As time goes by municipalities are inventing more ways to sidestep the competitive procurement process.
I have been told by some municipal staff that what is most important for them is not whether a competitive process of contract award was used, but whether there was sufficient integrity in the procurement method employed, to give one reasonable confidence that best value for money was obtained.
They go on to explain that this concern can be addressed in a number of ways, such as peer review; council approval of contracts (adopted by some municipalities); the limitation of untendered contracts to specific types of transaction (the policy adopted by most municipalities in Canada); or approval by the purchasing manager or by senior management, such as the purchasing manager or the commissioner (or general manager) responsible for the purchasing department.
One problem with the current measures in place at most municipalities, is that they fail to provide a proper business basis for making decisions as to whether – in the context of a given transaction – the municipality should shift away from the tender, RFP or formal competitive quotation approach towards a more private sector approach. Even if one were to assume that a tender or RFP would normally generate the lowest possible price, there are still a range of circumstances in which a negotiated approach is likely to secure a lower cost result.
One obvious situation in which tenders and RFPs are counterproductive is in the relation to low value contracts, for in such cases, the prospect of cost-saving through a formal competitive process is always offset by the transaction costs associated with such a process.
In my opinion, any major construction project should be sent out for a formal process. The most recent process I would be concerned about is the proposed Thunder Bay Event Centre. My understanding of this project was that a Request for Expressions of Interest (RFEI) was sent out to gain the level of interest from the industry to bid on this major capital procurement.
The RFEI stated that "it is expected that the city will engage with the short-listed respondent(s) in an interactive process, the objective of which will be to develop, through a subsequent RFP process, a framework for a possible partnership agreement, subject to the City of Thunder Bay formally agreeing to construct the Thunder Bay Event Centre." After the RFEI was done, council voted to skip the RFP process and work towards putting together an agreement to award a sole source $100 million plus contract with one of the teams interviewed during the RFEI portion of the process.
However the government funding did not get approved yet and the event centre may be put on the back burner for now. This project should have moved to the RFP stage in order to get a true competitive price to build it in a fair, open, and transparent manner.
My point with the entire government procurement system is based on the fact that we have a very defined set of rules that need to be followed, by everyone, including the owners and contractors.
Once we stray from the "foundation of government procurement" being the policies and procedures, it never ends well for all parties involved in the process. As I have written before about the municipal procurement process, without rule compliance we end up with private sector procurement that is focused on the bottom line to the shareholders. The public sector is responsible to make sure the tax dollar is spent in the best possible way to ensure "value for money," which again can be done by making every major project as competitive as possible.
Stephen Bauld is a government procurement expert and can be reached at firstname.lastname@example.org. Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths. Send comments or questions to email@example.com