The United Nations has recently published a statement to this effect: “As the most influential purchasers in a national economy, who spend typically 15% to 30% of GDP on a diverse and wide range of goods and services, governments can drive the market for sustainable products through their procurement policies”.

Although the logical leaps from procurement policy to job creation are not large, there is yet little evidence to suggest the best ways to undertake these programs.

For instance, should governments be focused in creating certain types of jobs (e.g., goods vs. services, different types of technologies, etc.)? And if so, how does that manifest in procurement policy? Will prioritizing a “greening of the economy” also result in successful sustainability outcomes for governments?

Nevertheless, below is an abbreviated list of some procurement strategies that are being used across the world to assist in a “greening of the economy”.

• Engage the private sector and other stakeholders early on to better understand needs, capabilities, capacities, etc.
• Build people capacity with training, information sharing and tools / methodologies.
• Collect quick wins through pilot projects and build from your successes.
• As always, consider alternatives to actually procuring the good or service: rethink need, use less, re-use, recycle, recover energy, negotiate end-of-life management options, etc.
• Embed changes to procurement processes including naming of projects, specification definitions, evaluation methodologies and performance criteria.
• Seeking joint buying to provide additional economic scale to smaller suppliers of sustainable technologies.

In its July 2008 determination in 144314 Canada Inc./Nexys v. Department of Human Resources and Social Development, the Canadian International Trade Tribunal upheld a complaint after finding that the government had inaccurately interpreted a vague mandatory requirement and had improperly rejected the complainant’s proposal.

The case dealt with an RFP for the provision of translation and revision services in both official languages. The complainant disputed the government’s application of a mandatory requirement calling for proof of a minimum of five year’s past experience delivering the required services. The RFP contained a discrepancy between the English and French versions of the requirement.

The English version of the requirement clarified a discrepancy in the French version and confirmed that evidence of incorporation was required to satisfy the five year past experience requirement. However, the Tribunal determined that the ambiguity in the French version could not be reconciled by referring to the English version since the primary language of the complainant was French and it would be unreasonable to expect the French proponent to read the English version of the RFP to clarify the ambiguity. The Tribunal cited the contra proferentem rule and determined that the ambiguity should be resolved against the government as author the ambiguous provision. It ordered a re-evaluation of the complainant’s proposal.

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These materials are for general information and reference purposes only. They do not reflect the views of any past or present employers or clients and should not be relied upon as a substitute for case-specific qualified professional advice.

To subscribe to the National Tendering Law Update, or for more information about his procurement training sessions, contact Paul Emanuelli at: paul.emanuelli@sympatico.ca

National Tendering Law Update
© Paul Emanuelli, 2008. All Rights Reserved.

In its July 2008 determination in Immeubles Yvan Dumais Inc. v. Department of Public Works and Government Services, the Canadian International Trade Tribunal upheld a complaint after finding that the government applied an undisclosed formula to score the pricing of the complainant’s bid.

The case dealt with a tender call to lease office space in Baie-Comeau, Quebec. The complainant alleged that notwithstanding its pre-bid request for clarification, the government failed to clearly establish how it would score the proposed office space and per-square-metre leasing rates submitted by competing bidders.

Instead of multiplying each competing lease rate by the minimum 562 square metres required in the tender call, the government multiplied each bidder’s lease rate by the total number of square metres offered in each bid. By applying this apples-to-oranges calculation, the complainant’s tender was assessed as more expensive than competing bidders who proposed higher per-square-metre rates but offered less space.

The Tribunal determined that the government relied on an ambiguous evaluation process and failed to properly disclose its scoring formula. It awarded the complainant lost profit damages.

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These materials are for general information and reference purposes only. They do not reflect the views of any past or present employers or clients and should not be relied upon as a substitute for case-specific qualified professional advice.

To subscribe to the National Tendering Law Update, or for more information about his procurement training sessions, contact Paul Emanuelli at: paul.emanuelli@sympatico.ca

National Tendering Law Update
© Paul Emanuelli, 2008. All Rights Reserved.

1. the duty to conduct a fair evaluation based on transparent criteria;
2. the restriction against engaging in post-tendering price reduction schemes that prejudice low bidders; and
3. the adverse impact of conflict of interest and insider advantage.

