September 17, 2012

Municipal procurement includes mixed objectives

Procurement Perspectives | Stephen Bauld

Government purchasing requires a municipal policy to specify the goals to be achieved by using each type of procurement process.

The wording of some municipal bylaws in itself often suggests some confusion on the part of council as to whether the municipality is there for the advancement of the interests of its residents or its suppliers.

For instance, Section 1 of the Regional Municipality of Niagara Purchasing Bylaw No. 56-2009 sets out 12 purposes, goals and objectives that are to underline the execution of the purchasing function for that region. The bias in the list of such purposes towards being fair to suppliers (as opposed to driving a hard deal for the benefit of taxpayers) is self-evident. The bylaw states that its “purposes, goals and objectives and of each of the methods of purchasing authorized herein” are:

to encourage competitive bidding;

to ensure objectivity and integrity in the purchasing process;

to ensure fairness between bidders;

to maximize savings for taxpayers;

to offer a variety of purchasing methods, and to use the most appropriate method depending on the circumstances of the acquisition;

to the extent possible, to ensure openness, accountability and transparency while protecting the best interests of the corporation and the taxpayers of the Regional Municipality of Niagara;

to obtain the best value for the corporation when procuring Goods and Services.

Thus on a list of seven items, “savings for taxpayers” ranks fourth in priority.

What the bylaw is saying is that it is more important for procurement to be carried out in a manner that is competitive and which is fair to bidders, than it is for it to be carried out in a manner that saves money.

In a sense, this is shocking. It is contrary to virtually every principle of corporate governance for the staff of a corporate entity to be told to place more or the same emphasis on defending the rights of others as they are told to place on defending the rights and interests of their employers.

On this point, it is worthwhile to refer again to the general duty of corporate staff, as set down in section 134 of the Business Corporations Act:

“134(1) Every director and officer of a corporation in exercising his or her powers and discharging his or her duties to the corporation shall act honestly and in good faith with a view to the best interest of the corporation; and exercise the care, diligence and skill that a reasonable prudent person would exercise in comparable circumstances.”

I suggest this is the same standard as should guide both councillors and municipal staff.

They are there to represent and to further the interests of the municipality as a collective entity. They are not there to represent or assist local business, local workers, the ward or other bailiwick by which they were elected or in which they reside, or any other person, entity, special interest group or cause of the moment, save and except that they do so in a manner consistent with these fundamental duties to the municipal corporation for which they serve.

It is particularly critical that the exclusivity of staff and council responsibilities be made both express and manifest in relation to the purchasing function.

Bylaws that put the interests of suppliers on par with or ahead of the interests of the municipality appear to be inconsistent with section 2 and 8 of the Municipal Act, 2001, which indicate that the purpose of municipal purchasing policies and procedures is or ought to be to get the best deal possible for the municipality, taking into account the need to formalize purchasing procedures in order to mitigate the risk of employee misconduct.

Stephen Bauld, Canada's leading expert on government procurement, is president and CEO of Purchasing Consultants International Inc. He is also the co-author of the Municipal Procurement Handbook, published by LexisNexis Canada. He can be reached at stephenbauld@bell.blackberry.net.

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