Presentation on theme: "Building Success in Major Projects By Paul Emanuelli Forum 2007 Canadian Forum on Public Procurement September 30 th to October 3 rd, 2007 Calgary, Alberta."— Presentation transcript:
Building Success in Major Projects By Paul Emanuelli Forum 2007 Canadian Forum on Public Procurement September 30 th to October 3 rd, 2007 Calgary, Alberta
About the Presenter Paul Emanuelli is a nationally known procurement lawyer with an extensive track record of public speaking, publishing and training. He has top tier experience dealing with major procurements and advising institutions on the legal and strategic aspects of their supply chain operations. His top selling textbook, Government Procurement, award winning whitepaper, Key Concepts in Major Procurements, nationally distributed newsletter, the National Tendering Law Update, and road tested catalogue of training materials form the foundation for his standard setting programs.
Major Projects As the deals keep getting bigger and the stakes keep getting higher, the risks of failure become more pronounced. A purchasing organization should empower its major project teams by focusing on the following critical concepts for increasing a project team’s success rate: clarifying the role of legal counsel; addressing internal governance issues; building business plans and procurement strategies; selecting the appropriate procurement format; and focusing on critical project details.
Major Project Radar Internal Governance Plans & Strategies Format Selection Critical Project Details
Major Projects The Role of Legal Counsel In effectively managed major procurement projects, the role of lead legal counsel is more pronounced when compared with typical procurement. In major projects the legal issues are broader and more multi-faceted and the role of legal counsel is more integral to the ongoing planning and implementation of the project.
Major Projects Addressing Internal Governance To be effective, a project team must understand and operate within the public institution’s complex environment. With respect to managing internal governance, the following four factors are critical to a project’s success: identifying the organization’s internal approvals roadmap; establishing a clear decision-making framework; identifying roles and responsibilities within the organization; and distinguishing the internal and external audience.
Major Projects Addressing Internal Governance Approvals Roadmap A key component of empowered procurement is the identification of the organization’s internal approvals roadmap. Understanding the client’s internal approval process and confirming the internal approvals obtained for the specific project can help shape the representations made to the supplier community during the procurement process and can help guide the team in its selection of the appropriate procurement format.
Case Study Disclosure Saves Holy Cross Cancellation Holy Cross Surgical Services v. Calgary Health Region Alberta Court of Queen’s Bench, October 13, 2005 The case dealt with a request for proposal for surgical procedures. Calgary Health Region informed the incumbent, Holy Cross, that it was the successful bidder but then cancelled and reissued the RFP. Holy Cross brought a judicial review application challenging the Region’s cancellation and seeking to prevent the award of a contract under the reissued RFP. The court dismissed the application since the RFP rules clearly disclosed that a contract award would be conditional on Ministerial approval. That approval was reasonably denied because the cost of the Holy Cross bid would have resulted in 50% fewer surgical procedures for the available budget.
Major Projects Addressing Internal Governance Clear Decision Making Framework A clear internal governance and decision-making framework is another key component of empowered procurement. This framework can only be effectively established where all necessary internal stakeholders are identified at the outset of a project. Once those stakeholders are identified, a governance and decision-making framework can be established to provide direction to the team during all facets of the project.
Case Study Handshake Deal Leads to Legal Dispute Founders Square Ltd. v. Nova Scotia (Attorney General) Nova Scotia Court of Appeal, March 22, 2001 The Premier of Nova Scotia announced that Founders Square would restore certain historical buildings near the provincial legislature. As part of the arrangement, Nova Scotia would lease 25% of the restored space for 30 years to help amortize the costs. The paperwork was not completed at that time. A standard five year lease was later imposed on Founders Square by the Department of Government Services. When a new Premier took over, the government relied on that document to support a new policy direction and cancel the arrangement. The developer sued. The court ordered the government to honour its original 30 year commitment.
Major Projects Addressing Internal Governance Establishing Roles and Responsibilities Identifying the roles and responsibilities of the various players on the multidisciplinary project team is another critical ingredient for successful projects. To guard against role overlap and accountability gaps, roles and responsibilities should be clearly and accurately identified and communicated at the outset of a project.
Case Study Loose Communications Lead to Liability George Robson Construction (Weston) Ltd. v. Hamilton-Wentworth (Regional Municipality) Ontario Superior Court of Justice February 28, 2001 The case involved a construction project for the installation of a sewer pipe beneath a highway. The bidder claimed that a representative of the municipality had verbally confirmed that the use of steel pipe liner was acceptable and calculated its price in accordance with that representation. The court found that the bidder was prejudiced by the inaccurate representation. It held that the disclaimer contained in the tender call did not protect the municipality from this verbal misrepresentation and awarded the prejudiced contractor $222,000 in damages.
