CITATION: Envoy Relocation Services Inc. v. Canada (Attorney General), 2013 ONSC 2034 COURT FILE NO.: 07-CV-37522 DATE: 2013/04/06

ONTARIO

SUPERIOR COURT OF JUSTICE

ONSC 2034 (*)

BETWEEN:

ENVOY RELOCATION SERVICES INC. and NATIONAL RELOCATION SERVICES (RELONAT) INC. (as contractual joint venture called Envoy Relocation Services)

Plaintiffs

– and –

THE ATTORNEY GENERAL OF CANADA

Defendant

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Ronald D. Lunau, Phuong T.V. Ngo, Stephanie Pearce, Alanna Lawson and Jennifer Katsuno for the Plaintiffs

Derek Rasmussen, Gregory S. Tzemenakis and Elizabeth Kikuchi, for the Defendant

HEARD: September 21, 22, 26-29, October 3-6, 11-13, 17-19, 24, 26, 31, November 1, 7-10, 14-17, 21-24, 28-30 and December 1, 5-8, 2011, March 5-8, 12-15, 20-23, 26-27, April 26, May 1-4, 14-17, June 4-5, 7, 18-21, 26-28, July 3-5, 9-10, 12, September 26, November 26-28 and December 5-7, 2012

2013

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Appendices

ACKNOWLEDGMENTS

ACRONYMS

CHRONOLOGY

1810

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CHAPTER 1 - INTRODUCTION

PROPERTY MANAGEMENT SERVICES

[1]The debacle of Property Management Services (“PMS”) started out as a one-line formula buried in a 317 page tender document. Actually it was three lines, because there were three

Request for Proposals (“RFP”) in the tender invitation. One was for the larger Canadian Forces (“CF”) contract. The other contract would be awarded based on the combined scores from the

Government of Canada (“GOC”) and the Royal Canadian Mounted Police (“RCMP”) RFPs.

[2]Members of what was then a competitive relocation counselling industry were invited in the fall of 2002 to bid on implementing the Crown’s Integrated Relocation Program (“IRP”) policies for these government agencies. This policy, when reformulated as the requirements of a Statement of Work (“SOW”), would govern the relocation of most armed forces and government personnel, described generically as “Transferees”, across Canada and around the world.

[3]The impugned formula was contained in the Basis of Payment (“BOP”) that tendering parties would use to bid the prices of its subcontractors, called Third Party Suppliers. This included the provision of PMS to transferees. The Government sought to encourage transferees to choose the less expensive option of renting rather than selling their homes. PMS was therefore, part of an “incentive” program funded from a Personalized Funding Envelope (“PFE”) to encourage the rent option.

[4]PMS was nevertheless seldom used. The Office of the Auditor General (“OAG”) found that only 183 relocations of transferees occurred using PMS out of a total 81,000 moves in the Canadian Forces for the six years from 1999 to 2005. Thus, less than one quarter of 1 percent (.00225) made use of the service.

[5]Apparently, PMS as a subject matter received little attention from the drafters of the RFPs. I say this because the formula found in the RFPs used estimated volumes of 7200 moves requiring PMS. This amounted to 43,200 projected instances over the same six year period described by the OAG. Like so much in this lawsuit, no explanation was ever provided for this remarkable disparity in PMS volumes by a factor of approximately 250 times.

[6]More remarkable still, Royal LePage Relocation Services (“RLRS”), the incumbent in the 1999 Pilot Program that was to be converted into a permanent program by the 2002 RFPs, bid 0 percent on PMS. This meant that PMS would be provided free to transferees. RLRS would pay its Third Party Suppliers for these services.

[7]More importantly, it meant that RLRS tendered 0 dollars for this item as part of its total price component. Conversely, the plaintiffs (“Envoy”) wrote 8 percent into the BOP formula. When monetized, this amounted to a bid of over $42 million for the same services.

[8]I find that the differential is accounted for by RLRS using its insider knowledge of the actual PMS volumes; knowledge that it was aware of as incumbent. Envoy, on the other hand,

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bid the fair market value of its Third Party Suppliers using the grossly over-estimated volumes of PMS described in the formula.

[9]I say that the bid was remarkable, not only by the differential in pricing of the parties, but because PMS was a “flow-through” service providing no revenues for RLRS. This meant that to the extent of the differential between the actual value of the services over seven years, i.e. around $200,000, and the bid price of its competitors, i.e. $42 million, and $48 million by Envoy in

2004, RLRS had options on how to use the “PMS premium”.

[10]One the one hand, RLRS could simply lower its total price component of its tender proposal. Alternatively, if confident in its supremacy in the technical merit component as incumbent, it could transfer some or all of the “unused” PMS services to its Administrative Fee. By doing so, RLRS would add the transferred amount from PMS directly to its bottom line. Transferring the non-existent PMS, meant no additional costs were incurred by RLRS. It similarly meant adding no additional value to the Crown. This is what, in fact, I find occurred.

[11]But the outstandingly remarkable aspect of RLRS’ bid is that it went “unnoticed” through

two RFPs and their associated contracts except by the Contracting Authourity and the Project Authourity and a small number of other individuals. Indeed, the fact that the same PMS provisions were allowed to be tendered again in the 2004 RFP is one of the main foundations for a finding of liability against the Crown.

[12]It would have remained undetected, but for what can only be described as the brilliant intervention of the OAG. Not only did the OAG staff pick this item out of the haystack of issues on their desk, they also pointed out to Public Works and Government Services Canada

(“PWGSC”) and its client agencies that RLRS had been charging transferees for these services. They had promised to provide these services for free to transferees out of their own pocket.

[13]One dramatic event in the trial was the requirement of the defendant to produce documents that ought to have been revealed in normal court procedures. They disclosed that the Contracting Authority from PWGSC and the Project Authority from the Treasury Board had misled the OAG and the court in testifying that they were not aware that RLRS was charging for transferees for PMS. Indeed, they had authorized the charges. There is some unfinished issue as to who else in PWGSC and the Treasury Board was aware that transferees were charging fees.

[14]This evidence, and particularly the repetition of the PMS provisions in the 2004 RFP, figures prominently in my decision to declare that Envoy should have been declared the winner of that procurement process.

CANCELLING THE 2002 PROCESS AND RE-TENDERING

[15]The 2004 RFP came about as a result of the cancellation of the 2002 contract from a combination of miscues by the defendant. One consisted of a serious error of judgment by a long time PWGSC employee, who otherwise, I find was a valued member of the Department and whose evidence I rely upon. Her circumstances occurred in an unhealthy environment where personnel involved in the administration of relocation programs developed too close a relationship with RLRS, promoted by RLRS. The second miscue resulted from what I conclude

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was a misunderstanding between employees on how this complex and otherwise relatively well drafted contract (the PMS provisions obviously aside) should be scored.

[16]The results, on the one hand, led to an appearance of bias and on the other, in the elimination of experienced bidders at the mandatory requirement stage. These combined to force PWGSC to cancel and re-tender the program.

[17]Perhaps more importantly, I found that the 2002 process was unfair to the non-incumbent bidders. This was due to the delay that occurred in completing the tender documents, the results of which were inflicted on the tendering parties. This resulted in the elimination of procedures designed to assist tendering parties and cutting short time to complete a complex tendering exercise. This placed the new tendering parties at a significant disadvantage to the incumbent RLRS. This unfairness however, did not speak with sufficient clarity to overturn the process without the appearance of bias issue and the finding by the Canadian International Trade Tribunal (“CITT”) requiring the tenders to be re-evaluated using an appropriate scoring matrix.

CONFLICT OF INTEREST OF CROWN

[18]Re-tendering the contract raised significant challenges to PWGSC, which is where it got into more trouble. For starters, RLRS was threatening and actually commenced litigation to claim for loss of profits from the cancellation of the 2002 contract. The Crown accepted responsibility for the cancellation, resulting in it being in an actual conflict of interest with the non-incumbent bidders. The Crown’s interests in avoiding paying profits twice for the same contract, as well as minimizing damages in any outcome, aligned with the interests of RLRS whereby RLRS sought not only to win the tender, but to achieve profits greater than those earned under the 2002 contract.

[19]More complicated still was the fact that RLRS indicated early on its intention to participate in the 2004 RFP process as a means to “mitigate” its losses from the cancellation of the 2002 contract. In effect, RLRS could use the Crown to subsidize its bid of a lower price to win the 2004 RFP and then claim back from the Crown any differential in lost profits from the cancelled 2002 contract. This happened as the Crown paid RLRS $4.5 million for its alleged lost profits in 2008, below its original asking price of $18 million.

[20]The Crown’s pending conflict of interest situation was recognized even as PWGSC officers were deciding to cancel the 2002 contract. A risk assessment was ordered and, as learned from a document obtained by the plaintiffs in an access to information request, senior departmental officials, special advisors and legal counsel met early on to work out a strategy to mitigate the high risk of litigation.

[21]However, nothing was heard thereafter of any senior management team or risk analysis, or indeed, any explanation of the significant changes that occurred in the selection formula in the 2004 RFP. In the meantime, PWGSC abandoned its strategy to have a Fairness Monitor provide transparency into the drafting of the 2004 RFP terms. The composition of the drafting team was already controversial due to the participation of the CF Departmental Authourity and Project

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MODIFYING THE SELECTION FORMULA

[22]Tied to the conflict of interest issue is that of amending the selection formula. RLRS complained to the Crown that its prices had been disclosed to its competitors in the 2002 RFP who could use that information to their benefit. I find this not to be the case, but it had a ring of veracity to PWGSC. It used this rationale to justify the “remedial” measure of amending the selection formula to increase the weight of technical merit to three times that of price.

[23]The Crown’s reliance on concern about disclosure to RLRS was only disclosed to the tendering parties in the report of the OAG in 2006. In the meantime, the other bidders were misled as to the reasons for changing the method of selection. The failure to document the process to amend the selection formula was also a subject of criticism by the OAG as contravening standard PWGSC policy. I find that the amendment of the Method of Selection (“MOS”) was intended by PWGSC to favour RLRS and was done in bad faith. The review of evidence on this issue takes up a goodly portion of the court’s decision.

[24]The evaluation criteria used to assess the technical merit of the tendering parties were also revamped in the 2004 RFP. There are issues about the partiality of the evaluation team that ran under the direction of the Contracting Authority who oversaw the change in the selection formula. That person also preauthorized charging transferees for PMS in the 2004 Contract and was part of the team that was not truthful to the tendering parties on the reasons for amending the selection formula. There are other issues with respect to how the evaluation was carried out. They are examined in detail in the court’s decision. This results in overturning some of the evaluation decisions, one of which the CITT had also previously declared to be contrary to express terms in the RFPs.

LEGAL ANALYSIS AND LIABILITY

[25]The legal analysis of liability issues considers causes of action in tort and contract law. In particular consideration is given to some of defendant’s arguments concerning the application of procurement law, which are rejected.

[26]In summary, it was found that the Crown had acted intentionally to unfairly favour RLRS by repeating the 2002 PMS provisions in the 2004 RFP and by modifying the selection formula to play to RLRS’ strengths. These findings had consequences in determining that RLRS bid was non-compliant and in declaring a breach of the Crown’s implied contractual duty of fair and equal treatment of tendering parties.

[27]The result was a declaration that Envoy should have been declared the winner of both the 2004 CF and the GOC/RCMP contracts.

DAMAGES – EVIDENCE

[28]Extensive and complex evidence was introduced at trial to assess Envoy’s loss of profits for not having been declared the winner of the 2004 RFPs. This principally required an assessment by the court of the number of field staff, described by Envoy as Personal Relocation

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Counsellors (“PRC”) and Assistant Relocation Counsellors (“ARC”) required in comparison with actual RLRS staff engaged to carry out the work over the term of the contract.

[29]Envoy validated its damages claim by presenting the court with the same information that it had relied upon to bid the contracts. It also retained experts in Investigative Forensic

Accounting from Navigant Consultants Inc. (“Navigant”). Navigant meticulously reviewed and validated the steps in Envoy’s procedures along with the associated costs which underlay its claim for loss of profits.

[30]In the extra time available from the retendering process, Envoy’s team had deconstructed the IRP policy in detail to prepare a workload analysis that described each step and its frequency required of field staff to carry out their duties to complete a relocation file. This analysis served two purposes: firstly, it was used to design a systematic, form-driven and computer-controlled operating procedure intended to standardize and meet quality requirements to relocate transferees. Secondly, this was used as the basis for writing up the technical side of Envoy’s tender proposal, which was evaluated as being near letter-perfect.

[31]The workload analysis was also applied to determine the amount of time required for a PRC and ARC team to complete a file. Working from these time requirements, the number of working days available and the number of files described in the RFP, Envoy determined the field staff complement upon which its tender proposal was based. As mentioned, Navigant poured over these materials validating them for completeness and accuracy, as well as rejecting and accepting other cost elements associated with carrying out the work.

[32]Envoy’s tender had been put together with a consummate attention to detail and explanations. Their proposal included a DVD describing the computer system functionality which had been designed with a mock-up of checklists and processing steps. Envoy’s tender proposal spoke to the vast experience behind their team.

[33]The situation was very different for the Attorney General who had numerous problems in defending Envoy’s claims. It had little help from RLRS who apparently refused to speak with its expert and did not always provide answers to questions asked of it. No expert from RLRS or otherwise in relocation was called by the defendant. This placed the defendant at a considerable disadvantage with no one to match to the experienced and knowledgeable members of Envoy’s bidding team or to provide evidence that did not undermine Envoy’s proposed operational methodology which I conclude was different from that of RLRS .

[34]The one employee who did testify from RLRS confirmed that their operations and responsibilities of personnel were indeed different from those proposed by Envoy. Whatever technological oversight structure RLRS had in place to direct its processes, was never divulged. In the end, with no expert evidence from RLRS and only limited explanations of how it carried out its work, the defendant was left with only RLRS’ actual staff numbers.

AWARD OF DAMAGES

[35]Ultimately, apart from deductions for contingencies applied to account for Envoy starting pretty well from scratch had it been awarded the contract, the court accepted Envoy’s evidence,

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including accepting one year of profits from the two year option period that would have been available at regular contract end.

[36]Envoy was awarded a total loss of profit on the CF contract of $20,695,043 and $8,471,464 on the GOC/RCMP contract for a total award of $29,166,507 accounting for contingencies. It is also entitled to pre-judgment interest in accordance with the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and an award of costs on which submissions have been requested.

[37]Envoy’s claim for punitive damages was rejected, despite a finding that the defendant’s actions were high-handed, arbitrary and departing to a marked degree from ordinary standards of decent behaviour in respect of procurement processes. I concluded that an award of punitive damages would serve no purpose in terms of denunciation and deterrence, which is an essential requirement for an award of punitive damages.

[38]As for bid preparation costs for the 2004 process, none were awarded, being the cost of doing business to win the 2004 tender.

[39]In the detailed analysis that follows, in Chapter 2, I review the factual background and findings arising therefrom for the 2002 process. In Chapter 3, I consider the PMS issue in depth under the 2002 Process. In Chapter 4, I review the 2004 Process and the OAG investigation. In Chapter 5, I apply the legal principles to the facts to make findings of liability of the defendant. In Chapter 6, the court reviews the evidence on damages to assess Envoy’s loss of profits. An appendix of acronyms and chronological events completes these reasons. I conclude with my final order.

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CHAPTER 2 - 2002 FACTUAL BACKGROUND

Methodology of Factual Presentation

[40]I am grateful to the parties for their very comprehensive, detailed and referenced written submissions that cover most of the relevant evidence that I have drawn on in this case. In many cases I have described facts quoting verbatim from the written submissions.

[41]I am particularly indebted to the plaintiffs, who have provided a detailed recitation of the evidence in support of their factual contentions. The Attorney General has not provided a similarly detailed exposition of the evidence in its written submissions. In most cases, this is because a great deal of the detailed evidence conveyed in the plaintiffs’ submissions is really not in dispute. Accordingly, my factual conclusions below adopt large portions of the plaintiffs’ recitation of the evidence.

[42]I do not propose to include overly detailed references to the evidence which supports nearly every portrayal of the factual conclusions found in the plaintiffs’ submissions. Should this matter proceed to appeal and my factual findings are challenged, these references have been identified by the parties.

[43]At the same time, there remain many instances where I disagree with the circumstantial factual conclusions asserted by the plaintiffs in their review of the evidence. Where this happens in respect of factual conclusions disagreed upon by the parties, I have attempted to provide explanations for my decision.

[44]I generally proceed through the evidence in a chronological fashion, making findings of fact as they arise. There are several issues that develop and evolve through the chronology and which are central to this litigation.

[45]As I promised the parties during their oral submissions at the end of trial, I make my best efforts to explain my important factual findings. In many cases, the conclusions result from circumstantial, i.e. indirect, evidence which requires a more detailed explanation.

[46]In reviewing the events of the 2002 procurement process, it should be borne in mind that they are mainly relevant in respect of their impact on the 2004 process, upon which plaintiffs’ claim is advanced.

Description of the Plaintiffs

[47]The Plaintiffs, Envoy Relocation Services Inc. and National Relocation Services (Relonat) Inc. (“Relonat”) are Canadian corporations that provide specialized relocation services to Government and private sector clients. For the purposes of bidding on the RFPs that are the subject of this action, Envoy and Relonat formed a contractual joint venture, called Envoy Relocation Services (“Envoy”).

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[48]Bruce Atyeo was the key figure in the joint venture. Although not formally qualified as an expert on matters of relocation, he was nevertheless the dominant witness at trial given his expertise in relocation matters. His evidence throughout, both in respect of the explanations provided for the plaintiffs’ conduct and concerning government employees, as detailed, logical and reasonable in the circumstances. In most cases, I have accepted his testimony.

[49]Mr. Atyeo has had significant and extensive experience with the relocation management services industry since the 1970s. In 1975, he co-founded Employee Relocation Services Ltd. (“ERS”) a relocation management company. ERS was the first independent relocation company focusing solely on relocation services. ERS introduced a number of new and innovative program features to the industry. Historically, relocation services had been provided primarily by real estate companies. ERS introduced the concept of providing counselling to transferred employees and managing third party service providers directly. ERS also introduced a number of new features designed to control the cost of relocation, including managing the sale of residential property, which is the biggest cost component of relocation. These features caught on and contributed to the success and growth of the company throughout the 1970s and 1980s. ERS’ clients included RLRS Bank, Bank of Montreal, CIBC, CN, the Government of Ontario, Bell Canada and Canada Post.

[50]Mr. Atyeo was the Executive Vice President of ERS. By 1993, ERS had five offices across Canada and one in Europe and was the largest relocation company in Canada.

[51]In June 1993, ERS was acquired by an American relocation management company named PHH Home Equity. This company provided relocation management services targeted at the corporate market and the United States’ government. At the time of the acquisition, ERS was performing just under 2,000 guaranteed home sale files on an annual basis, together with delivering the Canadian Forces Relocation Program (“CFRP”) program (discussed further below) which involved between 12,000 and 15,000 files per year. To successfully deliver the required services pursuant to the CFRP, ERS built the infrastructure for this program from scratch. At the same time, ERS was also providing a number of other relocation related services to corporate and government clients.

[52]After the acquisition, Mr. Atyeo was retained to manage what then became the Canadian division of PHH as the Senior Vice President and General Manager of that company. Mr. Atyeo accepted a five year management contract, which expired in June 1998.

[53]In late 1996 or early 1997, following a share purchase, PHH changed names to HFS Mobility Services, which then changed names to Cendant Mobility. Sometime after the acquisition, HFS advised Mr. Atyeo that it did not want to be actively involved in managing a business outside of the United States and they mandated Mr. Atyeo to sell the Canadian division.

[54]In 1997, HFS entered into discussions with RLRS. Ultimately, those discussions resulted in a fairly lengthy due diligence process. RLRS acquired the relocation business and the transaction closed in November 1998. Mr. Atyeo was involved during the initial months of due diligence, until he left at the end of June 1998.

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[55]In 1998, when the Government put out the first RFP for the IRP Pilot Program (“Pilot project”) (and discussed at length below), HFS began to prepare to submit a proposal. However, at some point in time after Mr. Atyeo left HFS in June 1998, it was decided that the due diligence phase of the acquisition was far enough along that they needed to declare to the Government that they would not be bidding separately. Instead, they would be submitting one bid for the contract that was the subject of the Pilot project. HFS never bid on the Pilot project. As the Vice President of HFS, Mr. Atyeo was personally involved in the discussions with RLRS around the acquisition. His understanding was that the Pilot project coming up for tender was a factor behind these discussions between HFS and RLRS.

[56]Mr. Atyeo was the subject to a non-compete clause that ran until the end of 1998. At the beginning of 1999, he set up Envoy Consulting Services as a holding company. As a leader of this business, Mr. Atyeo did most of the business plan work for a relocation management company capable of providing services to individuals, corporations and government entities. In late 2001, Mr. Atyeo had discussions with a number of potential business partners who might be interested in being involved and providing financial backing for this company. This entity then became Envoy Relocation Services Inc.

[57]In the spring of 2002, Louis Anania introduced Mr. Atyeo to Pierre Titley. Mr. Anania was at all material times, the General Manager at Relonat, one of the three largest relocation management companies in Quebec. Relonat is a company owned by Remax Quebec, and Mr. Titley. Remax Quebec is imminently successful in its industry.

[58]From 1974 to 1995, Mr. Anania worked at Montreal Trust, a trust company that operated across Canada and offered various personal and corporate services to its clientele, including relocation services. Montreal Trust offered complete corporate relocation services to a range of corporate clients. In his position at Montreal Trust, Mr. Anania was involved with the supervision of relocation services across four departments. Approximately 30 staff reported to him in this role. In 1996, Mr. Anania moved to Relonat where he took on the role of General Manager. He remained in this position until the end of 2010.

[59]Relonat is a Quebec based relocation management services company. At the time, Relonat had a number of a Major Quebec based employers as clients, many of which are government agencies and divisions such as the Quebec Provincial Police and Hydro Quebec. Relonat already had an existing infrastructure to support and run a corporate relocation management business including systems technology, human resources and bilingual capabilities.

[60]Envoy, on the other hand, had the extensive management experience and the capability to put together a management team largely due to Mr. Atyeo. This team could lead the bidding proposal preparation as well as the start-up and subsequent ongoing management requirements.

[61]The senior management team that was ultimately recruited for the preparation of the bids and anticipated performance of the contracts had significant expertise and experience in the relocation industry. The collective experience of individuals like Francie Bujna, Marlene Rogers and Elaine Taylor included relocation counselling, the management of third level the Party Services and financial management of relocation files.

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[62]Following discussions between Mr. Atyeo and Mr. Titley, the former incorporated Envoy Relocation Services Inc. The two plaintiff companies entered into a contractual joint venture called Envoy Relocation Services to bid in competitive processes run by the Government of Canada for the procurement of relocation management services in 2002 and 2004.

History and Evolution of Integrated Relocation Program

[63]The federal government’s Integrated Relocation Program (“IRP”) has evolved over the years, beginning with the Canadian Forces Relocation Program (“CFRP”) in 1991/1992. From 1992 to 1998, Mr. Atyeo’s companies were involved in providing relocation services to the federal government, both under the CFRP and the GHSP. Mr. Atyeo’s company was then acquired by RLRS, which won the IRP Pilot Project in 1999. Since then, this is the sole company that has been selected to provide relocation services to the federal government.

[64] Overall, contrary to the Defendant’s suggestions, the Plaintiffs’ extensive experience in the provision of relocation services to the federal government should not be minimized or diminished.

Canadian Forces Relocation Program (1992 – 1999)

[65]In 1991, the Canadian government issued an RFP seeking a contractor to manage the CFRP. The CFRP was fundamentally the same program as the current IRP, with the exception of the contract’s financial management aspect of the contract. The counselling portion of the CFRP was identical to the IRP subject to policy changes.

[66]Mr. Atyeo’s company at the time, ERS, managed the CFRP contract from April 1, 1992 to 1995. Under the CFRP, ERS supplied relocation counsellors at more than 40 Canadian Forces (“CF”) base locations, which made it even more widespread than the later IRP contracts, which had 28 base locations being serviced. Under the CFRP program, ERS managed on average 12,000 to 14,000 relocation files per year, and in the first year ERS managed over 16,000 files.

[67]At the start-up of the CFRP contract, ERS was required to manage the relocation of transferees from Germany to Canada. This work was not anticipated in the CFRP RFP and required ERS to respond quickly. This mass relocation was the result of an unexpected closure of the CF base in Germany. Envoy was required to build a team of counsellors in Germany and to provide counselling to CF members who were being moved back to Canada from Germany. ERS was successful at meeting the counselling requirements under the CFRP and the success of ERS’ management is well-documented within CF records. While the CFRP was in place, Ms. Lee Douglas inherited this file as a contracting officer, and was the contracting authority during the entire life of the CFRP.

