Contracting with the Crown

1. Contracting with the Crown October 25, 2013

2. Contracting with the Crown Introduction

3. Contractual Capacity • The Crown has the contractual capacity of a natural person • Can make any kind of contract into which any individual can enter. • Making of contracts is an executive act.

4. Authority to make contracts • Executive Council Act, s. 6: • No deed or contract in respect of any matter under the control or direction of a minister is binding on Her Majesty or shall be deemed to be the act of the minister unless it is, • (a) signed by the minister, the deputy minister of the ministry or an authorized delegate; or • (b) approved by the Lieutenant Governor in Council.

5. Authority, cont’d. • Ministry statutes: e.g. Ministry of Transportation Act, s. 4 • (1) Any power conferred .. on the Minister … may be delegated by him or her in writing, subject to such limitations,conditions and requirements as the Minister may set out in the delegation, to the Deputy Minister of Transportation or to any employee of the Ministry who may act in the Minister’s place and stead …. • (2) Despite the Executive Council Act, a deed or a contract made by a person empowered to do so under subsection (1) has the same effect as if signed by the Minister

6. Authority, cont’d. • Carltona principle • Carltona Ltd. v Commissioner of Works [1943] 2 All ER 560: allows persons who are not the named recipients of a statutory discretion to exercise that power for and on behalf of the person named in the statute. • Section 10 of Executive Council Act • Sections 8 and 9 apply, with necessary modifications, to ministries over which a minister of the Crown presides and to the public servants under the jurisdiction of a minister of the Crown.

7. Directives • Management Board of Cabinet Procurement Directive • Transfer Payment Accountability Directive • Delegation of Authority Directive • Directives have the legal status of lawful instructions by an employer to its employees

8. Contracting with the Crown The Basics

9. The Project … Your Ministry plans to build a bridge over the Mississippi River. Your job is to get it done. Now what do you do?

10. First: Determine the Appropriate Procurement Document

11. Other Possible Approaches • Pre-qualification (?) • Cooperative purchase with other jurisdictions • With more and more aspects of government being contracted out, consider existing contractual rights. • Also, existing VOR arrangements

12. Contracting with the Crown Preliminary Work

13. Study, Plan (Organize), Execute • Most problems result from a failure to follow this three step approach • No single critical success factor is more important than properly defining the business problem. • Need to clearly articulate the problem they are trying to solve through the RFP. If you cannot state the business problem in a single sentence, you are likely including requirements you think are part of the solution rather than just identifying the business problem itself.

14. For Major Projects • A Team Approach • The team should • Include the manager of the user department and relevant subject matter experts. • Have a balanced size three to nine people. • Have people who understand relevant rules and processes

15. Know what you want to buy • Building a bridge may sound straightforward. • But is it? • Ask a lot of questions • How many lanes • How many vehicles an hour • What kind of vehicles (what is the blend of trucks, buses and cars)

16. Know what you want, cont’d. • More questions • What does it connect with (city streets or 400 series highway)? • Does it cross a border? • How will it impact environment? • Is Federal environmental legislation relevant?

17. Identify potential problems • Very few types of procurement are unique • Although they may be new to us • What types of problems have arisen when other governments have undertaken similar projects • Consider what measures would help to avoid

18. Is a market survey advisable? • Request for Information: A general inquiry addressed to the relevant industry typically made during the project planning phase where the buyer cannot clearly identify product requirements, specifications, and purchase options.

19. Market survey • RFI process offers opportunity to solicit information that will be helpful in the development of the pricing sections of RFPs. • The information that is gathered about the methods or structures a vendor may propose can be examined and analyzed to determine the content of the pricing components for the RFP. • Written pricing structure responses from vendors need not include specific dollar amounts.

20. Market survey • Vendor responses can be accepted and made available to the entire vendor community without specific identification, similar to RFP question and answer postings.

21. Market survey • Thousands of RFPs are available on-line for reference. • Look at these documents for ideas. • There are more than 39,000 web sites dealing with cost overruns in relation to bridge construction • Are they relevant? • Kind of have to think that they are!

22. Market survey, cont’d. There are more than 500,000 web sites dealing what scandals related to bridge construction. Probably not a bad idea to have a look at them as well.

23. Buyer Beware • Much of the “common wisdom” about what various things (like a bridge) can do for the local economy, is prepared by people who have a vested interest (like bridge builders). • For instance, did light rail make Calgary’s downtown a good place to set up business? • Or was it the expansion of the Alberta oil industry?

24. When to use an RFP • Multiple (different) solutions are available that will fit the need; • Multiple vendors can provide the same solution with different implementation scenarios; • Exact solutions for the project cannot be clearly specified; • The project requires different skills, expertise, and technical capabilities from vendors;

25. When to use, cont’d. • Tenders are best suited to commodities • Less fungible the product or service that you wish to buy, the more suited that procurement is to an RFP • The problem requires that vendors combine and subcontract products and services; or, • You want to exert leverage on a vendor to provide your agency more savings.

26. Contracting with the Crown Preparing the Document

27. Drafting an RFP MINISTRY OF LAND AND WATER TRANSPORT Request for Proposals For The Design and Construction of a Bridge Over the Mississippi River Request for Proposals No.: Insert RFP Number Issued: Insert Date of Issue Proposal Submission Deadline: Insert Date and Time of Deadline

28. Drafting an RFP • Know the meaning of key terminology: • Build: Government is responsible for the design • Design/Build • Design/Build/Finance • Design/Build/Finance/Maintain • Design/Build/Finance/Operate • Each of these is distinct from the others • Each involves a different allocation of risk

29. Writing an Effective RFP • Continent wide, 20% of government tenders attract only one bid or no bids • RFPs and RFTs should be viewed as being in a sense a sales document. • Goal is to sell contractors/suppliers on the idea of taking up the project. • Like any sales proposal, the RFP must sound attractive.

