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Procurement Pespectives: Is ‘open, transparent and fair’ procurement possible?

0 62 Government

by Stephen Bauld

From time to time we all question the procurement process that municipalities use. For whatever reasons the problems with documents and disputes continues on a regular basis.
Procurement Pespectives: Is ‘open, transparent and fair’ procurement possible?

This never-ending set of stories that happen every day around the country should not be of any surprise to contractors. Every time I have a contractor call me with an outrageous story about a tender or RFP award I have to wonder what set of rules are being followed in the bylaws of each city. I sometimes think some cities just make it up as they go, hoping the contractors will not complain about the process.

It always comes back to the answer that while an open, transparent and fair system can result in best value for the public, it is not likely to do so except in a relatively narrow band of cases. As I have stated many times, there are both theoretical and observational reasons to doubt that the so called "open, transparent and fair" beloved by the government is likely to generate an efficient result. To be fair, no one would deny that there are benefits in competition. An open and competitive process reduces perceptions of favouritism, and gives all contractors (each of which is a taxpayer) a fair chance to bid for government contracts that their taxes fund.

The question for me is why numerous studies have shown that governments around the world generally pay more than the private sector for goods and services that they buy. The solution to this problem most decidedly is not to move towards single-sourcing the vast majority of government purchases. Monopoly generally violates the public interest, since by being insulated from competition the monopolist can both charge higher prices and produce products of lesser quality, because the customer has no choice.

As has been noted several times in many publications, one obvious problem with government procurement is, that by virtue of the tender system, the government is essentially stuck with the first price that is quoted. It is assumed that a tender result in each supplier bidding is the lowest price. In reality, and depending on the amount of companies bidding, there is no reason why any bidder should do so: all that a bidder needs to do is quote a price that is below what he or she expects the competition to bid.

To give a simple example, in a tender all potential suppliers are invited to bid for the contract that is to be awarded. The competition for the contract should be conducted in accordance with defined rules set by the contracting authority. The most important of those rules is that each supplier submits sealed bids in which it offers to supply the required product or service at a stipulated price. All suppliers bid the same terms for the same contract.

The general rule is that most tenders have a number of advantages. The process should be completely open for all bidders. There is at least some degree of competition. The uniformity of the process ensures a degree of equality of treatment. But as I have mentioned in past articles, tenders also have limits, and far too often these limits are ignored. For some reason some municipalities make this process highly technical.

Most complaints I get on a daily basis across Canada are from bidders who submit a bid for a contract and are then ruled out from consideration because of some minor problems in the way they submit their bids. If the award of public contracts were a game, all this would be fine. Games have rules, and players who do not play by the rules are penalized. However, public contracting is not a game; and municipalities are not neutrals in that game. They have interests of their own to protect.

Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com.

Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.

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