[68]This evidence is significant in that Mr. Atyeo had experience working with large numbers of CF deployments. I find that this experience also provided him with the background to propose a more systematic approach to manage CF relocations occurring on a repetitive basis in Envoy’s 2004 RFP tender. This allowed for a significantly reduced CF administration fee in comparison with Envoy’s GOC/RCMP tender proposal.

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[69]In 1995, RLRS won the CFRP contract. RLRS did not have the infrastructure in place to manage the services, but instead had to build it from scratch. Mr. Ray Belair testified under the plaintiffs’ subpoena and was the General Manager at RLRS. Mr. Belair also reported to Jim Lockington, President of RLRS. In his estimation, Mr. Belair found that it took three months to implement every aspect that was needed to run the program, including hiring and training staff members and obtaining offices and computers. RLRS was able to do this successfully within that three month time period. Mr. Belair confirmed that there was no financial management component of the CFRP, however the program did include face-to-face counseling with CF members and their families. Mr. Belair, having previously worked at Domtar doing corporate in- house relocation involving corporate relocation policy, was hired by RLRS to implement and manage the CFRP for RLRS.

[70]This evidence is significant because it demonstrates that implementation of a start-up operation to relocate CF members had previously been carried out in a short timeframe.

[71]After RLRS won the CFRP contract, they hired a number of ERS employees to start up the program in 1995. Many of those employees continued in their employment at RLRS for years. ERS provided RLRS with a list of names of ERS employees to hire. RLRS did in fact hire ERS relocation counselors to continue service delivery. Mr. Ateyo testified that had Envoy won the tender, it would have similarly hired many of incumbent’s employees of RLRS.

[72]This evidence is significant because it confirms Envoy’s evidence that the movement of staff from the incumbent to the replacement contractor was logical. New positions were being opened for experienced staff, while the incumbent desired to avoid severance pay costs associated with terminating staff no longer required.

Guaranteed Home Sale Plan (1996 – 1999)

[73]In 1996, the Treasury Board issued a tender for the Guaranteed Home Sale Plan (“GHSP”). This contract was awarded to four different relocation management companies. Mr. Atyeo’s company, PHH, won half of the contract’s volume under this program in the Central Region . Subsequently, it also acquired files in the Pacific Region. PHH delivered relocation services on a national scale from one region of Canada to another. From February 1996 to the spring of 1999, Ms. Douglas of PWGSC was the Contracting Authority for the GHSP.

[74]Major Michael Keleher began working as head of the Travel and Relocation Section, one of four sections in the Director of Compensation and Benefits Administration (“DCBA”) at the CF in January 1998. At that time he became responsible for the GHSP and thereafter, the CFRP. With respect to the GHSP, Major Keleher was responsible for delivery of the program within the CF. He was also responsible for service delivery under the CFRP.

[75]Mr. Ram Singh was employed at the RCMP at this time. In 1997, he became a senior policy analyst and was asked to take over the GHSP. He remained in that position until the fall of 1998 and had responsibility for relocation during that time for the RCMP. He would later transfer to the Treasury Board Secretariat, holding the position of Senior Financial and Business Systems Analyst.

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[76]The GSHP involved the provision of relocation services to transferees. It guaranteed the transferees the sale of their property. The GHSP provided all the other relocation services a transferee needed. Ms. Douglas testified that the services provided under the GHSP were similar to those under the IRP.

[77]Mr. Atyeo testified that the sale of a house was more complicated under the GHSP, than under the IRP. However, the other elements were the same under both programs. They included: the destination services, the counselling of transferees, policy and procedure governing relocation, and household good shipments. He further explained that the policy elements in the IRP are different from the policy elements in the GHSP, however one is not more complicated than the other.

IRP Pilot Program (1999 – 2003)

[78]In 1998, the Government of Canada decided to replace the GHSP with an IRP. This involved expanding the scope of the CFRP to include the rest of the Government of Canada’s public service. It also added a financial management piece for the contractor to administer.

[79]In the fall of 1998, Mr. Singh was approached by senior management at the RCMP to be seconded to Treasury Board Secretariat (“TBS”). He was asked to develop a pilot program for relocation. He was advised that the Federal Government wanted to develop a program and policy that would provide enhanced relocation benefits to federal public servants, to be in place by April 1, 1999.

[80]Mr. Singh was involved in the competitive procurement process for the pilot program. He wrote the Statements of Work (“SOW”) for the IRP pilot program. He also reviewed the RFP before it was issued. Mr. Singh participated in the bidder’s conference and attended meetings involving senior officials from the involved departments where the procurement was discussed. He was also involved in the technical evaluations for the pilot program as an evaluator.

[81]I conclude that Mr. Singh was the most knowledgeable and experienced government employee concerning the content and administration of the IRP contracts.

[82]At the CF, Major Keleher was responsible for implementing the IRP pilot program. Major Keleher was involved in meetings with TBS on behalf of CF. He was involved with the development of the relocation program and was responsible for reporting back to his superior at the CF on what the program was like, what TBS was considering and how it might apply to the CF. Following the initial design of the program by TBS and the indication that the CF would participate, Major Keleher became part of the project management office that was responsible for implementing the program.

[83]According to Major Keleher, the pilot program came to be as a result of complaints/concerns raised during hearings of the Standing Committee on National Defence and Veteran Affairs (“SCONDVA”). The IRP program was to address some of those concerns and dissatisfaction that CF members had with relocation and benefits applying to relocation.

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[84]RLRS bid on, and won, the contract under the IRP pilot program. From 1999 to March 31, 2003, RLRS provided services under the IRP pilot program. During this time, Mr. Belair was the RLRS General Manager and reported to Jim Lockington, who was the President. Mr. Belair was responsible for ensuring that the program was implemented and run according to the contract that was signed between RLRS and the government.

[85]Ms. Douglas was the contracting authority under the 1999 pilot program and she was very prominent in holding RLRS’ feet to the fire throughout the duration of the contract. The pilot program was a large scale contract, and there were monthly and/or quarterly meetings. During these meetings, upcoming issues were reviewed for potential action.

[86]Under the pilot program, Mr. Singh was the Project Authority, also described as the Technical Authority, designate and the individual responsible for providing policy interpretation and liaising with RLRS. He dealt with Mr. Michel Bonin, National Director, Client Services, Government Relocation Solutions and other personnel at RLRS and was in touch with RLRS representatives as often as once or twice per day. He also met face to face with RLRS personnel once or twice per month.

[87]Lt. Col. Jacques Taillefer was the head of DCBA at the CF from 2001 to 2004. Major Keleher reported to him. In that role, he was responsible for the relocation benefits policy and the monitoring of the IRP pilot contract. His responsibilities involved resolving any issues that were raised either with the members, the commanding officers, the chain of command or the contractor. Lt. Col. Taillefer liaised between the contractor and the CF.

[88]He dealt with RLRS on a regular basis and at times, on a daily basis. His staff also dealt with RLRS regularly to address any issues. When problems reached the commanding officer level, Lt. Col. Taillefer became involved and contacted RLRS, most often Michel Bonin, to determine what had happened and to get RLRS’ perspective on the issue. He testified that it was part of the business of administering the pilot contract to meet regularly with RLRS officials.

[89]Mr. Singh testified that Consulting and Audit Canada conducted an audit of the IRP pilot program to confirm that it was rational to make the program permanent. Mr. Singh said that audit confirmed TBS’ belief that the program was “very good and it would be something that all public servants can benefit from.” For the most part, he said everyone who participated in the audit was happy with the IRP. He said the fact that the audit showed a 75percent satisfaction rate among transferees played a role in the decision to make the pilot program permanent.

The 2002 RFP Process

[90]I agree with the plaintiffs that the 2002 RFP process had numerous flaws and created numerous barriers for non-incumbents to bid successfully for the IRP contract. The process was also tainted with a serious reasonable appearance of bias towards RLRS that required the contracts to be re-tendered. In addition to describing the factual background concerning the 2002 process and the resulting aftermath, I will make findings of fact on the plaintiffs’ claims on these issues.

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March 4, 2002 – Meeting Between Bruce Atyeo, Ram Singh and Richard Gagné

[91]In early 2002, TBS was considering making the IRP pilot program permanent. To satisfy the requirement of “consultation” with the industry, TBS placed an advertisement in the Canadian Employee Relocation Council (“CERC”) news magazine, purportedly to seek input from the relocation industry.

[92]In response to this advertisement, Mr. Atyeo sought a meeting and one was set up between Mr. Atyeo, Mr. Singh and Richard Gagné for March 4, 2002. The significance of this meeting is its reflection on the credibility of Mr. Singh. While the meeting adds little to the more significant and clearly apparent problems I find on other issues, it undermines his trustworthiness as a witness.

[93]Mr. Atyeo testified that, despite providing notice that TBS was seeking feedback on

refining the IRP program, in fact, neither Mr. Gagné nor Mr. Singh asked any questions of Mr. Atyeo or sought his advice on the IRP program. As a result, the March 4t h meeting consisted of a general discussion about Mr. Atyeo’s previous experience with relocation programs and policies. Mr. Atyeo documented a number of the main points he discussed during the meeting. He also provided TBS with a five page memorandum in follow up, with a series of specific recommendations with respect to the IRP policy, program administration and RFP. The plaintiffs state that Mr. Atyeo provided extensive input to the Crown, as an industry expert, on ways to improve the program, with which evidence I agree.

[94]Mr. Singh’s evidence was that he expected Mr. Atyeo to provide input on how to enhance the program. Instead he testified that Mr. Ateyo spent most of his time trying to find out how

Envoy could participate in the program, which deviated from the purpose of the meeting. Mr. Gagné was not called as a witness by the defendant.

[95]I accept the plaintiffs’ submissions that Mr. Singh’s evidence is in contradiction with both a follow-up memorandum sent to Mr. Singh by Mr. Atyeo, as well as Mr. Atyeo’s testimony. I am satisfied that Mr. Atyeo could not help himself but make helpful suggestions as to how the procurement process should be run. This was demonstrated in much of his other correspondence with the Crown on how these procurement processes should have been carried out, as is seen in this initial memorandum to the TBS.

[96]I also agree with the plaintiffs that Mr. Singh’s testimony at trial belies the animosity Mr. Singh harboured towards the plaintiffs.

Interdepartmental Working Group and Drafting of the RFP

[97]An Interdepartmental Working Group (“IDWG”) was established for the 2002 procurement process. This group included Ram Singh, Richard Gagné and Zenovia Pankiw from TBS, Lt. Col. Jacques Taillefer, Major Mike Keleher and MWO Pearl Danford, Ray LeMay from the RCMP and David Pyett and Lee Douglas from PWGSC. These individuals were selected to be members of the IDWG because they were all involved in overseeing the IRP

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Pilot Program while working in-house in their respective departments. Given everyone’s involvement dated as far back as 1999, they all had extensive prior dealings with RLRS.

[98]Specifically, at the time of the 2002 procurement process, Ms. Douglas had over 30 years of experience in government procurement. She joined PWGSC in 1981, having prior experience as a contract clerk and contract administrator at NRC from 1970 to 1981. She had been working as a Senior Procurement Officer at level PG-5 since 1996. Ms. Douglas worked on various government relocation contracts beginning in the early 1990s with the CFRP, then called the Guaranteed Home Sale Plan (1996-1999), and as the Contract Authority for the IRP Pilot Project (Spring 1999-March 2003). Due to a re-organization at PWGSC in April 2002 Ms. Douglas, changed divisions at PWGSC. However, she continued to act as the Contracting Authority on the IRP Pilot Project. However, Mr. Pyett took over the IRP Contract on a go-forward basis, including the procurement process for the permanent program (the “2002 Contract”).

[99]Mr. Pyett joined PWGSC in June 1993. He was promoted to a Supply Team Leader at Level PG-5 in October 2001. Mr. Pyett testified that he worked with Ms. Douglas on the IRP Pilot Program to “learn the IRP process” and assist with administrative functions. He could not recall when he became involved in that program, but noted that while he was present at numerous related meetings, he did not participate. He had no experience as a contract authority with the IRP until the 2002 contract was awarded, nor had he performed any work involving relocation. As Ms. Douglas was the Contracting Authority from the time the Pilot Project started, and worked on that project up until March 31, 2003, she had considerably more experience with the IRP program than Mr. Pyett.

[100]Major Keleher and Lt. Col. Taillefer testified that Major Keleher was placed in charge of a small group of individuals at CF, who were responsible for developing the SOW. MWO Danford worked with Major Keleher on the SOW, and they both reported to Lt. Col. Taillefer. Major Keleher provided regular updates and reports to Lt. Col. Taillefer on the progress of the SOW, and Lt. Col Taillefer testified that he “led” the CF team.

[101]When the SOW was finished, Lt. Col. Taillefer signed off on it and sent it to his Director General. The Director General, on advice from Lt. Col. Taillefer, also signed off on it and sent it to PWGSC. Ultimately, the three SOWs were reviewed by the department heads as well as Mr. Singh, on behalf of TBS.

[102]Mr. Singh testified that each of the three departments were responsible for creating their own SOW. Mr. Singh testified that the IDWG ultimately agreed on the contents of all three SOWs.

May 10, 2002 - Letter of Interest Published; May 22, 2002 - Closing Date

[103]The defendant published a Letter of Interest (“LOI”) on May 10, 2002. The LOI is a normally a draft version of the RFP provided to bidders for comment before release of the final version.

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[104]The tender documents actually included three separate RFPs. However, the bids were evaluated on the basis that two contracts would be awarded, one for the CF RFP in the other for the GOC and RCMP RFPs combined.

[105]Each RFP included a number of sections. The first is the General Information section setting out definitions and the ground rules for the tender process for all three contracts, i.e. CF, RCMP and GOC. It is followed by a number of annexes. The contents of the annexes were also in three parts for each of the three RFPs which bore much resemblance to each other.

[106]Annex A contains the SOW for the CF, RCMP and GOC contracts, which for the most part are very similar. They constitute a major component of the RFPs. They describe the requirements of the contract in terms of the services the contractor is required to provide.

[107]Annex B contains the three Basis of Payment (“BOP”) documents. For the most part they are tables used by contractors to insert their bid prices for the administration fee and the contracts’ third party services fee. The numbers tendered form the basis upon which the winning bidder will be paid. These tables are repeated with information used to complete them found in the Financial Evaluation Section of Annex C, which contains the evaluation criteria and procedures documentation described below.

[108]Annex C contains the Evaluation Criteria and Procedures for the three contracts. It is a

Major document consisting of three sections. Section C1 is the Evaluation Procedure which is a short document containing mandatory technical minimums and the MOS or selection formula. The technical merit minimum was a 70 percent score.

[109]The selection formula describes the combination of the total technical merit scores and the total price bid to determine the winning bidder. In the 2002 RFP, the selection formula was the LCPP. The winning bidder was determined by awarding the contract to the bidder with the lowest dollar amount achieved when the total price was divided by the total points of the technical score. As will be discussed, a major issue in the 2004 RFP concerns the modification of the selection formula. This modification resulted in the winning tender being chosen based on a combined score whereby technical merit was weighted at 75 percent while total price was weighted at 25 percent.

[110]Section C2 consists of the technical evaluation and criteria for the three contracts. These describe the formulas used to ascribe points consisting of multipliers to different levels of achievements. More importantly, it contains the detailed technical criteria used to evaluate the proposals, in effect describing how the tender should be structured and evaluated using a point rating.

[111]The third section in the 2002 RFP, which is described as an Annex to section C1, consists of the Financial Evaluation. These comprise formulas used to complete the same table as found in the BOP, but expressed in the relevant dollar amounts. Thus, while the contractor had to bid a ceiling price for PMS in the BOP, it did so based on the calculations found in this annex. In turn, this annex monetized the ceiling price bids in the BOP into dollar amounts.

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[112]The formula used to calculate PMS described estimated volumes of files. It is acknowledged that the estimates were grossly inflated. RLRS as incumbent, had knowledge of the actual volumes, and I conclude bid a 0 ceiling price in the BOP using this information. RLRS therefore, bid 0 dollars for PMS.

[113]In comparison, Envoy’s 2002 bid stated a ceiling price of 8 percent for PMS. Using the same formula as described above, when this was converted into dollars, it represented a bid price of $42,860,160 over seven years on the CF contract and $4,900,896 ($3,013,920 and $1,886,976) on the combined RCMP and GOC contract, respectively.

[114]On May 13, 2002, Mr. Atyeo asked David Pyett, Contracting Authority at PWGSC, if Annexes B through E to the RFP would be provided. Mr. Pyett told Mr. Atyeo that Annexes B through E had not yet been developed, but they would be part of the final RFP.

[115]I agree with the plaintiffs that the publication of the evaluation criteria provides important direction to bidders on how their capabilities will be measured, scored and weighed. The failure to publish the evaluation criteria in advance prejudiced non-incumbent bidders, including Envoy, in preparing their proposals. I accept Mr. Atyeo’s testimony that without the knowledge of the evaluation criteria, it was difficult for a bidder to begin planning its proposal and developing a strategy for dealing with the start-up period. It was an omen of more problems to come.

May 16, 2002 – Plaintiffs Request for Information Relating to the Financial Evaluation Formulas

[116]On May 16, 2002, Mr. Atyeo posed a question to Mr. Pyett asking if there was a breakdown available between tenants, homeowners and personnel living on base regarding the DND volume numbers given in the draft RFP. Mr. Pyett advised that there were no numbers readily available, but that he could ask that the numbers be calculated for the final RFP. Mr. Pyett admitted during cross-examination that he did not make any inquiries about this matter within the client departments. The request for information therefore received no serious consideration. This was the first of many requests from the plaintiffs for information that were turned down.

Evaluation Criteria - Confusion over Multipliers and the Minimum Technical Pass Mark

The Problem with the Exceeds Category

[117]The Exceeds category as it was used to determine the level of scoring resulted in the elimination of all tendering parties from the 2002 process, except RLRS. It was obviously therefore, the focus of much attention during trial.

[118]The evaluation criteria were being worked on in July 2005 at which time the scoring formula was also being developed. Major Keleher and his group at CF designed the scoring matrix. It scored items and created categories of scoring within each item. Mr. Pyett reviewed the evaluation criteria and provided comments. While there were a number of issues that were raised

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in this phase, ultimately, the IDWG as a whole agreed upon the evaluation grid and finalized the evaluation criteria with input from Ms. Douglas.

[119]In order to have its proposal evaluated, each bidder was required to achieve the mandatory pass mark of 70 percent of the total technical marks available.

[120]On any item in the evaluation criteria, a bidder was assigned a fixed number of points depending upon the merit of its proposal. The descriptive evaluations were then turned into points using multipliers.

[121]The multipliers for the points awarded for the grade achieved on each item were described in the 2002 RFP as follows:

[122]Thus, achieving a “Meets” score on any item only resulted in obtaining 70 percent of the available points. If a bidder failed to score “Meets” on any item, the shortfall would have to be made up by attaining points at the “Exceeds” level on other items, wherein lies the problem.

[123]The RFP failed to define the meaning of “Exceeds”. Only the evaluation sheets handed out by PWGSC to assist bidders in the technical evaluation, described the Exceeds requirement. I assume that this was obviously a last-minute correction of a major oversight in the RFP. I say that because it was only as a result of the court’s questions that the definition of “Exceeds” was found.

[124]It was described on the technical sheets as follows:

It is not possible to anticipate what constitutes a performance which is considered to “exceed” the requirement. In other cases it is not considered possible to “exceed” expectations. However as the guiding principle in order to score under the “exceeds” column a particular bid must add overall measurable benefit to the crown as a result of the proposal submitted for that requirement.

[Emphasis added.]

[125]Thus, it was clear that the “Exceeds” category would not be available in every instance. In addition, the meaning “overall measurable benefit” was ambiguous, but clearly it set a high threshold of having to provide something beyond the requirements of the contract.

[126]With little scope to recapture points on the “Exceeds” category, a failure to achieve a “Meets” score was very difficult to make up.

Major Keleher Wrongly Criticized Over Exceeds Category

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[127]At trial, Major Keleher testified that the 70 percent pass mark came from him and the IDWG worked with it. Major Keleher testified that the 70 percent was equated to a “B” grade in terms of school marks. He testified that he did not have any concerns that the pass mark was too high or too low.

[128]On cross-examination Major Keleher was asked about notes made by Michel Genest in his internal investigation report dated September 24, 2003, which will be discussed regarding other issues below. On the passing mark issue, Mr. Genest recorded a disagreement over who suggested the 70 percent passing mark. Mr. Genest stated:

It should be noted that three (3) members of the evaluation committee, Mr. Lemay, Mr. Singh and Lt. Col. Taillefer who is Major Keleher’s boss, stated that the high passing mark of 70 percent had been suggested by Major Keleher who denied it during his interview by saying not to be comfortable with the 70 percent passing mark and that he brought it to the attention of Ms. Lee Douglas. It is unknown at this time the reason why Major Keleher would deny ever suggesting the passing mark.

[129]Major Keleher testified that he was not given an opportunity to respond to this conclusion and that Mr. Genest had confused his comments regarding the passing mark and the multipliers (i.e., the percentage applied to calculate the point score for each criteria). Major Keleher explained that he was uncomfortable with the multipliers, not the pass mark.

[130]From an e-mail chain in July 2005, it is evident that Major Keleher initially proposed a series of multipliers whereby the “Meets” category would receive 90 percent of the available points as follows:

Unsatisfactory 0.0

Meets Most 0.3

Meets 0.9

Exceeds 1.0

[131]Thus, by his initial scheme, if a bidder “meets” the requirement on any criterion, they would easily clear the 70 percent pass threshold with extra points to apply elsewhere. This scheme would have made it certain for bidders, such as Prudential, which was only 55 points short of the mandatory minimum, to surpass the 70 percent minimum threshold overall.

[132]It also meant that the importance of the “Exceeds” category was minimized. It was thus left to be used in undefined circumstances where a bidder could demonstrate some exceptional aspects of overall benefit to the Crown on that item. This was a fair requirement otherwise. The justification for replacing, or not, the incumbent, should result in the Crown obtaining better value in terms of price or improved performance. This includes increases from the incumbent, which the “Exceeds” category was intended to demonstrate.

[133]I conclude that the scheme as proposed by Major Keleher would not have unnecessarily eliminated bidders. Bidders would have had a large margin of points above the mandatory

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minimum simply by meeting the requirements. These points could be used to make up for shortfalls on other criteria where they failed on the mandatory level “Meets” requirement. I also conclude that the “Exceeds” category, when defined in this manner, is logical and appropriate. It does not need to be available for every category, but where it is available, it provides an opportunity to supplement a bidder’s technical score by a 10 percent margin on that criterion.

Ms. Douglas is Requested to Resolve Concerns over Major Keleher’s Scoring Matrix

[134]However, the whole process went askew when Mr. Pyett indicated that the scoring scheme was unacceptable. When advised of the formula, Mr. Pyett, replied to Major Keleher as follows:

With respect to your suggested point factors, what I see is that you are making the pass mark .9. This [is] because to achieve a pass mark, you must meet all the requirements you have set out. Anything less than that would not achieve the level of service you have requested. As I stated in my voice mail to you on Tues July 02, the pass mark should be set at either .6 or .7 dependant upon where you determine the pass mark to be.

[Emphasis added.]

[135]Mr. Pyett misunderstood Major Keleher’s proposal. He conflated the mandatory minimum with the multiplier points for the “Meets” category. He incorrectly stated that Major Keleher had set the pass mark at 90 percent (“you are making the pass mark .9). Rather, his concern was actually the same as Major Keleher’s; that bidders not be eliminated with too high a mandatory minimum.

[136]Mr. Pyett directed Major Keleher to discuss the matter with Ms. Douglas who was mentoring Mr. Pyett on this process while carrying on her duties elsewhere. Major Keleher emailed her with a slightly modified proposal whereby “Meets Most” would earn 60 percent of the points rather than 30 percent, and “Meets” would result in 85 percent of the available points, rather than 90 percent as originally proposed. We clearly indicated that the minimum would be set at 70 percent.

[137]After a telephone call between Ms. Douglas and Major Keleher, about which neither party can understandably recall the contents ten years later, Ms. Douglas responded by email with the formula that was used in the RFP. It set “Meets Most” at 50 percent and “Meets” at 70 percent – the later was also set as the total percentage of points required to qualify. This is not unexpected, as in most instances one would assume that “Meets” on multipliers should be the same as “Meets” for the mandatory minimum.

[138]This resulted in all bidders being eliminated with the exception of the incumbent RLRS. Even then, RLRS barely passed the mandatory minimum. No one it appears, except maybe Major Keleher understood that the “Exceeds” category provided no buffer for anyone scoring scores under “Meets”.

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[139]Unfortunately, Lieut. Col. Taillefer was the only witness who was questioned on the definition of the “Exceeds” category. He testified as follows:

During the development process and discussion it was realized it was not possible to exceed expectations in some circumstances, but it gave us a location of basis we have ‘x’ number and you cannot exceed that. It was designed to offer the opportunity for bidders to provide innovative – doing business – or gain added points. It was within the spirit of the proposal.

