ADVANCING INNOVATION OPENING COMPETITION THROUGH DIALOGUE RFPS

Unnecessarily strict procedures, overly narrow evaluation criteria, and overly prescriptive specifications serve to stifle competition and expose procurement processes to unnecessary litigation. To avoid tender compliance disputes and enable innovation, purchasing institutions should deploy negotiated Requests for Proposals (RFPs) with competitive dialogue stages.

Bidders are increasingly challenging what they perceive to be overly restrictive evaluation criteria and performance requirements.

In fact, in its October 2022 report entitled Improving health care through pro-competitive procurement policy: Digital Health Care Market Study Part 2, Canada’s Competition Bureau recommended that government institutions use fewer prescriptive evaluation criteria and specifications and use negotiated RFPs to enable bidders to propose market-based solutions rather than being tied to unnecessarily narrow government requirements. As this report cautioned, “Canada is at risk of falling behind international best practices for digitally-enabled health care treatments” and that adjustments were required to government purchasing rules to “ensure that Canadians continue to have access to the best care possible.”

The Competition Bureau attributed current restrictive practices to a lack of government expertise in defining requirements and to a lack of market intelligence. As the report cautioned, “it is important to get RFP requirements right” since “failing to do so can create barriers to market entry, particularly for innovative companies and SMEs.” The report concluded that “improp- erly scoped RFP requirements can make procurement policies needlessly complex and, at their worst, can reduce competition and innovation to the detriment of the Canadian health care system.”

Similarly, in its July 2022 Annual Report 2021-2022, Canada’s Office of the Procurement Ombudsman cautioned against the use of unnecessarily restrictive evaluation criteria, noting that concerns over unfair, overly restrictive, or biased evaluation criteria were the top issues raised by its industry stakeholders. In fact, those stakeholders felt that government procurements were unfairly biased for and influenced by incumbent suppliers. The industry stakeholders also raised concerns over the flawed interpretation of evaluation requirements and the application of hidden criteria, such as Canadian education requirements that were never disclosed in the government’s solicitation documents.

Legal Challenges

The use of unnecessarily restrictive requirements can lead to successful legal challenges, as evidenced by two high-profile legal rulings involving Canadian provincial governments whose procurements were struck down for breaching open competition rules under applicable trade treaties. In its February 2022 decision in The Ministry of Highways for the Province of Saskatchewan v. West-Can Seal Coating Inc., the Saskatchewan Queen’s Bench dismissed the Saskatchewan government’s appeal of a trade treaty arbitration decision. That arbitration decision determined that the government breached open competition rules by applying local labour requirements under a “community benefits” scheme that awarded highway maintenance work to a Saskatchewan company.

Further, in its June 2022 ruling in Thales DIS Canada Inc. v. Ontario, the Ontario Superior Court of Justice – Divisional Court struck down an Ontario driver’s licence and health card RFP after the government failed to justify domestic production restrictions on security and privacy grounds. The Ontario government sought leave to appeal the decision, which was granted by the Ontario Court of Appeal in fall 2022, setting the stage for a higher court ruling on the use of restrictive requirements by Ontario government institutions. While government institutions should avoid setting the competitive bar too high with unnecessarily restrictive requirements, setting the technical bar too low and proceeding with low-bid awards can also stifle innovation. For example, in its September 2022 report entitled Audit of Zero-Emission Buses – Sprint 2 – Tendering Process for 40-Foot Electric Buses, the City of Ottawa’s Office of the Auditor General found that the City’s draft RFP for a fleet of electric buses contained no rated technical evaluation criteria. Instead, the draft solicitation set minimum technical requirements and proposed to award the contract to the lowest compliant bidder. The Auditor General concluded that the proposed approach failed to allow for innovative solutions that could address the City’s future needs, stating that “this procurement approach could have resulted in awarding the contract to a proponent with the lowest proposed price that met the stated require ments, but not necessarily the pro ponent with superior technical capabilities.” The City ultimately decided to cancel its proposed RFP. As this audit illustrates, pub lic institutions continue to struggle in implementing dialogue process es that open the door to innovation and need more guidance in effec tively leveraging these strategies.

Rather than locking their pro curements down with restrictive procedures, and stifling innovation with anti-competitive requirements, public institutions should be lever aging negotiated RFPs with com petitive dialogues so they can open their competitions to more suppli ers and open the door to more innovation. SP