Landmark ruling that defined the future of public sector software procurement. Corel's complaint suggested that Microsoft's incumbency gave them undue advantage. Subsequent solicitations for software were directed at resellers and not OEM (original equipment manufactures).

1. ANALYSIS OF COREL
VS.
DEPT OF NATIONAL
REVENUE @ CITT
ALLAN CUTLER
PUBLIC SECTOR
PROCUREMENT
Okafo EKE, Ifeoma Nneka
9/28/2015
BY

2. 1
An analysis of the determination of the Canadian International Trade Tribunal (CITT) in the matter of the 2
complaints: File Nos.: PR-98-012 and PR-98-014 filed by Corel Corporation against the Department of
Public Works and Government of Canada Services (PWGCS)in the RFP – Solicitation No. 46577-7-1709/A
for an enterprise licence for an Office Automation Suite (OA) standard on the behalf of Department of
National Revenue (here referred to as Revenue Canada) under subsection 30.11(1) of the CITT act and
the decisions to conduct inquiries into the complaints under section 30.13(1) of the CITT Act

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Table of Contents
Executive Summary........................................................................................................................ 3
1. Background and Implications to Non-MS Software providers ............................................... 3
1.1. Office Automation: .......................................................................................................... 3
1.2. Y2K Compliance – RC7 Project:..................................................................................... 4
1.3. Disregard of TBS guidelines:........................................................................................... 4
1.4. Draft and Final RFP: ........................................................................................................ 4
2. Corel - The Complainants Position – ...................................................................................... 4
Summary ..................................................................................................................................... 4
Other Submissions on Unfair Procurement Practice by the Department.................................... 5
Complainants Legal Redress....................................................................................................... 6
The Departments positon:............................................................................................................... 6
Microsoft’s (MS) Position Summary.............................................................................................. 8
The Tribunal’s Decision ................................................................................................................. 9
The Finding and Ruling and Rationale: ...................................................................................... 9
Remedy...................................................................................................................................... 10
Significance of the Outcome of the Case...................................................................................... 10
Other History ................................................................................................................................ 11
Appendix....................................................................................................................................... 12
Appendix A - Timeline of Proceedings..................................................................................... 12
References..................................................................................................................................... 13

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Executive Summary
Corel Corporation on June 12 and July 14th 1998, filed two complaints with the Canadian
International Trade Tribunal (CITT) that stipulated that the procurement of Office Automation
(OA) software by the department of Public Works and Government Services (here referred to as
the department), for Revenue Canada discriminated against Corel, in favour of the incumbent
software vendor - Microsoft Corporation (MS) in several ways. The Complaints went further to
state that the procurement process was detrimental to both Corel and the integrity of the Canadian
Procurement System and was contrary to Articles of: the Agreement on Government Procurement
(AGP), the North American Free Trade Agreement (NAFTA) and the Agreement on Internal Trade
(AIT), all collectively referred to in this paper as the agreement. In addition, the complaint stated
that the RFP in question combined software licence procurement with integration, training and
conversion requirements (henceforth referred to as conversion costs): costs hither to not included
(but absorbed by Revenue Canada) in a prior procurement from MS of 25,000 OA licences through
standing offers (SO) The complaints further noted the bond requirement applicable to Corel but
not MS as well as the inequitable evaluation criteria. Corel’s second complaint was based on
subsequent events since its first complaint and to the effect that the government had neither
provided it with sufficient information to prepare a responsive bid nor had it agreed to extend the
closing date for the bid given the forgoing. Corel proffered some remedies that would address their
complaints. The sequence of events surrounding these complaints is listed in Appendix A.
The Tribunal determined that Corel’s complaint was valid and had met the conditions for an
inquiry (pursuant to section 7 of CITT Act) and gave all parties to the complaint an opportunity to
respond. The Tribunal proceeded with a decision given that sufficient documentation had been
provided by the parties to the complaint. A summary and analysis of events and rulings follow.
1. Background and Implications to Non-MS Software providers
1.1. Office Automation:
Between 1991 and 1992, Revenue Canada Customs and Excise (RCCE), began the purchase of
MS software as part of its standardization of office automation (OA). The advance contract award
and subsequent SO prevented Lotus and Corel (OA vendors) from participating for technical
reasons. Fortuitously, all conversion costs were also absorbed by the government without the need
for a performance bond. In 1992, RCT - Revenue Canada, Taxation’s evaluation selected 2 Lotus
and MS products as their OA software of choice. When RCCE and RCT were amalgamated into

