Acquisition of site preparation for the installation of a chemical storage unit by Natural Resources Canada

April 2026

Summary

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Office of the Procurement Ombud
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Catalogue number:
P114-47/2026E-PDF
International Standard Book Numbers (ISBN):
978-0-660-99172-6

Please note that the report is available in a PDF or paper format if needed. 

On this page

The complaint

1. On October 8, 2025, the Office of the Procurement Ombud (OPO) received a written complaint from a Canadian supplier (the Complainant) regarding a contract awarded by Natural Resources Canada (NRCan). The contract was for ground/site preparation for the installation of a chemical storage unit. The contract, valued at a maximum of $69,995.35 (applicable taxes excluded), was awarded on October 7, 2025.

2. The requirement was solicited a total of 3 times, with 2 of the solicitations having been cancelled. The Complainant was the sole bidder on both cancelled solicitations; the first was cancelled because the bid exceeded NRCan’s budget, and the second because NRCan determined that, despite discussions of a price reduction with the Complainant, there were insufficient funds to complete the project even with such a reduction. The Complainant alleges that NRCan used information from its bid and price discussions to alter the scope and restructure subsequent solicitations. The Complainant further contends that NRCan should have continued negotiations up to the limits of the available budget, given the Complainant’s lowest‑priced status.

3. The complaint raised the following issues:

4. On October 9, 2025, OPO confirmed the complaint met the requirements of the Procurement Ombudsman Regulations (the Regulations) and it was considered filed.

Mandate

5. This Review of Complaint was conducted under the authority of paragraph 22.1(3)(b) of the Department of Public Works and Government Services Act and sections 7 to 14 of the Regulations.

6. Pursuant to subsection 9(2) of the Regulations, the Procurement Ombud requested NRCan provide all Departmental records associated with the procurement and the award of the contract in question, as well as NRCan’s procurement policies and guidelines in effect at the time of the solicitation. The Procurement Ombud also requested the Complainant provide additional information not submitted as part of the complaint.

7. The Procurement Ombud determined that the circumstances warranted the use of the expanded review process, and as a result, the expanded review process was used for this Review of Complaint. In accordance with subsection 11(4) of the Regulations, the Government organization is given 25 working days to comment on the complaint. These comments are then shared with the Complainant, who then has 10 working days to respond to the comments. If the Complainant raises new arguments or evidence in its response, the Government organization then has another 10 working days to provide additional information.

8. The chronology of events and the findings in this report are based on the records provided to OPO by the Complainant and NRCan, as well as relevant publicly available information. The failure by either the Complainant or NRCan to disclose any relevant records or information could impact the findings of this report.

Chronology of events

9. On May 30, 2025, NRCan issued a Request for Proposal (RFP) for the preparation of a site to accommodate a chemical storage locker at the Laurentides Forestry Centre (Solicitation A). The RFP was by invitation only and was sent to 3 vendors, including the Complainant. The basis of selection was lowest-priced compliant bid.

10. On June 12, 2025, the Complainant submitted a bid. It was the only bid received, and exceeded NRCan’s available budget for the work. The available budget was not made public.

11. Later on June 12, 2025, the NRCan Contracting Authority requested a cost breakdown of the Complainant’s bid, which the Complainant then provided.

12. On June 16, 2025, the NRCan Contracting Authority advised the Complainant that the solicitation was cancelled because the bid price exceeded the available budget.

13. On July 18, 2025, NRCan removed the electrical work from the Statement of Work. Because the electrical work was the only element that triggered the security clearance requirement, its removal eliminated the need for a cleared contractor and enabled NRCan to invite additional vendors who did not hold that level of security clearance in the subsequent solicitation.

14. On August 4, 2025, a new RFP (Solicitation B) was sent to 5 vendors, including the Complainant. The closing date of the solicitation was initially August 19, 2025, but was extended to August 22, 2025.

15. On August 21, 2025, the Complainant submitted a new bid. Once again, it was the only bid received, and exceeded NRCan’s available budget for the work.