Antian Professional Services Inc. v. Department of Public Works and Government Services
Canadian International Trade Tribunal
July 2, 2008

In its July 2008 determination in Antian Professional Services Inc. v. Department of Public Works and Government Services, the Canadian International Trade Tribunal dismissed the complainant’s challenge of the government’s evaluation process. The case dealt with a Request for Standing Offer for exhibit management and related personnel services. The complainant alleged that the government conducted an unfair evaluation process.

However, the Tribunal rejected the complaint, finding that it had no reason to second-guess the subject matter experts on the government evaluation team.

As the Tribunal noted, it will typically take a deferential approach to government evaluations and will generally not substitute its own evaluation for that of the government evaluation teams unless it finds evidence of a significant evaluation error:

“The Tribunal has stated, in previous determinations, that it will not substitute its judgment for that of the evaluators unless they have not applied themselves in evaluating a bidder’s proposal, have ignored vital information provided in a proposal, have wrongly interpreted the scope of a requirement, have based their evaluation on undisclosed criteria or have otherwise not conducted the evaluation in a procedurally fair way.”

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These materials are for general information and reference purposes only. They do not reflect the views of any past or present employers or clients and should not be relied upon as a substitute for case-specific qualified professional advice.

To subscribe to the National Tendering Law Update, or for more information about his procurement training sessions, contact Paul Emanuelli at: paul.emanuelli@sympatico.ca

National Tendering Law Update
© Paul Emanuelli, 2008. All Rights Reserved.

If nothing else, the event highlighted the philosophical and technical decisions that need to be made to implement a fully functioning sustainable procurement program.

Some of the key questions that I took away from the session included:

• How far down our supply chain should we be concerned about? Do we care about the activities of our suppliers’ suppliers?
• How does one create a traditional business case for improved social, economic and environmental benefits? Should a traditional business case be required?
• How can we avoid the adverse consequences of silo’ed budgeting practices on making sustainability decisions?
• Should our suppliers be able to charge a premium for sustainability? In many cases, shouldn’t sustainability result in less expensive products?
• How can we effectively lead our supply chain? What policies do we need in place in order to have the credibility to impose new sustainability requirements on our supply chain?

There is no simple answer to any of these questions. But I don’t think there is any debate whether sustainable procurement is part of our future. So, I’ll endeavour to keep on top of new developments in this area that I can share through the blog.

Rate Bid Form Correction

In its March 2008 decision in Jarlian Construction Inc. v. Waterloo (City), the Ontario Divisional Court upheld a November 2007 trial judgment which found that the City of Waterloo had improperly accepted a non-compliant low bid. The case dealt with a mistake in the selected bidder’s rate bid form. The municipality had corrected an obvious error in the low bidder’s tender and awarded the construction contract to that bidder. A competing bidder sued. The trial court concluded that the error made the low bid legally incapable of acceptance and that the municipality had accepted a non-compliant bid:

“…Xterra’s bid was clearly non-compliant and therefore not capable of being accepted by the City in accordance with the terms and conditions of the tender. By accepting Xterra’s bid, the City was in breach of its implied obligation to only accept a compliant bid.”

As this case illustrates, purchasing institutions should be careful to avoid engaging in post-tender “bid repair”. The correction of bid errors, particularly mistakes relating to price, can constitute a breach of the implied duty to reject non-compliant tenders.

Correct Math May Be Wrong

In its May 2008 decision in Maystar General Contractors Inc. v. Town of Newmarket, the Ontario Superior Court of Justice found that the defendant municipality improperly corrected a mathematical error in a tender and held the municipality liable for awarding a contract to a non-compliant bidder. The case involved a tender call for the construction of a recreational facility.

The plaintiff, Maystar General Contractors, was an unsuccessful bidder. It alleged that the contract was awarded to a non-compliant competing bidder. It sued for $3.3 million in lost profits. Newmarket, the defendant municipality, argued that the selected tender was compliant and that its mathematical corrections were permitted within the tendering rules. The Court disagreed, finding that the bid price in the selected tender was uncertain and that the post-bidding “clarifications” and “corrections” amounted to improper bid repair:

“…the uncertainty of the price that existed in Bonfield’s bid could not, in my view, be corrected or rectified by the subsequent communication from Bonfield to the Town and in particular, Bonfield’s facsimile letter of September 20, 2005 purporting to clarify its Bid Price. As I have held, the Bid was non-compliant and therefore incapable of acceptance…”

The Court concluded that the “clarification” process resulted in the improper post-bidding alteration of the tender.

