Is Atyeo $30 million judgement against Canadian Government good or bad for public sector procurement? by Jon Hansen

Posted on November 12, 2013


. . . the fact is that the RFP process should be as you indicate a guidance tool as opposed to a selection tool.  Unfortunately the public sector seems to look for absolutes as a way of mitigating risk as opposed to making the right choice in terms of choosing the best supplier partner.

My response in the comment stream for the November 4th, 2013 Procurement Insights EU Edition post The trouble with algorithms by Tom Moore

In my January 26th, 2013 post titled “Breaking News: Vendor’s efforts to sue government for $62 million as a result of losing bid understandable but misguided,” I expressed my understanding of why Bruce Atyeo had made the decision to sue the Canadian government . . . I however did not agree with it.

Even though Atyeo was on the favorable side of Justice Peter Annis’ ruling to the tune of $30 million, my position has not changed.

In fact if anything, I am more adamant relative to my earlier stated belief, based on the fact that rather than serving justice, the Annis ruling will actually further entrench the belt with suspenders risk averse mindset that has both dominated and limited public sector procurement effectiveness.

Even though he won $30 million dollars relating to lost profits resulting from the award of a 2004 relocation contract to competitor Royal LePage Relocation Services, Atyeo’s disappointment that he did not receive punitive damages was palpable.

His belief that a heavier penalty would have served as a deterrent in that it would have gotten the government’s “attention” and stopped “the behaviour” that led to the suit, was where he and Justice Annis parted ways in calculating the government’s ultimate financial liability.  Annis concluded that punitive damages would “serve no purpose in terms of denunciation and deterrence.”

However, what both men have failed to see is the bigger picture, and the far reaching consequences of this outcome.

To begin, and as outlined in my February 2010 article Latest Government of Canada Procurement Scandal Belies the Very Principles Associated with Effective Purchasing Practices, relationships between the government and its supply partners over the life of a long-term contract will by natural progression become familiar and strong.  This is necessary for the contract to be successfully executed.  Does this afford the incumbent supplier a certain advantage when the contract comes up for renewal?  Absolutely!  In the real-world where people deal with whom they know, like and trust this is not only understood but accepted.

The problem is that public sector procurement practice flies in the face of this logic by imposing an artificially created “level playing field” framework for doing business that is based more on politics than on practicality.

In explaining his ruling, Annis concluded that “Envoy Relocation Services should have won the five-year deal in 2004.”  Why?

A question that is of even greater importance is whether or not they were the better supply partner.  In other words, Royal LePage Relocation Services maintained the contract because they were known and were doing a good job.  The issue with their selection was the result of the “requirement” to retender the contract in the first place.

In the end, and while one might be tempted to question Justice Annis’ ruling, and Atyeo’s seemingly sanctimonious denouncement of the procurement process, the truth is that neither man had any choice but to do what they did based on the government’s flawed belief that everyone deserves a shot at government business.

Until this changes the system will continue to be mired in the morass of unwarranted rights as opposed to sound business principles – a situation made worse by Justice Annis and Mr. Atyeo.

Atyeo lawsuit . . . the beginning of litigious procurement?

Atyeo lawsuit . . . the beginning of litigious procurement?