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Bidder barring boundaries: Defensible debarment (2/2)

As we discussed in Part 1 of this article, with the SNC Lavalin case and many others, there’s a high likelihood of blowback when making a decision to debar a bidder from a public contract. Faced with the prospect of losing a major source of work, especially if it’s for a long time, it’s not surprising to see bidders take a bet-the-farm approach to litigating against the procuring entity, going political, complaining over social media, and trying to make headlines around how unfairly they’re being treated.

Before taking this step, it’s important to ensure the procuring entity can defend itself from what could be a multi-faceted attack from an impacted supplier.

Proactively Establish a Debarment Policy

We’ve seen that courts have a harder time supporting random or targeted decisions to debar a bidder.  In Soo Logging Co. Ltd. v. HMTQ (2005), and in Shell Canada Products Ltd. v. Vancouver (1994), there was no formal debarment policy in place.

In Soo Logging the court rejected the idea that Soo Logging had been debarred for legitimate reasons, suggesting BC’s Ministry of Forests had a personal animus against the bidder, and awarded special costs against the BC Ministry of Forests.

In Shell Canada, the Supreme Court of Canada rejected Vancouver’s decision to debar Shell from municipal contracts.  In that case the court found the debarment, which was driven by political motives, did not have as its purpose a “benefit to the citizens of the City”.

Almost all the court cases on debarment involve a procuring entity reactively putting a policy in place in response to a specific bidder situation. While this was not always fatal for the procuring entity, it put the procuring entity’s motives under the microscope and I’d suggest also motivated the bidder to sue as, to the bidder, it surely felt punitive and unfair.

To avoid bidder surprises and backlash, and having the procuring entity’s motives questioned, it’s best to proactively put a written policy in place and to do so before a specific situation arises.

Include Legitimate Considerations for Debarment

In addition to listing valid grounds for debarment, the policy should also include a requirement to consider reasons justifying a debarment. For example, if the policy states that the procuring entity can debar a litigious bidder, it’s a good idea to list out legitimate reasons for implementing the debarment.  This ensures decision-makers turn their minds to ensuring the debarment is not arbitrary or punitive.  Perhaps not all types of litigation warrant implementation of debarment protocols.

A good example is seen in the City of Ottawa’s Procurement Policy. The policy allows exclusion of litigious bidders but requires that the decision-maker consider:

(a) whether the litigation is likely to adversely affect the bidder’s ability to work with the City, its consultants and representatives; or,

(b) whether the City’s experience with the bidder indicates that the City is likely to incur increased staff and legal costs in the administration of the contract if it is awarded to the bidder; or,

(c) whether the bidder has been convicted of a criminal act against the City or one of its local boards or corporations; or,

(d) whether the bidder has failed to satisfy an outstanding debt to the City or one of its local boards or corporations; or,

(e) there are reasonable grounds to believe it would not be in the best interests of the City to enter into a contract with the bidder.

In documenting a debarment decision, decision-makers would include one or more of these considerations, which, in turn, will enhance the defensibility of the decision.

Notify Bidders in Advance

Suppliers shouldn’t be put to the trouble of preparing a bid only to later be told that they’re debarred because, for example, they’d filed a lawsuit against the entity 3 years prior.

Ideally, every RFx template would have a clear reference to a policy, and if possible, not buried in the legalese which is not always read. A clear reference may be particularly useful if a bidder can be debarred for poor performance. Knowing up front that performance is a potential ground for debarment will go a long way towards ensuring contractors pay attention to meeting expectations throughout the period of the contract.

Allow for Due Process Before Rendering a Final Decision

A final and important point to be made is to establish procedures that provide affected suppliers with due process. Due process is especially important if the decision has the potential of materially impacting a supplier’s business for many years to come.

Due process, also referred to as procedural fairness, requires that the procuring entity provide the supplier with the reasons supporting the debarment decision and an opportunity to challenge a debarment decision at the entity-level. In rendering a final decision after hearing a supplier’s side of the story, the entity should document its reasons, including due consideration to the supplier’s arguments, for upholding or overturning its initial debarment decision.

If decisions are handed down without due process, suppliers are likely to become suspicious of the entity’s motives and be motivated to launch legal challenges and/or resource-intensive freedom of information requests.  Courts are also likely to view the entity’s actions in a negative light.

Conclusion

We began Part One of this article by highlighting the 2019 SNC Lavalin scandal related to federal government debarment of the company from government contracts, due to criminal charges in Canada for bribing Libyan officials.

So, whatever happened to SNC Lavalin?  There’s little information available on the fate of SNC Lavallin after the company negotiated a settlement agreement with the federal government in December 2019. It’s generally believed that the government minimized the scope of debarment in the settlement agreement to the benefit of SNC Lavalin.

In this respect, it seems the political pressure ultimately paid off for this company, which didn’t please everyone.  As so aptly stated by Jennifer Quaid who was quoted in a New York Times article in December: “From the company’s perspective, they got what they wanted,” Professor Quaid said. “I’m not so sure about how it serves the public’s interest.”

A version of this article originally appeared on NECI Legal Edge.

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