“Minor Irregularity” or Fatal Flaw?

In its February 2008 decision in Surespan Construction Ltd. v. Canada, the Federal Court of Appeal upheld the Canadian International Trade Tribunal’s decision to summarily reject the complaint of a non-compliant bidder. In its May 2007 determination, the CITT summarily dismissed the rejected bidder’s complaint after noting that the bidder had failed to submit a signed front page with its tender as was required by the Invitation to Tender. While the rejected bidder argued that this was a “minor irregularity”, the Tribunal disagreed. It found that signing the front page was a mandatory requirement and that the government had acted appropriately in rejecting the bid for non-compliance. The Federal Court of Appeal rejected the bidder’s subsequent appeal:

“…there is no reason for us to intervene in the decision of the CITT. The applicant asked the CITT to commence an inquiry into the rejection of its bid for the construction of a bridge because the face page of the bid was not signed by an authorized official of the applicant as required by Tender documents. The CITT declined to embark upon an inquiry and dismissed the complaint summarily…. In our view the necessary implication which flows from that conclusion is that the CITT did not consider the absence of a signature to be a minor irregularity.”

As this case illustrates, what some may see as “minor irregularity” may actually be a fundamental flaw that calls for the rejection of a tender.

Buyers Beware of Bid Repair

As these cases illustrate, engaging in the post-bidding rectification of tender defects can be a risky business practice. To avoid being on the receiving end of the next bid repair claim, purchasing professionals should always proceed with caution when assessing tender compliance.

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These materials are for general information and reference purposes only. They do not reflect the views of any past or present employers or clients and should not be relied upon as a substitute for case-specific qualified professional advice.

To subscribe to the National Tendering Law Update, or for more information about his procurement training sessions, contact Paul Emanuelli at: paul.emanuelli@sympatico.ca

National Tendering Law Update
© Paul Emanuelli, 2008. All Rights Reserved.

In July 2008 the Supreme Court of Canada granted leave to appeal the December 2007 British Columbia Court of Appeal decision in Tercon Contractors Ltd. v. British Columbia. The Court of Appeal decision enforced a limitation of liability provision contained in a government tender call and reversed a trial decision that had originally awarded over $3 million in damages against the government.

The original March 2006 decision of the BC Supreme Court overrode a limitation of liability clause in the government’s tender call and found the BC government liable for $3.3 million for awarding a contract to a non-compliant bidder.

The case involved a tender call for the construction of a gravel highway in the Nass Valley of British Columbia. One of the unsuccessful bidders sued, alleging that the contract was awarded to a non-compliant competitor. The tender call rules clearly prohibited joint venture bids. Notwithstanding this rule, the government awarded the contract to a low bid submitted by a joint venture. While the awarded contract was styled to reflect only one of the two joint venture parties as the prime contractor, the trial court saw through the government’s attempted bid repair.

The trial court determined that the bid was made by a non-compliant joint venture and found that the government breached its tendering law duties. It then considered the applicability of the following limitation of liability provision contained in the tender call:

“Except as expressly and specifically permitted in these Instructions to Proponents, no Proponent shall have any claim for any compensation of any kind whatsoever, as a result of participating in this RFP, and by submitting a proposal each proponent shall be deemed to have agreed that it has no claim.”

The trial court noted that the courts have discretion to limit the enforceability of such exclusionary clauses: (a) within the tendering context due to policy considerations; and (b) more generally under contract law based on doctrines such as fundamental breach, unconscionability, unfairness and unreasonableness. The trial court then concluded that it would not allow the government to shield its conduct behind the exclusionary clause contained in the tender call.

However, in December 2007, the British Columbia Court of Appeal granted the government’s appeal and reversed the trial decision’s finding of liability. The Court of Appeal found the above noted limitation of liability clause to be enforceable and allowed the government to avoid liability after accepting the non-compliant bid.