16. On August 25, 2025, the Complainant provided a cost breakdown of its new bid, as requested by the NRCan Contracting Authority.

17. On August 28, 2025, at NRCan’s request, a meeting was held with the Complainant. The Complainant requested NRCan’s questions in advance, but NRCan declined and indicated it would be simpler and clearer to discuss them during the meeting.

18. Following the meeting, the NRCan Contracting Authority provided clarifications regarding certain specifications in the Statement of Work and advised that they would await a revised submission from the Complainant.

19. On August 29, 2025, following an internal meeting (but prior to the Complainant sending their revised submission), NRCan advised the Complainant that, even with a cost reduction and revised bid, there would be insufficient funds to complete the project. As a result, the solicitation would be cancelled, and a new Statement of Work would be developed.

20. On September 12, 2025, NRCan issued a new solicitation (Solicitation C) to 11 vendors, including the Complainant. Changes to the solicitation included: revising excavation and lower wall specifications, removing the demolition requirements, and dividing the requested work into 3 phases.

21. On October 2, 2025, the solicitation closed. 2 bids were received, including a bid from the Complainant.

22. On October 3, 2025, an evaluation of the 2 bids received was completed. The Complainant was not the lowest bidder.

23. On October 7, 2025, the contract was awarded to the other bidder.

24. On October 8, 2025, the Complainant submitted a complaint to OPO.

25. On October 24, 2025, OPO advised both NRCan and the Complainant that it had launched a review of the complaint.

26. On November 19, 2025, NRCan provided OPO with its response to the complaint and supporting documentation. The Complainant did not submit a response to NRCan’s response.

27. On December 15, 2025, NRCan provided OPO with its final response to the complaint.

Analysis of issues and findings

Issue 1 – Did Natural Resources Canada inappropriately use the Complainant’s bid and expertise to revise its subsequent solicitations?

28. The Complainant stated:

“[Solicitation A]: I was the only compliant bidder: I was asked to provide my cost breakdown and explanations, and then the project was cancelled. [Solicitation B]: I was the only compliant bidder: Very minor changes. I was asked to provide my cost breakdown, negotiation of certain items, asked how to reduce costs, and finally the project was cancelled. [Solicitation C]: Project was broken into 3 steps and changes were made according to our discussions. All of my expertise and my ideas for reducing costs were included. I am no longer the lowest priced bidder.” (Translated from French)

29. NRCan stated:

“When only one compliant bid is received, it is standard practice to request a cost breakdown to assess price fairness, as outlined in the Supply Manual and Practitioner’s Guide for Procurement Pricing. For the first two solicitations, cost breakdowns revealed that most of the requirements would be subcontracted and identified high-cost items such as electrical and concrete work. Despite scope changes, the second bid was higher than the first. NRCan explored cost-saving measures, including removing electrical requirements and changing sidewalk material; however, these adjustments did not achieve affordability objectives. Discussions during debriefing identified potential savings related to the retaining wall specifications, which informed changes in the third solicitation. As noted above, the third solicitation also adopted a phased approach and was distributed to a wider vendor base. Two bids were received, and the contract was awarded to the lowest compliant bidder.”

Analysis – Issue 1

30. Each of the 3 RFPs included a clause titled “Insufficient Funding”, which stated:

“If the lowest-priced compliant bid exceeds Canada’s allocated funding for the work, Canada may

  1. Cancel the solicitation; or
  2. Obtain additional funds and award the contract to the bidder with the lowest-priced compliant bid; and/or
  3. Negotiate a maximum reduction of 15% to the proposed price and/or to the scope of the work with the bidder who submitted the lowest-priced compliant bid. If Canada is unable to reach a satisfactory agreement, it will exercise option a) or b).”

