Article

Procurement Perspectives: Tender issues, limitations and benefits explored

0 111 Government

by Stephen Bauld

The use of tenders, its limitations as well as its benefits need to be considered and the process should not be used where those limits outweigh the benefits.
Procurement Perspectives: Tender issues, limitations and benefits explored

In my opinion, this is one of the most critical issues that needs to be addressed in the public procurement area.

The reason why Canadian municipalities are generally inflexible in dealing with procurement issues is because they have repeatedly been punished through the award of adverse judgments by courts when they have acted in a way that is perceived to be incompatible with the integrity of the tender system.

Under the Canadian law of tender, among the worst anti-integrity steps that a government can take, the courts tell us, is the process of bid shopping.

The term "bid shopping" describes "the practice of soliciting a bid from a contractor, with whom one has no intention of dealing, and then disclosing or using that in an attempt to drive prices down amongst contractors with whom one does intend to deal."

It involves using "the bids submitted to it as a negotiating tool, whether expressly or in a more clandestine way" so as to drive down the price charged to the government.

Yet surely in a market economy, it is the responsibility of government purchasing staff to seek to advance the interests of their employer so as to obtain the best possible price. If the tender process does not promote the goal of getting the best price, then only in very unusual circumstances would the public interest be served by employing it.

Efforts to play one supplier against another may be outside the boundaries of the established tendering protocol.

Although, I would point out that this established protocol can be traced back no further in this country then the decision of the Supreme Court of Canada in the MJB case, but they are far from being inconsistent with normal behaviour within a market economy.

On the contrary, it is very common for customers to ask their suppliers — who are, after all, supposed to be in competition with each other — to meet or better prices so as to drive the price down. Suppliers do not look after the customer's interest. Why should any government customer be asked to look after the interests of its suppliers?

The explicit assumption in that court decision that any "express" or "clandestine" effort pursued by a government "to obtain a better price or other contractual advantage" is somehow "bid manipulation," "potentially dangerous," or "objectionable" appears to arise from the implicit belief that the use of the tender process somehow places suppliers at a disadvantage — that it is more costly for them to compete by way of bid submission, or exposes them to risks that otherwise would not apply.

Such a proposition should be supported either by proper evidentiary material or at the very least by some kind of testable model of market behaviour.

I do not agree with this line of reasoning, because it is based on one mistaken premise after another. As a general rule, the submission of a tender does not entail any "significant expense" beyond what a supplier might expect to incur in answering any serious inquiry about the cost of its products and services.

For the most part the public procurement process results in a reduction in sales-related costs in comparison to private sector business.

Both the tender process and various other rules governing public procurement cut to a minimum, if they do not entirely eliminate, the costs incurred in private sector sales competition in relation to corporate entertaining — the so-called business lunch, followed by the business golf game and the business trip to the hockey game.

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.

Leave a comment

Or register to be able to comment.

Copyright ConstructConnect TM. All rights reserved. "ConstructConnect" is a dba for CMD Holdings.
The following rules apply to the use of this site:
Terms of Use and Privacy Statement