With respect to the significant public policy implications of allowing government institutions to receive binding bids while contracting out of their corresponding legal duties, the Court of Appeal concluded that the solution rested in bidders opting out of such tendering processes rather than in further judicial intervention.

Yet, allowing purchasers to avoid their fairness duties in formal tendering processes by relying on limitation of liability provisions seems to fly in the face of the more nuanced treatment of privilege clauses in prior decisions. For example, in its April 1999 decision in M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., the Supreme Court of Canada limited the scope of the privilege clause (which typically reserves the right to “reject any and all tenders, low bid not necessarily accepted”) by finding that it did not permit the purchaser to accept non-compliant bids.

As MJB illustrates, a purchaser’s discretion is typically limited to the pool of compliant bids and tempered by its overarching duty to act fairly and in good faith. This protects the integrity of the bidding process and recognizes the rights of compliant bidders.

However, the Tercon Court of Appeal decision purports to allow a purchaser to receive binding bids and to then bypass fairness obligations or judicial scrutiny by using a broad limitation of liability provision. This judicial “hands off” approach seems at odds with the traditional role of the court as protector of the integrity of the bidding process.

It will now be left for the Supreme Court of Canada to clarify how the balanced approach to reserved rights and implied duties reflected in the MJB decision can be reconciled with the BC Court of Appeal’s Tercon reversal, which apparently empowers purchasers to dispense with any duties by simply substituting a limitation of liability provision in place of a traditional privilege clause. Until these matters are reconciled, this will serve as a source of significant uncertainty for purchasers and bidders alike in the years to come.

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These materials are for general information and reference purposes only. They do not reflect the views of any past or present employers or clients and should not be relied upon as a substitute for case-specific qualified professional advice.

To subscribe to the National Tendering Law Update, or for more information about his procurement training sessions, contact Paul Emanuelli at: paul.emanuelli@sympatico.ca

National Tendering Law Update
© Paul Emanuelli, 2008. All Rights Reserved.

Plain Language in Legal Documents

The plain language philosophy has significant influence in international legal circles. For example, the European Parliament’s Joint Practical Guide for legislative drafting recognizes plain drafting as its first principle and calls for legislation that is: (a) clear, easy to understand and unambiguous; (b) simple, concise, containing no unnecessary elements; and (c) precise, leaving no uncertainty in the mind of the reader. While no-one can reasonably disagree with these objectives, achieving them is not nearly as simple as proclaiming them. There are, unfortunately, complicating factors awaiting us on the path to plain language utopia, particularly when we apply plain writing to our contract documents.

The Need for Technical Terms

The things we buy are often described in the marketplace in technical terms. Our use of plain language needs to be tempered by this commercial reality. For example, try going into a technology store and asking a clerk for an MP3 player without using that term “MP3 player”. Try saying that you are looking for “one of those small devices that you attach to your computer to record music that you can then detach and walk around with to listen to music with your headphones.” As this example illustrates, technical terms often serve as the succinct shorthand of the marketplace. The trick is to distinguish between helpful technical terms that facilitate accuracy and brevity in communication and gratuitous technical terms that serve no purpose other than showing off knowledge in obscure subject areas. Knowing the difference is critical to precise contract drafting.

Ordinary vs. Technical Interpretations

Once you cut your content down to the essential technical terms, you still face a challenge in achieving contractual certainty since your technical terms may have no universally understood meaning. Much may depend on your audience. In fact, the common meaning of a term, as generally understood by a non-expert, is often inconsistent with the more precise meaning of that term as understood by an expert.

In Sullivan and Driedger on the Construction of Statutes, Ruth Sullivan provides two good examples dealing with “fruits and vegetables” under Canada’s Excise Tax Act. In the first case the court determined that the statute did not apply to the defendant peanut importer since nuts (which, technically speaking, fall within the category of “fruits and vegetables”) did not fall within the common understanding of “fruits and vegetables”. In the second case the court found that the statue did apply since mushrooms (which, technically speaking, are a type of fungus) were commonly understood to be vegetables. In both of Sullivan’s examples, the outcome would be reversed if the court had applied a technically precise meaning over an “ordinary meaning” interpretation. This illustrates the big risk of plain language interpretations: they may not line up with what you originally intended when you used a technical term in your contract.