[140]Having reconsidered this testimony after the fact, I am satisfied that the IDWG did not fully comprehend the limitations of the “Exceeds” category.

[141]In any event, the plaintiffs raised this issue to establish that Major Keleher, or Ms. Douglas, intentionally set the multipliers and scoring scheme to favour the incumbent as part of their submissions that there was a widespread conspiracy to eliminate bidders from the 2002 process.

[142]While I agree that the scoring formula favoured RLRS because it resulted in the elimination of all of the other bidders, I do not conclude that this was intentional.

Major Keleher’s Credibility

[143]I pause for a moment to note that I appreciated the manner in which Major Keleher testified. In particular he answered the questions asked of him succinctly, without any discernible attempt to mislead or craft the evidence in anything other than, what I would describe as, a neutral fashion.

[144]I was particularly impressed on more than one occasion in cross-examination when counsel questioned his responses. He correctly pointed out that the problem was with the question, not his response. When the question was rephrased, he provided the answer sought of him by his questioner.

[145]I believe him to be an honest, credible and reliable witness. I think it unfortunate that the plaintiffs had targeted him, due to the comments in the Genest Report, instead of attempting to find out from him what really happened during the 2002 RFP process.

[146]Concerning Major Keleher’s proposed scoring formula, it is clear that he intended the exact opposite effect to what occurred, i.e., his desire was to facilitate bidders exceeding the mandatory minimum.

[147]There was no basis to criticize Major Keleher for his conception of the scoring grid. The witnesses quoted by Mr. Genest in his report misunderstood his proposal and it is unfortunate that he was not provided an opportunity to correct it.

Ms. Douglas’s Credibility

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[148]If I am challenging the plaintiffs’ attacks on Major Keleher and Ms. Douglas, it is not just because I found them both to be credible witnesses, which I believe them to be. Their evidence is of singular importance in supporting the evidence of Mr. Pyett, who has his own credibility issues. He needs shoring up therefore, when he states that he did not tell anyone about RLRS 0 percent PMS bid. I am required to choose between his version of the evidence and that of Mr. Singh. The fact that other evidence suggests Ms. Douglas and Major Keleher were aware of the 0 percent bid, which they deny and which I believe, is an important finding of fact.

[149]As shall be discussed, Ms. Douglas was the central figure in Mr. Genest’s conflict of interest investigation. Ms. Douglas invited Mr. Belair to go on a cruise with her in a promotion scheme whereby, in finding other travelers, her ticket was free. As such, the plaintiffs attempted to paint her as intentionally setting the scoring matrix to ensure the elimination of the non- incumbent bidders in the 2002 process so as to favour RLRS. I do not accept that theory in any fashion.

[150]From Ms. Douglas’ performance as a witness and my conclusions of her role in events on the file, I am satisfied that her moral compass is well aligned. She was completely frank and responsive to questions put to her and tried to help out when she could not recall events.

[151]Moreover, her commitment to telling the truth was such that she could not help but be critical of Mr. Pyett’s conduct described below, even though I am satisfied that it was the last thing she wanted to do. It is one of the reasons that an honest person can be so hard on a friend when put to the test. She says as much herself:

I mean, I socialized with my contractors, I always did. I always felt that honesty is the best policy. You might as well get to know me because I’m going to be your best friend and your worst enemy, depending on -- it’s just the way it is. I mean, I’m a tough negotiator, but I’m fair. I always believe that the best contract is one that is fair to both parties, and I won’t let the clients run over the contractor, and I won’t let the contractor run over the clients. I always felt that was my responsibility.

[152]Mr. Atyeo confirmed this when he testified that she held the contractors’ feet to the fire when administering the relocation contracts as Contracting Authority.

[153]On being influenced by the cruise with Mr. Belair, she commented as follows:

Q. What do you say to the suggestion that your attendance on a cruise with Mr. Bélair somehow influenced the outcome of the ‘02 process?

A. I think it’s ludicrous.

Q. Why do you say that?

A. Well, for one thing, I didn’t -- I wasn’t -- I didn’t have any responsibility for the procurement. I would not deliberately do anything that would favour any given bidder. I’ve always, throughout my entire career, strived to create competition. The last thing I would ever want to do is fix it so that the same

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person wins, because that’s bad for business, it just makes no sense. I was hoping somebody else would win, because it’s better for the government, it’s better for competition, and it’s way better for the industry. Because what happens eventually is the industry loses interest, they won’t bid. They figure they can’t win and they won’t bid, and now you have a monopoly created, which is bad.

[154]I judged her error in judgment on the cruise issue - one a person who has lived an honest life can make - was being so certain of her own integrity that she falsely believed that she could put herself in a situation of an open appearance of conflict without anyone raising an issue.

[155]With respect to Ms. Douglas, I conclude that she was likely not made aware of the definition of the “Exceeds” requirements and not provided with a sufficient opportunity to respond on that issue. Specifically, she was not asked questions during her examinations as to whether she was made aware of the definition of “Exceeds” or its incomplete application, nor what her reaction would have been at the time had she been made aware.

[156]I accept her evidence that it was not her intention that all the bidders, including Prudential, which most certainly was expected to meet the minimum requirements, be eliminated. Reinforcing this conclusion, she could not provide any explanation for the results as demonstrated by her responses below:

Q. Okay. And we know under the scoring scheme, that it was only RLRS LePage, the incumbent bidder, that qualified?

A. That shocked me, I have to admit that when I found that out, I was surprised.

Q. And that would indicate to you a problem with the scoring mechanism?

A. I don’t know if it was a problem with the scoring mechanism or what it was, it’s just in my heart I felt that there were other qualified bidders and I didn’t know why they had been found non-responsive, I just didn’t know.

[157]I also have no concerns about relying on her testimony relating to her criticisms of Mr. Pyett’s handling of Mr. Gerrie’s question discussed below, or when she said she could not recall being advised of RLRS’ 0 percent bid.

[158]I am otherwise in agreement with the plaintiffs’ contention that Ms. Douglas, when consulted, was the decision-maker of last resort throughout the 2002 procurement process. I differ in that I conclude that her intentions were to see the procurement process be conducted fairly and had she been running this procurement process, as opposed to being a part-time go-to person, these events might have been prevented.

August 14, 2002 - 2002 RFP Issued - Closing Date September 30, 2002

Only 45 Days for Bid Preparation

[159]In his memorandum to Mr. Singh in March 2002, Mr. Atyeo had suggested that the RFP be issued by May 1, 2002 with a 90 day in being awarded August 1, 2002. Mr. Atyeo envisioned

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a start date of April 1, 2003, as it would allow eight months of lead time. Contrary to these suggestions, the IWG quickly found itself running behind time: the RFP was published on August 14, 2002, with a closing date of September 30, 2002.

[160] Questions from the bidders were treated pursuant to paragraph 2.0 of the “General Information” section. All enquiries or issues concerning this procurement were to be submitted in writing to the Contracting Authority, whose key employee was Mr. Pyett.

[161]In order to ensure the relevant information was both consistent and reliable, the Contracting Authority was required to simultaneously answer all questions and provide all bidders with any information regarding significant enquiries by form of amendments to the RFP.

September 13, 2002 - Envoy Asks About the Formula for Property Management Fees

[162]In terms of the ongoing chronology, it is only noted at this point that on September 13, 2002, Gordon Gerrie, a representative of the plaintiffs, sent a question to PWGSC with respect to the defendant’s data relating to property management fees.

[163]Mr. Gerrie’s question is the starting point for my analysis on PMS in the next chapter. Request to Extend Closing for Four Further Days

[164]The following question and answer was published on September 19, 2002, as part of Amendment No. 1.

Q30: The Integrated Relocation Program, Solicitation 24062-0200061B closing date is 02:00 PM 2002-09-30. This date falls on a Monday, virtually eliminating valuable submission time with the closing date directly following a weekend. The DND CFIRP SOW is substantially different from the “Draft” SOW, therefore a few extra days response time would be very beneficial to submission of the best response possible. A formally request PWGSC for an extension, to have the closing date be on the following Friday 02:00 PM 2002-10-04 is requested.

A30: RESPONSE:

Bidders have been provided with 45 days to prepare a response to this RFP. In order to offer a period of ramp up prior to service commencement April 01, 2003, the closing date cannot be extended.

[165]The plaintiffs argue that the abbreviated timeline served to favour the incumbent, RLRS since it had the experience from providing relocation services as well as having a service delivery structure in place. By its familiarity with the contract, RLRS already had a head start over their competition. This was exacerbated by the fact that the evaluation criteria had not been pre-published in the Letter of Interest.

[166]To illustrate their submission, the plaintiffs described that their proposal comprised eight bankers’ boxes, while the proposal submitted by Prudential Relocation Canada Ltd. comprised

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approximately 12 boxes. By contrast, during the same period of 45 days, RLRS was able to compile and submit a proposal comprising approximately 76 boxes, almost six times more material than Prudential.

[167]The abbreviated timeline posed a significant obstacle to non-incumbent bidders for two reasons: (1) the sheer size of the RFP; and (2) the requirement for bidders to familiarize themselves with the complex terms and conditions of the RFP in such a short time period.

[168]In addition, the plaintiffs needed to request information that was missing from the RFP. The comparison with the number of questions asked in the 2004 process and the 2002 process is

indicative of the time needed to properly inform tendering parties of the requirements of the bid.

Iagree with the plaintiffs’ submission that non-incumbent bidders were treated unfairly by the short time period to prepare bids. In particular, I am of the view that a “a few extra days response time” should have been provided, at least to minimize the closing date falling on a Monday.

Failure to Hold a Bidders Conference

[169]The draft RFP contained a clause stating that a bidders’ conference would be held. This clause stated that during the conference, the requirements outlined in the RFP would be reviewed and any questions would be answered. The defendant recommended that bidders attend the conference “in order to fully understand the scope of the requirement.” It was clearly seen as important. However, the evidence is clear that a bidders’ conference never took place.

[170]On September 13, 2002, Prudential requested that the defendant hold a bidders’ conference, however, no conference was held. This deprived bidders of an opportunity to receive explanations and pose questions, which would have been useful to the non-incumbents.

[171]On September 19, 2002 the following question and answer were published in

Amendment No.1:

Q 35: There should be a bidders’ conference to ensure that all bidders have an opportunity to discuss with the Contract Authority and Client Department representatives the full intent and requirements of the RFP. It would facilitate and enhance the knowledge level of bidders, further ensuring the quality of bid proposals submitted.

A. 35: Bids must close on 30 September 2002 to allow sufficient time for bid evaluation, approvals, contract award and contractor ramp-up prior to contract commencement on 01 April 2003. There is insufficient time remaining prior to bid closing to plan, notify Bidders and carry out all the tasks associated with a Bidders’ Conference.

[172]The plaintiffs succeeded in undermining Mr. Pyett’s credibility on this issue. In a letter after contract award, he indicated that as the IRP was very similar to the pilot program that was currently being used and given the cost implications to the bidders and the Crown, the decision was made not to have a Bidders’ Conference.

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[173]It is not clear what “cost implications to the Bidders” he could have had in mind, particularly inasmuch as these explanations were not included in the Amendment. Additionally, this answer was contradicted in information he provided to Mr. Genest, that the criteria from the pilot project could not be incorporated with original relocation program since they were entirely different.

[174]Nevertheless, while the plaintiffs point out that the timing of the RFP process was entirely in the defendant’s hands, it is clear that the IWG had fallen behind schedule. As such, the IDWG was scrambling to post the RFP in time to meet the government’s standard date of contracts commencing at the beginning of its financial year on April 1st.

[175]I agree with the plaintiffs that, as a result of the Crown’s failures, the non-incumbent bidders were once again short-changed and placed in an unfair position relative to that of the incumbent. While it appears that certain questions were being responded to, Prudential obviously thought that the conference was necessary and one ought to have been held. Had a conference been held, an opportunity would have been provided to allow bidders to discuss the scoring formula. This may very well have helped to avoid the subsequent elimination of all bidding parties except the incumbent.

[176]Were the defendant’s employee’s decisions concerning an abbreviated timeline and choice not to hold a bidders’ conference made in bad faith? I find that these actions were not

taken with the intention of harming the non-incumbents, but nonetheless undertaken knowingly or recklessly without regard to their impact. The defendant’s employees should have known that publishing the LOI without evaluation criteria, establishing a shortened tendering period and not providing bidders with a conference to deal with issues on the RFP, although promised, were actions that disadvantaged the non-incumbent bidders, with effects that would only serve to benefit the incumbent.

[177]This is a problem that can occur when public servants find themselves in a conflict of interest due to their inability to discharge their functions, or, in the face of some problem brought on by their own conduct. When it comes down to choosing between acknowledging mistakes or compromising the services provided to others, in the context of a risk-adverse public service, saving one’s own bureaucratic skin can prevail. In my view, is what contributed to these circumstances.

Envoy’s Review and Preparation of Submissions for 2002 RFP

[178]I accept that the Plaintiffs participated in the 2002 RFP process in good faith. They spent considerable resources to prepare a bid in response to the RFP. Their decision was based on previous experience in bid processes where the plaintiffs had been treated fairly; this is the underlying premise of a government tender.

[179]The plaintiffs decided to bid on the contract for several reasons: a) they felt that this would be a very good stepping stone for the two partners in the joint venture to obtain additional corporate business; b) the Plaintiffs had the necessary expertise; c) preliminary calculations gave the Plaintiffs a good idea that this could and would be a profitable contract; d) it is the biggest

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contract in Canada if not North America; and d) it would be very, very prestigious for both partners to be involved in this contract and to hold the government relocation business.

October 2 to October 8, 2002 - Evaluation of 2002 Bids

[180]The evaluation of the 2002 bids took place from October 2 to October 8, 2002, inclusive.

[181]Before the evaluations began on October 1, 2002, Ms. Douglas provided instructions to the evaluation committee. These instructions were provided at Mr. Pyett’s request, as he felt that he was unsure of what he wanted to tell the team members.

[182]The bid evaluation committee was comprised of Zenovia Pankiw and Ram Singh from TBS, Lt Col. Taillefer and Major Keleher from the DND, Ryan Higgs and Ray Lemay from RCMP, and Olivia Thompson from TC. The evaluation of all the bids took a total of eight days.

[183]The individuals that evaluated the bids were the same people that dealt with daily IRP- related issues during the pilot program. Thus, the evaluation team all had worked with RLRS on the Pilot Program. Zenovia Pankiw took over the responsibility of Project Authority for the IRP Program from Fern Lamarche. She became the Project Authority at TBS for the 2002 RFP until Mr. Singh replaced her in 2003. Mr. Singh was her designate in many respects concerning these contracts.

[184]Mr. Pyett oversaw the technical evaluation and was present for the majority of the bid evaluations. Mr. Pyett was present for the consensus evaluations of the technical evaluations and acted as a facilitator.

[185]Once the evaluators had completed evaluating the bids for any one bidder, they met as a group and came to a consensus score for that particular bidder after a discussion among the evaluation team members. Mr. Singh testified that Ms. Douglas came to check in on the committee throughout the process, but she primarily dealt with Ms. Pankiw.

[186]The defendant did not call Ms. Pankiw to testify. As it turns out, the failure to call the Project Authority of the 2002 RFP and resulting contract, in addition to not calling the immediate supervisors of Mr. Pyett or Mr. Goodfellow, were significant shortcomings in the defendant’s case. They were all witnesses, who by their central and supervising positions, could have corroborated, or otherwise explained, the actions of the Crown.

[187]I would have anticipated the supervisors of Mr. Singh, Mr. Pyett and Mr. Goodfellow to have substantiated and confirmed their subordinates’ conduct as well as its appropriateness and consistency with standard practices. This would include testimony concerning controversial issues, for example, relating to Mr. Pyett’s response to Mr. Gerrie, or the conduct of the 2002 and 2004 financial evaluations in particular regard to RLRS’ 0 percent ceiling price bid for PMS and its subsequent charging of transferees for these services. By their failure to testify, I conclude that they would not have validated the conduct of these gentlemen. See: Levesque v. Comeau, [1970] S.C.R. 1010, at para. 6.

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[188]I would not expect the plaintiffs to call these persons as witnesses. They are employees of the Crown and I consider that the defendant is in the sole position to bring these witnesses to court. I am aware that the plaintiffs subpoenaed Ms. Billings, but the mere fact that they were required to do so, thereby diminishing the scope of their ability to cross-examine her, only serves

to harm the Crown’s case; I find this to be evidence of its unwillingness to present a full defense of the actions of Crown employees.

[189]More generally, I do not find that the Crown has explained their failure to produce these witnesses, at least for the purpose of cross-examination. Crucially, the testimony that I would have expected from them, has not been covered by other witnesses.

Only One Compliant Bidder

[190]In addition to the Plaintiffs, RLRS, Remax, Transferease and Prudential bid for the

RCMP/GOC contract. Remax and Prudential also bid for the CF contract. Every bidder except RLRS was disqualified on both contracts.

[191]I agree with the plaintiffs that this was not a credible result and further agree that it ought to have raised red flags. Indeed, I believe it to be a contributing factor to PWGSC ’ decision to re- tender the bids.

Financial Evaluation of the Bids

[192]The RFP was clear that if a proposal did not achieve a pass mark, it would not be considered for financial evaluation.

[193]Nonetheless, despite this term, Mr. Pyett carried out the financial evaluations of the bids.

[194]He performed this evaluation independently, without any assistance and no one reviewed the results once he had completed the evaluations. The OAG was critical of this procedure and recommended that more than one person conduct the financial evaluation.

[195]Although all of the bidders, other than RLRS, were determined to be technically non- compliant, Mr. Pyett testified that his “management” wanted to know the prices of the non- compliant bids when the contract was forwarded for approval. Neither a witness, nor any explanation for that matter was called by the defendant to explain why “management” would ask for the pricing of bids that had been disqualified.

[196]Mr. Pyett created forms that contained the “roll-up”, or the breakdown of the financial evaluations for each bid, including RLRS. The form contained the bids for property command along with all the other items and the “Grand-Daddy of them all Total”, which was the total evaluated bid price.

[197]The line entitled “property management commission” is where Mr. Pyett entered the total estimated cost for PMS for each contract. For RLRS, the box would have been zero across the line. Out of the five bidders, RLRS was the only bidder to quote a zero ceiling rate for property management fees.

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[198]The defendant did not include a copy of Mr. Pyett’s rollup of the 2002 financial evaluation for this trial. In response to the Plaintiffs’ Access to Information Request, a redacted version of the “roll up” of the 2002 financial evaluations was produced to the Plaintiffs and entered into evidence.

[199]Mr. Pyett provided management with only the “Grand-Daddy” totals without the breakdown from the roll-ups. He also did not advise anyone else at PWGSC that RLRS had bid 0 percent for PMS.

[200]Mr. Pyett’s conduct in this respect will be reviewed in my analysis of Property Management Services.

December 18, 2002 - 2002 Contract Award to RLRS

[201]On, Mr. Atyeo received a letter by facsimile from Mr. Pyett, advising him that the plaintiffs’ bid was found to not be technically compliant. The plaintiffs were also advised that the contract had been awarded to RLRS in the global amount of $1,005,695,104.08 (including estimated Third Party charges and GST/HST as applicable).

[202]The RLRS bid was valued at $480,646,765.00 (GST/HST extra) for the purposes of the financial evaluation over seven years for all three clients combined, compared to the plaintiffs’ financial proposal, which was valued at $426,108,398.70 (GST/HST extra).

[203]Based on this information, the plaintiffs offered a $54,538,367 price advantage over RLRS. If one takes into consideration Envoy’s PMS quote of $42,860,160 which represents the advantage gained by RLRS bidding zero percent for PMS, Envoy’s total price advantage was $97,398,527, or approaching the $100 million.

[204]While the RLRS global bid price was disclosed in this facsimile, detailed or individual pricing information from RLRS’ financial proposal was not disclosed to Envoy. Thus, Envoy was unaware of RLRS’ quoted rate of zero for PMS.

[205]The plaintiffs were not told the individual unit prices behind RLRS’ bid. Mr. Pyett testified that he never disclosed any of RLRS’ unit prices to Envoy or to any other competitor of RLRS. Disclosure of RLRS’ prices is an issue raised in the 2004 RFP procurement process.

January 13, 2003 - 2002 RFP Debrief

[206]After being advised that they were disqualified, the plaintiffs immediately requested a meeting with PWGSC for a debrief on their proposal. Mr. Atyeo understood that the purpose of the debrief meeting was to review the evaluation committee scored the proposal, where the bidder received and lost technical points and to learn for the next time. The debrief meeting took place on January 13, 2003.

[207]It was clearly conducted in an adversarial atmosphere. The government officials were defensive for obvious reasons, having eliminated all bidders except RLRS.

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[208]Mr. Pyett asked Ms. Douglas to run the Envoy debrief session as he again deferred to her greater experience. Mr. Pyett was aware that contentious issues would arise at the debrief session and he was not comfortable in dealing with them. Thus, he asked Ms. Douglas to run the session so that he could see how he should handle it. This is consistent with his practice of turning to Ms. Douglas whenever problems occurred in the procurement process.

[209]The plaintiffs learned at the debrief meeting that they had lost a significant number of technical points because a GANTT chart was said to be missing out of the eight proposal binders that they delivered to PWGSC. The GANTT chart was worth 2100 points. It allowed the evaluation committee to see at a glance all of the activities that would have to take place prior to contract start date and the timeframe that allowed for each of those activities.

[210]Mr. Anania testified that a copy of the GANTT chart was contained within the copy of the proposal that the Plaintiffs had retained in Toronto, as well as the copy that was sent to Relonat’s office in Montreal. The matter was not resolved, but Envoy’s position was that it was never provided a real opportunity to participate in the 2002 process with the disappearance of this chart.

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January 2003 - RLRS Submits Commitment Forms Containing 9 percent Ceiling Rate for

PMS

[211]As per the 2002 contract, RLRS was required to submit an information package to the Project Authority for approval within six weeks of the award of the contract (December 18, 2002), with an information copy to be provided to the Departmental Authorities and Contracting Authority. Based on an e-mail written by Gus McIntosh, who had replaced Ray LeMay as the lead RCMP representative, it is evident that as of January 29, 2003, the Project Authority, Departmental Authorities and Contractual Authorities had received these documents.

[212]This evidence is significant and will be further considered in my analysis of Property Management Services.

February 13, 2003 IWG Meeting

[213]A meeting was held on February 13, 2003, where it is alleged by the plaintiffs that RLRS’ ceiling rate of zero for property management fees was discussed. Mr. Pyett, Ms. Douglas, Mr. Singh, Ms. Pankiw, Mr. Lemay, Mr. McIntosh and Major Keleher were all in attendance.

[214]This conclusion is based upon notes Mr. Singh took at that meeting. They read in part, “Prop Mgmt fees - bid is zero because given back to Crown. - now in personalized.” Mr. Singh testified that his note meant that RLRS bid zero for property management fees and that “the Crown” will not be making payments, so it’s “zero to the Crown.”

[215]I do not accept this testimony, for reasons discussed below when dealing with PMS.

March 17, 2003 - CITT Complaints and Conflict of Interest Investigation

[216]The plaintiffs argue that the rejection of the Prudential tender, their complaints to the CITT, and the results of the conflict of interest investigation by Mr. Genest, established that the real reason for the defendant’s decision to retender was to avoid a publicity scandal and was not a bona fide attempt to repair problems caused by the 2002 procurement process.

[217]I do not agree with these submissions. Given the numerous other issues I must consider, I will only touch briefly on these issues in comparison with the extensive submissions made by the plaintiffs.

[218]The relevant facts on the CITT decisions are quite limited. Prudential filed a complaint on March 17, 2003 raising the “Exceeds” problem identified previously, along with some general complaints about the fairness of the criteria and evaluation procedures, in particular imposing compatibility requirements on its information technology systems.

[219]Envoy intervened in Prudential’s complaint on April 4, 2003 and was granted leave on May 16, 2003. It supported Prudential’s argument on “Exceeds” and added a number of other complaints regarding favoritism, the subjective nature of the evaluation, deficiency of the LOI and shortage of time to prepare proposals. The CITT rejected these complaints during its preliminary view.

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[220]On July 30, 2003, the CITT released its decision, without reasons. They were provided on September 18, 2003. The CITT found on Prudential’s behalf concerning the impropriety of the scoring formulas because of the “Exceeds” limitations. It also found that PWGSC had incorrectly imposed requirements of compatibility of the information systems proposed by Prudential with the government’s existing technology.

[221]The CITT recommended that a revaluation be made of any point related criteria where no bidders were awarded an “Exceeds” rating. If the recommended revaluations resulted in a successful bidder other than RLRS, then the CITT recommended that PWGSC re-award the IRP contract no later than January 1, 2004. The defendant’s initial reaction was to proceed with the recommendation of a re-evaluation.

