OTTAWA—A federal court judge has condemned a federal agency’s purchase of $40-million worth of x-ray screening equipment for Canadian airports, saying the contract was “unfair, unreasonable” and “non-competitive.”

In a harsh judgment, Justice Peter Annis found that managers at the Canadian Air Transport Security Authority “misled” the board of directors about key details of the bids that resulted in an unfair contract.

He concluded that the directors would never have proceeded with the 2010 deal if they knew all the facts.

“The board authorized an award of a contract that resulted from an unfair and non-competitive procurement process,” Annis wrote.

“Given its mandate and policies, it would seem unlikely that CATSA’s board would have authorized the contract had the proper information been presented,” he wrote in his Feb. 6 decision.

“I think that it is a matter of importance to the public if a governmental decision-making body is misled or misinformed by its staff on a significant factor or group of factors likely affecting the outcome in a procurement process,” he wrote.

CATSA is responsible for screening passengers and baggage at major Canadian airports. It is forecast to spend $598 million in the 2013/14 fiscal year, paid for by passenger fees.

A spokesperson for CATSA, which had been criticized in the past by the auditor general for its contracting practices, declined to comment because the case remains before the courts. However, the agency has filed an appeal of the judgment.

The decision stems from an action launched by U.S.-based Rapiscan, which lost the CATSA contract to rival Smiths Detection. The five-year deal, with an option to renew for another five, was to supply x-ray equipment to screen baggage.

Yet Annis takes aim at what he calls an “ad hoc” and “concocted” process that he says “derogated drastically” from CATSA’s contracting procedures. And because the agency’s directors were kept in the dark about the shortcomings, the board “was unable to exercise its oversight function.”

The judge found fault on several fronts. For example, the board was told that Rapiscan had not met the requirements, even though it was certified by CATSA’s U.S. counterpart and had good reliability. As a result, board members never saw the pricing of Rapiscan equipment, which Annis says was less expensive.

As well, he said that CATSA “induced” Rapiscan to participate in a process knowing that it no chance of being considered because of a requirement for more than two x-ray generators used to create the image of the baggage.

But Rapiscan had argued that requirement was never spelled out in CATSA’s original “request for submissions.”

“Thus the process had the appearance that all industry leaders had participated in a competitive procurement when management knew in advance that Rapiscan would be eliminated,” Annis said.

“In my view this conduct constitutes bad faith on the part of CATSA,” the judge wrote.

Annis has invited both parties to file submissions on the “appropriate remedy.”

However, CATSA filed an appeal on Feb. 20, 2014, saying that Annis made errors in law in his ruling and relied on “erroneous facts.”

In its appeal, CATSA argues that Parliament exempted the agency from procurement rules to ensure it has flexibility in procuring “highly specialized equipment that is core to CATSA’s unique security mandate.

“Parliament intended CATSA to have the broadest possible discretion in fashioning procurements to ensure operational requirements are always met by exempting CATSA from the procurement rules

And CATSA says there were a “significant number of factors” beyond the number of views that distinguished the offers that were “material” to the purchase decision.

Loading... Loading... Loading... Loading... Loading... Loading...

Peter Kant, executive vice-president of external relations at Rapiscan, said the ruling validates the company’s claims that the contracting process was unfair.

“It does confirm what we’ve been saying, which is that CATSA didn’t follow any of its own stated contracting policies,” he said in an interview.

“It’s very concerning to see a public agency just behaving with incredible disregard for fairness,” Kant said.