Tribunal upholds Canadian North complaint

In response to a complaint filed by the Canadian North airline, the Canadian International Trade Tribunal said this week that the Department of Indian Affairs and Northern Development should re-issue a $175 million, five-year food mail contract won by the Makivik Corp.’s First Air in November of 2005.

The tribunal also said Canadian North should be paid compensation equal to 60 per cent of the profit that it would reasonably have earned from the start date of the contract.

And if DIAND does not enter into a new food mail contract with Canadian North, the tribunal says they should pay the airline 60 per cent of lost profits for the remainder of the contract period.

They also ordered that DIAND pay Canadian North $10,000 to cover its legal costs. The tribunal said the exact amount of compensation that DIAND owes Canadian North should be negotiated within 60 days.

This is a major victory for the Canadian North airline, which filed its complaint with the trade tribunal in October of 2006.

In that complaint, Canadian North alleged that Canada Post, which acts on behalf of DIAND, subjected Canadian North to discriminatory treatment by not disclosing to them all the criteria they used to evaluate food mail contract proposals.

Canadian North also complained they were the lowest bidder, but still lost the contract. And they suggested that DIAND uses Canada Post as its food mail agent to avoid rules that normally apply to federal government contracts.

For their part, the trade tribunal appears to have upheld all or most parts of Canadian North’s complaint.

“The Tribunal found that evaluation criteria not disclosed in the tender documents were used in the evaluation of proposals and, therefore, determined that the complaint was valid,” the tribunal says in a press release issued Feb. 6.

However, a source told Nunatsiaq News that Canada Post, DIAND, and First Air will attempt to fight the decision by seeking a judicial review in the Federal Court of Canada.

The contract, one of the biggest that the federal government awards in northern Canada, covers the handling of food mail for northern Quebec, Baffin, the Kitikmeot, and parts of the Northwest Territories.

Aimed at supplying northern communities with nutritious perishable food at low postal rates, the food mail program is run by DIAND and paid for by money that comes out of DIAND’s budget.

DIAND uses Canada Post to acquire the air transportation needed to ship the food. Under that arrangement, perishable food bought at certain designated entry points qualifies for a low postal rate. The designated entry point for Baffin and Nunavik is Val d’Or, Quebec.

But Canada Post doesn’t actually handle or store any of the food shipped under the program – it’s actually against post office rules for people to send perishable food through the mail system.

All storage, handling and transportation work is done by the airlines, who must provide warehouses, freezers and refrigerators.

So to prepare its food mail contract bid in 2005, Canadian North had to demonstrate they were ready to go as of Dec. 1, 2005, using their warehouses in Val d’Or, Edmonton, Cambridge Bay, Iqaluit and Yellowknife, all equipped with coolers and freezers.

They also shipped building materials into Kuujjuaq that summer for use in the rapid construction of a new cargo warehouse there.

And in their proposal, Canadian North suggested, as an option, that the contract could be split between the two airlines, with some routes going to Canadian North and some routes going to First Air.

But in November of that year, officials with Canadian North were stunned when DIAND officials told them that once again the entire contract would be awarded to First Air, Canadian North’s main competitor in the eastern Arctic. First Air has held the food mail contract for 15 years.

Canadian North is a subsidiary of Norterra Inc., owned 50-50 by two Inuit birthright corporations: Nunasi Corp. of Nunavut and the Inuvialuit Development Corp. of the western Northwest Territories.

Failing to get at least part of the lucrative food mail deal means that Canadian North doesn’t have an anchor contract that it could use to help create competing airline services in small eastern Arctic communities.

At a meeting of the Qikiqtani Inuit Association in Iqaluit last October, a Canadian North official, Christie Sinclair, told delegates that if the airline were to get part of the food mail contract, they could expand services in the Baffin region.
“Perhaps if we were successful, it would be a good vehicle from which to start serving smaller communities,” Sinclair said, responding to complaints made by people who want more airline competition.