Major Projects Addressing Internal Governance Internal and External Audience The project team should be aware of both its internal and external audience and should clearly delineate between the documentation prepared for each. Only those details that are relevant to the competitive procurement process and to the performance of the contract should be disclosed to the external supplier community. To promote clear and concise external communications, internal matters should be left to the internal audience.
Case Study Premature Award Binding on Government Canship Ltd. v. Newfoundland and Labrador Newfoundland and Labrador Supreme Court March 11, 2005 The case dealt with a tender call for the provision of a container ocean vessel. Minutes before the expiry of the tenders, the government sent the plaintiff bidder a Letter of Acceptance. Within one-half hour of sending the letter, the government attempted to rescind the award, taking the position that the letter had been issued without the required internal Treasury Board approvals. The Court rejected this argument, noting that the government could not rely on non- compliance with its internal governance rules as a reason to cancel the contract award.
Major Projects Business Plans & Procurement Strategies Thorough business plans and well-tailored procurement strategies are critical to the success of a major project. Legal counsel can provide crucial strategic and tactical advice to a team in the development of these critical project components.
Major Projects Business Plans & Procurement Strategies Distinguishing process from purpose is a critical key to empowered procurement. An effective project team identifies and separates the means from the ends, tailoring its procurement documentation to clearly delineate between: the procurement process rules that lead to the selection of a preferred service provider; and the objectives that should be achieved under the contract once awarded.
Case Study Town Mired in Garbage Bid Battle Tantramar Sanitation & Trucking Ltd. v. Sackville (Town) New Brunswick Court of Queen’s Bench January 16, 2006 A municipal tender call for waste removal services included the requirement of an in- town garbage transfer station. The winning bidder did not have an in-town transfer station when it was awarded the contract. A competing bidder challenged the process, alleging that the contract was awarded to a non-compliant bidder. The court ultimately rejected the claim after finding that the transfer station was a contract performance requirement rather than a tender compliance requirement. This case underscores the importance of clearly distinguishing between tender compliance and contract performance requirements.
Major Projects Business Plans & Procurement Strategies Once a business plan is established, the team should develop a customized procurement strategy tailored to the specific objectives of the particular project. A critical component of a procurement strategy is the identification of appropriate procurement formats and processes. Legal advice is critical to informing the development of a sound strategy.
Case Study Contractor Walks Out On Sketchy Project Greenslade’s Construction Co. v. Conception Bay South Newfoundland Supreme Court December 22, 2000 The case involved a dispute over the construction of a baseball field for the 1996 Newfoundland Summer Games. Acting on the mayor’s direct instructions, the municipality issued a tender call with designs based on a rudimentary hand-drawn sketch. The provincial government refused to release funding for the project until proper design specifications were established. This prompted a midstream change to the specifications. A dispute arose with the contractor due to the repeated design changes. The contractor eventually walked off the job and successfully sued for outstanding payments.
Major Projects Selecting the Appropriate Procurement Format The selection of a procurement format should be a conscious, informed and transparent decision that clearly identifies whether the particular competitive procurement process will be conducted under a binding bidding format or a negotiated format. Once a format is selected, mid-process paradigm shifts between binding tendering models and negotiated models should generally be avoided.
Case Study Ambiguous Tender Call Leads to Liability Canadian Logistics Systems Ltd. v. C.N. Transportations Ltd. British Columbia Supreme Court February 24, 2000 The case involved a “Request for Information and Pricing” for motor vehicle inspection services. The plaintiff bidder alleged that it had been treated unfairly during evaluations. The purchaser argued that it never intended to create a formal binding bidding process and therefore owed no legal fairness duties. Even though the RFIP contained no express requirement for irrevocable tenders, the court found that it gave rise to Contract A and the legal duty of fairness. It then found the purchaser liable for treating the bidder unfairly during the evaluation process.
Case Study Deal Tanks in BC Bid Shopping Case Stanco Projects Ltd. v. British Columbia British Columbia Court of Appeal May 17, 2006 The case involved a tender call for a water system upgrade project requiring two water tanks. After the tenders were opened, the government decided to rescale and proceed with just one tank. However, the tender call never contemplated the severance of the contract and failed to ask for separate pricing for each tank. The low bidder was asked to provide a lower single tank price under an improvised “Offer of Credit” process. One of the plaintiff’s competitors, who knew the low bidder’s original bid, was also asked to submit a new single tank bid. The low bidder refused to provide a new bid and sued after the contract was awarded to its competitor. The court found the government liable for bid shopping.