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one entity, MS was adopted and a shopping spree for MS licences ensued under a National Master
Standing Offer (NMSO).
1.2. Y2K Compliance – RC7 Project:
In 1996 the RC7 project aimed at addressing Y2K software compliance (What Does Y2K, n.d.)
was born. As a result, the upgrade and or replacement of the MS installed base at Revenue Canada
was called for and they relied on call-ups against the MS NMSO and another MS licence shopping
spree was triggered with conversion costs again absorbed by the government.
1.3. Disregard of TBS guidelines:
On August 28, 1997 however, the Treasury Board of Canada Secretariat (TBS) advised of changes
made against the use of NMOS for custom of the shelf (COTS) software as well as computer
applications. Revenue Canada continued to issue call-ups against MS NMSO as it continued with
the RC7 project roll-out contrary to the Treasury Board’s Policy at the time that restricted
purchases to 10 licences or a maximum $40,000. Revenue Canada did claim that this was to
forestall any delay to the objective of achieving Y2K compliance although it also conveniently
expanded the incumbent’s installed base thus raising the barrier to entry.
1.4. Draft and Final RFP:
Having stacked the deck in favour of MS, and in spite of its urgent need for Y2K compliance, in
1998, Revenue Canada’s opened up its OA suite requirement to competition and issued a draft
RFP to potential bidders on April 23 1998 and a review was conducted the next day with Corel,
MS and Lotus (OA publishers) in attendance. Appendix A (Evaluation of Proposal) to the RFP
was subsequently amended 5 times in response to questions and concerns raised by Corel
demonstrating inadequate preparation on the part of the department. Corel’s request for an
extension was denied because of the urgency of the requirement. Request for information was not
adequately addressed and the RFP was posted to MERX on May 22, 1998. Corel subsequently
submitted four lists of questions with respect to the RFP and finally filled its first and second
complaints on June 12 and July 14th
, 1998.
2. Corel - The Complainants Position –
Summary
The complainant’s position is surmised in their response to the GIR (Government Institution
Report) as well as other circumstances prior to the issuing of the solicitation and after. Corel
complaint stipulates that the Government by their own admission was responsible for:

6. 5
1. The incumbency of MS: an obstacle to fair competition; imposed an unequal burden on non-
MS suppliers in the form of: Conversion costs, NMSO licences with conversion costs backed
out (for MS) and evaluation criteria with no attempt to level the playing field – including the
cost of MS licences obtained via NMSO into the evaluation of Microsoft’s bid
2. The incomplete RFP: since it did not contain sufficient or reliable information necessary to
make a bid – information available to and not needed by the incumbent
3. The continued procurement by Revenue Canada of MS licences in violation of TBS policy
created an environment of incumbency. By delaying the RFP an environment of urgency was
created while at the same time facilitating the expansion of MS installed base by the
procurement of additional licences not made part of the evaluation criteria.
4. Procurement practices in contravention of government policy and international agreements;
abuse of the SO as a procurement tool led to an MS de-facto standard;
5. Sole Source: A conscious effort on the part of the government engineered sole-sourcing without
meeting the requirement for sole source (Article V:15 of the code)
Other Submissions on Unfair Procurement Practice by the Department
1. The procurement was not fair and open, and did not provide equal opportunity and access, and
clearly favoured the incumbent in contravention of domestic regulation and trade agreements.
(see sections 1.1 to 1.4) .Information that the incumbent was privy to was also not made
available to other bidders
2. The Evaluation framework was discriminatory in terms of conversion costs that the
incumbent was not subject to and had been absorbed by the department previously (section)
3. Costs charged by MS since the inception of the RC7 project were not made part of the costs
subject to evaluation criteria to level the playing field (section 1.2)
4. Conversion costs previously absorbed by the government and not charged the incumbent
were now being made a material part of the evaluation criteria tipping the scales in MS’s
favour out the gate and making other bidders’ bid responses non-competitive.
5. Combing licencing and service costs which was not the practice in past procurements
especially related to this project since the same costs were now, evaluation criteria that the
incumbent was not subject to and requiring a performance bond from non-incumbent bidders
6. Non-MS bidders were being asked to provide a firm-unit price for costly document
conversion services without any knowledge of the scope, size and complexity involved -

