set out by the Supreme Court in Baker. (13) Requirements may include the right to make written or oral representations to the decision maker and have the decision maker consider them, entitlements to notice, rights of appeal and the provision of reasons. Second, the applicant may urge the court to evaluate the substantive reasonableness of the decision. Courts will generally afford deference or a "margin of appreciation" to discretionary decisions where they fall "within a range of possible, acceptable outcomes which are defensible in respect of the facts and law." (14)

   Therefore, in the tendering context, a cause of action in administrative law will lie with a party who has been treated unfairly by the tendering agency or who has been adversely impacted by a substantively unreasonable choice of successful bid.

   II ADMINISTRATIVE LAW: A SOURCE OF CONFUSION

   Administrative law is a source of confusion in government procurement disputes for two related reasons. First, it is unclear when administrative law review ought to be available. Second, the jurisprudence delineating the scope of public law duties of fairness and reasonableness is often difficult to apply to the commercial context. The first part of this section reviews recent lower court jurisprudence, focusing on the Rapiscan case, to illustrate how these twin problems play out in tendering litigation. The second traces the source of confusion to the jurisprudence of the Supreme Court.

1. THE CURRENT CHALLENGE

   The conflicting judgments of the Federal Court (FC) and the Federal Court of Appeal (FCA) in Attorney General of Canada v Rapiscan Systems Inc. (15) illustrate the confusion created by inserting public law remedies into tendering disputes. First, inconsistencies in internal reasoning and indeterminate legal tests make it difficult to ascertain when public law remedies are supposed to be available. Second, public law concepts prove to be an awkward analytical fit for a dispute that, at its core, is commercial in nature, making it difficult to apply the jurisprudence on the scope of public law duties in the procurement context. Before turning to those two challenges, however, it is necessary to understand what was at stake in the Rapiscan case.

   In Rapiscan, the applicant corporation challenged the decision of a government agency (the Canadian Air Transport Security Authority or "CATSA") to award a contract for x-ray technology to another bidder. The applicant alleged that (a) CATSA's ultimate decision was unlawful because CATSA staff misled the CATSA Board about the substance of the bids and (b) its bid was reviewed in a procedurally unfair manner. Although the case was factually complex, the core legal issue was whether public law remedies were available. Since the terms of the tender call (the "RFP") expressly excluded the formation of Contract A and any of its related duties, the applicant could not rely on implied private law duties of fairness. (16)

   The trial judge found that a public law remedy was available, agreeing with both of the applicant's allegations. On the first allegation, he found that CATSA's management had misled its Board on fundamental aspects of both the process used and the substance of the bids. Consequently, CATSA's decision was unlawful because it was made without the Board exercising its "oversight function" as required by regulatory policy. (17) On the second allegation, the trial judge found that the applicant was entitled to public law guarantees of procedural fairness notwithstanding the ouster of...