Major Projects Critical Project Details Empowered procurement calls for an attention to critical project details. These front-line considerations typically include: meeting disclosure duties; reconciling requirements; coordinating concurrent drafting; achieving horizontal and vertical document integration; tailoring a legal agreement; and developing a negotiating strategy.
Case Study – Disclosure Duty “Partners” Owed Extra Disclosure Duties EBC Inc. v. New Brunswick New Brunswick Court of Queen’s Bench October 27, 2005 The case involved a $9.6 million contract for the construction of a new wharf and ferry terminal. While the court noted that a contractor is typically responsible for determining its own performance methods, it found this case to be an exception due to the special “partnering” provisions in the contract which expressly adopted a “spirit of respect, trust and cooperation and “a commitment to assist in the other’s performance and cooperate in a common endeavour.” The court found that government engineers failed to disclose the appropriate concrete mixing technique to the contractor. The province was therefore found liable for the contractor’s additional performance costs and was ordered to pay over $225 000 in damages.
Case Study – Reconciling Requirements Garage Bid Battle Over Compliance Issues Toronto Transit Commission v. Gottardo Construction Ltd. Supreme Court of Canada, April 27, 2006 The case involved a tender call for a bus garage construction project. The low bidder claimed that it made a mistake and refused to honour its tender. The purchaser selected the next-best bid and sued the low bidder for the difference. The case turned on a tender call rule that required bidders to provide post-bidding documentation within two days of close. The bidder refused to do so and argued that its tender was therefore non-compliant and not binding. The purchaser argued that the documentation was a post-compliance process requirement that had to be met by the bidder to honour its tender. The bidder won at trail but the Ontario Court of Appeal reversed and found the bidder liable for $434, 000 for failing to honour its bid. The Supreme Court of Canada refused the bidder’s appeal.
Case Study – Reconciling Requirements $3.4 Million Judgment for Improper Award Tercon Contractors Ltd. v. British Columbia British Columbia Supreme Court March 27, 2006 The case involved a tender call for the construction of a gravel highway. One of the unsuccessful bidders sued, alleging that the contract was awarded to a non-compliant competitor. The tender call rules clearly prohibited the award to a joint venture. Notwithstanding this rule, the government awarded the contract to a low bid submitted by a joint venture. While the awarded contract was papered to reflect only one of the two bidders as a prime contractor, the court saw through this arrangement and found the Ministry liable for $3.4 million for making an award to a non-compliant bid.
Case Study – Coordinating Concurrent Drafting Contract Rocked By Inconsistent Terms Fournier Excavating v. Nanaimo-Ladysmith School District No. 68 British Columbia Supreme Court, December 3, 2002 The case dealt with a contract performance dispute caused by the purchaser’s failure to properly define key terms in its sewer works tender call. As the court noted, “the contract uses three terms: ‘bedrock’, ‘trench rock’ and ‘mass rock’ and defines none of them.” The court interpreted the contract based on the wording in the tender call and the plain dictionary meaning of the terms and prevented the purchaser from introducing after-the-fact explanations of its intentions into evidence. While the purchaser’s interpretation was eventually upheld, this case illustrates the importance of clearly defining key terms to help avoid disagreements and disputes.
Case Study- Vertical and Horizontal Integration Drafting Error Causes Double-Dip Billing Dexter Construction Co. v. Nova Scotia (Attorney General) Nova Scotia Supreme Court August 9, 2004 This case dealt with a billing dispute. The purchaser’s inadvertent inclusion of two different line-items on the rate bid form for the same work resulted in a double-charge by the contractor. While the court criticized the contractor for not bringing the mistake to the attention of the purchaser, it still held the purchaser partially liable for its drafting error. The parties were therefore ordered to split the difference, resulting in an unnecessary $267,876 overpayment by the purchaser. As this case illustrates, a purchaser’s inexact drafting practices can lead to costly outcomes.
Major Projects Integrating Legal Counsel The complex and multi-faceted nature of major procurement projects requires legal counsel to play an intensive role on the project team. By integrating into the team and understanding the broader context within which that team operates, legal counsel can be a key contributor to the success of a project. To increase their chances of success, project organizers would be wise to retain this key player at the early stages of their major initiatives.
Concluding Comments Excellence is never achieved by accident. Institutions that are serious about delivering top tier results know that proper training is key to achieving and maintaining high performance standards. To empower their procurement professionals, public institutions need to implement a training regimen that targets the seven critical areas of supply chain success:
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