7. 6
all knowledge that the incumbent was privy to and by design not subject to as the incumbent;
while the other bidders had to rely on a SAIC( Science, Applications International
Corporation) report with compounding errors and a site visit that was going to provide
information on said report
7. Changing the evaluation requirement with respect to 3rd party software (SAP) from a
point-rated certification to an interface mandatory requirement thus ensuring that other bidders
will be non-compliant.
8. Urgency of the RC7 project was implausible: Revenue Canada had claimed to be working
on Y2K compliance since 1988 and recognized the requirement for a distributed platform in
1996 and did nothing
9. Obfuscation of Information: relating to product numbers, prices, descriptions, the
department made it impossible to provide a responsive bid
10. Perception of Unfairness: by hiring MS lobbyist (which was dismissed since they were
subsequently fired)
Complainants Legal Redress
1. Statement of Requirements and Evaluation methods in RFP be amended to ensure Revenue
Canada’s needs are met,
2. RFP is to be compliant with domestic and international procurement obligations
3. Divide the RFP into separate RFPS for licence(goods) and service(training and integration)
4. Include MS OA licence costs associated with RC7 project for a level playing field
5. Removing the mandatory SAP integration requirement covered in 2 rated requirement (to
avoid double penalty or reward)
6. Postponement of closing date of RFP until 40 days after validity of complaint is determined
7. Costs and Compensation be awarded in recognition of a denied opportunity to participate and
profit from the above procurement
The Departments positon:
1. Incumbency has cost advantages; competitors cannot be pacified at taxpayers’ expense
2. TBS’s policy is committed to ‘best value’; Competition for all software procurement leads to
an unreasonable taxpayer burden required to retrain if there was a change; Further, best product
was MS at the time it used SOs and was thus justified. In addition, there was no policy that
bound Canada Revenue to TBS policy and invalidated its NMSO.

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3. Fairness to the non-incumbent and risk management was engendered by: Competing the
requirement, absorbing some of the conversion costs and limiting: documents to be converted
(in view of limited information) and training costs in spite of the urgency of Y2K compliance
for software. The department also felt justified in the performance bond requirement since
document conversion and Y2K compliance were vital to the project)
4. Procurement prior to Jan 1, 1994 was outside the Tribunals jurisdiction since it pre-dated its
existence (a position refuted by the Tribunal since the department’s actions during that time
influenced current proceedings) and was beyond the limitations per section 6 of CITT act and
as such cannot grant remedies
5. The Directive (No 0023) that supported the procurement of 4,744 MS OA licences defined the
licence as a ‘good’ and was not covered under the code at the time and as such the procurement
in question was not in breach of ‘the code’. However, it did create the need to level the playing
field which the department did through item 1 of section 2.1.1 of Appendix B of the RFP (per
the complaint – RFP was not sighted for this report).
6. Article 1002 of NAFTA cannot be interpreted to mean mandated competition when structures
exist and are in place for limited tendering - i.e. Standing Offers
7. In response to Corel’s position on conversion costs the Department opined the following:
a. Competing a requirement for OA software that creates considerable associated artefacts
would create an undue burden on the tax payer with respect to associated conversion costs
and should be stated clearly as the intent of the trade agreement if that were so
b. The 1992 selection of MS was based on ‘best product’ at the time which provided a sole
source justification under Government Contracts Regulation and subsequent valid NMSOs
were in place until the need for a reassessment arose so no rules were broken; Further
contract splitting would suggest a competitive process was required (which was not the case)
which could then be circumvented with contract splitting
8. As contract-splitting did not occur, there was no need to amend Appendix B of the RFP to
reflect upgrades and related conversion costs since the inception of the RC7 project. The
department further clarified that upgrades (not new licences) were acquired capable of
processing Y2K related data (a requirement being competed for if it was paid for and thus a
contradiction on the part of the department); According to the department, an upgrade to repair