April 3, 2003 - Conflict of Interest Investigation - Michael Genest Investigator

[222]PWGSC launched an investigation into conflict of interest allegations raised by Envoy commencing in April 2003. Mr. Michael Genest, a former RCMP officer and member of PWGSC Fraud Investigation and Internal Disclosure Unit was assigned as the investigator.

[223]On July 14, 2003, in the course of carrying out his investigation, Mr. Genest spoke to Mr. Atyeo to obtain more information on a possible witness. During this conversation he disclosed that Ms. Douglas had attended a Caribbean cruise with Mr. Belair, and that members of the evaluation team had participated in a golf tournament sponsored by RLRS.

[224]This discussion occurred more than a month before Mr. Genest prepared the first draft of his report on August 19, 2003 and submitted it to his superiors. In addition, Mr. Genest continued to interview persons after July 14, 2003.

[225]On July 24, 2003, Envoy’s legal counsel wrote legal counsel at PWGSC providing an affidavit of Mr. Atyeo describing his conversation with Mr. Genest. He claimed that a reasonable apprehension of bias existed, citing the decision of Cougar Aviation Ltd. v. Canada (Minister of Public Works and Government Services), [2000] F.C.J. No. 1946, and requested a copy of Mr. Genest’s report. He also urged PWGSC to advise the CITT of Envoy’s allegations and the results of the investigation.

[226]PWGSC failed to advise the CITT due to the fact that no written report existed. As a result, Envoy wrote to the CITT on July 28, 2003, enclosing a copy of Mr. Atyeo’s affidavit requesting that these issues be considered in the context of the ongoing complaint. This request was rejected by the CITT in its decision released two days later.

[227]Envoy continued to write legal counsel for PWGSC asking it to address its concerns over apprehended bias. On August 18, 2003, it advised PWGSC that it would file a complaint with the CITT, if necessary.

[228]On August 19, 2003, Mr. Genest completed the first version of his report. It should be noted, however, that he re-interviewed Ms. Douglas and Mr. Pyett on August 25, making extensive amendments to his report.

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Mr. Genest’s Report Amended by Superiors

[229]This report was subsequently critiqued by Mr. Pyett’s superior, Mr. Smith. This resulted in a further amended report. The plaintiffs argue that the report of August 19, 2003, should be considered the valid version for the purpose of the court’s consideration. I see no benefit in this proposition. For my part, I find that the additional conclusions added to the August 25 report were relevant.

[230]Moreover, I find Mr. Smith’s comments entirely appropriate. He points out certain areas where Mr. Genest should have provided an explanation for his conclusions. He advised Mr. Genest not to base his recommendations on his “26 years of experience,” but rather to prepare his recommendations in the context of the breach of terms of the PWGSC Conflict of Interest Guidelines reference to which should be added to the report. He also advised Mr. Genest to remove the addendum relating to his subsequent conversation with Mr. Atyeo which was clearly irrelevant to the conduct or findings of his report. Mr. Genest did not complain at trial about these amendments by Mr. Smith. I find no reason for the plaintiffs to complain either.

[231]Further versions were produced, including an addendum by Mr. Genest. No explanation was given for its absence from the original version. Thereafter, other senior members of PWGSC tinkered with the report, but made no modifications of any significance as far as I can determine, despite the plaintiffs’ protests of improper interference.

August 29, 2003 - Decision to Retender

[232]On August 29, 2003, PWGSC communicated their intention to re-tender the IRP contract to the CITT, copying counsel for RLRS as well. The department cited the CITT complaint and

[233]This came about following a meeting of senior members of PWGSC on August 21 in an attempt to assess the ramifications of Ms. Douglas’ influence on the 2002 procurement process and an appropriate departmental response to the CITT decision requiring a revaluation based upon the discriminatory “Exceeds” scoring category. A number of issues were canvassed including the question of terminating the present contract and conducting a reprocurement process. The questions considered included the following from the note of the meeting:

Do we need a 3rd party review? Should we employ a fairness monitor for the revaluation? What should we tell the CITT (the decision that was made earlier is being revisited). Should we terminate the present contract and reprocure? What is missing for this is the Tribunal’s reasons for recommending a reassessment.

[234]The decision was ultimately made to terminate and reprocure. A draft memorandum from the Deputy Minister, Mr. Marshall, was prepared to the Minister recommending a full retender was prepared on August 26, 2003. It stated:

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Given the virtual certainty that Relonat/Envoy will file a CITT complaint based on an allegation of bias, the fact that the report of the Audit and Ethics Review Branch will be a part of that proceeding and that it will be very difficult to convince the CITT that the employees’ conflict of interest did not bias the outcome of the evaluation, it is recommended that PWGSC re-tender this procurement.

[235]This wording was not contained in the final version. The Deputy Minister was cross- examined on the draft document, but he had not seen it in preparation for his testimony and could not recall it from the past.

[236]He relied on the final version of the memorandum. It recommended termination and reprocurement due to the serious challenges presented in complying with the CITT direction to re-evaluate, and the existence of a perceived conflict of interest. These would be legitimate grounds to terminate and retender and I do not doubt that they were part of the Deputy Minister’s decision.

[237]Nevertheless, no one asked Mr. Marshall directly on the point of his senior counsel’s opinion that Envoy would succeed before the CITT. In addition, no one asked him whether it would have been realistic not to retender in the face of advice from his senior counsel that Envoy would likely succeed before the CITT.

[238]These are important questions because I am satisfied that, as Deputy Minister, he must have been aware of the views of his senior legal counsel, and would be required to take them into consideration in any decision made on the issue. Ignoring this advice only to have the CITT set aside the decision and order a re-tender in a few months’ time would be contrary to the best interests of the Department.

[239]It would therefore, serve no purpose to re-evaluate or to attempt to conceal the “scandal” since Envoy already had the information, the most important of which – concerning the cruise and Mr. Singh’s attendance at the golf tournament – had already been leaked to the press.

[240]The fact that the Deputy Minister did not broadly publicize concerns about the conflict of interest issue inside the government, or that he had no option in the face of the pending CITT challenge, is not something that I would hold against him.

[241]The defendant contended that the court could not rely upon the draft memorandum, which I ultimately interpret as exonerating the Deputy Minister, while the plaintiffs argued that it should somehow be used against him.

[242]During oral submissions, I pointed out my conclusions on the Deputy Minister’s reliance on legal advice. I indicated that it would be unthinkable for the head of any department to proceed on a matter which is fundamentally rooted in legal considerations, without hearing what his legal advisers had to say. Whatever the reasons for removing the passage from the draft, and I can think of many, none having anything to do with the soundness of the advice. On balance, I

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would be astounded if the Deputy Minister was not aware of his Department’s legal advice before deciding to re-tender.

[243] Having made the very significant and correct decision to re-tender, the Deputy Minister had every right, and indeed I think it was his obligation, to implement damage control measures to attempt to protect the reputation of his Department. It was already severely battered by the Sponsorship scandal. Having made the decision to retender and all that that involved, I find no sense of his crossing the line from damage control into covering-up something that had already been leaked to the press.

Criticisms of Department for Contemplating Discipline against Mr. Genest

[244]The plaintiffs describe PWGSC’s proposal to discipline Mr. Genest as a “vicious act of reprisal” for having disclosed his findings to Mr. Atyeo on July 14, 2003, which it claimed affected the defendant’s defence against the conflict of interest allegations. I find the issue is irrelevant to these matters, but because the plaintiffs are so insistent, I will deal with it.

[245]The Department did not pursue discipline. Even if they had, I would not discount the legitimacy of their criticisms of Mr. Genest’s conduct. There were immediate and legitimate concerns raised by the first departmental officials who were reviewing the situation about Mr. Genest possibly breaching the ATI procedures by divulging confidential personal information regarding the investigation.

[246]I also think the Department had every right to be taken aback by its investigator disclosing the significant results of his investigation to the complainant a month in advance of having completed the investigation, not to mention advising his superiors. I am also concerned by his not having verified some of his conclusions with witnesses, such as Major Keleher. His report makes Major Keleher appear to have had primary responsibility for the elimination of the non- incumbent bidders, when ironically, he was the one member of the IDWG who had set up the scoring matrix to prevent this from happening.

[247]I do not want to be too critical of Mr. Genest who I find to be a very good investigator, particularly in respect of the ardour that he applied to his work. My view, is that the Department’s failure was in not properly training Mr. Genest to distinguish between his duties as a RCMP investigator who regularly works closely with complainants to obtain information and concerns about avoiding disclosure of results of investigations before finally completed.

Conclusion on Issues Not Directly Related to PMS

[248]I agree with the plaintiffs that the 2002 tender was not conducted fairly. There was insufficient time to properly conduct the process caused by the IDWG not being able to complete preparation of the tender documents in a timely fashion. Nonetheless, it was the non-incumbent parties who suffered as a result of the Crown’s tardiness. Resultantly, the time available to prepare bids was restricted, no evaluation criteria was provided in the LOI, besides being denied the benefit of standard information gathering procedures on a complicated and challenging procurement process, without which they had no chance to compete fairly with RLRS.

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[249]Fortunately for the plaintiffs, the Crown employees miscued badly on the “Exceeds” debacle. They compounded this with poor judgement in allowing too close a relationship to develop with RLRS to the point that PWGSC had no option but to retender the contracts.

[250]I am critical of some of the PWGSC witnesses, such as Ms. Billings, who were of the view that the retender ought not to have taken place. No doubt this was because the reprocurement placed the Department in a very difficult position vis-à-vis avoiding conflicts of interest, which ultimately was woefully handled, as shall be seen below.

[251]Nevertheless, I give PWGSC full marks for re-tendering. I would not want Departmental

officials to come to the conclusion that the lesson learned from all of this was never to retender in the future.

[252]The lesson learned should be to put the tendering party’s interests first if time constraints arise and ensure a fair process unblemished by conflicts of interest attained by maintaining professional and appropriately arm’s-length relations with contractors of the Government.

[253]A factor that I consider was at play going forward was the resentment evidenced by Mr. Singh towards Envoy and Lt. Col. Taillefer in having to conduct the reprocurement process. In addition, a highly respected long-time public servant had been publically humiliated along with the reputation of the government in relocation. All this could be traced back to Envoy. I doubt that there was anyone in government circles who would go that extra step where Envoy`s interests were concerned.

[254]Otherwise, I find little in the events during the 2002 process, outside of the property management services issue, that has much impact going forward. The other events have set the background and perhaps rehabilitated the credibility of witnesses who play an important role in the Court’s findings of facts involving the PMS issue, to which I now turn my attention.

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CHAPTER 3 - PMS VOLUMES AND THE 0% CEILING RATE

CONTRACT PROVISIONS GOVERNING PROPERTY MANAGEMENT SERVICES

(“PMS”)

[255]In order to understand much of the analysis that follows, it is necessary that I review the provisions of the RFP concerning property management services. These requirements did not change significantly from the 2002 to the 2004 RFP.

Property Management Services

[256]The property management services (“PMS”) offered under the RFPs are considerable. This is not to be overlooked when one considers the consequences of RLRS’ offer to provide them free of charge to transferees.

[257]The 2002 and 2004 RFPs described PMS as follows:

The services provided by the Property Management Company shall include but not be limited to:

a.Advertising and showing the property to prospective tenants;

b.Thorough tenant screening;

c.Drawing up of leases;

d.Rental collection;

e.Interaction and monitoring of tenants;

f . Payment of Member’s obligations (mortgage, property taxes);

g. Assistance, at tenant’s cost, in securing rental insurance coverage; and h. Property inspections.

Third Party Suppliers

[258]Third Party Suppliers were limited to those defined in the RFPs as service providers “engaged by the contractor to provide specialized services in accordance with the IRP program or to the relocating Member as part of their [sic] entitlement under the program” (para 2.2.2) (emphasis added).

[259]By this and other provisions, responsibility for the administration of Third Party Suppliers was “downloaded” to the contractor. The Third Party Suppliers were, in effect, subcontractors with no direct legal relationship with the Crown.

[260]The contracts between the contractor and Third Party Suppliers are generally referred to as “commitment letters”.

[261]The six categories of third party services described in the RFP are: real estate, appraisal, legal, building inspection, rental search and property management. The first five of these services

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are funded from Core Funding Envelopes, whereas PMS are funded from the Personalized Funding Envelope. Both of these will be discussed at length below.

[262]There are other contracts pertaining to the relocation of transferees, such as those providing for the physical move of transferees’ belongings. These are not at issue in these proceedings.

[263]The IRP contracts focused on the management of the moves, particularly by providing counselling services to transferees and assisting them in their dealings with Third Party Suppliers.

[264]While contract and administration responsibilities of Third Party Suppliers were “downloaded” to the contractor, PWGSC and TB were responsible for monitoring their work to ensure they performed the contract awarded as a result of the tendering process. This contract is sometimes referred to as Contract B. The terms of Contract B were identical to those contained in the RFP, unless extra services were contracted for outside of the RFP process.

[265]The Contracting Authority is a PWGSC employee named in the contract, whose responsibilities included ensuring that the contractor and its Third Party Suppliers delivered the services contracted for under Contract B. For the 2002 and 2004 contracts, the Contracting Authorities were Mr. Pyett and Mr. Goodfellow respectively.

[266]PWGSC shared the task of ensuring contractor compliance with the Treasury Board. These responsibilities fell to the Project Authority, sometimes described as the Technical Authority. Ms. Pankiw and Mr. Singh were the Project Authorities for the 2002 contract, with Mr. Singh’s responsibility continuing into the 2004 contract. Mr. Singh reported to Ms. Pankiw when she was Project Authority.

[267]Another relevant responsibility of the Project Authority was to interpret the application of the contract where questions or disputes with transferees arose. Mr. Singh performed these duties, as well as updating the IRP policies where necessary, which could result in an amendment to the IRP contract.

Commitment Letters and the Directory of Third Party Suppliers

[268]The commitment letters signed by the Third Party Suppliers contained “quality and price assurances,” the latter being the maximum prices they could charge transferees. From time to time, I will refer to these maximum prices, expressed in terms of percentage of gross monthly rent, as “commitment prices” to distinguish them from “ceiling prices” which are quoted by the contractor in the RFP as its price for the services.

[269]The RFP required the winning contractor to prepare a Directory of Third Party Suppliers. The Directory listed all of RLRS’ third party suppliers who had committed to meet the quality requirements of the IRP policies at the commitment price quoted in agreements.

[270]It was a term of the RFP that the contractor recommend one of the Third Party Suppliers from the Directory to any transferee who had not preselected one. There was an additional term

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that stated that the contractor had to agree to distribute referrals, to maintain a consistent market share among Third Party Suppliers participating in the program. RLRS, as the relocation manager, was not permitted to provide third party services which had to be delivered by Third Party Suppliers.

Directory and non-Directory Third Party Suppliers

[271]Transferees could substitute other arm’s length Third Party Suppliers in the place of a service provider from the Directory. Arm’s length, non-Directory suppliers were not required to commit to quality standards or price limits as those listed on the Directory. However, invoices from these suppliers were also reimbursed from the transferee’s Personalized Funding Envelope up to the established fee limits.

[272]Alternatively, property management services could be obtained completely outside of the contract. The transferee could cash out the amounts remaining in the Personalized Funding Envelope and use them to pay someone who was not necessarily at arm’s length, or even a professional PMS provider. These non-arm’s length suppliers would be paid with after-tax dollars, which was a disadvantage.

[273]The property management services volumes quoted in the RFP lie at the heart of much of the controversy in this case. PMS volumes for the purposes of the RFP, whether referring to estimated or actual volumes, comprise only volumes of services provided by Third Party Suppliers listed on the Directory.

[274]The right of transferees to retain non-directory, arms-length Third Party Suppliers of PMS, introduced confusion into the tracking of PMS volumes. While they were paid from the transferee’s personalized funding envelope, they were not counted for tendering purposes. However, their costs were tracked because they were paid from the transferee’s Personalized Funding Envelope. PMS providers paid for by the transferees were similarly not tracked in PMS volumes maintained under the contracts.

[275]On many occasions, witnesses for the defendant indicated that it was not possible to know exactly the PMS volumes were used for tendering purposes, as there were only services supplied by Third Party Suppliers on the Directory. In fact, I find that these volumes were tracked and the breakdown of volumes between Directory and non-Directory PMS suppliers was available. To reinforce this finding, I note that the OAG obtained the Directory volumes with relative ease when requested.

[276]What was not available were the statistics on non-arm’s length Third Party Suppliers retained by the transferee themselves. This is logical since the transferee paid them individually. However, these data are not relevant to this litigation.

Payment from Personalized Funding Envelopes

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[277]The funding of PMS was different from the other third party services. The other five third-party services were paid from the Core and Custom Funding Envelopes. Property management services were paid out of the transferee’s Personalized Funding Envelope.

[278]The distinction between these three “Envelopes” is as follows:

Core Funding Envelope: Core funded benefits were used to pay for services considered essential for the move, which included the other five third party services in these contracts such as real estate fees, legal fees, etc.

Custom Funding Envelope: This envelope was used to fund benefits for services that were customized to the personal situation of the transferee. They included costs incurred due to variances in the size of the family, the distance that was being travelled and the weight of the household goods and effects that had to be shipped. These benefits are not relevant to this matter.

Personalized Funding Envelope: The benefits from this envelope were used to pay legitimate relocation expenses, as recognized by Canada Revenue Agency, though they were not considered to be critical to the move. These included property management services.

[279]The last envelope was funded from grants – Movement and Posting Allowance Grants – and from transferred Core funds as incentives. The most significant incentive was that paid into the fund when transferees chose not to sell their residences (the other two incentives relate to savings on long-term storage of appliances and travel expenses).

[280]When homeowners sold their homes, the related costs incurred by the Crown, such as real estate and legal fees, were substantial. As noted above, these costs were paid out of the Core Funding Envelope. When homeowners choose not to sell, which usually involved the rental of their homes, savings were generated to the Crown. As an “incentive” not to sell their homes, the government transferred some of its savings out of “core” and into the transferee’s Personalized Funding Envelope.

The Basis of Payment (“BOP”) for PMS

[281]The incentive amount transferred into the Personalized Funding Envelope from the other envelopes was calculated using the following formula:

80 percent of real estate commission for not selling home (max. $12,000)

[282] Funds in the Personalized Funding Envelope were the property of the transferees. Although retained in the government’s possession and control, I find that the beneficial interest of funds deposited in the Personalized Funding Envelope passed to the transferee upon the exercise of the decision to sell. The funds in the Personalized Funding Envelope were to be used

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at the transferee’s entire discretion. Any amounts left over were cashed out to the transferee as a taxable benefit.

Savings Generated by Competitive Tendering Process

[283]The competitive tendering process carried out across Canada was intended to obtain the lowest possible ceiling prices for all third party services using volume discounts. Savings from core funded third party services were to the Crown’s benefit. A 0 percent ceiling price, in the case of real estate, would mean that these services were free or at “no charge” to the Crown.

[284]Conversely, because the funds in the Personalized Funding Envelope belonged to the transferee, any savings to property management services generated by the tendering process were for the benefit of the transferee, not the Crown. A 0 percent ceiling price for PMS meant that these services were free or at “no charge” to the transferee.

[285]While I do not mean to belabour this point, it is important to clarify as both Mr. Belair and Mr. Singh repeatedly attempted to rationalize RLRS’ charging transferees for PMS based on the notion that there was “no charge to the Crown.”

Pricing Property Management Services

[286]The BOP in the RFP asked for prices for two categories of services, which together made up the contractor’s “total bid price”. The Contractor’s component of the bid was an assortment of Administration Fees paid for its overall management of relocations based primarily on its counselling functions and from which it derived its revenues and profits.

[287]The second category of services included in the Contractor’s total bid price was that it is Third Party Suppliers. These were flow-through fees, in the sense that the contractor generated no profits from them. Indeed, the fees and profits made by Third Party Suppliers were part of the costs that the Contractor had to bear as a component of the administration services. This included ensuring that Third Party Suppliers were paid for their services out of the envelopes set up under the RFP.

[288]The Crown obtained the lowest price possible for third party services by requiring the tendering parties to quote “Ceiling Prices” in the RFPs for the six categories of third party services. Thus, the lower the Third Party Suppliers’ fees, the lower the total bid price of the contractor. The contractor thereby shared the Crown’s interest of obtaining the lowest possible price from the various Third Party Suppliers in order to win the tender.

[289]The ceiling prices for property management services were expressed as a percentage of the gross annual rent limited to $1000 annually in 2002 and $1500 in 2004. To calculate the total price for property management services over the five or seven year term of the contract, the ceiling price percentage [described as the “rate”] was monetized by multiplying it by the arbitrarily fixed amount of $12,000, representing a fictional gross yearly rent.

[290]This amount was inserted in the following formula, as one of four multiplicands (underlined below) to calculate the property management fee for each region.

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Property Management Fee:

60 percent of the estimated number of moves annually by region X annual rate (rate X $12,000 per year) by region X the number of years the rate applies by region.

[Emphasis added.]

[291]The estimated number of annual moves was a statistic provided in the RFP by the Crown. However, reference in these reasons to the “estimated PMS volumes” refers to 60 percent of the estimated annual moves. This is the volume of moves multiplied by $12,000 and by the ceiling rate quoted to determine the dollar price bid.

[292]By the fact that the annual estimated moves, the annual gross rent and the number of years (and regions) were set by the formula, only the ceiling rate was supposed to be a true variable in the formula.

[293]One of the compliance issues considered in this lawsuit, but eventually abandoned having not been pleaded properly, is whether the estimated number of moves was also a true fixed multiplicand. The only means to have made it a true fixed multiplicand was to require the contractor to bid the commitment price of their Third Party Suppliers.

[294]Importantly, if the tendering parties were not required to bid the commitment price of their suppliers, they could also substitute actual PMS volumes for estimated PMS volumes. This permitted a lower ceiling price to be quoted which reflected the actual volumes, even though the formula stipulated estimated ones. As the tendering party was only required to quote a ceiling price, the fact that it was using actual volumes would not be known.

[295]However, when the ceiling price quoted is 0 percent, it is clear that this ceiling price could not reflect fair market value for the services: no arm’s-length third-party supplier would agree to provide its PMS free of charge.

[296]It turns out that the total estimated volumes in the PMS formula were about 250 times higher than the actual volumes. This meant that the ceiling price could effectively be 0 percent without any serious financial consequences to the tendering party, as long as the actual volumes remained at their low volumes.

[297]However, if PMS were free, their use would be expected to rise significantly under the new contract, given that they were free. There would be no reason for any transferee to use any non-directory Third Party Supplier of PMS when professional services were available at no charge. Free PMS would also be a meaningful incentive for borderline homeowners to decide not to sell, but rent their homes.

[298]In addition, because the services were at no charge, the $1000 and $1500 limit would never be attained.

RLRS’ Property Management Services Premium

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[299]Envoy bid a ceiling price of 8 percent in 2002 for PMS across the country. As noted above, this ceiling price was converted into a monetary value of $42,860,160. In 2004, Envoy’s PMS bid was $48,327,426.

[300]The 0 percent ceiling rate tendered by RLRS for property management services, by reason of applying the formula, obviously resulted in a total price bid of $0 for these services. I have described the differential between Envoy’s bid and RLRS’, as RLRS’ PMS “premium” because it was to RLRS’ advantage. In 2002, the premium was approximately $42 million. Because of the increase in volume estimates, it was approximately $48 million in 2004.

[301]I find as a fact that RLRS’ premium resulted from it substituting the actual PMS volumes for the estimated volumes in the RFP formula when quoting a 0 percent ceiling price. Conversely, I find that Envoy understood that the scheme of the contract, confirmed by answers provided by the Contracting Authority, required it to quote the commitment prices of its suppliers as its ceiling prices and multiply them by the estimated PMS volumes.

[302]From the figures described above, the resulting differential between Envoy’s and RLRS’ bids was very significant. For example in the case of CF relocations, the actual number of moves using Directory PMS was less than one third of 1 percent (.003) of those estimated in the RFP. Based on Envoy’s seven year total PMS bid of $48 million, RLRS’ cost to service the volume of actual moves during that period would be approximately $108,000 or $150,000 over 7 years (.003 of $48 million) with the remainder being RLRS’s premium.

Charging Transferees for PMS

[303]The Crown’s case came apart because RLRS charged transferees for PMS, despite quoting a 0 percent ceiling rate. The Crown authorized these charges when it pre-approved the Third Party Suppliers’ PMS commitment letters as required under the RFPs. The commitment letters were contained in the relocation packages provided to transferees who were being relocated. It is my finding that the Crown authorized charging transferees for PMS knowing that this was in violation of both the 2002 and 2004 Contracts.

