Ottawa makes it harder for bidders to challenge national security exceptions

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The Canadian government is making it harder for businesses to challenge purchasing decisions in which it invokes the “national security exception,” a measure that allows Ottawa to circumvent commitments made under international trade agreements to treat all bidders equally.

Every year, the Canadian government buys more than $22-billion worth of goods and services on behalf of departments and agencies. If a bidder believes they have been mistreated, their easiest route to seek redress is the Canadian International Trade Tribunal (CITT), which has powers similar to a superior court and, as one of its roles, adjudicates challenges of federal purchasing decisions, including those that involve Canadian companies.

In a move made without consulting business groups, Ottawa has rewritten the regulations governing the CITT. New language says the tribunal “shall order the dismissal of a complaint in respect of which a national security exception … has been properly invoked by the relevant government institution” and that an exception is “properly invoked” whenever an assistant deputy minister or a bureaucrat of equal rank signs a letter declaring such before a contract is awarded.

Critics say the changes will make it impossible to challenge before the CITT procurement decisions that involve a national security exception, even if there are grounds to question whether it’s justified. Peter Mantas, a lawyer at Fasken who has represented firms before the tribunal, said the exception has even been used to skirt normal competitive bidding rules for office printers.

He says businesses will have to consider using Canadian courts, which will cost more. Unlike complaints before the tribunal, those filed in federal court include no obligation for the government to suspend the contract until the matter is resolved.

“The tribunal was designed to provide an inexpensive and quick process to challenge unfair public procurements," Mr. Mantas said. "The government now has an on-off switch that it can use as it sees fit, to stop such legal challenges from ever being heard by the tribunal.

“Rather than listen to the tribunal and properly invoke the national security exception, the government has instead decided to silence the tribunal.”

It’s not clear that the national security exception or the changes give Canadian companies an advantage over foreign firms because such decisions do not always exclude non-Canadian firms.

Invoking the national security exception allows the government to award a contract outside of normally competitive bidding rules, including by allowing only selected bidders. It is intended to prevent the tribunal from reviewing whether a procurement violated rules of fairness, trade agreements and Canadian law. But in several recent cases, the CITT questioned procurements in which the exception was used. Seven times since 2016, experts on government procurement say, companies have challenged federal government purchasing decisions at the tribunal after the security exception was invoked, and the CITT rejected Ottawa’s request to dismiss them.

Mr. Mantas called the changes worrying.

"The government can now say, for example, that a decision to purchase pencils cannot be challenged by the tribunal if national security grounds were invoked. ... This is a sign that the use of the exception will expand.”

Bill Norgate, chief executive officer of 4 Office Automation Ltd., said his major concern is that companies like his will not be able to challenge contracts that may not have been fairly awarded.

“The regular tribunal has been thrown out the window and I object to it, very much so,” Mr. Norgate said. “We are not in an industry when it is a good idea to take away any kind oversight on the people who are buying these things.”

Kelly McCauley, deputy Conservative procurement critic, accused the government of trying to shield itself from scrutiny.

“I think they’re trying to assert the right to exempt themselves from the law, which is wrong. They’re [trying to] give themselves more power to avoid being dragged in front of the CITT,” Mr. McCauley said.

He said various government departments in recent years have increasingly invoked the national security exception for items such as copy paper or photocopiers that don’t appear to be at risk of security breaches.

“It’s bad for taxpayers. It’s bad for business,” he said.

The Department of Finance said the state of affairs before left it too unpredictable how procurement complaints would be handled.

“These amendments help provide greater clarity and predictability for all parties involved in procurement inquiries,” Finance Department spokeswoman Marie-France Faucher said.