9. 8
a deficiency in version was not a change in requirement that would invalidate a previous
decision to standardize software.
9. The SAP mandatory requirement was so modified to allow software publishers and not SAP
confirm compliance with the requirement
10. The department first dismissed the 2nd complaint on the grounds that it did not introduce any
new issues, was an attempt to claim relief not sought in the first complaint, sought to reopen,
and amend the RFP or to terminate resulting contracts - in violation of CITT act (subsections:
30.11 & 30.11(2) ) and violated filling rules on time limits (section 6 – of regulation)
11. The jurisdiction argument notwithstanding, the department responded as follows:
a. On lack of extension – Y2K compliance urgency was cited
b. Clarity of Sample files for viewing at site visit and inadequacy of SAIC report – the
department maintained that: It never intended to show sample files at site visit; Files Corel
viewed were not representative of work complexity & the SAIC report provided sufficient
information for evaluation of conversion tasks (thus contradicting the SAIC report)
c. SAIC report disclaimer was irrelevant given that the associated risk was ameliorated by
RFP amendment 3 that reduced quantity of files converted to the lowest amount possible
d. Per Article 103(1) of NAFTA and Article XII(2) of the AGP, all information available was
made available (unfortunately untrue) all be it unsatisfactory to bidders
e. On hiring MS Lobbyists: They were fired when notified (how does this happen?)
Microsoft’s (MS) Position Summary
Microsoft agreed with the department stipulating that they received no preferential treatment and
that:
1. On their 1992 selection – it was consistent with procurement procedure in effect
2. On Contract splitting – like the government said, MS claimed it did not happen since
incremental procurement was the intent of the SO which continued subsequently. An initial
requirement was not deliberately split up which would suggest contract splitting
3. Aggregate acquisition led to a critical mass which necessitated a call for an enterprise
solution RFP (convenient since it could only serve to engender the incumbent)
4. On SAP Compliance – Industry practice dictates compatibility of all enterprise software
with existing installed software systems

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The Tribunal’s Decision
The Finding and Ruling and Rationale:
1. Insufficient Information provided (as a result of improper planning) , would prevent Corel
from providing a responsive bid in contravention of Article 1013(1) of NAFTA tender
documentation and Article XII (2) of the AGP. While the second complaint did not give the
Government sufficient time to gather information, it was reasonable to anticipate that bidders
other than the incumbent would require this information. An effort was made by recruiting
SAIC to provide the required information but they also did not have sufficient time to obtain
said information and submitted an inadequate and ineffective report
2. Not granting an extension that would allow Corel a reasonable time to bid was in violation of
Article 506(5) of AIT. In light of prior claims to Y2K readiness and proposed 1 year testing,
the tribunal was not convinced that a claim to urgency could not accommodate an extension
of the bid due date: to allow for investigation of file conversion and compatibility issues - a
requirement that had been previously delayed.
3. The RFP was found to be in contravention of Articles 1008(1) of NAFTA, VII(1) of AGP
since tendering procedures was not non-discriminatory and further contravened Articles 501
of AIT (purpose), since it did not provide a framework that ensured equal access to
procurement for all Canadian Suppliers in order to reduce purchase costs by:
a. The creation of 2 bidding classes: Non-incumbents and MS with all rights and privileges
of incumbency including absence of conversion cost per evaluation criteria as well as no
need for bond (necessitated by the lack of clarity in RFP and associated risk to non-MS
bidders as well as Y2K compliance requirement), access to information and meeting SAP
interface mandatory requirement without an explanation thus hindering an effective bid by
non-incumbents and effectively sidelining Corel
b. Updating evaluation criteria for conversion and training cost at 50% of value without an
explanation to the risk exposure to the government, taxpayer and bidders
c. Delay in initiating competitive procurement long after it had been approved in favour of
call-ups that expanded MS installation base and contravened TBS directives, created a tight
time line and difficulty for bidders
d. Not providing information on the nature and quantity of licences procured since the TBS
ruling thus preventing bidders from effectively discounting their bids

