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Summit Column




Legal Notes
public procurement and the law

Sole sourcing is sensible! 

by Robert C. Worthington

Welcome to Summit's new column devoted to the ever-changing legal landscape which governs the business of purchasing. In this space, I will be discussing a wide variety of new and old laws, court cases and other topics of interest to purchasing and supply management professionals in the public and private sector alike. If there is any particular legal issue that you would like to see covered in this column, please let me know.

Since the law is always changing, and the world of public procurement is increasingly complex, even the most accepted principles must be revisited and re-evaluated when seeking to reduce legal risks in day-to-day purchasing affairs. Sole-source contracting, a popular but often misunderstood method of procurement, is an ideal subject to tackle in this first column.

We have all read the policies and heard the arguments - competitive bid contracting produces the best price and keeps those with buying power honest. Competition ensures public dollars are spent wisely. Sole-source contracting, on the other hand, is shady, underhanded and leaves too much room for corrupt business practices and back room politics. Balderdash! When we opt to sole source contracts where sole sourcing offers the best value, good for us.

It is true that competition can often produce good pricing but that is not "the truth, the whole truth and nothing but the truth." There are lots of good reasons to avoid competitive bidding and they are growing.

Consider this. When a public (or private) organization chooses some form of competitive procurement, be it an invitation to tender, request for proposal or request for quotation, they become legally bound to:

  • fully disclose all known information which would potentially influence a bidder in deciding whether to bid and what price to bid (Cardinal Construction v. Brockville); 
  • treat all bidders fairly and equally throughout the process, from qualification through evaluation to final award (Chinook Aggregates v. Abbotsford); 
  • award a contract which is substantially similar to what was originally sought in the invitation/request (Best Cleaners v. Canada); 
  • avoid all undisclosed preferences and potential conflicts of interest between bidders and evaluators (Kencor Holdings v. Saskatchewan); 
  • act in good faith to all bidders throughout the competitive bid process (Opron Construction v. Alberta); 
  • reject any bid (no matter how attractive) which is non-compliant (MJB Enterprises v. Defence Construction); and 
  • (likely) negotiate no changes to scope of work, price or any other major component with any bidder without offering every other bidder the same opportunity (Vachon Construction v. Cariboo).

On the other hand, if one were to sole source, none of these legal obligations would apply. Other than obligations to be honest and act in good faith, the two parties are pretty well free to make any lawful deal they wish to negotiate and can agree upon between them.

For example, suppose you are perfectly happy with your existing supplier. Your knowledge of marketplace pricing reveals no significant change since the last time you contracted out. Policy dictates a competitive procurement so you run one, at great cost, time and effort to the organization. A new supplier undercuts your existing supplier and wins the award. Now, you have to train a new supplier, check their work or product with extra care and manage a brand new business relationship. And, if this apparently better deal isn't so wonderful, there is more work still to terminate this new contract. Back to square one.

Did the taxpayer benefit? Was money saved or well spent? Was the public trust well served? Was this an effective way to manage your organization's time and resources?

Imagine instead a real choice - sole source or competitive bid - as the situation and the procurement required. If you can build a proper business case for your sole source; if you can justify it openly and without secret agendas; if it is the best all-round choice for your organization, the taxpayer and the public - then why not sole source?

In today's modern procurement world, with trained purchasing professionals at the wheel, there really is no valid reason why more discretion (and responsibility for the exercise of that discretion) can not be given. Competitive procurement has its place but so does sole-source procurement.

So, policymakers of Canada, if you expect purchasers to make strategic business decisions and do more with less, give them the choice to use their business expertise wisely. In the long run, it only makes good business sense.

Robert C. Worthington is president of Worthington & Associates Ltd, a Vancouver-based company specializing in business education and training in purchasing law. He has lectured on law for public and private corporation in-house seminars, as well as at the University of British Columbia. He is the author of the Purchasing Law Handbook and several legal texts for various public and private clients.

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