Further Interpretive Technicalities

Furthermore, there is no consensus on what we even mean by an “ordinary meaning” or on when it should trump the technical meaning. As F A R Bennion notes in Bennion on Statute Law, the “ordinary meaning” of a term can be “impacted by education levels, regions and class variations”. In other words, who’s “ordinary meaning” applies? Furthermore, Bennion notes that: (a) a technical term should be given its technical meaning when used within its specialized area; but (b) a term that has both a technical and ordinary meaning should be interpreted based on the context. This begs the question: what interpretation applies when that context is unclear? Is it my understanding of “MP3 player” or that of some teenage techno-wizard? Does it depend on where we’re standing?

The Devil’s in the Details

It may give you little comfort to know that your next contract interpretation dispute could land you in a courtroom where lawyers may be unable to agree on the meaning of “ordinary meaning”, let alone on whether that meaning should prevail over the technical meaning of your disputed term.

Contract drafters should therefore define their technical terms as precisely as possible since, as it turns out, keeping things simple is much harder than it appears.

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These materials are for general information and reference purposes only.  They do not reflect the views of any past or present employers or clients and should not be relied upon as a substitute for case-specific qualified professional advice.

To subscribe to the National Tendering Law Update, or for more information about his procurement training sessions, contact Paul Emanuelli at: paul.emanuelli@sympatico.ca

National Tendering Law Update
© Paul Emanuelli, 2008.  All Rights Reserved.

So, I thought this might be a good time to review what makes a successful shared service model. For reference, see a whitepaper produced by A.T. Kearney on the subject. I have picked which ones I believe are most relevant for the readers.

1. Define the scope, set realistic targets. Typically, shared service models are best applied to more transactional activities. For procurement, this might include: RFP development, marketing, and process management.

2. Create an effective governance structure. How will the executive reporting structure work? How can service levels be improved for internal customers? These are effected through the governance structure.

3. Take your time. A.T. Kearney suggests that full implementation, depending on scale and scope, takes approximately 2 years. Even small organizations must recognize that it will take time to define and implement an effective shared services program.

4. Choose your management tools. Should it be Service Level Agreements (SLAs) or Chargebacks? The management and administration of SLAs can be quite cumbersome. Yet it many organizations it is unclear whether chargebacks are resulting in the desired service levels. A trade-off between effectiveness and administrative headache is inevitable.

5. Measure your performance. As the old adage goes, “you tell me what you’ll measure, and I’ll tell you what I’ll manage”. Thus, to get the desired service levels, you need to create effective performance metrics.

6. Focus on internal customers. Treat your internal customers like you would if you were running a program focusing on external customers. That means adopting a “customer is always right” philosophy and an “outside-in” approach to organizational improvement.

Background

Public sector organizations face unusual challenges when evaluating and selecting a vendor for a major contract. By definition, the number of “stakeholders” in a public sector tender is vast - potentially all taxpayers can claim to be an interested party. All these stakeholders want reassurance that their taxes are being spent efficiently and fairly. Another factor is that public sector spending represents a very large part of the economy’s GDP. As such, it can have a significant impact on levels of competition in the market. Finally, public sector organizations are often obliged to publish their accounts, so expose themselves to a media hungry for news of scandal or corruption.

For all these reasons, it is essential that public sector tenders are conducted in such a way that their diligence and impartiality are beyond question. Most governments publish regulations for the conduct of procurement activities that attempt to enforce this. Whilst it’s beyond the scope of this article to address these regulations in depth, it is possible to identify some common benefits that public sector organisaitons derive from the use of eSourcing software.

What is eSourcing software?

eSourcing is simply a term given to software that assists with the sourcing process - identifying, assessing and selecting vendors. The two most common types of eSourcing applications are eRFx products and eAuctions. eRFX products help with managing RFP, RFQ, ITT, and PQQ projects. The focus is collecting information from vendors about their products and services in such a way that useful side by side comparisons can be made. Typically, eRFx products enable the buyer to frame their requirements in the form of questions, the vendors to answer the questions online, and the buyer to then score and analyse the responses.

Why use eSourcing software?