Application of RLRS’ Premium

[304]RLRS could apply its premium to its advantage in two ways: lower its total bid price or increase its profitability. Lowering its bid price was simple. It just bid on the other third party and administrative fees as it normally would, taking advantage of the zero dollars for property management services to reduce its total price.

[305]Alternatively, if RLRS was of the view that it did not need all or some of the premium to win the contract - for instance as a result of its superior technical competence - it could decide not to use all or part of the $48 million price advantage on PMS. Instead, it could transfer some or part of its PMS premium to its administration fee by increasing its price. In this manner, its total price would not reflect that it bid a 0 percent ceiling price, because the PMS premium would be reflected in a higher administration fee, i.e. increased by a maximum amount in 2004 of $48 million based on an 8 percent ceiling price tendered by other bidders.

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[306]As RLRS generated its profits from its Administration Fees, it could add a further $48 million to its administration fee price, with only a minimal increase in its costs representing

1/250th or .003 of the amount that it would have to pay, so long as the actual volumes remained at their historic level.

[307]Conversely, the Crown would not obtain any value for any increase in the winning bidder’s administration fee, to the extent that any or all of RLRS’ premium was transferred to its administration fee.

[308]In fairness to RLRS, I have used the scenario as though it transferred the entire premium to its administration fee. This is admittedly unlikely, since RLRS still had to win the bid and a lower price component would undoubtedly be beneficial.

[309]Nevertheless, RLRS being $97,398.527 higher than Envoy certainly suggests that it used much of its PMS premium to raise its administration fee, rather than lower its price

[310]Transferring PMS savings to the administration fee was not a work of fiction. Mr. Lockington, President of RLRS during both tenders, testified that by bidding 0 percent on property management fees, RLRS was able to propose a higher administration fee. However, no details on the premium charged were ever provided to the Court.

[311]The possibility of transferring PMS dollars to administration fees, also explains why the OAG concluded in its 2006 report that the Crown may have paid too much in administration fees for these contracts.

TENDERING AND EVALUATION OF PROPERTY MANAGEMENT SERVICES IN THE 2002 PROCESS

[312]I conclude that the 2002 tender for PMS was unfair. Tendering on PMS was based on estimated PMS volumes which were known by the defendant to have been grossly inflated. The defendant was also aware that RLRS had bid for the provision of PMS using the actual historical PMS volumes, when the other bidders had been instructed to use estimated volumes set out in the RFP. As I noted above, the plaintiffsabided by these instructions in its bid.

[313]After understanding that RLRS had gained an unfair advantage by its PMS bid, this information was concealed within a select group of the defendant’s employees and no action was taken to challenge RLRS on its bid. The defendant’s awareness that the process was unfair was further confirmed when it authorized RLRS to charge transferees for PMS while being fully cognizant that this conduct was contrary to what RLRS had tendered.

Disparity between the Estimated and Actual Volumes

[314]The estimated CF relocation volume of PMS, in both the 2002 and 2004 RFPs, were described as being 60 percent of the estimated 12,000 total annual CF moves. This meant that estimated annual PMS usage was 7,200, or 36,000 for five years.

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[315]Information provided to the OAG confirmed by the client agencies found that only 183 relocations used PMS out of a total 81,000 moves for six years from 1999 to 2005. Thus, less than one quarter of 1 percent (.00225) transferees used PMS in comparison with the estimated 60 percent of relocations provided in the BOP PMS formula.

[316]A similar differential existed between the estimated use of PMS by members of the RCMP and GOC and those that actually occurred. Between 1999 and 2005, only 2 of almost 11,000 RCMP moves and 4 of more than 5,300 GOC moves used PMS under the IRP contracts.

Mr. Singh was Aware that PMS Volumes Were Grossly Inflated

[317]The defendant has attempted neither to explain how the inaccurate estimates occurred, nor who amongst its many witnesses was principally responsible. Because it did not ask questions that might have shed some light on the single most important factor giving rise to this litigation, I can only presume that this evidence would not have assisted its case.

[318]The only information elicited concerning origins of the inaccurate estimates was obtained in the documents questioning this apparent rationale and from cross examination of the Crown’s witnesses.

[319]At one point, Mr. Pyett indicated that the estimates came from the pilot project. This evidence was unsupported in any manner and appears to be refuted by quarterly reports discussed below, copies of which Mr. Singh acknowledged receiving and that Mr. Pyett should have been aware of.

[320]This is also contradicted by Major Keleher’s testimony in that he was asked to supply CF statistics differentiating between homeowners and renters. Major Keleher testified that he did not

participate in drafting the BOP formulas for third party suppliers and was not aware of RLRS 0 percent bid on PMS. I find his absence from the discussions, though a member of the IWG, disquieting to say the least.

[321]The effect of accepting their evidence results in a disturbing conclusion: not all members of the IWG were involved in drafting the PMS pricing evaluation formula. This is corroborated by other evidence leading me to conclude that Ms. Douglas and Major Keleher were also not advised of RLRS’ 0 percent bid or that RLRS charged transferees 9 percent for PMS. Mr. Pyett corroborates their evidence that they knew nothing about RLRS’ zero bid.

[322]The evidence overwhelmingly establishes that erroneous PMS estimates originated from rental statistics at the destination locality. At the same time, and deeply troubling to this court, is that there is no logical connection between destination rental statistics and transferees selling their homes at points of origin.

[323]This point was raised with Mr. Singh on other occasions. In 2006, during the OAG investigation of the 2004 RFP, Mr. Charlebois, the RCMP Departmental authority at that time, asked asked Mr. Singh the following:

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Since it is apparent that these estimates (expressed as a percentage) re purchases / rentals relate to housing at new post, we have a hard time understanding how this could then be used to estimate that 30 percent of the annual RCMP moves involved property management services?? We really can’t understand the correlation between renting at destination (new post) and the need to use property management services at origin (old post).

[Emphasis added.]

[324]As he did throughout his testimony in this trial, Mr. Singh did not answer the question: though this is not surprising as there was no logical response. Instead, he mislead Mr. Charlebois, stating, “It was difficult to say for a fact how many will actually use such service since the choice was a personal matter and not necessarily processed through RLRS.” As mentioned above, non-contract use of PMS was a red herring. In any event, the question was not whether he knew for a fact about the actual volumes, but rather what was the basis for his estimates.

[325]Evidence introduced during trial, in the form of quarterly expenditure reports, from which Mr. Singh admitted he reviewed as part of his duties, refutes any rationale justifying a volume estimate of 7,200 usages of PMS for the CF contract or similar estimates for the GOC or the RCMP.

[326]It was Mr. Singh’s responsibility as Project Authority to monitor workload volume and referrals to Third Party Service. His duties included monitoring expenditures for the Government and contractor, as well as advising members that there were staying within budget.

[327]Among reports that Mr. Singh acknowledged he regularly received and reviewed, there was one entered into evidence which described expenditures for all departments by category for the 18 month period of April 1, 1999, to September 30, 2000. Total property management fees for this period were $84,475. In the departmental break-out, DND had 18,825 relocations, but PMS costs were $73,400. The RCMP had 2274 relocations with PMS costs of $1891. The remainder of $9,181 in PMS costs is attributed to the GOC which fell squarely within Mr. Singh’s bailiwick.

[328]The 18 month total represents an annual PMS cost of $56,317. When extrapolated over seven years, this produces a total PMS cost to the Crown of $394,217. Bearing in mind that these figures include Directory and arm’s length non-Directory amounts paid out of the personalized funding envelope, the totals for Directory the PMS should be less than this amount.

[329]While these reports only tracked total moves and revenues expended for PMS, they demonstrate conclusively that the estimated volumes in the RFP were very significantly inflated.

[330]The dollar amount of $73,400 expended by DND for 18 months would represent approximately 75 relocations using PMS. Meanwhile, the projected dollar amount for even a lowball Ceiling Price of 4 percent would result in a total seven-year amount in the millions of dollars, many times greater than the figures shown on these reports. No explanation, satisfying or

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otherwise, has been provided to this court, why the information in the quarterly reports was ignored.

[331]Given Mr. Singh’s primary responsibility for monitoring work load volume and referrals to PMS, including expenditure on services, which he had never suggested was not assiduously carried out by him, I conclude that he knew full well that the formula calculating PMS use as a function of 60 percent of total relocations was preposterous, and that the actual volumes exponentially smaller.

[332]The evidence suggests that Mr. Pyett also received and reviewed RLRS’ quarterly reports. It appears that he was not credible when he testified in chief that he did not receive quarterly reports. This is contradicted by answers provided the OAG whereby both the Project Authority and the Contracting Officer received quarterly financial reports that were reviewed. I hold this evidence against him for knowing, after the fact, that the estimates had been grossly inflated and having taken no steps to correct the situation as a result.

[333]Nonetheless, it is not apparent that Mr. Pyett knew the extent of the misrepresentation of estimated PMS volumes during the 2002 tender process. He was never specifically asked whether he received the reports from the pilot project. In addition, he had just become the Contracting Authority in 2002 and I doubt that he was familiar with this historical information – his reliance on Ms. Douglas further reflects his lack of experience.

[334]Ms. Douglas would have likely known about these reports. Further, from her general knowledge of relocation, had the PMS volumes in the RFP been specifically drawn to her attention, she would have very likely known that they could not possibly have been accurate. She was not asked questions on her knowledge of volumes however, so I make no specific finding on that fact. I also note that Mr. Pyett did not have responsibility to monitor workload volumes and referrals to Third Party Services, which was solely the function of the Project Authority.

Mr. Pyett Breaks Standard PWGSC Protocol Answering a Question from Envoy

[335]In an email dated September 13, 2002, Mr. Gerrie, a representative of Envoy, pointed out to Mr. Pyett the same fallacy of the rationale being used to determine estimated volumes of PMS as was put to Mr. Singh four years later. He requested to be advised of the basis for the 60 percent calculation.

While it is recognized that 60 percent of CF members ultimately rent accommodation in the destination location, it is not likely that 60 percent of the total own property in the departure location. Please advise on what base [sic] number the 60 percent is calculated.

[336]On September 19, 2002, the IWG held a meeting to provide answers to bidders’ question. Ms. Douglas and Major Keleher were invited to this meeting. In the afternoon, Mr. Pyett posted Amendment #2 to the RFP which comprised questions and answers from bidders. Mr. Gerrie’s question was not included in the Amendment, which is a concern to the court as to whether it was intentionally withheld by Mr. Pyett.

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[337] The following day, Mr. Gerrie pointed out to Mr. Pyett that the amendment did not include an answer to his question and requested a response. Mr. Pyett answered as follows:

I apologize for missing your question in the Amendment yesterday. In response, the numbers provided in Appendix 1 to Annex C are for evaluation purposes only in order that we may arrive at a total bid price for each bidder.

Upon Contract award, these fees would only be paid in the actual instance where the service is provided.

As CF estimates show only 40 percent of members are home owners, it is possible that the actual usage for this service would be closer to 40 percent than the 60 percent indicated. However, as this number is used purely for evaluation and is consistent for all bidders, no amendment will be made to the document.

[Emphasis added.]

[338]Because Ms. Douglas was the acknowledged expert on procurement, when she testified she was asked in chief by the defendant how the Contracting Authority was supposed to deal with questions from bidders.

The contracting officer receives questions from the potential bidders and forwards those questions, when they’re technical, forwards them to the client department for a response, vets the response to make sure that it’s consistent with the technical requirements, in other words, the response doesn’t mean that the Statement of Work or the evaluation criteria need to be amended, because if they do, then the Contracting Authority has to do the amendment. They post the questions and the answers on the MERX so that all of the bidders who have the RFP can see all of the answers, all of the questions that have been asked by all the bidders and all of the responses that are provided

[Emphasis added.]

[339]She was not asked about Mr. Pyett’s answer to Mr. Gerrie in chief. For this reason, when questioned in cross-examination on the events of the 2002 RFP having to do with PMS, I ascertain that she was caught off guard. She struggled to find an explanation for Mr. Pyett’s conduct, but ultimately could not. In the end, I judged her to be flabbergasted by his actions.

Q.And you said that there are certain questions that would be forwarded to the Technical Authority for response?

A.Yes.

Q.Would you consider this to be such a question?

A.Yes.

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Q. It doesn’t appear that Mr. Pyett has sent this to the Technical Authority for a response.

A. In this chain, that’s correct.

Q. You’ll see, in the third....

A. But if he -- he could have, he could have sent it, got a response back, and then responded to the e-mail that he had received, as opposed to forwarding the whole thing. I don’t know. I mean, it’s not a decision that David would make on his own. To my -- to my knowledge, I wouldn’t -- I wouldn’t think he would either.

Q. Well and it appears that Mr. Gerrie is following up at 10:46 a.m. and David replies at 10:58?

A. Yes, that’s what it looks like.

...

Q. In Mr. Pyett’s third paragraph, in the top e-mail, he says:

As CF estimates show only 40 percent of members are home owners, it is

possible that the actual usage for this service would be closer to 40 percent than the 60 percent indicated.

A.Okay.

Q.If the CF estimates show that only 40 percent of members were homeowners, why would the inflated number of 60 percent be used here?

A.I don’t know.

Q.And you have...

A.I don’t know.

Q. ...no explanation for why an amendment wouldn’t be made to make the number more accurate.

A.None.

[340]Mr. Pyett followed Ms. Douglas as a witness. While he knew little about relocation, he was experienced in matters of procurement, being with PWGSC since 1993.

[341]He was asked questions in chief concerning his response to Mr. Gerrie. No question addressed the issue of his providing this information to one bidder and not by amendment. I do not believe that any response was possible in that he had clearly broken standard protocol of ensuring all bidders have the same information.

[342]He explained however, that he did not review this request with the technical authority because it was based on an estimate. As such, he thought it was fair to all bidders and was therefore not necessary. He also testified that he had no information on actual usage.

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[343]I find his answer not credible in light of Ms. Douglas’ clear statement that she could not understand how he could provide these answers himself without involving the technical authority. She also could not understand how an amendment would not be made to correct the estimates. This was not testimony she wished to give in my estimation. I have already indicated that I find Ms. Douglas to be a credible witness.

[344]Mr. Pyett had no actual information on PMS volumes, yet opined that the estimates were possibly incorrect, suggesting that actual volumes were one third lower than estimates.

[345]Accordingly, an “estimate” on a bid item representing millions of dollars can be off by as much as one third.

[346]The other problem in his answer concerns the distinction that he provides between actual volumes and estimated ones. He points out that “fees would only be paid in the actual instance where the service is provided.” Against this backdrop, he tells Envoy that bidding will be based on estimates. In effect, he is saying that actual volumes do not matter and effectively directs Envoy to use the estimated volumes because it “is consistent for all bidders.”

[347]By this response, Mr. Pyett has boxed himself in when he opened RLRS’ financial bid and sees the PMS 0 percent ceiling price quote. I find that he realized that RLRS had used actual volumes when he had clearly told Envoy that this could not be done and directed Envoy to use the estimated volumes in contradiction to the requirement of fairness to all bidders. I add to these conclusions below.

[348]I find that he cannot take RLRS’ 0 percent bid to his superiors without being the subject

[349]Perhaps worst of all, it is a clear direction that the bidders cannot rely upon actual volumes and must bid using the estimated volumes. On this basis, RLRS’ bid was fundamentally noncompliant.

[350]On top of all the other problems with this RFP - no evaluation criteria, an inappropriately shortened tendering period and the failure to hold a promised bidders’ conference because it ran behind time - his situation as contracting authority in being responsible for the overall conduct of the bid is already extremely problematic, leaving aside the additional problems caused by his response to Mr. Gerrie.

[351]I conclude on the basis of his conduct, that his decision was to conceal RLRS’ bid of 0 percent to avoid any scrutiny of his failures as Contract Authority of the RFP.

Mr. Pyett Recognized the Tender was Unfair Because RLRS Had Used Actual PMS Volumes

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[352]I find that any reasonable person in Mr. Pyett’s circumstances would have been surprised, to say the least, after all the bids were open, by the realization that RLRS, unlike the other tendering parties had not bid zero dollars for PMS, the difference with Envoy’s bid was $42 million.

[353]Mr. Pyett, as the person charged with conducting a major procurement process, would have the extra added responsibility of ensuring that nothing untoward impinging on its integrity would occur on his watch.

[354]Common sense dictates that PMS would not be provided free of charge by property management professionals. Mr. Pyett saw that other bidders had tendered as much as $42 million

for the services which must have reflected fair market value. This excludes any possibility of the 0 percent bid originating from a concession on the part of RLRS’ Third Party Suppliers.

[355]The question of the inaccuracy of the PMS volume estimates was live in his mind as the issue was raised by Mr. Gerrie requiring him to breach PWGSC tendering protocols, something he had to be painfully aware of. He had acknowledged that the estimates were off by as much as one third. He had no knowledge of how accurate they were.

[356]The PMS financial tendering formula was set, but questions had been raised about the veracity of the estimates. He knew that bidders were supposed to rely upon the estimated volumes. He knew the magnitude of differential of $42 million was simply too great to be written off as a business decision. Mr. Pyett was not an unintelligent person. A moment’ s reflection had to force his mind back to the formula, back to the queries on the estimates, back to the realization that RLRS would know the actual historical volumes and to the obvious conclusion that it had tendered using historical PMS volumes, when everyone else had relied upon the estimates, as he had told Envoy to do, and which he knew were at least one third off.

[357]I readily find on the balance of probabilities that Mr. Pyett was aware that there was a significant problem with RLRS’ bid on PMS and that Mr. Pyett knew it related to RLRS using actual PMS volumes to tender or otherwise turned a blind eye to this probability.

[358]Finally, if not from the circumstances leading up to opening the tender, Mr. Pyett impliedly admitted that RLRS used insider information during cross-examination.

Q.But you didn’t care how accurate the estimate was?

A.For the purpose of bid evaluations, no.

Q.No. So, I guess you didn’t care if bidders knew how accurate the information

was.

A. Everyone was provided with the same information.

Q.But it seems some bidders had more information than others, wouldn’t you agree?

A.Possibly.

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Q. Yes. Royal LePage, to be specific.

A. Yes, and if Envoy had had the contract, they would have had an advantage too.

Q. Well, they didn’t have that contract, did they?

A. Not at this time.

Q. No. Not ever, in fact. In fact, nobody has had it but Royal LePage, right? A. That appears so.

[Emphasis added.]

[359]In admitting that RLRS had an advantage because it had information as the incumbent that Envoy did not, Mr. Pyett effectively admitted that the procurement process was unfair.

Rule Against Comparing Bids

[360]Mr. Pyett testified that Paragraph 4.0 of the Evaluation Procedures in Part II of the General Information section of the RFP prevented him from comparing bids. It reads as follows:

Proposals received will be compared separately against the evaluation criteria identified therein for the total requirement of this Request for Proposal (RFP) and in conjunction with the accompanying Statement of Work.

[Emphasis added.]

[361]This explanation, which I find to be bogus, was also used by Mr. Goodfellow to justify the fact that he took no action when RLRS also bid 0 percent on PMS in the 2004 RFP.

[362]The rule against comparing scores is to prevent arriving at a score by comparing it with another bid as opposed to relying upon the evaluation criteria.

[363]The issue is not about evaluating or comparing a single number inserted as a ceiling price which was glaringly a complete outlier quote that jumped off the page of Mr. Pyett’s rollup of all the bids. I find that Mr. Pyett was aware, by the magnitude of the difference between the bidders that, at minimum, there was a fundamental problem that raised issues as to the integrity of the procurement process.

[364]He found himself in a conflict of interest in carrying out an investigation of RLRS’ outlier quote on PMS by his knowledge that he may have contributed to it, or, if an investigation ensued, would be severely criticized for breaching fundamental PWGSC tendering protocol.

[365]Issues concerning the integrity of the bidding process are not subject to any rule which could prevent an investigation to determine whether the process is fair, any more than it could prevent PWGSC from taking corrective measures from a conclusion that the process was unfair.

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[366]To permit a term in the RFP to prevent obvious unfairness in a process which is premised on fairness was not credible on the part of both Mr. Pyett and Mr. Goodfellow. It would be an

acceptance by the court of an extreme dereliction in their duties as Contracting Authorities were I to accept their testimony, which I do not.

Mr. Pyett Conceals RLRS’ Zero Bid

[367]In order for Mr. Pyett to avoid the consequences of the difficult position that he had put himself in, I conclude that he followed a strategy of concealing RLRS’ zero bid to the extent possible. He did this in four ways:

1.He failed to advise his superiors of RLRS’ bid and his own actions;

2.He did not advise Ms. Douglas;

3.He did not advise Lt. Col Taillefer and Major Keleher ; and

4.He permitted RLRS to charge transferees 9 percent, thus concealing its 0 percent bid.

[368]I will examine the first three of these items in this section because they all relate to Mr. Pyett. I will consider the acquiescence to RLRS charging transferees in the next section where I will consider Mr. Singh’s similar conduct.

Mr. Pyett’s Failure to Advise his Supervisor of these Events

[369]I asked Mr. Pyett whether he advised his superior, Mr. Paquette, that RLRS had bid zero on PMS. His answer was that he did not believe so and that he prepared no reports or anything else in writing to his superiors indicating the bid outcomes in detail.

[370]The defendant is critical of my asking this question, and others seeking an explanation as to how he could not have reacted to RLRS’ bid. Indicating that I had exceeded the bounds of neutrality by doing so, the defendant requested that these passages be struck. I am prepared to accede to this request.

[371]By the time that Mr. Pyett testified, I had already concluded that, without some explanation, he must not have advised his superiors. Ms. Billings and Mr. Benoit testified that they had no knowledge that RLRS had bid 0 percent on PMS in the 2002 process and I believe them.

[372]The fact that senior management was not aware of RLRS’ bid was also contained in the report of the OAG. If Mr. Pyett had advised his supervisors it is unimaginable that they would not have advised others and senior management would have found out. Instead the OAG indicated there was a problem that only one person was conducting the financial evaluations, and pointed to the failure to provide detailed information on tender bids to management, which

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obviously supports my conclusion that Mr. Pyett, incredibly, did not report to his supervisors that RLRS had tendered 0 percent bid.

[373]The plaintiffs pled that the defendant “failed to exercise a reasonable degree of managerial oversight over those officials who were tasked with carrying out this tendering process.”

[374]My conclusion that Mr. Pyett intentionally did not advise his superiors is also formed by the logic of the situation, including: his inappropriate conduct as Contracting Authority in responding to Mr. Gerrie’s question; the failure of the defendant to lead evidence from him explaining his turning a blind eye to the egregious differences in bid outcomes between RLRS and the other bidders; the failure of the defendant to call Mr. Paquette; Mr. Pyett’s concealing the 0 percent bid from Ms. Douglas and Lt. Col. Taillefer; and finally Mr. Pyett knowingly permitting RLRS to charge transferees contrary to contract terms.

Mr. Pyett’s Failure to Advise Ms. Douglas of these Events

[375]Ms. Douglas was questioned on the fact that her name was shown on Mr. Singh’s handwritten notes as one of the attendees at a meeting on February 24, 2003. Other participants included Mr. Pyett and Major Keleher. The note included a short statement on PMS. It stated:

Prop Mgmt fees

-bid is zero because given back to Crown.

-now in Personalized.

[376]In chief, Ms. Douglas stated that she had no memory of the meeting or anything discussed, although she admitted that if she was shown as one of the attendees she must have been there. However, she also said that in preparing for the trial, she had seen mention of RLRS bidding zero and that may have been the first time she learned about it.

[377]In cross-examination, Ms. Douglas indicated that she did not recall anything about being involved in any decisions regarding PMS, who made any decisions about this issue, why it was included as part of the financial evaluation, or why PMS had been moved into the personalized envelope. She testified “I don’t remember anything about this. I really don’t.”

[378]When questioned about the attendees at the February 24, 2003 meeting, Mr. Pyett stated that he had no memory of what was discussed at the meeting. However, he went out of his way to indicate, in no uncertain terms, that he had not told any of the attendees at the meeting about the zero bid, which would include Ms. Douglas, Major Keleher and Mr. Singh.

Q. Okay. So, when this subject came up at the meeting, would you not have been attuned to this subject, wouldn’t it have been of interest to you?

A. I would suppose so.

Q. And yet you can’t recall anything about it.

A. I do not recall anything about it.

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…

Q. How did -- these are Mr. Singh’s notes. How did he know their bid was zero? A. I have no idea.

Q. Did you tell him?

A. No, I did not.

Q. Did you tell the other people at this meeting?

A. No, I did not.

Q. Mr. Singh hadn’t been involved in the financial evaluation?

A. No, he was not.

Q.Okay.

A.Sorry, you’ve tripped -- sorry, let me retract my answer. They knew that they had bid zero because they were told the pricing for Royal LePage’s bid.

Q.At this meeting?

A.No, bef... -- I don’t recall when, but they knew what Royal LePage’s unit pricing was.

Q.Okay. So, they knew that Royal LePage’s unit pricing for the property management fees component had been zero.