31. Following the closing of Solicitation A, the NRCan Contracting Authority emailed the Technical Authority to advise that 1 bid had been received, and requested approval for an increase in funding as the bid price exceeded the funding originally allocated to the requirement, in alignment with option (b) of the Insufficient Funding clause. However, the Technical Authority refused the funding increase, indicating that the bid price was significantly above their expected price.

32. As a result, and in accordance with the Insufficient Funding clause, NRCan was effectively left only with cancelling the solicitation under option (a), as the Complainant’s bid price exceeded the available funding and the price differential was too great to be resolved through negotiation of a maximum 15% reduction under option (c). Despite this, NRCan subsequently requested a cost breakdown from the Complainant. It was only after the cost breakdown had been submitted that the Complainant was advised that, pursuant to the Insufficient Funding clause, the solicitation had to be cancelled due to the issue with the 15% price differential.

33. While requests for cost breakdowns may be used to validate pricing where only 1 bid is received, making such a request when it was already known that the solicitation would be cancelled reasonably created a perception for the Complainant that a contract award remained possible. There was, however, no evidence that NRCan inappropriately relied on the Complainant’s bid or expertise to shape or revise the requirements for Solicitation B, as many of the subsequent changes had already been determined internally prior to the request for the cost breakdown. Nonetheless, in these circumstances, NRCan should have acted more fairly by clearly explaining the limited purpose and context of the request.

34. In Solicitation B, the NRCan Contracting Authority again advised the Technical Authority that 1 bid had been received and sought approval for an increase in funding, as the bid price exceeded the funding originally allocated to the requirement. The Contracting Authority also advised that a cost breakdown had been requested from the Complainant. Unlike in Solicitation A, the Technical Authority did not immediately refuse to consider additional funding, indicating that, while the news was not ideal, they would await the receipt of the cost breakdown before discussing the matter further.

35. Following receipt of the cost breakdown, the Contracting Authority requested a meeting with the Complainant to clarify certain aspects of their cost breakdown. The meeting was to take place the following day. The Complainant agreed to meet noting that the questions could alternatively be addressed by email that same day; however, the Contracting Authority advised that the questions were not readily available in writing and suggested that it would be clearer to discuss them during the meeting. Following the meeting, NRCan suggested that the Complainant could submit a revised proposal based on the discussion, during which NRCan provided clarifications regarding the requirement. However, the next day, NRCan advised the Complainant that even with a cost reduction and revised bid, sufficient funding would not be available to complete the project and that the solicitation would therefore be cancelled. NRCan further advised that a third solicitation would be issued at a later date.

36. The Directive on the Management of Procurement (DMP/the Directive) states the following:

4.3 Contracting authorities are responsible for the following:

4.3.1 Conducting procurements on behalf of the department or agency, and establishing contracts and contractual arrangements based on sound procurement principles, including fairness, openness and transparency to obtain best value.

37. The revisions brought to Solicitation C’s Statement of Work were informed by the meeting with the Complainant, as acknowledged by NRCan in its response to the complaint, “the debriefing discussions identified potential cost savings related to the retaining wall specifications, which informed changes in the third solicitation”. However, this does not demonstrate that NRCan inappropriately used the Complainant’s bid or expertise. The Insufficient Funding clause expressly contemplates negotiations under option (c), and information voluntarily provided by a bidder during such discussions may be used to refine future requirements, provided it is not used in a manner that disadvantages the bidder or undermines the competitive process. In this case, there was no evidence that the information provided by the Complainant was used to confer an unfair advantage on other bidders or to exclude the Complainant from future competition. NRCan’s actions were consistent with the provisions of the RFP.

38. That said, NRCan should have more clearly advised the Complainant that the discussions were occurring within the context of option (c) of the Insufficient Funding clause. The absence of such clarity may have left the Complainant uncertain as to their position in the process, including whether negotiations were contingent on securing additional funding. NRCan also could have taken additional steps to promote procedural fairness, such as providing questions in advance or postponing the meeting to allow the Complainant to prepare. Finally, NRCan’s reversal of position the following day (i.e., advising that a revised bid was not to be accepted due to insufficient funding and that the solicitation would be cancelled) could reasonably create a perception that negotiations were not well‑controlled or that the process was not anchored in a clear and stable requirement and budget. While these shortcomings do not amount to inappropriate use of the Complainant’s information, they underscore the importance of clearer communication and transparency.

