Playing in bounds
Rules for the procurement game
by Ron Lunau and Sean Moore
Among the things that most distinguish Canada - and other
established democracies - from countries mired in poverty and instability
is the relative integrity, transparency and efficiency of its government
institutions and processes.
It's well established that corruption and inefficiency in
government are among the major impediments to the economic, social and
political development of many nations. And while the terms
"corruption" and "inefficiency" cover a lot of sins,
one of the most obvious relates to the purchase of goods and services by
the public sector.
However, it isn't so much corruption that leads countries
to introduce clearer and more comprehensive rules governing procurement.
Rather it's a desire to introduce greater competition into the market for
government business and, with it, more prudent and effective use of public
funds. A poorly run procurement regime, with its attendant uncertainties,
imprecision and lack of market discipline, imposes huge costs on taxpayers
and businesses.
Multilateral, regional and domestic trade agreements are
the principal device for bringing about changes in procurement. In Canada,
that means obligations under WTO-AGP (World Trade Organization Agreement
on Government Procurement), NAFTA (North American Free Trade Agreement) as
well as the domestic Agreement on Internal Trade (AIT) between the
federal, provincial and territorial governments.
AIT obligations also extend to procurements by government
organizations such as municipalities, academic institutions, schools and
hospitals, known as the "MASH" sector.
Each trade agreement spells out the rights of suppliers of
goods and services, as well as government's obligations, including the
requirement that government should conduct its procurement process
following specific rules designed to ensure a fair, open and impartial
competitive process. Governments are obliged to avoid bias in their stated
contract requirements and specifications that favour particular bidders;
are prevented from dividing up procurements in such a way as to circumvent
the procurement rules of such agreements; and must specify in advance how
they will evaluate proposals and what weightings will apply to various
factors. In some instances, governments can, and do, appoint
"fairness monitors" to ensure that proper processes are
followed. The agreements also require that government provide suppliers,
who feel they have been denied a contract unfairly, with the right to
submit protests concerning any aspect of the procurement process.
Despite the rules, there are numerous disputes every year.
At the federal level, the primary venue for dealing with such matters is
the Canadian International Trade Tribunal (CITT), the same quasi-judicial
administrative tribunal that deals with trade complaints such as dumping
and countervail. The advent of the various trade agreements and the CITT
has substantially codified and clarified the legal rights and remedies of
suppliers involved in bidding on government contracts in Canada.
A potential supplier to most federal institutions may file
a complaint with the tribunal concerning any aspect of the procurement
process. Where the tribunal determines that a complaint is valid it may
recommend to government "any remedy which it considers
appropriate," including issuing a new solicitation for the designated
contract; that the bids be re-evaluated; that the contract be terminated;
that the contract be awarded to the complainant; and/or that the
complainant be compensated by an amount specified by the tribunal. In some
cases, this last remedy has involved recommendations in which complainants
would be awarded the profits they would have earned if they had been
awarded the contracts in the first place. In a notable case two years ago,
a successful complainant obtained approximately $10 million in
compensation through the CITT process.
By law, the government must implement the recommendations
of the CITT "to the greatest extent possible."
CITT determinations not only affect the individual
suppliers involved, but also provide direction to the government on the
manner in which it is to implement its procurement obligations in the
future. Examining CITT cases can provide critically important guidance for
companies intent on being successful suppliers to governments. For
example, it is absolutely imperative that a bidder's proposal be fully
compliant with all mandatory terms in a Request for Proposal, otherwise it
will be disqualified. It's also essential that key information be
presented properly - indeed logical organization of information in a
proposal can be critical. Evaluators shouldn't need to wade through
voluminous documents looking for information not situated where it's
supposed to be.
For every proposal, bidders should have a strategy in mind
that includes how their competitive advantage can be best presented, as
well as a clear understanding of what the government is looking for and
how the proposals are to be evaluated.
So while the trade agreements impose obligations on
governments to play by clearly defined rules, they also set out a game
plan for serious players in the business of selling to government.
Ron Lunau is a Partner with the law firm
of Gowling Lafleur Henderson LLP specializing in government
procurement.
Sean Moore is a Gowlings Partner and the
firm's Public Policy Advisor.
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