A.Yes.

Q.And then at this meeting on February -- and by “they,” you’re referring to the people who attended this meeting.

A.Some of them, yes.

Q.Okay. So, Lee [Douglas] knew?

A.She may not have known.

Q.Okay. You definitely knew.

A.Yeah.

Q.Mr. MacIntosh?

A.No, he probably did not know.

Q.Mr. Lemay?

A.Yes, he would have known.

Q.Okay. Ms. Pankiw?

A.Yes.

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Q. And Mr. Singh?

A.Yes.

Q.Mike -- is that Keleher?

A.I cannot say.

[Emphasis added.]

[379]Mr. Pyett’s evidence came out unexpectedly because he wanted to correct the record. He described that not everyone that was listed as attending the February meeting knew of RLRS ’ bid.

[380]He was very certain in his answers that Mr. Lemay and Ms. Pankiw had been so advised, while Mr. McIntosh and Ms. Douglas were probably not. I am satisfied that there was some event he could recall, when the matter must have been discussed involving those he could identify. Unfortunately, he was not asked how he was aware of this information. I am satisfied that he was truthful on this testimony about who knew and who did not.

[381]The most important evidence for the purpose of this subject matter however, is that Ms. Douglas “may not have known” about RLRS’ 0 percent bid. Mr. Pyett could only make this statement if he had not informed Ms. Douglas himself, which is the point I make here.

Mr. Pyett Relied upon Ms. Douglas as his Mentor in Conducting the RFP

[382]As part of their case, the plaintiffs argued that Ms. Douglas was the de facto Contracting Authority. I would not go that far, but I do agree that she was called in to help out on many decisions. Nevertheless, she still had her own job and was not overseeing the entirety of the process. That was Mr. Pyett’s full-time job.

[383]She was quite accurately described as Mr. Pyett’s mentor; someone to be called upon when he needed help, which it turned out was quite often. I cite the evidence that the plaintiffs compiled to prove this point:

1)On March 28, 2002, Lt. Colwell provided Ms. Douglas with the Proposed IRP Contract and SOW.

2)In April, 2002, Lt. Colwell provided Ms. Douglas with the updated contract and SOW.

3)Ms. Douglas reviewed all three SOWs and provided handwritten comments. Ms. Douglas’ comments were incorporated into Mr. Pyett’s revisions to the SOWs.

4)Ms. Douglas was provided with the draft evaluation criteria. She reviewed this and made recommendations for changes.

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5)On July 25, 2002, Richard Gagne sought Ms. Douglas’ views as to whether bidders ought to be provided with an opportunity to demonstrate their various systems.

6)In August, 2002, Ms. Douglas was involved in the bid solicitation review for the 2002 IRP Contracts.

7)Mr. Pyett deferred to Ms. Douglas’ expertise with respect to the scoring mechanism for the 2002 contract.

8)Mr. Pyett directed Major Keleher to “present your rationale” to Ms. Douglas. It was Mr. Pyett’s evidence that Ms. Douglas would provide better feedback than he could.

9)Ms. Douglas had influence - in my view she decided this issue - over the development of the scoring scheme presented to the evaluation committee by Major Keleher.

10)On September 11, 2002, Mr. Singh invited Ms. Douglas to attend a meeting of the “members of the team” to “review and analyse the Evaluation Criteria and the weight allotted for segments therein.” The meeting was scheduled to proceed on September 19, 2002. I note that this was the same day the Q and A amendment was issued.

11)On September 25, 2002, Mr. Pyett asked Ms. Douglas if she would debrief the evaluation committee because he was not sure what he wanted to tell the team members. On October 1, 2002, Ms. Douglas provided this debrief and gave instructions to the evaluation committee.

12)Mr. Pyett asked Ms. Douglas to run the Envoy debrief session with the bidders as he deferred to her greater experience. Mr. Pyett knew that there were going to be contentious issues and was not sure that he was 100 percent comfortable in dealing with contentious issues. Mr. Pyett therefore asked Ms. Douglas to run the session so that he could see how he should handle it.

[384]The irony of this allegation concerning Ms. Douglas, and similarly Major Keleher for different reasons, is that had she been the Contracting Authority with responsibility to supervise the process in its entirety, none of this may have happened. I am satisfied on the balance of probabilities that Mr. Pyett was of the same view. That is why, despite his consistent practice of asking her to help out in difficult situations, she was not brought in on the problem of PMS volumes, nor advised about RLRS’ zero bid.

[385]I also accept that it was important for him to correct the record to state emphatically that he had not passed on information about RLRS’ bid to others. This means that the three people he could identify with certainty who knew of RLRS’ bid had learned from other sources, which

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could only have been from RLRS, as he told no one in PWGSC. This is not totally improbable given that Mr. Singh and Mr. Belair are the only witnesses who incredibly testify that RLRS was allowed to charge transferees for PMS after bidding 0 percent for these services. This suggests that they may have discussed the matter to achieve agreement once a strategy to explain RLRS’ unlawful behaviour.

[386]The other two persons identified as knowing that RLRS had bid zero were Mr. Singh’s manger, Ms. Pankiw, the Project Authority at the time, and Mr. Lemay, the RCMP’s Departmental Authority. These latter two persons were not called. I am of the view that both should have testified because of their involvement in the 2002 process, not to mention clarifying who knew about RLRS’ bid, which is an important issue in this litigation.

Lt. Col Taillefer and Major Keleher were not Advised RLRS had Bid Zero for PMS

[387]Lt. Col Taillefer indicated that he was not aware that RLRS had bid zero for PMS in the 2002 or 2004 tender processes. This might not be completely unexpected, because the evidence shows that he was a busy officer with four sections to administer. However, I would have expected Major Keleher to know about RLRS’ zero bid, because he was the person most involved from CF that worked on the IRP.

[388]Major Keleher was questioned on this issue as one of the attendees at the meeting of February 24, 2003. I have already indicated that his testimony throughout his questioning and on this issue was crystal clear. He answered the questions succinctly and directly without any attempt to mislead or craft the evidence in any way.

[389]Like Ms. Douglas, Major Keleher strikes me as the sort of person who would have understood immediately that something was afoot with RLRS bidding zero. He also would not have been baffled by someone saying that the 0 percent bid meant no charge to the Crown.

[390]The record demonstrates that Mr. Singh, Ms. Douglas and Major Keleher were the most knowledgeable persons on relocation and the RFP, all three having been involved in the IRP over a considerable period of time. His evidence on knowing about RLRS’ zero bid is as follows:

Q. And it’s saying Royal LePage’s “Bid is zero because given back to Crown. Now in Personalized.” Do you have any recollection of this discussion?

A.No, I don’t.

Q.Do you have any recollection of being made aware that Royal LePage’s pricing for property management or ceiling price was zero?

A.No.

Q.Do you recall anybody raising concerns at any point after the contract award that Royal LePage had provided a zero percent ceiling rate for property management services?

A.The first time that it came to my attention was during meetings that I had with my counsel.

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Q. In preparation for trial?

A.Yes.

[391]Major Keleher had enough about being asked about his recollection that he ignored the question put to him about his recollection of knowledge of the 0 percent PMS bid. Instead, he provided an unequivocal direct statement that the first time he learned about the bid was in preparation for the trial. I accept his testimony.

[392]On the basis that Major Keleher was not aware of the zero bid, I am satisfied that Lt. Col Taillefer was also not advised. I conclude therefore that the CF personnel on the IWG were intentionally not informed of RLRS’ 0 percent bid. This is another exceptional fact: the client department which was the overwhelmingly dominant user of these services, and the department most affected by the program, was not aware that RLRS had bid zero or that it subsequently was charging its members for services that were supposed to be free.

[393]These circumstances further support my finding that information on RLRS’ bid was intentionally kept from key people who should have been fully briefed on this extraordinary situation.

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The Zero Bid Contained in Contract Documents

[394]Mr. Pyett was asked questions to demonstrate that Departmental Authorities would have known about RLRS’ 0 percent bid from the contract document distributed to them at some undisclosed time. He provided a qualified affirmative response. Two of the three departmental authorities, Mr. Singh and Mr. Lemay, were aware of the zero bid, making this issue of concern only to the CF personnel.

Q. Now, the zero bid or the zero rate from Royal LePage’s proposal would have been carried over into their contract, would it not?

A. That is correct.

Q. Okay. So, anybody who had a copy of the contract should have known. A. Potentially.

Q. And who would have had a copy of the contract?

A. Each of the department heads.

Q. Okay. So, to our list there, we can add each of the department heads.

A. Like, in this case, it would be Ram, Gus and Jacques Taillefer.

Q. Okay. So, they knew.

A. Gus may not still have known because he’d just joined the team at that time.

Q. Okay. But all of -- each of the Departmental Authorities for each of the clients,...

A. Yes.

Q. ...they would have known.

A.Yes.

Q.They would have had to have known, right? Because they’re responsible for reviewing all of the financial transactions under the contract.

A.Yes.

[Emphasis added.]

[395]When Mr. Lunau asked these questions, I had not yet ordered the production of RLRS’ commitment agreements. These documents indicated that RLRS was charging transferees 9 percent for PMS. The evidence shows that these were forwarded to the Departmental Authorities on January 3, 2003. On January 29, 2003, Mr. McIntosh advised that he had reviewed the commitment letters and found them acceptable. I understand Mr. Lemay was the Departmental Authority at the time.

[396]There is no evidence of when the contract documents were provided to the Departmental Authorities, but it would clearly be after the signature of the commitment letters as they were a

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component of its contents. The contracts did not start until April 1, 2003. The commitment agreements had to be delivered within six weeks of contract award.

[397]The plaintiffs have not established that the Departmental Authorities were aware RLRS had bid zero. I accept Mr. Pyett’s original answer that “potentially” they could have learned it from the contracts. However, the potential appears very slim. If previously advised by the commitment letters that RLRS was charging 9 percent for PMS, and having approved the commitment forms, a single number buried in a large bundle of contract documents is not something that I could see any of the departmental authorities necessarily noticing. As noted above, the contract documents were never put in evidence, nor was any other evidence showing where and how reference was made to RLRS’ PMS bid in the three contracts.

[398]I accept the evidence of Lt. Col Taillefer and Major Keleher that they were not aware of the zero bid. I accept that they would not have contemplated a 0 percent bid from RLRS after reviewing the commitment forms which indicated that transferees would be charged fair market prices, for the services. A zero percent figure in these forms would have stopped them in their tracks

[399]I accept Mr. Pyett’s evidence that he did not tell anyone about RLRS’ zero percent bid. I find that the failure to advise these persons, and particularly Ms. Douglas, fits into a persuasive pattern of circumstantial evidence indicative of an intention to conceal this information. I attribute this attention to Mr. Pyett’s concerns that the zero percent bid was unfair and that he had played a part in its unfairness, which if revealed, would redound to his disadvantage. It also would have made little difference in the outcome. All other bidders had already been eliminated on the technical evaluation by the time he carried out the financial evaluation.

[400]Mr. Singh plays the more central role in this issue. Mr. Pyett’s situation is more defensible as he did not participate in the 2004 procurement process. It is not sufficient, however, for me to exonerate him, as I am satisfied that he was aware that everything about the RLRS bid, and subsequent charging of transferees, was improper. He was required to take some positive step to protect the procurement process as he was charged with promoting and upholding its integrity.

CHARGING FOR PROPERTY MANAGEMENT SERVICES AND THE CONCEALMENT THEREOF

Introduction

[401]The evidence regarding RLRS charging transferees for PMS is highly relevant. It speaks to the issue of whether repetition of RLRS’ zero percent bid in 2004 was noncompliant because the Crown had knowingly allowed RLRS to breach the 2002 contract because the same provisions of that RFP were repeated in 2004 with the same results.

[402]The Crown’s conduct on this issue is similarly highly relevant in assessing whether the Crown breached its implied contractual duty of fair and equal treatment of bidders based on the same circumstances. The Crown’s behaviour also raises questions about the directions given to

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bidders during the open tender period, which bear some similarity to those given by Mr. Gerrie described above.

[403]I begin my analysis of this issue with a review of the importance to RLRS, and to Mr. Pyett and to Mr. Singh, of concealing the fact that RLRS charged transferees for PMS despite having tendered a 0 percent bid for the services.

[404]I will then analyze credibility issues relating to Mr. Singh’s testimony and conduct which is fully exposed in these events. This is important because the three factual issues that I am required to consider very much turn around my conclusions on Mr. Singh’s credibility.

[405]I will consider three of the most crucial controversial factual issues. They are interrelated, and, taken together, reflect on Mr. Singh’s credibility. They are:

(1)whether Mr. Pyett advised Mr. Singh that RLRS had bid zero percent on PMS, and at the same time, advised him that transferees would be charged because the bid was at no charge to the Crown, as claimed by Mr. Singh;

(2)whether the court may rely upon Mr. Singh’s notations on his note of a meeting on February 13, 2003 with various persons explaining why property management fees bid was zero; and

(3)whether Mr. Belair and Mr. Singh’s justification for charging transferees for PMS is tenable.

RLRS’ Motivation to Charge Transferees for PMS

[406]While I am most interested in the issue of concealment of the 0 percent bid, I conclude that there were two reasons for charging transferees despite the bid proposal that they would receive them free of charge.

Firstly, Concealing RLRS’ 0 Percent Tender on PMS

[407]I conclude that the most important factor motivating RLRS to charge transferees was that its tender would have been challenged if its 0 percent bid was exposed. This was avoided by sending out thousands of commitment forms across the country indicating that RLRS had bid a fair market ceiling price of 9 percent for PMS in the prices it was charging transferees. This ironically is the basis relied upon by RLRS in arguing that its pricing structure was known.

[408]If the 0 percent PMS Ceiling Price bid became public knowledge, RLRS and the government would have faced a battery of challenges from the other bidders for all the same reasons raised in this litigation. Given the recognition by the industry that the estimated PMS volumes in the RFP were inflated, they would have instantaneously understood that RLRS’ bid on PMS was obviously unfair because the incumbent had used information that only it possessed after they were instructed to use the estimated volumes.

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[409]RLRS also had to keep its bid secret to avoid a challenge by a bidder such as Prudential that its tender proposal was noncompliant. Although it had been eliminated on its technical merit score, its shortfall was only 55 points on a total of 15,000. Accounting for the possibility of making up the shortfall on the “Exceeds” category, as described in some detail above, it would have been well situated to win the 2002 if RLRS was disqualified by its bid.

[410]In this regard, one of the lingering mysteries in the whole bizarre story of PMS, in both the 2002 and 2004 RFPs, is the court’s inability to understand why RLRS would have run the risk of being challenged on its bid - including being found non-compliant - particularly given its position of strength going into these tender processes as the incumbent.

[411]RLRS understood the rules of fairness as well as anyone. Mr. Lockington and Mr. Belair must have understood that by using the actual PMS volumes to make its bid, it had an unfair advantage over its competitors.

[412]In my view, it makes no sense for the incumbent to have risked court challenges and losing the tender altogether, while occupying the ascendant position in the relocation industry in Canada. I recognize at the same time that some of the economic advantages it gained on other bidders by doing so – worth $42 or $48 million depending on the RFP - could be applied to its bottom line to make the contract more profitable. Nevertheless, I remain astounded that it would act knowingly in what obviously was such an unfair manner.

[413]In any event, by sending out thousands of commitment forms across the country indicating that transferees would be charged a fair market ceiling price of 9 percent for PMS, no one knew or would have even contemplated the RLRS 0 percent bid. It was successfully concealed until the OAG opened up RLRS’ PMS Pandora’s box.

Secondly, Avoiding a Significant Increase in the Use of PMS

[414]If the actual volumes of PMS represent less than 1 percent of the estimated number, the question that struck the Court was why RLRS would not simply absorb the costs in the larger savings generated from the zero percent PMS bid. Why run the risk of breaching a multimillion dollar contract for $200,000 to $300,000?

[415]Besides concealment, I am satisfied that if PMS had been offered to transferees for free, there would have been a dramatic increase in use of Directory PMS services. Arm’s-length suppliers not on the Directory, being those engaged by the transferee but paid out of the Personalized Funding Envelope, as well as those paid directly by the transferee with its cashed out funds, could not compete with an offer of free unlimited professional PMS services. Even a transferee’s brother-in-law for free services could not compete with this offer.

[416]I say unlimited PMS, because not only was the annual cap of $1000 or $1500 never attained for free services, Mr. Singh also confirmed that the government would continue to pay for these services as long as the transferees lived outside the location where their homes were rented.

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[417]The significant expected uptake in use of Directory PMS is one of the reasons that I am of critical of the Government only requiring that RLRS pay back only those transferees who had actually paid for PMS services out of their Personalized Funding Envelope.

[418]I do not know if recourse was limited to payment of Directory PMS providers, but I hope not. The Crown has already breached its duty of fidelity towards transferees and the agreement that it made with them to give them funds as an incentive not to sell their homes. Hopefully, they did not nickel and dime Transferees on this item as well. In my view, RLRS ought to have been assessed the maximum amount for the period that any transferee’s house was rented.

[419] In addition, RLRS should have been required to pay some significant multiplier applied to the actual minimal use of these services, representing those borderline transferees who might have been convinced to rent their homes had PMS services been free throughout their tenure abroad. At the very least this would have compensated the defendant for undermining its incentive program upon which was intended to encourage transferees to rent so as to save on the greater costs incurred by sale of their homes.

[420]In passing, I also cannot help but wonder how the government would leave in the hands of the company with one of the largest realtor operations in Canada, the responsibility of advising a transferee whether to rent or sell. It would seem to me, that there was a double monetary incentive to discourage transferees from using PMS: avoid RLRS paying for those services and increasing the opportunity for its realty division to earn significant commissions on the sale and purchase of homes across the country.

[421]Coming back to the re-payment of transferees PMS expenses exacted from RLRS, I find that the slap on the wrist that RLRS received for the serious breach of the terms of both the 2002 and 2004 contracts indicative of the continued favouritism RLRS received from the government in these matters.

[422]Two explanations come to mind. Firstly, this litigation may have played on the minds of the defendant, although I find that RLRS has failed in any manner to come to the rescue of the Crown and left it almost defenseless in respect of the plaintiffs’ damage issues.

[423]Less speculative and much more pertinent to these proceedings is Mr. Belair’s letter of March 13, 2004 which will be analyzed below. Basically, it was a sign off by the Contracting Authority and the Project Authority, along with approving RLRS’ commitment forms on PMS, to allow RLRS to proceed in the fashion that it did. If these authorities had no problem with charging transferees, who could blame RLRS from going ahead?

Crown Employees’ Motivation to Permit RLRS to Charge Transferees

[424]I have already explained my reasoning for Mr. Pyett concealing RLRS’ bid from others being what I would describe as “bureaucratic cover-up”. He committed a grave dereliction in his duties by responding to Mr. Gerrie’s memorandum. He should have done so by amendment. He should not have provided advice on volume estimates as this was within the exclusive responsibility of the Project Authority. He should not have acknowledged that the estimates may

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have been as much as one third off. Worst of all, he should not have directed Envoy to bid using the estimated PMS volumes because it was “consistent for all bidders”, when RLRS had based its tender on the historical actual volumes that it alone had access to.

[425]Mr. Pyett pleads that he really did not understand issues relating to PMS, which only came to his attention after RLRS bid zero percent on its tender proposal. I partially accept that testimony in that this would not have been a subject matter that the IWG was concentrating on. Major Keleher made a similar comment.

[426]Furthermore, Mr. Pyett acknowledges that his initial understanding was that transferees were not to be charged. This subsequently changed to accepting that they could be charged, but without any explanation or any of the details as to how this transformation in views came about, at least not before being faced with the commitment forms. I say that because he ascribes his reconsideration to Mr. Belair’s letter of March 19, 2003. But, as this comes far too late after the commitment letters are received, this cannot be anything but a post facto rationalization.

[427]My conclusion is that Mr. Pyett, when faced with the choice of announcing to the world all the mistakes that he had made in this procurement process, instead pursued a strategy of concealment. RLRS had already won the bid on the technical evaluation, so bidding zero percent had no impact on the outcome. In that sense, I conclude that he went along with the commitment

forms, long before receiving in writing Mr. Belair’s explanation. To use the plaintiffs’ pleading he truly turned a blind, or at least a reckless, eye to what RLRS was up to. This is similar to his decision to not investigate what the actual PMS volumes after the fact.

[428]Mr. Singh’s motivation is much less clear. The defendant argues that there is no discernible explanation for Mr. Singh to have favoured RLRS to the extent of intentionally permitting it to breach the 2002 contracts. I do not agree inasmuch as I have found that he was aware that the PMS volumes were grossly inflated for all the reasons described. Perhaps there was a similar “bureaucratic cover-up”. An investigation into these egregiously incorrect volumes would surely have followed disclosure of RLRS bid, the primary responsibility of which would have been traced back to him and his oversight functions on the pilot project.

[429]The plaintiffs went further by attempting to suggest that Mr. Singh obtained some personal benefit favouring RLRS by it making donations to a charity that he was involved in. Mr. Singh denied the suggestion outright, but I admit to some surprise by Mr. Belair’s answer which was not the outright denial expected. Instead he replied to the question only that he could not recall any such donations, which is the standard answer resorted to often by witnesses in trouble in cross examination. He also deflected the answer to others who would have made that decision.

Q.Have you ever heard of a charity called the Sai Nalayam Spiritual organization?

A: The only thing I know is he left once a year somewhere to help some organization. What it was, who it was – I have no idea.

Q.Okay. Did Mr. Singh ever solicit donations from Royal LePage for any charity?

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A.Not that I remember.

Q.Did he ever ask for any other types of support or assistance for any charity?

A.Not that I remember.

Q.Do you recall if you or Royal LePage made donations to any charities at his request?

A.Not that I remember. And any request would have went to Toronto.

[October 18, 2011, pp. 57-58.]

[430]It is hard to imagine that Mr. Belair could not recall whether RLRS made a donation to Mr. Singh’s charity. It obviously would have been totally improper for RLRS to provide an indirect benefit to Mr. Singh by contributing to a charity that he was involved in when he was the Project Authority of its relocation contracts with the Crown. He had already just dodged one bullet by participating in a cruise with Ms. Douglas for which, in my view, RLRS should have been reprimanded along with Ms. Douglas. Moreover, I would not expect the person having primary responsibility to oversee the relocation contracts with the Crown not recollecting whether RLRS had made a contribution to the Project Authority’s charity. However, the issue was not followed up on and I leave it at that.

[431]Besides this testimony, I find that Mr. Singh had too close relationship with RLRS over the years as Project Authority by his attendance at their events, the most blatant example being his travel to Toronto to participate in a charity golf tournament paid for by RLRS, supposedly on his own time, which was never verified by the defendant.

[432]Despite my uneasiness, there is insufficient evidence for me to conclude what motivated Mr. Singh to provide a benefit to RLRS by approving its charging transferees for PMS. As shall be seen, I discount entirely the outlandish justification that its proposal was “at no charge to the Crown.”

[433]Accordingly, my conclusion on Mr. Singh’s bona fide support for RLRS’ contention that it was justified in charging transferees because it was at no cost to the Crown, is based upon whether there exists any logical or reasonable explanation for such a conclusion, irrespective of whether or not any apparent motive exists.

Mr. Singh’s Credibility on RLRS Charging Transferees

RLRS’ Relocation Packages and Commitment Agreements

[434]As described above, RLRS was required to submit a copy of the Commitment Form to Mr. Singh, the Project Authority, Departmental Authorities and the Contract Authority within six weeks of the award of the contract for approval.

[435]The Crown did not include copies of RLRS’ Relocation Packages or Commitment forms in its productions although relevant to a central issue to these proceedings. While many questions

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were asked of witnesses, particularly of Mr. Goodfellow, and the OAG report made the charges to transferees for PMS amongst its most shocking revelations, no documents were introduced into evidence to support this testimony prior to Mr. Singh testifying.

[436]On November 23, 2011, the defendant’s counsel led evidence during Mr. Singh’s examination in chief that Mr. Singh had reviewed the information package provided by RLRS under the 2002 contract. Mr. Singh was asked if the information package contained any financial information. He testified that “it’s not supposed to carry financial information.” When asked again if he could recall if the package contained any rates he replied, “I don’t think so, no.”

[437]Mr. Singh was then asked about the written agreements under the 2002 contract that Third Party Service providers needed to sign to agree to participate at the rate specified in the bid for their area of expertise. Mr. Singh stated that he was provided the forms and approved them. Again, he testified that he didn’t recall the forms speaking directly about a rate for the service.

[438]Mr. Singh was later asked about the written agreements that were provided under the 2004 contracts. He testified that once the contract was awarded, RLRS had a specific timeframe to submit the documents that would be provided to the third party service providers. When asked if these agreements included rates for specific services, Mr. Singh testified that he did not recall seeing any rates in them.