11. 10
Remedy
1. Start the solicitation afresh in line with provisions of trade agreements, reducing the impact of
conversion costs on non-incumbents to provide for more effective competition while taking
into consideration the Y2K timeline, a requirement and urgency that was self-created.
2. Alternatively and in light of the work already done, the department provide a proposal jointly
developed with Corel that recognizes the lost opportunity and potential revenue lost had it
won the solicitation bid
3. Compensation be rewarded: In the context of the CITT Act: Paragraph 30.15 and sections 2
and 3 a, b, c that stipulate compensation should be based on:
(a) the seriousness of any deficiency in the procurement process found by the Tribunal;
(b) the degree to which the complainant and all other interested parties were prejudiced;
(c) the degree to which the integrity and efficiency of the competitive procurement system
was prejudiced; (Canadian International Trade, n.d.)
4. The tribunal further awarded to Corel, reasonable costs for preparing a response to the
solicitation and filling and proceeding with the complaints
Significance of the Outcome of the Case
The Government has since recognized that an Organization wide Standardization of software
including Office Automation Software (OA):
1. Creates an environment of incumbency
2. Raises barriers to entry for other vendors
3. Imposes a significant burden on the tax payer should there be a change in software.
While recognising best software as the Standard, the government subsequently no longer
accepts solicitation bids from Software vendors. Procurement of software is now:
a. For a specific software functionality
b. And is now procured through resellers and not vendors. This provides a more
level playing field to all bidders in course of software procurement.

12. 11
Other History
The RFP had significant revenue opportunity considering the work involved several years of
work which included:
1. Software licence and installation
2. Support and Training
3. Document conversion, macros and other document artefacts
4. Y2K compliance (Software RFP Violates , 2010, October 15)
Considering the potential cost of damages that the Government was going to award Corel, the
Government mounted an appeal at the Federal court. The Courts rejected the Federal
Government’s claim that CITT exceeded its jurisdiction and should have been more differential
in its ruling. They went on to uphold the CITT ruling (Lalonde, P., 1999, June 1).

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Appendix
Appendix A - Timeline of Proceedings
Timeline with respect to Proceedings in respect of Corel’s Complaint against the Department
Date Activity
1 Aug 28, 1997 Additional Microsoft Licences/upgrades procured by Revenue Canada under
NMSO
2 June 12, 1998 Corel filed complaint – File No. PR-98-012 with CITT
3 June 17, 1998 The Tribunal determined that conditions for inquiry had been met and decided to
conduct an inquiry into complaint.
4 June 18, 1998 CITT issued an order postponing the award of any contracts relating to the
procurement issue until validity of complaint is determined
5 June 29, 1998 The department certified that procurement was urgent and delay would not be in
public interest
6 July 2, 1998 CITT rescinds its postponement order
7 July 10, 1998 CITT granted Microsoft leave to intervene in – File No. PR-98-012
8 July 14, 1998 Corel filed complaint – File No. PR-98-014 with CITT
9 July 17, 1998 Parties to 2nd
Complaint informed by CITT of their intention to proceed jointly with
the two complaints
10 CITT requests that GIR be submitted to address both complaints
11 July 21, 1998 CITT granted Microsoft leave to intervene in – File No. PR-98-014
12 Aug. 11 1998 The Department filled the GIR related to the two complaints
13 Aug. 26, 1998 Corel and Microsoft filed comments on GIR with Tribunal
14 Sept. 8, 1998 CITT asked the department to respond to issues raised in Corel’s comments on GIR
15 CITT asked department to provide additional information with respect to licences
procured after August 28, 1997
Sept 11. 1998 The Department responded to the latest tribunal request
16 Sept 21, 1998 Corel sent comments on GIR
17 Microsoft informed CITT of it support of the Departments response to Corel’s
comments on GIR.
18 Oct 26, 1998 CITT issued its determination on the forgoing bypassing the need for a hearing and
deeming information on record sufficient for such a determination.

14. 13
References
Canadian International Trade Tribunal Act (R.S.C., 1985, c. 47 4th Supp. (n.d.). Retrieved
November 8, 2015, from http://laws-lois.justice.gc.ca/eng/acts/c-18.3/page-29.html#docCont
COREL CORPORATION. (n.d.). Retrieved November 8, 2015, from
http://www.citt.gc.ca/en/procure/determin/archive_pr2b060_e
Lalonde, P. (1999, June 1). Citting in, Objection Sustained. SUMMIT: The Business of Public
Sector Procurement.
Software RFP Violates 'Open Competition' Agreements - NECI. (2010, October 15).
Retrieved November 8, 2015, from http://neci-legaledge.com/software-rfp-violates-open-
competition-ag
SYBASE CANADA LTD. (n.d.). Retrieved November 8, 2015, from
http://www.citt.gc.ca/en/procure/determin/archive_pr96037_e#I2
What Does Y2K Compliant Mean? (n.d.). Retrieved November 8, 2015, from
http://www.uic.edu/depts/accc/newsletter/adn21/y2kcomp.html