The main reason to use eSourcing software is to cut down on the administrative burden of collecting and analysing information from multiple vendors. This is a pure efficiency gain. However, by capturing the entire process on-line a number of other benefits emerge, many of which directly address the needs of the public sector. These benefits, elaborated upon below, are:

• Audit Trail - all vendor and buyer actions are logged and timestamped
• Multiple Evaluators - the RFP can be scored separately by different evaluators working in parallel.
• Uniform Communication - ensure that all bidders received identical information
• Uniform Evaluation - ensure that all bid’s receive the same consideration
• Feedback for rejected vendor

Audit Trail

One of the strongest but most simple benefits of eSourcing software is that all user actions can be recorded. For example, if one vendor emerges with a suspiciously high score for one aspect of their response it is possible to trace which users input the scores for that vendor, whether earlier scores were overwritten, what the early scores were, and so on. Or, consider the case where a vendor submits their RFP response after the deadline. Rather than claiming that it got lost in the post, or the bicycle courier got lost, there is now a deadline record of when the vendor last logged in, and when they tried to submit their response.

Many public sector tendering regulations (for example EU procurement rules) mandate that a timed record is kept for each significant action in the tendering process. So, when working with post and paper documents, it is necessary for a witness to observe, time and record the moment that a bid is received, and it’s envelope opened. With eSourcing software, records like this are created by default as an inherent part of the system.

Multiple Evaluators

One of the easiest accusations to level at a tendering exercise is the charge of favouritism to one vendor at the expense of the others. At its most ugly the charge is of outright corruption, and can lead to criminal charges. Ensuring that no favouritism is present is very challenging. A common approach (and under some regulations a requirement) is for multiple evaluators to read and score the same set of vendor responses. Of course there is no reason why multiple evaluators cannot be involved in an off-line process. However, for a 400 hundred question RFP, with 8 vendors, and 6 evaluators, there would be 19,200 scores. Clearly, working with paper documents and perhaps disparate excel spreadsheets, there would be considerable administrative burden and scope for error.

Fully featured eRFx software will include in-built support for multiple scoring sets. In our own product, SupplierSelect, when Multiple Scoring Sets are enabled, each evaluator will record their own scores. Users with appropriate permissions can view other user’s scores, and then record a definitive “Agreed” score. Consolidated scoring information can be downloaded into spreadsheets for further analysis, for example checking that there is consistent scoring bias with any of the evaluators.

Uniform Communication

EU procurement rules, and those of many other regimes, dictate that all bidders receive exactly the same information from the buyer. This may sound like a banal and obvious requirement, but it’s implications are surprising. For example, if a vendor sends an email asking for clarification about one aspect of the RFP, the buyer is not allowed to answer the email directly to that vendor. Instead, they are obliged to publish this new information to all vendors.

This style of communication is very easily facilitated when using a good eRFX system. There is usually some message board functionality, together with rules about whether or not to permit messages sent to just one vendor. So, in this case, one vendor posts a message with a question, and the answer is then published so that all vendors can see, and are notified of its publication.

Uniform Evaluation Period

Another common rule is that all tender submissions must receive the same amount of attention. In practical terms, this means that all vendors’ responses must be evaluated over the same period of time. Therefore if one vendor submits their response significantly before the deadline, this should not allow them to receive greater consideration than other vendors.

Translating this into practical terms, if the response is submitted either by post (for hard copy documents) or by email (for spreadsheets and word documents) then the evaluator must not open the envelope, or read the email, before the deadline. Clearly, this is very difficult to demonstrate.

Once again, when using eRFX software, such considerations may be taken care of in the background. In SupplierSelect, for example, it is possible to set a flag for an evaluation project which hides all vendors’ responses until the deadline has passed.

Feedback for rejected bidders

Bidders who fail to win a contract greatly value detailed information as to where they failed. This can help to improve for future tenders, or to learn not to go through the bother and expense of bidding for inappropriate tenders. Many public procurement regulations stipulate the failed vendors must be given detailed feedback.

Working offline, this requirement means that the evaluator must prepare reports for each vendor detailing how they were scored, and where they fell short. A time consuming job.

eRFX software can greatly help, since good products will provide an option to publish to vendors details of how they scored, compared to the average and winning scores.

References

EU Procurement Legislation

New Zealand Public Sector Procurement Guidelines

©SupplierSelect Ltd. 2008