Finding – Issue 1

39. Ultimately, while NRCan did use information derived from the Complainant’s bid and expertise to inform revisions to subsequent solicitations, this use was not found to be inappropriate. NRCan’s actions were consistent with the applicable solicitation provisions, including the Insufficient Funding clause. However, NRCan’s communications with the Complainant could have been clearer and better anchored in those provisions. In particular, NRCan should have avoided steps that reasonably created the impression that additional opportunities for contract award remained available when that was not the case. Examples include NRCan requesting a cost breakdown after it had already decided not to increase available funding for Solicitation A and contemplating its cancellation, as well as advising the Complainant that it could submit a revised proposal under Solicitation B, only to reverse course the following day.

40. Fairness is fundamental to the integrity and effectiveness of federal procurement. In future solicitation processes, NRCan should clearly communicate which process is being pursued, the authority under which additional information is being requested, and the limits of any discussions with bidders. Doing so would promote transparency, manage bidder expectations, and reduce the risk of ambiguity or confusion for future participants.

Issue 2 – Was Natural Resources Canada required to negotiate with the Complainant up to the allowable budget, since they were the lowest-priced bidder?

41. The Complainant stated:

“Wasn’t it necessary to respect the fact that I was the lowest priced bidder in order to negotiate effectively with my company and ultimately avoid the appearance of a conflict of interest by inviting new bidders each time, with all my figures and calculations in hand?” (translated from French)

42. NRCan stated:

“The complainant raised concerns about not being awarded a contract despite submitting the lowest compliant bid in the first two solicitations. NRCan’s requirement was solicited three times. The first two solicitations were cancelled because bid prices significantly exceeded the available budget. Each subsequent solicitation included scope changes and was distributed to a broader vendor base to encourage competition.”

Analysis – Issue 2

43. As mentioned in the Issue 1 analysis above, each of the 3 RFPs included the “Insufficient Funding” clause, which permitted NRCan to cancel the solicitation, obtain additional funding, or negotiate a reduction of 15% to the proposed price or scope of work with the lowest-priced compliant bidder in cases where that bid exceeded NRCan’s allocated funding for the work.

44. Each of the 3 RFPs also contained a clause titled “Rights of Canada”, which stated:

“Canada reserves the right to:

  1. Reject any or all bids received in response to the request for proposals;
  2. Negotiate with bidders on any aspect of their bid;
  3. Accept a bid in whole or in part, without negotiation;
  4. Cancel the request for proposals at any time;
  5. Reissue the request for proposals;
  6. If no compliant bid is received and if the requirement is not substantially modified, reissue the request for proposals, inviting only those bidders who had submitted bids to submit new bids within a period specified by Canada; and
  7. To negotiate with the sole compliant bidder to ensure that Canada obtains best value.”

45. These 2 clauses are referred to in contract law as “privilege clauses”. Their purpose is to broaden the list of actions that a purchasing entity (in this case, NRCan) can take without detrimentally affecting the integrity of the procurement process.

46. The RFPs also included a third clause titled “Results of the Request for Proposals” which stated:

“1. There will be no public opening of bids.

2. The lowest priced compliant bid will be recommended for contract award.

3. After the bid closing date, the results of the request for proposals can be requested by emailing the following address…”

By submitting a bid, bidders indicate that they understand the terms and conditions of the solicitation and agree to be bound by those terms.

47. This third clause sets out the basis for selection of a successful bidder. In this case, the only selection criteria was the “lowest priced compliant bid”. Bidders were not required to demonstrate that they met any technical criteria, and the results of the solicitation would be determined based on price alone.