Order to Produce Commitment Forms & Relocation Packages

[439]The plaintiffs objected to this line of questioning, as the defendant had not produced the relevant documents to which Mr. Singh’s testimony related, namely the information package provided under the 2002 contract, or the written agreements under the 2002 contract or the 2004 contracts.

[440]Oral arguments were heard on November 24, 2011. Following this, I ordered the production of the information packages, the Third Party Supplier written agreements and the Directory of Third Party Suppliers, all in respect of PMS for both the 2002 and 2004 contracts.

[441]Despite leading evidence about these documents in examination in chief, the defendant then sought the opportunity to make written submissions with respect to admissibility. Following written submissions, I then issued another Order determining that the documents were admissible in evidence. I awarded costs in any event of the cause for that ruling made in favour of the plaintiffs.

[442]Included in my order was a conclusion that these documents should have been included in the Crown’s productions. They are obviously relevant to the pleadings and the extensive evidence that had been already gone in unopposed. I am specifically referring to the fact that the RLRS was charging transferees despite its zero percent bid.

[443]I suspect that the defendant was objecting so strenuously to the admissibility of these documents because they are hard proof that Mr. Singh and Mr. Goodfellow had been untruthful on this vital issue that RLRS was charging for its services despite having denied it on many other occasions, in addition to when testifying in front of me.

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New Productions from the Defendant

[444]Following my order, the defendant produced portions of the Relocation packages and commitment forms for both the 2002 and 2004 contracts indicating that RLRS was charging 9 percent for PMS.

[445]Entered into evidence at the same time was a copy of a letter from RLRS to Mr. Singh dated January 3, 2003 submitting the commitment agreements with the third party suppliers including that for PMS. This letter was forwarded by Mr. Singh to Mr. Goodfellow on September 28, 2003 with a note written on it indicating that it was in reference to a complaint. Finally, copies of four letters dated January 20, 2003 to Mr. Goodfellow, Mr. Singh and the Departmental Authorities of DND and the RCMP enclosing the 2005 commitment letters were filed with the court.

[446]An email from Mr. McIntosh of the RCMP to Mr. Singh, Col. Taillefer, Ms. Pankiw and Mr. Lemay dated January 29, 2003 was produced in the regular course. It notes receipt of the “forms from RLRS”. Below in the body of the letter, Mr. McIntosh makes reference to the Commitment Form for Realtors. It is assumed that RLRS complied with the contract terms and all persons named in the email chain received the documents.

[447]I note again that, in a fashion not dissimilar to a broken record player which unfortunately will be left playing throughout these reasons, neither Mr. Lemay nor Ms. Pankiw testified at trial. They could have brought more light to bear on these issues. I particularly expected Ms. Pankiw to testify as Mr Singh’s manager and the designated Project Authourity of the 2002 process, even if Mr. Singh carried out most of the position’s responsibilities. She had been identified by Mr. Pyett as someone who was aware that RLRS had bid zero and it is now determined that she also received commitments letters indicating that the price for PMS would be 9 percent of annual rent. Her absence raises a presumption in my mind that her testimony would not assist the Crown’s case and in particular would not corroborate the testimony of Mr. Singh. It is assumed that Mr. Singh would have kept his manager informed of events occurring on the file.

[448]Moreover, the fact that we have evidence of RLRS’ bid being known by a more senior TBS manager raises the issue of how much further knowledge of this misfeasance went up Treasury Board’s hierarchy. The Court simply does not know because the Crown thwarted any possibility of this information receiving wider diffusion.

[449]Col. Taillefer received copies of the 2003 commitment letters. But, as he was not aware of RLRS’ zero bid, he would not know the commitment price of 9 percent was not the same as the bid price. Mr. McIntosh passed away prior to trial.

Mr. Singh is Recalled and Acknowledges Being Aware of RLRS’ Charging Transferees

[450]The defendant then recalled Mr. Singh to continue his testimony in March 2012. On March 21, 2012, Mr. Singh testified in chief that the commitment form from 2002 stipulated a rate for PMS and he agreed that a rate of 9 percent, not zero, was included in the form. Mr. Singh

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then stated that he was aware after the award of the 2002 contract that RLRS had quoted a ceiling rate of zero for PMS.

[451]He also said that when he saw the commitment form he was not concerned because “the Crown doesn’t pay for property management, so it’s zero to the Crown.”

[452]Mr. Singh’s trial testimony of being aware of charges to transferees also contradicts information that he provided to the OAG in 2006 and answers to undertakings provided to the plaintiffs during examinations for discovery.

Mr. Singh’s Responses to the OAG

[453]On Oct 10, 2006, Mr. Singh was advised of the opinion of the OAG that while the contract called for 0 percent commission rate for PMS, the contractor had been charging 9 percent. PWGSC indicated that they had not amended the contract to allow for this. Mr Singh replied:

We do not pay for this service, individual employees pay for this.

Based on the comments from the OAG I have asked for a complete audit of all files that had this service rendered. They are supposed to provide me with a complete report in addition to immediately reimbursing with interest, all charges to affected relocated employees.

[Emphasis added.]

[454]The court was never provided with any of the materials. By this reply, it was understood that RLRS was not paying for the service but when he saw the comments of the OAG, Mr. Singh took immediate action to have the transferees repaid.

[455]Then, on October 12, 2006, Mr. Singh was asked about the commission rate for property management services by the OAG. He was asked whether TBS was aware that the contractor was charging a 9 percent commission for PMS. When Mr. Singh stated that TBS does not get a copy of the invoices, and therefore could not be aware, he was reminded that TBS gets a copy of the signed agreements and was asked to confirm that there is no paper trail on this. Mr. Singh replied:

Once and for all -

TBS was not aware of a 9 percent charge by RLRS for Property Management. This service is an option that relocating employees opt for from either personalized funds or personal funds from their pocket. We do not audit this since it is a private arrangement between relocating employees and the [sic] service provider who has since been asked to conduct an immediate audit and to report to the Project Authority (Ram Singh) with the findings fully identifying the affected

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files and the amounts, if any, charged. They have also been advised to reimburse such amounts with interest.

I learnt last evening that the possibility exists for a misunderstanding that RLRS did not charge for property management services but for other services employees requested such as administering payments to individuals who mow lawns etc. for our employees.

I reiterate, TBS was and is not aware of any charges for property [sic] management.

[456]This answer was simply not truthful. Mr. Singh admitted under cross-examination that the answer, “TBS was not aware of a 9 percent charge for property management” as provided to the OAG, was not true. He then tried to claim that at the time of the above statement he could not remember seeing the rates in the agreements and that he did not have the documents “with him”.

[457]In addition, during cross-examination Mr. Singh provided the following answer to the question regarding the OAG advising of its interpretation of the PMS provisions.

Q. And the Auditor General later found that your interpretation of the contract was incorrect.

A. Yes, they -- at that point we were told that our interpretation was wrong.

…

Q. Yes. And they were wrong since 2002?

A.According to the OAG.

Q.And you don’t accept that.

A.No, because we were under the impression that the Crown does not pay, the transferee does.

[458]There is no evidence that Mr. Singh ever advised the OAG of his [“we”] opinion that RLRS was entitled to charge transferees because it was at no cost to the Crown.

[459]Instead, he was untruthful telling them that he was not aware RLRS was charging for the services. He thereby contradicted, not only his knowledge that he knew RLRS was charging for the services, but his opinion expressed in court that RLRS was entitled to do so and that the OAG was wrong.

[460]It might also be noted that the paper trail existed in the form of commitment forms that were not supplied to the OAG, as if provided, the OAG would have not asked the question whether TBS was aware RLRS was charging transferees. The suggestion in the third paragraph of Mr. Singh’s testimony above, that there was a possible misunderstanding regarding services not covered by the contract, appears also to be untrue as it was never mentioned during the trial.

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Mr. Singh’s Reluctance to Co-operate with the OAG

[461]This is probably the opportune moment to also review the evidence of Mr. Singh’s resistance to the OAG audit process. At the onset of the audit and in his response to the OAG’s initial request for information, Mr. Singh commented that “this is tremendous amount of work” and “Wow! I guess I will have to suspend all tasks at hand?”

[462]Mr. Singh’s resistance to the audit process continued. His responses turned from simple annoyance to accusations of misconduct on the part of the OAG audit team. For example, in June 2006, still early in the audit process, Mr. Singh received an email from the OAG providing a copy of the Entity Plan Summary and seeking comments. Mr. Singh responded with an all capitals email which stated: “IN MY PERSONAL OPINION IT IS A FORM OF ENTRAPMENT”. In his evidence, Mr. Singh acknowledged that he had deliberately capitalized this email as he was agitated and upset while repeating the allegation that he was being “entrapped” by the OAG audit.

[463]In a further email, Mr. Singh, who was responding to a routine follow up request by the OAG for outstanding information, stated that he had, “been made a scapegoat so far with unrealistic demands for data.” It was Mr. Singh’s evidence that he felt he was being treated unfairly during the audit.

[464]Mr. Singh also made accusations about members of the OAG audit team. In response to an email from the OAG regarding a rescheduled meeting, Mr. Singh stated that Mr. Carroll, one of the auditors tasked with conducting the audit and his team, “did not appear to respect and acknowledge for whatever reason be it official, personal or cultural” (emphasis added). In his evidence, Mr. Singh agreed these were serious allegations that were only based on his opinion.

[465]Mr. Singh was eventually reminded of his obligation as a public administrator under s. 13 of the Auditor General Act, R.S.C. 1985, c. A-17, to provide the requested reports to the OAG. Indeed, the OAG provided Mr. Singh with a firm deadline for his response and stated that if the information was not received, they may decide to qualify the audit with a statement that information was not provided by TBS.

Mr. Singh’s Responses to Undertakings

[466]Mr. Singh also provided contradictory evidence in his response to two undertakings given to the plaintiffs. The relevant undertakings and answers read as follows:

Q.Was Ram Singh aware that transferees were being charged property management fees after 2002?

A.Mr. Singh only became aware that transferees were being charged property management fees after the audit of the Auditor General.

Q.Ask Ram Singh, LCol. Taillefer and Maj D’Amours de Couberone [sic] if they

knew that RLRS LePage had been dealing with property management fees in the fashion set out in Mr. Bélair’s letter.

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A. Mr. Singh was not aware until the Auditor General’s report.

[467]When these passages from his examination for discovery were put to Mr. Singh in cross- examination, he made a feeble denial which ended up effectively establishing why the he cannot be believed for anything he says.

Q. Now, sir, why did you advise, when you gave answers to the undertakings, that you were not aware until the Auditor General’s report -- that you were not aware until the Auditor General’s report that Royal LePage had been dealing with property management fees in the fashion set out in Mr. Bélair’s letter?

A. Could you repeat your question, please?

Q. Why did you respond or provide a response in request -- in response to our request for an undertaking that you were not aware until the Auditor General’s report that Royal LePage had been dealing with property management fees in the fashion set out in Mr. Bélair’s letter?

A. Because I never accessed the DND financial reports, DND was responsible for that.

Q. Sir, you just said yesterday in the portion of the transcript that I read you that you were not surprised when you saw Mr. Bélair’s letter because you knew that that was Royal LePage’s intent and that was how you proceeded under the 2002 contract. That was before the Auditor General’s report.

A.Yes.

Q.So, the answer that you provided in response to the undertaking was incorrect.

A.No, it was not. I’ve said all along, we were operating under the assumption that they will be charging transferees directly. The question was asking about the letter, I didn’t know anything about the DND’s billings and what they paid and what they didn’t audit.

Q.You said yesterday that you knew they were proceeding under the contract in accordance with Mr. Bélair’s letter, right?

A.That’s -- he spelled it out in his letter.

Q.That’s what you said yesterday, isn’t it?

A.They were operating....

Q.That’s what you said yesterday.

A.I guess so, yes.

Q.Yes. And when you responded to the undertaking that we just looked at, you said something different.

A.No, I didn’t.

Q.Didn’t you?

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A.No, I didn’t.

Q.You said you were not aware until the Auditor General’s report that Royal LePage was dealing with property management fees in the fashion set out in Mr. Bélair’s letter. Yesterday you said you did know.

A.We were operating under the principle that they are charging transferees direct.

Q.Sir, yesterday you said you knew that Royal LePage was acting in accordance with Mr. Bélair’s letter under the 2002 contract; in response to the undertaking in March 2003, you said you didn’t know that until the Auditor General’s report came out in 2006. Right?

A.Yes.

[468]The passage above was typical of Mr. Singh’s testimony in cross examination. He would be asked a question about his telling the OAG that he was not aware RLRS was charging transferees only to reply in a misleading fashion with an answer that he never accessed the DND financial, while the evidence was staring him in the face from the commitment forms that he knew exactly what RLRS was up to shortly after they had bid. Similarly, he attempted to distract the questioner by leading into Mr. Belair’s letter of March 19, 2003, which, when read closely makes, no sense apart from conveying that transferees would be charged property management fees resulting in “no charge to the Crown.”

[469]I conclude that Mr. Singh is not a credible witness whose testimony can be relied upon. He provided untruthful answers that he was not aware that RLRS was charging transferees for PMS. He was untruthful as regards the OAG, and responses provided to questions on discovery and in the initial answers provided to the court even before my order requiring the relocation packages to be produced. In addition, I found him to be not credible in many of the denials and excuses in his testimony, which I conclude were further calculated attempts to mislead the Court.

Question #1: Did Mr. Pyett Advise Mr. Singh “Crown Pays Zero Because no Charge to the Crown”?

[470]Mr. Singh testified that, on the last day of the bid evaluation, Mr. Pyett advised “us“ that RLRS was the successful bidder and provided the team with the RLRS fee structure. In that fee structure, Mr. Singh states that he saw that RLRS had quoted a zero rate for PMS. He also testified that Mr. Pyett told them that the Crown was paying zero for PMS by stating that “the Crown pays the fees and they are zero.”

[471]As described above, Mr. Singh initially declined knowledge of RLRS’ zero bid to the OAG, on discoveries and in court. Accordingly, I have some difficulty in accepting that, having changed his position from not knowing of the zero bid until the OAG investigation, he now testifies that at the very moment that he learned RLRS won the bid, he also learned about the zero bid and hearing the rationale that the Crown not paying any fees. This is completely denied by Mr. Pyett, who testified that he told no one about RLRS’ bid.

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[472]The court does not know who the “us” was that Mr. Singh refers to. Apparently, they also learned from Mr. Pyett, when announcing the winner the detailed story of RLRS’s victory, as well as the rationale for charging trustees. No one else has come forward to suggest that Mr. Pyett gave them this information. Again, it would have been helpful if Ms. Pankiw or Mr. Lemay had been called as witnesses, but the Crown chose not to call them. Everyone else who testified has denied knowing about the zero bid, much less that RLRS proceeded to charge the transferees thereafter because it was at no cost to the Crown.

[473]The probability of Mr. Pyett, who was new to the relocation industry, coming up with an explanation of a zero bid involving CF IRP policy and personalized envelopes, after seeing the bid is much too far-fetched for the court to even consider. He would be the least knowledgeable person to offer this explanation. He testified that upon seeing RLRS 0 percent bid, he understood it could not charge transferees for the services but changed his view later.

[474]I much prefer Mr. Pyett’s testimony that Mr. Singh, and the others (Ms. Pankiw or Mr. Lemay), must have learned of the zero bid from some other source. That could only have been from the entity that submitted the bid, and then most likely from Mr. Belair who enjoyed a close relationship with Mr. Singh.

the Crown.” I tend to accept Mr. Pyett’s explanation that he really did not understand the personalized envelope, but not to the point of finding it as a fact.

[476]I conclude that Mr. Singh attempted, once again, to mislead the court by a form of “cutthroat” defence in attempting to pass responsibility for his understanding and his actions to Mr. Pyett by being the source of his knowledge that RLRS was charging transferees for PMS because it did not cost the Crown to do so.

Question #2: May the Court rely upon Mr. Singh’s Notes as to What was Discussed at the Meeting of February 13, 2003?

[477]A meeting was held on February 13, 2003, at which it is alleged a discussion ensued about RLRS having quoted a ceiling rate of zero for PMS. Mr. Singh alleges that he took notes at that meeting, which read in part, “Prop Mgmt fees bid is zero because given back to Crown. Now in personalized.”

[478]Mr. Pyett, Ms. Douglas, Mr. Singh, Ms. Pankiw, Mr. Lemay, Mr. McIntosh and Major Keleher were noted as being in attendance. Ms Douglas and Major Keleher did not know that the RLRS charged zero for PMS, as I have so found. This is obviously difficult to reconcile with Mr. Singh’s note.

[479]The plaintiffs submitted that Mr. Pyett confirmed that, at this meeting, a topic of property management fees and a reference to them being given back to the Crown was discussed. That is not quite accurate as he testified that he could not recall any details of this meeting. His testimony, in fact, was that he could not recall the subject matter that was raised at the meeting

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even though he would probably have been attuned to this subject when it came up and that it would have been of interest to him.

[480]Looking more closely at Mr. Pyett’s testimony, he indicated Mr. Lemay knew about RLRS’ bid, but Mr. McIntosh did not, although both were shown as attending the meeting. This suggests that the subject could not have been discussed at the meeting in Mr. McIntosh’s presence. In passing, it is noted that Mr. McIntosh has passed away, while the other two attendees were not called by the Crown.

[481]In examination-in-chief, Mr. Singh testified that he could not recall what exactly was discussed at the meeting, but that his note meant that RLRS bid zero for PMS and that “the Crown” will not be making payments. Therefore it’s “zero to the Crown.” He said that he could not recall anything else about the note.

[482]However, in cross-examination he advised that it would have been Mr. Pyett, or Ms. Douglas, who would have made the statement, “one of the two of them explaining it” as they were going through the fee schedule on the contract.

[483]I conclude that Mr. Singh is dragging Ms. Douglas into this discussion because he knew that it was not plausible that someone with as little experience as Mr. Pyett could explain the “no charge to the Crown” rationale. I find that Mr. Singh thereby confirms that if Mr. Pyett would attempt to deal with this issue, he would have had to bring in Ms. Douglas to help.

[484]When asked how the participants knew the reason that RLRS had bid zero, Mr. Singh answered as though he really did not understand, “I wrote down what I heard” suggesting he did not know what his note meant.

[485]This was the answer of the person who wrote the policy and had worked with it since it was part of the pilot project years before this meeting. He demonstrated the implausibility of his answer that he, of all persons involved in relocation, did not understand the meaning to attribute to his own note by the follow-up question. When asked whether the statement, “Now in Personalized” was a reference to the fact that PMS was paid from the transferee’s personalized envelope, he responded with a misleading answer intended to baffle the questioner, by indicating that this was a reference to “Customized” envelope in the pilot project.

[486]I conclude that the reference could only be with respect to how the funds would be paid out of the personalized funding envelope of the transferee. This envelope is the distinguishing fact relied upon by Mr. Belair, as he also attempts to provide the Court with some plausible explanation for RLRS’ breach of contract.

[487]The questioning concludes with Mr. Singh denying that he had any discussions with Mr. Belair about this statement that Royal LePage bid zero because something was being given back to the Crown. Nonetheless, only Mr. Belair and Mr. Singh attempt to defend charging transferees for PMS, both using the same incredulous argument.

[488]I terminate my discussion on Mr. Singh’s note of February 13, 2003, with one of two conclusions. First, if the subject matter was raised at the meeting, it happened after Major

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Keleher and Ms. Douglas left, or discussed in some manner in their absence. I accept their testimony that they were not aware of RLRS’ zero percent bid.

[489]The second, and admittedly more cynical conclusion, is that Mr. Singh, like Mr. Belair wanted something on the record as evidence that the subject had been discussed in the presence of others under the direction of Mr. Pyett.

[490]I say like Mr. Belair. It will be seen that his letter of March 19, 2003 is a proactive explanation of a subject about which no previous, or later, document refers to, apart from Mr. Singh’s note. As Mr. Pyett agrees in cross-examination, Mr. Belair’s letter is clearly “for the record“ to make certain that there is no misunderstanding about RLRS’ intentions in its treatment of PMS.

[491]Given the illogical rationale of “no charge to the Crown”, I conclude that Mr. Belair would want this letter on file, just in case anyone accused RLRS of defrauding the Crown. With it in his pocket, RLRS is free to continue charging transferees under both the 2002 and 2004 Contracts, knowing that it has the blessing of the Contract Authority and the Project Authority.

[492]It would be my concern that Mr. Singh’s note is similarly “for the record”. With all the problems that I have with Mr. Singh’s credibility, I am not prepared to give him the benefit of the doubt that this was added to his note or the subject matter was raised with only the other attendees who knew that RLRS had tendered a 0 percent ceiling rate for PMS.

[493]In either case, I reject the note of February 13, 2003 having any probative value for lack of reliability and being based upon Mr. Singh’s testimony which I reject as not being credible.

Question #3: Does “No Charge to the Crown” have any Degree of Plausibility?

The Concocted Rationale: No Charge to the Crown

[494]In anticipation of the IRP contract commencing less than two weeks later, Mr. Belair sent Mr. Pyett an unsolicited letter on March 19, 2003 describing how “[I]n accordance with the commitment in our proposal, we will provide these services at no charge to the Crown.” No one else was copied with the letter.

[495]Everyone else who testified, except Mr. Belair, but including Jim Lockington, the past President of RLRS, disagrees that RLRS was entitled to charge transferees for PMS. Mr. Pyett takes no position on the correctness of charging transferees, but simply states that he accepted Mr. Belair’s position, although contrary to his original understanding of what the zero percent bid meant.

[496]In considering the positions of Mr. Singh and Mr. Belair, versus everyone else, regarding charging transferees, I will first review the explanation provided by Mr. Belair and to some extent Mr. Singh. I will also describe what I consider to be the motive of Mr. Belair for the letter and standing by his position, though unreasonable.

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[497]The answer to the question regarding the plausibility of the rationale is obvious for at least four reasons and a fifth that explains why a zero percent bid is noncompliant.

a)There are no cost savings to the Crown for property management services;

b)If this were the case all bidders would bid 0 percent;

c)RLRS obtains an additional $40 million premium “free of charge”; and

d)The zero bid adds additional costs to the Crown.

[498]In addition, I find that it is implausibleness is motivated by the fact that charging transferees conceals from the relocation world that RLRS had bid zero percent on PMS gaining an advantage of $42 million in 2002 and $48 million in 2004 on its competitors at no cost to itself.

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No Cost Savings to the Crown

[499]In the second paragraph of his letter of March 17, 2003, Mr. Belair points out that PMS is treated differently from other third party services because it is paid out of the Personalized Funding Envelope.

Property management services are unique under this contract. All other similar services for transferees-appraisals, legal services, home inspections, realtor services, and rental-finding services--are covered through the core funding envelope.

[500] In recognizing that difference, he is fully cognizant that the monies in that fund are for the transferees’ benefit, not the Crowns.

[501]In the third paragraph, Mr. Belair describes RLRS’ intention to charge PMS to the transferees’ personalized envelope so that these services would be at no cost to the Crown.

In our proposal, RLRS offered more than a “cost reduction” for property management services -- we committed to providing these services at no cost to the Crown. However, property management fees are covered through the personalized funding envelope. Therefore, the only mechanism whereby RLRS can provide this cost saving is to provide services to transferees on request, charging the cost to their personalized envelope, and then crediting the cost of these services to the Crown.

[Emphasis added.]

[502]He continues in the last paragraph of his letter describing the steps that would be followed to ensure no costs were incurred by the Crown for the services.

After arranging these services and paying for them through the transferee’s personalized envelope, RLRS will reduce the invoice to the Crown by the amount of these services in accordance with the Commitment Form, thereby delivering the committed savings to the Crown.

[Emphasis added.]

[503]The letter communicates three important points from RLRS’s perspective. First, its zero percent bid was a commitment by RLRS to provide PMS at no cost to the Crown; second, that transferees would be charged for the services [in order to pay the Crown!]; and finally, RLRS’ defence that the charges would be in accordance with the Commitment Form, i.e. nine percent. Thus, all bases are covered by this letter.

[504]I agree with the plaintiffs that the reasoning, if it may be called that, described in Mr. Belair’s letter is preposterous. Despite this, Mr. Singh insists that the treatment of transferees is in harmony with how the contract was intended to be applied.

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[505]It is simply not plausible for Mr. Belair or Mr. Singh to think under any circumstance that RLRS could take back from transferees money deposited in their Personalized Funding Envelopes placed there by the Crown as an incentive not to sell their homes and pay it back to the Crown, thereby eliminating the incentive and double-crossing transferees.

[506]Monies deposited in Personalized Funding Envelopes are held in trust exclusively for the transferees who, alone, use them at their discretion. Any amounts left over will be cashed out to the transferees as a taxable benefit.

[507]Tendering a Ceiling Price serves no purpose to generate savings for the Crown. Upon an indication that the transferee is not selling his home, the Crown will deposit an amount determined by a pre-established formula into the transferee’s Personalized Funding Envelope. This occurs before the transferee makes any decision on the use of PMS.

