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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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