30. Why government buyers need to be more sales oriented • Many suppliers will not sell to government • Surveys of business have revealed a range of different reasons for not doing so. • Political (many gun manufacturers will no longer sell to police in the State of New York, due to that state’s tough antigun legislation • Government purchase decisions are often seen as unpredictable

31. Won’t sell, cont’d. • Perception that the “fix” is in. • Process is unfamiliar • Contracts are widely seen as too one-sided • A 2010 construction industry survey in Ontario identified numerous construction companies who will not bid for government work.

32. Wont’ sell, cont’d. • Mandatory criteria are often seen as an unrealistic barrier to entry • Tender process is seen to favor “low ball” contractors • Poor previous experience in bidding for government work • Purchase requirement is often not stated clearly—”it takes too long to figure out what they are trying to buy”

33. Won’t sell, cont’d. • Complexity of the RFP/Tender documents: too much material to wade through • Contract terms are seen as unrealistic. Particular problems relate to • Deadlines for the completion of work • Penalty clauses • Holdback rights (in relation to payment) • Allocation of risk under the contract

34. Won’t sell • Interference with subcontracting • Security clearance requirements are unrealistic • Government is too slow to pay • Post award approval process • A particular problem in relation to high tech contracts • One article dealing with work on website development noted that for a private sector customer, the project usually takes a week, but for a government the process can take nine months • Numerous meetings and revisions mean that the supplier’s cost is ten times or more than what it could have been

35. Some important points to remember • The best suppliers in any industry usually have a choice over which work they will take on. • The best suppliers tend to avoid customers who are perceived as • High risk • Difficult to deal with • Unsure as to what they are seeking to buy • Such customers require a lot more attention, and that cuts profit.

36. Some important points, cont’d. • Businesses have to generate a stream of work • Your job is not the only project on which they will work in a given year • A supplier will have to fit you into his/her/its schedule. • Open-ended time commitments do not suit most businesses • Approvals • Provision of feedback or necessary information • Start dates

37. Minimize the Problems • Giving the above sales resistance (rarely a problem at the vendor end), it is worthwhile minimizing aspects of the Government contract process which contribute to it unnecessarily. • We obviously have to follow the rules • But find a way of working through them quickly • Plan out the steps to be taken • Do not go to market until the ducks are in a row.

38. For instance • Make the document as easy to read as possible. • Clearly define the need that you are trying to fill • Do not over-specify the solution • Leave it to the supplier to offer a means of addressing your needs. • Do not tell them how to do their job.

39. Tell a Story When Drafting • WHY = set the scene: • Relevant historical or background information • WHO = actors need stage direction: • What is supplier responsible for; what, if anything, will the ministry do? • WHAT = provide detail so the story makes sense! • Results to be achieved • Knowledge transfer • Meetings – how many, where, ODA, how long • Reporting – how many copies, formatting • WHEN = must have a beginning, a middle and an end • Timelines

40. Follow the Money • How do you want to pay? • by Deliverable, milestone, monthly • Rate Bid Form • Understand industry practice • Optional and/or desirable features • What factors influence price • Consider travel and accommodation • Examples of Rate Bid Form - handout

41. Take care in using headings Headings should be used to organize a document Careful use of headings can identify potential repetition Also allows a quick check to confirm that all important matters covered But, in contract interpretation they generally are ignored, so if a sentence depends on the heading that precedes it, there is a risk that won’t make sense.

42. Cross-references • Reduces the need to repeat information • Be sure to confirm that they are accurate • Use cross-referencing feature of Word, so that they will update automatically. • However, if you do, be sure to “update field” before printing off the document. • Do not over-use.

43. 8 Drafting Traps to Avoid • Ambiguity and poor description of deliverables • Lengthy sentences • Poor / illogical organization • Too many or incorrect mandatory requirements • Problematic vocabulary like industry jargon or bi-weekly (which has 2 meanings) • Misspelling and typographical errors • Always be sure to finish what • Double negatives

44. Contracting with the Crown Specific Areas of Concern

45. RFP Contents • A Request for Proposal should define a problem to be solved. For instance • “The MLWT need to build a bridge across the Mississippi which is capable of handling 4000 commuter cars in each direction per hour at peak intervals.” • It is necessary to state the requirements that must be satisfied in relation to the RFP: • “The Bridge must be constructed in accordance with The Canadian Highway Bridge Design Code, CAN/CSA-S6-06 • “It must be suited for travel by high speed passenger and commercial vehicles (normal legal operating speed of 100 km per hour)”

46. RFP Contents • However, it is unwise to set out detailed instructions as to how work is to be carried out. • The main strength of an RFP is that it allows the buyer to draw on the seller’s expertise.

47. RFP Contents • Provide a good executive summary which gives a meaningful overview of the whole project • Link the summary to the overall RFP, so that more detailed information can be quickly accessed. • Be succinct but clear and precise

48. RFP Contents • Usually, the RFP will cover the following range of matters: • Project description • Design requirements • Technical and infrastructure requirements • Functional requirements • Estimated project duration • Assumptions and agreements

49. RFP Contents • And also • Submission information • For additional information or clarification • Basis for award of contract • Anticipated selection schedule • We will look at each of these items later in the presentation

50. RFP Contents • Do Your Homework • Before you start to write an RFP, figure out what you really need, what you want, and what is possible. • Match your requirements to your budget • Do some research re market availability and price • Find out who is in the market and what the likely price is