[508]Lower prices for PMS are for the benefit of the transferee. The lower the cost of these

services, the greater the amount cashed out or available for services that may be paid from funds in the personalized funding envelope.

[509]An argument that there are no charges, or that PMS are free to the Crown is irrelevant. The Crown has no obligation to pay for these services. If the transferee uses these services, the transferee must pay money for them from his or her personalized envelope.

[510]Mr. Belair and Mr. Singh may as well have argued that the ceiling price of zero means there was no charge to some unknown person standing on a street corner. That person, like the Crown, has no obligation to pay for PMS used by a transferee; the money has already been paid into the personalized funding envelope.

[511]Moreover, there is no evidence of any funds being credited back to the Crown. Indeed, the first reply of Mr. Singh and RLRS when all this came to light should have been that the Crown received a credit back for these services. Therefore, while RLRS would argue that it was mistaken in its interpretation, it was for the Crown to re-credit the money to the transferees, not RLRS. The evidence is that RLRS repaid the transferees, not the Crown.

All Bidders Would Logically Bid 0 Percent

[512]Taken to its logical conclusion, the theory of “no charge to the Crown” would lead all tendering parties to bid zero percent for PMS. There would be no disincentive to do otherwise.

[513]If the ceiling price bears no relation to what transferees would be charged, all bidders would logically bid zero percent. Similarly, commitments obtained from Third Party Suppliers would have no impact on the bid.

[514]Thus, if two bidders submitted the same zero percent ceiling price bid for PMS, while one had a commitment from its Third Party Supplier to charge a maximum price of eight percent and the other one percent, both PMS bids for the purpose of determining the lowest overall price for contract award, would be identical.

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[515]Ironically, Mr. Belair’s theories in terms of benefits to the Crown, although not shown in the ceiling price bid in the tender, means that the bidder with the highest commitment price would provide the greatest return to the Crown when PMS funds were credited back. In other words, not only would the Crown’s interests be diametrically opposed to the purpose of its incentive program, but the higher the amount charged the transferee, the greater would be the Crown’s credit.

[516]In his testimony described below, Mr. Singh actually supported the illogical outcome that all bidders should have tendered a zero percent ceiling price.

[517]The passage containing Mr. Singh’s statement also describes Mr. Singh’s view on how the personalized envelope works and makes no mention of crediting anything back to the Crown. The remainder of the excerpt demonstrates Mr. Singh’s attempts to both feign that his error was an honest mistake and to mislead the court by evasive and misleading answers.

[518]When challenged, Mr. Singh’s responses developed into a loose pattern. He will first attempt to lead Mr. Lunau astray by reference to service users that are not relevant for bid purposes. Next, when questioned on the purpose of the personalized envelope, after agreeing to most of what is suggested, he will again attempt to mislead with reference to irrelevant income tax consequences, bearing in mind that Mr. Singh holds an MBA. Finally when brought to the inescapable purpose of the personalized funding envelope, he will answer that he cannot comment on the question, although he has acknowledged that he is a government expert on relocation and one of the designers of the IRP policy.

Q. So, before the 2004 procurement process, were you aware that Royal LePage had bid zero for property management services in the 2002 procurement process? A. Yes, I was, because at the – the time that the contract was left, we had the – the ceiling fees for the services we required, and it was zero to the Crown.

…

Q. And did you anticipate or think that Royal LePage, given the same criteria, was likely to bid zero again?

A. Never thought about it.

Q. No? So that was something that never entered your mind?

A. No, it never did. As I said previously, property management was not an area of issue in the re-tender.

Q. It became a big issue, did it not?

A. Not at the development phase when we were working on it, it became an issue after the fact.

Q. Okay. So you gave no thought to the fact that Royal LePage might be expected to bid the same way in ‘04 as they did in ‘02.

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A. I was hoping that everybody would read the policy document to understand that the Crown does not pay for property management, the transferee does.

Q. So you’re saying everybody should have bid zero?

A.Yes.

Q.So why would you put a requirement in a contract that everybody should bid zero for?

A.Well, I don’t expect them to bid zero, if they want to put a dollar value, tell us how much they will charge the Crown. If they want to charge the Crown, fill it.

Q.And the Auditor General later found that your interpretation of the contract was incorrect.

A.Yes, they -- at that point we were told that our interpretation was wrong.

Q.Okay. And you thought in 2002 that it was okay for transferees to be charged these fees because that’s what was in the commitment forms.

A.Yes.

Q.So if you’re wrong in 2004, you were wrong in 2002.

A.That was the eventual conclusion, yes.

Q.And Royal LePage appears to have prepared its bid on the basis of the same understanding that you’ve said you had.

A.Yes.

Q.And if you were wrong in your understanding, then they were wrong.

A.It came out that way, yes.

Q.Yes. And they were wrong since 2002?

A.According to the OAG.

Q.And you don’t accept that.

A.No, because we were under the impression that the Crown does not pay, the transferee does. And if they select someone outside of Royal LePage, they had to pay for the services.

Q.We’re not talking about a situation where a transferee accepts someone from outside Royal LePage, we’re talking about a situation where a transferee uses the services of Royal LePage under the IRP contract.

A.Right.

Q.Okay. And the cost to the Crown of funding the envelope is the same whether a bidder bids zero as a ceiling price in its bid or whether it bids some other percentage?

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A.I don’t understand your question.

Q.Well, you said that a bidder would be justified in putting in a ceiling price of zero in its bid because there’s no cost to the Crown.

A.Yes.

Q.And what I’m saying to you is that the cost to the Crown is actually fixed by the personalized funding formula.

A.Right.

Q.And that funding formula is the same whether a bidder bids zero or bids 8 percent...

A.Yes.

Q. ...or 9 percent.

A.Yes.

Q.And once the Crown funds the envelope, its liabilities to the transferee with respect to this particular envelope are fixed.

A.Yes.

Q.And the transferee, to the extent that funds are not disbursed from that envelope, has ownership of those funds.

A.Yes.

Q.So, it’s to the benefit of the transferee to reduce disbursements from the personalized envelope as much as possible.

A.No, it’s not, really.

Q.Well, the fewer the disbursements out of the personalized envelope, the more funds the transferee has at the end.

A.No, they would lose 50 percent of the cash value to CRA.

Q.Well, leaving aside sort of what happens income tax-wise,...

A.Right.

Q. ...the transferee -- it’s in the transferee’s interest that disbursements out of the personalized envelope be minimized as much as possible.

A. I can’t answer that question.

[Emphasis added.]

RLRS obtains a plus $40 million premium “free of charge”

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[519]Probably the most obvious point that comes to mind when RLRS bid zero percent on PMS was that it obtained a very large advantage over its competition who bid, as Envoy did, in the neighbourhood of eight percent at a total PMS bid price of $42 million.

[520]From the perspective of fairness, it is bad enough that RLRS, thanks to its knowledge as the incumbent of actual PMS use, obtained this “premium”. To turn around and eliminate any cost to it or provide any added value to the Crown is, to again quote the plaintiffs, a completely preposterous proposition.

[521]RLRS was adding insult to injury by making transferees pay for PMS and was avoiding its one “cost” that would flow from a zero percent bid - the cost being that incurred by the transferees - which were supposed to be free.

[522]In effect, RLRS takes the position that it could obtain the minimum premium of $40 million on its competition by bidding zero percent on PMS at absolutely no cost to itself, and no value to the Crown.

Extra Costs to the Crown

[523]Once again ironically, not only was RLRS’ zero percent tender on PMS not at no cost to the Crown, but it significantly increased the costs of the Crown by enabling RLRS to pump up its administration fees at no cost to itself or any extra value to the Government.

[524]Under most scenarios, where RLRS bids zero percent for PMS while charging transferees, the results will increase the cost of the contract to the Crown. In such a situation, the best outcome possible is that the Crown avoids incurring any extra costs.

[525]The fact that a zero percent bid on PMS will drive up the cost of the IRP contract is not necessarily related to whether or not transferees are charged for the services. Nevertheless, Mr. Belair argues that bidding zero percent on PMS is at no cost to the Crown, when, in reality, the exact opposite was the effect to the Crown.

[526]The results of the 2004 procurement process appear to be an example of where RLRS’ zero bid cost the Crown more than it otherwise would have paid for the administration of relocation services. This was similarly the conclusion of OAG report at paragraph 5.63:

Because PWGSC was unaware of the incorrect property management business volumes in the request for proposal, the government may have paid more than it needed to for the administrative services of a professional relocation company.

[527]While the OAG’s comment points to property management volumes, it is referring to the overpayment for administrative services. This occurs as a function of RLRS having tendered a ceiling price of zero percent which caused the Crown to pay more for its contract because of the actual low volumes of PMS in compared with the grossly inflated values in the PMS payment formula.

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[528]I have already explained in the introduction to this section how RLRS obtains, what I described as a “premium” that may be applied either to reduce its price or to increase profitability via the administration fee. The premium represented the difference between the property management price of zero dollars that it bid in comparison with the price generated by

multiplying its suppliers’ commitment price (9 percent) by the estimated volumes multiplied. This premium would be reduced to the extent that RLRS had to pay for PMS out of its own pocket, rather than have these costs flow through under the model where the Ceiling Price is the commitment price. In any event, RLRS would have two options on how to apply this premium.

[529]If it wished to increase its profitability, it could do so by transferring some, or all, of the premium to its administration fee on which it generates its profits. The evidence confirms that RLRS transferred some of the PMS premiums to its administration fee.

[530]This was confirmed by Jim Lockington, President of RLRS from 1994 to 2006. He testified that by bidding 0 percent on PMS, RLRS was able to propose a higher administration fee. He further agreed that the higher fees charged by RLRS allowed it to support more staff, an issue that will be further discussed in the damages section, stating as follows:

Q. And I understood you to say, sir, that these bids of zero would have been at a loss for Royal LePage insofar as if there were property management services to be delivered, there would be no charge to the crown for those services. Is that correct?

A. Yes. That’s correct.

Q. Would you agree that it’s fairly obvious that if you bid zero for something in - under this contract, it would affect your overall bid price?

A.Yes. Yes.

Q.A bid of zero would arguably result in a lower bid price?

A.It would result in a number of factors that - that lower bid price, and the opportunity to have a higher file fee, so that ....

Q.And the file fee you’re referring would be the admin fee?

A.Correct. Shall we say the entire exercise is a composite exercise? None of these things was dealt with in isolation.

Q.And when you say a composite exercise, just so that we’re clear on the record, what you’re saying is, Royal LePage looked at both the admin fee portion, Table I, and the ceiling rates that were to be delivered under - that are recorded under Table II, as a whole, and at the end of the day, it made a business decision as to what it was going to bid in both those tables. Correct?

A.Yes. And based on what we were bidding in our services. We knew what our baseline delivery expense would be, so the entire bid is a composite exercise. If you’re going to bid a greater and better service, your fee has to be higher to provide for profitability, and then that extends into the whole exercise of reviewing the supplier pricing and your administration fee.

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Q. Part of that also extends into the actual staff you have on the ground to deliver the services?

A. Big and better service means more staff.

[Emphasis added.]

[531]Conversely, if RLRS uses its premium so as to lower its total bid price, the loss to the Crown is determined by the extent that RLRS’ administration fee exceeds that of its nearest competitor. For example, if after adding the premium back into Envoy’s bid, RLRS remains the successful bidder, there would be no loss in value to the Crown. If on the other hand, Envoy would have won if RLRS had not obtained its $48 million unearned premium, the Crown loses by the value that RLRS’ administration fee exceeded that of Envoy’s. All this is to demonstrate that RLRS’ zero percent bid adds no value to the Crown. Its least harmful effect on the costs of the contract to the Crown occurs when the premium has no effect on the outcome.

[532]Accordingly, the argument of Mr. Belair and Mr. Singh that the zero percent ceiling price bid for PMS meant no charge to the Crown is incorrect; in a situation where the differential between the estimated volumes and actual volumes of PMS is significant, the economic interests of the Crown are likely to be harmed by a zero bid. The evidence in this case is that the Crown paid more.

[533]How much more? We know from the evidence provided in the assessment of damages portion of the trial that that RLRS would have had revenues of approximately $112 million against costs estimated by the defendant’s forensic investigative accountant being applied on a

comparative basis against Envoy to be in the neighbourhood of $66 million. This would produce a profit margin of $46 million. RLRS 2002 total bid price was $48 million higher than in 2004, despite being quoted against a smaller number of files, meaning that it had even greater profits on that contract. Its premium on PMS in comparison with Envoy’s CF tender was $42 million in 2002 and $48 million in 2006. All these figures are in relation to the CF RFP.

[534]There definitely appears to be some margin in the profits generated in either year to think that a significant portion of the PMS premium went straight to RLRS’ bottom line.

Did Mr. Singh Turn a Blind Eye?

[535]A blind eye is a euphemism for “intentionally” allowing RLRS to breach its contractual obligations under the 2002 Contract.

[536]Mr. Singh testified that when he read Mr. Belair’s letter, he understood he was proposing to charge for PMS from the personalized envelope of transferees, but that this did not surprise him because that was RLRS’ intention.

Q.And when you read this letter, did you understand that what Mr. Belair was proposing to do in March 19, 2003 is to charge the cost of property management fees to the personalized envelope of transferees?

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A.Yes.

Q.And did that surprise you?

A.No

Q.No. So you knew that this had been their intention?

A.Yes, it was in the forms, and this is the way we operated.

Q.So going back to the 2002 contract, you knew that that was how Royal LePage was going to operate.

A.Yes.

[537]I stop here to point out that this is significant evidence in relation to my finding that RLRS 2004 bid was noncompliant because its intention was obvious when it bid on the contract that the defendant “new that that was how Royal LePage was going to operate.”

[538]I have already explained, for all the reasons set out above, why a zero percent bid could not possibly work in the fashion suggested by Mr. Singh. The manner in which the personalized funding envelope operates results in the Crown having no property in its contents; the consequences of his interpretation is therefore absurd from every perspective. Probably his most extreme statement was that all bidders should have tendered a zero percent as the Ceiling Price for PMS.

[539]Of all of the government employees, Mr. Singh is the person best positioned to have known the scheme of these policies and the contracts that were designed to implement them. To now testify that the design of the contract was to allow a tendering party to bid zero, to remove the transferee’s incentive, with no consequences paid to for it by RLRS, or any value provided to the Crown, with the result of significantly increasing costs to the Crown is unbelievable in the legal sense of that term, i.e. no intention to exaggerate. The evidence cited above suggests that he anticipated RLRS’ conduct as being a function of the design of the contract. Again this is evidence of a clear intention of RLRS` to repeat its conduct for the purpose of considering the 2004 procurement process

[540]I weigh these patently unreasonable interpretations of provisions that Mr. Singh was supposedly involved in drafting and administering which, on their face, do not present challenges for interpretation in terms of how the funding of the personalized envelope works or is paid out. I simply cannot accept that someone of Mr. Singh’s obvious intelligence could really believe what he is telling the court.

[541]His lack of credibility from the unreasonable rationale presented is magnified by the manner in which he has acted around the issue of PMS. As shall be seen, he takes no steps in the 2004 RFP process to prevent the same irrational results occurring with RLRS capturing a significant premium on a zero percent bid for PMS and proceeding to charge transferees for the services. He sees no problem in one bidder interpreting the contract differently from all the other bidders, to its own advantage, being repeated a second time.

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[542]When the situation starts to unravel and the OAG requests information, I find that he intentionally attempts to prevent the audit from proceeding or the information on PMS volumes being provided. He misleads the OAG, saying that he was not aware that RLRS was charging transferees. He knew that his argument was indefensible then, just as it is now.

[543]Nevertheless, he continued to conceal his knowledge through the examinations for discovery and initially during the trial. Before me, when pressed, he finally admits his knowledge of RLRS’ bid and its charging of transferees. Instead of being chagrined by being caught in a monstrous lie, he instead leads a spirited defence based on his illogical reasoning.

[544]But what other alternative does he have? Like Mr. Belair, I do not find that Mr. Singh was truly trying to convince the Court that RLRS could charge transferees. That was a hopeless task. Instead, he wanted the Court to accept that he honestly believed that charging transferees did not infringe the contract. If his mistake was an honest one, and honestly believed, regardless of how lacking in merit or reasonableness it may have had, no one could accuse Mr. Singh of intentionally turning a blind eye to RLRS’ unlawful conduct.

[545]I am more than satisfied well beyond the balance of probabilities that Mr. Singh was fully cognizant that RLRS was breaching the contract and acquiesced to it doing so by transferees for PMS. He knowingly allowed RLRS to procure an advantage at the expense of the transferees and his employer, whose interests he was supposed to be upholding.

Did Mr. Pyett Turn a Blind Eye?

[546]In counter distinction to Mr. Singh, Mr. Pyett takes no apparent stand on the viability of the rationale justifying RLRS’ conduct of charging transferees for PMS. He pleads instead that he really did not understand the subject matter.

[547]He acknowledges that his first understanding was that transferees were not to be charged, but that is inconsistent with his approval of the commitment forms. This subsequently changed to accepting they should be, but without any explanation or any of the details as to how this transformation came about. He ascribes his rethinking to Mr. Belair’s letter of March 19, 2003, but this comes much too late after the commitment letters are received, to be anything but a post de facto rationalization.

[548]I conclude that his strategy was to conceal the 0 percent bid. It did not matter what rationale was offered up. He was ok with whatever achieved his objective.

[549]I conclude that Mr. Pyett either knowingly acquiesced to RLRS’ breach of the contract, or alternatively acted in a reckless fashion to avoid confirming the correctness of Mr. Belair’s proposal to charge transferees, thereby enabling RLRS’ unlawful conduct.

[550]He was probably blindsided twice by RLRS’ conduct. The first was when he saw that it had bid 0 percent when he opened their tender and decided it had no consequence on the outcome of the process and he would not challenge it. The second was when he realized that RLRS was going to charge transferees in accordance with their commitment forms. When Mr. Belair’s “for the record” letter came in just before contract commencement, I conclude that he

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quietly put it away in the hopes that it would never be raised again. But for the intervention of the OAG, he and the others who were concealing these events, would have got away with it.

[551]I do however distinguish his role from that of Mr. Singh. There is no suggestion that he advocated for Mr. Belair’s illogical explanation. It simply suited Mr. Pyett’s purposes of concealing everything about the PMS bid.

[552]On the contrary, Mr. Singh was a vocal apologist for the rationale of “no cost to the Crown.” In addition, he makes a feckless attempt to direct responsibility for originating this rationale to Mr. Pyett, which appears to be supported by Mr. Belair’s letter directed to the Contract Authority and no one else.

[553]But it is clear from this trial, and I so find that Mr. Singh is the person inside the government touting Mr. Belair’s incredible justification for charging transferees for PMS. He continues to act on their behalf in the 2004 procurement process, by failing to bring to the attention of others running this contract, including Mr. Goodfellow who I conclude was also broadsided by RLRS PMS bid, to prevent the same unfortunate and costly scenario from recurring in 2004.

Is Mr. Lockington Credible that he did not Know RLRS Charged the Transferees?

[554]Mr. Lockington was one of the Crown’s key witnesses in support of its allegation that RLRS breached its contract by charging transferees for PMS.

Q. So they should.... If you bid.... If Royal LePage bid a ceiling rate of zero, was

it your view that transferees should not then be charged rates for property management fees because Royal LePage had bid zero?

A. For the service that we had contracted for, the crown and nor – nor the transferee, neither the crown nor the transferee should have been charged for those services. That is correct.

[Emphasis added.]

[555]Thus, against the backdrop of Mr. Lockington’s testimony, it would appear that Mr. Belair knew that charging transferees was in breach of the contract. His testimony was such to suggest that Mr. Belair was a “rogue” employee who went off on his own to charge transferees. Mr. Lockington never actually testified to this effect. But it was clear from his answers that he always understood that the zero percent bid for PMS meant that the transferees would not be charged and Mr. Belair’s course of conduct proposed in his letter of March 19, 2003 made no sense. He could not recall being consulted on the issue, which fell within Mr. Belair’s responsibility, as long as it did not involve an issue where the client was not satisfied.

[556]I admit to having some difficulty with this scenario. It is difficult to comprehend how Mr. Belair’s self-interest would justify him going out on the limb when the returns, and they appear to be sizable, were to RLRS’ shareholders. His employment position may well have been at risk if RLRS lost its most important contract, but I would think that would equally apply to Mr.

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Lockington. This was a contract that would make or break a relocation company and radically change the face of the industry in Canada.

[557]Admittedly, Mr. Belair had some credibility difficulties. For example when he testified that he was not involved in the financial bidding component of RLRS’ tender, this was completely rejected by Mr. Lockington in his testimony. He testified that they all worked on the tender together. It makes no sense given his role as the project manager for the IRP contracts. Moreover, his letter of March 19, 2003 belies his own evidence by explaining the financial implications of RLRS’ bid on PMS.

[558]Mr. Lockington confirmed my observations that he should have anticipated some significant increase in the use of PMS by transferees to be given away by RLRS free of charge. He testified that RLRS had a contingency plan in place but that it would have breached the contract. It would have relied upon the use of RLRS’ own forces to provide the services.

Q. ...so not the grass cutting, and things like that. We’re talking about the fees. And Royal LePage bid a ceiling rate of zero expecting that it would take some loss. First of all, would it be accurate to refer to it as kind of a loss leader for Royal LePage?

A. No. Can I step back one step away from the....

…

A. So, of course, coming back to answer your question, Ron – because I know you want to loop back to property management fees, did I know we’d take a haircut on those instances of property management, yes.

Q. Right. And my question was.... When you were looking at the financial

implications of how big a haircut are you going to take, you said it was considered manageable and my question is, is that because you knew or anticipated, from your past experience, that the actual volume of files that would involve property management fees was quite small?

A. A – a variety of things would have factored into it. That would be one for sure. Another would be that we had a network of Royal LePage brokerage offices across the country, a sister company that we could call upon to do that property management service for us at a – at a low rate, and also retain revenue, because it was going to flow back into the family. So those are two things I can think of right now. We certainly would have looked at historic volume which, I think, answers your question. But I – I also want to say that we wouldn’t have looked at that in the absence of the – the contingency plan as to how we would execute based on the – the volume that could well occur in any future year.

[Emphasis added.]

[559]A number of conclusions flow from this testimony. Firstly, RLRS has admitted that it used its historical information to formulate its bid; which goes a long way towards proving that the tendering process on this item was unfair.

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[560]Secondly, this is something that he would have had to discuss with Mr. Belair because they worked on the tender together as a team at a“ granular” level according to Mr. Livingstone. Mr. Belair would also have to know about the contingency plan as it could not be carried out the liaison between the two branches of RLRS. If Mr. Belair understood that RLRS was going to “take a haircut”, how could he possibly have misunderstood that transferees were not to be charged? Why on earth would he make up the “no charge to the Crown” and put himself out there as the rogue employee, when no apparent benefits would flow to him. Mr. Belair did not strike me as a “company man”, incidentally, which is how I would describe Mr. Goodfellow.

[561]hirdly, as already pointed out, RLRS could not have done what Mr. Lockington said it would do to take up any surge in PMS use. Mr. Belair, with whom he would have discussed these issues at length, would have been the first person to draw such a flagrant anticipated breach of the contract to Mr. Lockington’s attention.

[562]Fourthly, RLRS tender documents both in 2002 and 2004 indicated an intention to charge transferees in the sample commitment forms as part of the relocation packages in their tender proposals. Accepting Mr. Lockington’s evidence, it would appear therefore that Mr. Belair filled in the sample commitment forms in both tender proposals, showing a 9 percent and then 8 percent commitment price in in 2002 and 2004 respectively, all unbeknownst to Mr. Lockington.

[563]I am even more deeply troubled when I look to the 2004 bid. RLRS had been performing under the 2002 contract since April 1, 2003, even though it was terminated by the Crown. By the time it submitted its tender on June 15, 2004, it would have had more than two years’ statistics to observe whether the anticipated surge in PMS occurred. None occurred, principally because RLRS charged nine percent. How could Mr. Lockington not have inquired and not been informed about Mr. Belair’s contract-breaching conduct?

[564]I am not in a position to answer these questions, nor am I required to do so. I will say however that charging transferees would seem so much a simpler. In addition to all of the problems described above, I would think that a very bright man like Mr. Lockington would surely have seen the benefits of not revealing to the relocation world that RLRS had enjoyed a $42 million and then a $48 million premium on its PMS bid over a bidder like Envoy. Certainly by the time the 2004 RFP took place, Envoy had established reputation of being both vocal and litigious in these matters. Besides, by the time the 2004 bid rolled around, RLRS had Mr. Belair’s letter of March 19, 2003 in its pocket, happy with the knowledge that it had pre- approved its 0 percent bid the previous Contracting Authority and the continuing Project Authority.