A spat between Hewlett-Packard Canada and Shared Services Canada (SSC) is bringing the accountability of the federal government department into sharp focus.

The computer supplier filed a complaint with the Canadian International Trade Tribunal (CITT) in November, alleging that SSC wrongfully rejected its bid on a high-performance computing solution. The $430.4 million project in question is said to be for a weather forecasting supercomputer to be used by Environment Canada.

The company accuses the SSC of unfairly concluding that its bid didn’t meet the conditions set out in its request for proposal (RFP). Reports said that Hewlett-Packard has asked a federal court to determine whether SSC wrongly invoked a national security exception (NSE) during the procurement process and chose a solution from IBM.

In 2012, SSC notified suppliers that it would invoke NSEs for procurements related to email, telecommunications and data centres. These exemptions are intended for use when there is a national security concern around a project. They enable government departments to avoid following procurement rules laid down by trade agreements when purchasing solutions such as IT equipment. An NSE means that they don’t have to consider proposals from companies that may put other governments’ interests first.

One source familiar with SSC internal processes explained to IT World Canada that NSEs are often used to avoid procurement rules when a specific product is required. This often occurs when design teams need to guarantee interoperability, for example.

“You can’t go RFP and say ‘I want Cisco or Juniper’,” said the source, who preferred to remain anonymous. “But with an NSE you can name the thing you want.”

Since the exemption rules were introduced in 2012, their use has become more systemic, and the source said that the use of exemptions has been “pushed past where it was.”

The contract was for a supercomputer that would help Environment Canada simulate environmental forecasts. It has been using IBM computers for this since the late 1990s, and documents describing its procurement process explained the department’s contract with the company was expiring “with few remaining options to extend.”

Documents show that SSC issued a request for information in fall 2012, qualifying four bidders a year later. It moved to refine its requirements in summer 2014, and issued requests for proposal between November 2014 and June 2015. The Treasury board approved IBM in April this year, officially awarding the contract on May 27, but reportedly tried to keep the information from the public.

This is not the first time that the government’s federal IT procurement processes have come under fire. In a report initially sent to ministers in March 2015, the Information Technology Association of Canada (ITAC). an industry lobby group to which both Hewlett-Packard Canada and IBM are members, said that security requirements for members to be part of the federal IT supply chain were causing a concern. “The criteria for acceptance or rejection of a supplier is hidden under a veil of national security,” it complained.

The report also described an industry engagement day held in March 2014 covering SSC data centre requirements. Shared Services Canada didn’t respond to multiple requests for details about the procurement process, and subsequently awarded over $4 million in contracts to IBM under a national security exemption, it said.

“There was a lack of transparency and companies spent time, energy and money pursuing an opportunity that was sole sourced under a national security exemption, almost one year after the Industry day,” the report added.

After this report was submitted to ministers, ITAC reportedly withdrew it and issued a revised version making no reference to national security issues in procurement. Both of those reports are detailed in this CBC story.

Other companies have complained about the SSC’s use of NSEs in its procurement processes.

Toronto-based Eclipsys Solutions accused SSC of wrongly invoking an NSE in a complaint to the CCIT last year. The CCIT was forced not to inquire into the complaint because its job is to assess how well procurement processes conform with trade agreements, but the NSE was used to preclude any trade agreements altogether.

In its findings, the tribunal warned that it had concerns about how the SSC used NSEs. It believed that “the present case provides an example of where a government institution may have cast too wide an exclusion from the disciplines of the trade agreements for reasons seemingly unrelated to national security,” it said. It advised agencies to limit the scope of their NSEs to only specific provisions of trade agreements, rather than precluding them altogether.

There have been other, more successful attempts to challenge NSEs in government procurement. M.D Charlton successfully complained to the CITT earlier this year when  Public Works and Government Services invoked an NSE during a procurement contract for night vision binoculars for the RCMP. The department invoked the NSE improperly, the inquiry found. The tribunal required that a new solicitation be issued that did not include technical requirements favouring a particular supplier.

The tribunal has extended the length of its deliberations from 90 to 135 days, explained its registrar Michel, Parent, meaning that a final decision should be announced around the end of March.

SSC did not answer questions submitted by IT World Canada about its use of NSEs.



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