48. In conducting this procurement, NRCan had to balance its duty of fairness to bidders with its duty for the responsible stewardship of public funds. The DMP notes that “contracting authorities are responsible for…conducting procurements on behalf of the department or agency, and establishing contracts and contractual arrangements based on sound procurement principles, including fairness, openness and transparency to obtain best value.”

49. The “Insufficient Funding” and “Rights of Canada” clauses of the RFP reserved the right to negotiate both price and scope of work should that bid exceed the available funding.

50. Case law has repeatedly confirmed that a purchasing entity is not under an obligation to award a contract, and that it has the right to reserve privileges to itself in the tender documents. In Martel Building Ltd. v. Canada ([2000] 2 S.C.R. 860), the Supreme Court of Canada noted that “in light of the privilege clause, the Court rejected the proposition that the party who had instigated the tender call was required to accept the lowest compliant tender”, and that “a tendering authority has ‘the right to include stipulations and restrictions and to reserve privileges to itself in the tender documents’ (Colautti Brothers at para. 6).”

51. The courts have also found that there is no obligation to proceed with negotiations if the lowest-priced bid exceeds the purchasing entity’s budget. This is especially true in cases where the purchasing entity is a public organization using public monies, as there is an obligation to seek best value and probity of funds. In Colautti Brothers Marble Tile and Carpet (1985) Inc. v. Windsor (City), ([1996]O.J. No. 4527; 67 A.C.W.S. (3d) 1105), the Ontario Court of Justice noted that “once it became apparent to the City that it could not negotiate a price for the work with the plaintiff that was within or reasonably close to its budget, it was proper for the City to divide the work into 3 packages and to re-tender the work on that basis.” In the case of Solicitations A and B, on which the Complainant was the sole bidder, their bids in both circumstances were over twice NRCan’s allocated budget.

52. The “Insufficient Funding” clause contained in each of the 3 RFPs stated that “If Canada is unable to reach a satisfactory agreement, it will exercise option a) or b),” with option a) being to cancel the solicitation. Combined with the duty to ensure best value, NRCan was not under an obligation to negotiate with the Complainant solely because they were the lowest-priced bidder, especially given the disparity between their allocated budget and the bid price.

53. NRCan had a right to cancel both solicitation processes for Solicitation A and Solicitation B and was under no obligation to negotiate with the Complainant.

Finding – Issue 2

54. With regard to Issue 2, NRCan did not have an obligation to negotiate with the Complainant because they were the lowest-priced bidder. NRCan reserved the right to cancel the solicitation processes at any time. NRCan therefore acted within its rights as set out in the tender documents by cancelling Solicitation A when it determined that the only bid significantly exceeded their available budget, and by cancelling Solicitation B as they had insufficient funding to be able to accept the only bid. Given its responsibility for ensuring best value, NRCan was justified in cancelling the processes.

Conclusion

55. The Procurement Ombud did not find merit in the first assertion that NRCan inappropriately used the Complainant’s bid and expertise to revise its subsequent solicitations. The revisions made to Solicitation B were consistent with internal discussions that had occurred prior to discussions with the Complainant. While NRCan acknowledged that the revisions made to Solicitation C were informed by discussions with the Complainant following Solicitation B, there was nothing in the applicable solicitation provisions that precluded NRCan from using information obtained through the bidding process to refine the scope of future solicitations. However, NRCan’s requests for information were, at times, unclear and were not consistently framed with reference to the relevant solicitation provisions. Clearer communication regarding the purpose and context of these requests would have enabled the Complainant to make a more informed decision about how to respond.

56. The Procurement Ombud did not find merit in the second assertion that NRCan had an obligation to negotiate with the Complainant because they were the lowest-priced bidder. NRCan leveraged the “Insufficient Funds” clause included in the tender documents in order to cancel both Solicitation A and Solicitation B when it became clear that the Complainant’s bid significantly exceeded their allocated budget, and chose to include scope changes and a broader distribution for the solicitation in order to increase competition in an effort to achieve best value to Canada.

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