Guiding principles

From the June 2022 print edition

The use of references in public sector bid evaluations has been subject to multiple bid protests. This article summarizes leading Canadian cases and offers governing principles for evaluating references based on domestic and global rulings.

In its April 2003 decision in Air-Tite Sheet Metal Ltd. v. Canada (Attorney General), the Newfoundland and Labrador Supreme Court found that the government improperly rejected a bidder after evaluators acted as self-references to reject a bidder’s prior project experience based on their flawed recollection of its past performance. Similarly, in its June 2003 decision in Rockwood v. Harbour Grace Community Youth Network Inc., the Newfoundland and Labrador Provincial Court found that evaluators used an undisclosed reference requirement to improperly deny an award to a sole bidder.

Further, in its October 2009 determination in TELUS Communications Co. v. Canada, the Canadian International Trade Tribunal ordered a re-evaluation after finding that a low bid was improperly rejected due to ambiguities in the reference questionnaire. Similarly, in its June 2010 determination in Valcom Consulting Group Inc. v. Canada, the Tribunal found that the government changed its evaluation rules by introducing a more lenient process for accepting reference information from government institutions compared to other parties. Finally, in its February 2015 determination in 4Plan Consulting Corp. v. Shared Services Canada, the Tribunal determined that the government improperly used reference information to retroactively define the meaning of past projects to evaluate prior experience.

Guiding principles
These Canadian cases are reflective of broader global case law. In summary, the case law indicates that the following governing principles should apply to the use of references during bid evaluations:

  1. Remedies for misuse: The improper use of reference information can result in re-evaluation orders, the nullification of contract award decisions, and, in some jurisdictions, lost profit damages awarded against the purchasing institution. Evaluators should therefore avoid using reference information to evaluate bids in an inconsistent, arbitrary, subjective or non-transparent manner.
  2. Use of evidence: The use of references should be limited to situations where the collection of information from references would be sufficiently reliable and relevant to enable a defensible evaluation. Purchasing institutions must establish evaluation rules that clearly define how collected reference information will impact the scoring of bidders, since that information must be used in a consistent and rational manner.
  3. Transparent scoring: Prior experience and related reference checks should be scored out of an identified number of total points, with a clear description of how those total points will be allocated.
  4. Disclosure to bidders: The information required from references, and the procedures around the collection and use of reference information, should be clearly identified in the solicitation document to allow bidders to select the appropriate references for the specifically required criteria and to allow evaluators to use that information based on clearly established procedures.
  5. Avoid process over substance: Purchasing institutions should avoid the mechanical application of “content-free” reference check procedures that require the name and title of references in situations where no relevant information will be collected from the references.
  6. Transparent rectifications: The post-bid substitution of non-responsive references should only be allowed where the solicitation rules specifically permit that practice. To avoid unnecessary disqualifications and resulting bid protests, solicitation documents should incorporate clear rectification procedures to allow bidders an opportunity to provide additional references when the originally identified references fail to respond to reference requests.
  7. Self-references: Purchasing institutions should establish clear rules for providing references for their own evaluation procedures to incumbent bidders or to bidders who have worked for them in the past. When providing references to their own bidders, purchasing institutions should avoid creating more lenient standards for their own references than those applied to third-party references.
  8. Duty to investigate: Purchasing institutions should proceed with caution prior to denying a bidder a contract award due to a bad reference or concerns over past experience. Purchasing institutions are under a duty to look behind negative references and to assess whether the failure to complete prior projects was due to material non-performance by the bidder or due to factors outside that contractor’s control.
  9. No division of work: Evaluation committees may not divide up the reference check process among evaluators since this creates the risk of biasing the collection of information. All evaluators should have equal access to all reference information.
  10. Evaluation records: Evaluators should maintain detailed, contemporaneous records of how reference information was used as part of their evaluation process.

Public institutions should follow these principles, since failure to meet proper legal standards can undermine the defensibility of their evaluation and award decisions.

Paul Emanuelli is the general counsel of The Procurement Office and can be reached at [email protected]