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. 3

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. 4

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 5

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. 6

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 7

8. Contracting with the Crown The Basics

9. 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. 10 First: Determine the Appropriate Procurement Document Request for ProposalsRequest for Tenders $25K and over Sets out an objective to be achieved and seeks solution Sets out what is to be done and exactly how it is to be done Specifies “what”, “when” and “why” but not “how Specifies “what”, “when”, “why” and “how” Price is typically 25-35% of evaluation criteria Price is the only evaluation criteria

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 11

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. 13

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 14

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) 15

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? 16

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 17

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. 18

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. 19

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. 20

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! 21

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. 22

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? 23

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; 24

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. 25

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 27

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 28

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 39

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 40

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. 41

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. 42

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 43

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 47

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

51. Problem areas Too much background information Too much discussion of Ministry, too little discussion of proposed procurement Inadequate description of the business problem to be solved 51

52. Project Description If you want to attract suppliers, tell them very early in the document What you want to buy (or problem you want to solve) What you are going to use it for. Do not bury this information in the middle of the document Many business people will not read through 5 or 6 pages of caveats and qualifications to find out what you want.

53. General Project Requirements What kind of people are going to use it? (e.g. anyone with special needs) Under what conditions? How long does it have to last? Are there any special operating conditions

54. Technical Requirements Does the item sought have to interface with anything? Does it have to deal with an existing database or must it be compatible with existing machinery, tools, etc.

55. Getting too technical Avoid over-specification Do not suggest a requirement for 1500 widgets per month, when your Department has never required more than 25 a month. Unless you have especially demanding requirements, keep your specification to the market standard Avoid imaginary technology: there is no point in issuing an RFP for a flying car when a messenger can get through traffic just as fast on a bicycle. Avoid using standards you do not understand

56. Getting too technical or specific cont’d. For instance, Do not say: “must be compliant with all current United States DOD specifications relating to sunscreen use under all normal Canadian operating conditions.” Instead try: “Please explain whether your product can be used in normal summer conditions in Toronto (25 to 35 deg. Cel.) and in normal winter conditions in Thunder Bay (- 15 to -40 deg. Cel.). Are any modifications required to allow such use?”

57. Functional requirements What is the item going to do In the case of a hypothetical bridge, what is the normal traffic flow expected to be? Will that flow increase in the near to medium term future? Are there any existing special traffic needs to accommodate? Do you want to provide for future expansion?

58. Functional Requirements Be sure to specify what you need, not how it is to be done unless that is essential. Break-up complex specifications into sections Different types of specifications Mandatory: if we cannot get, we will not buy Preferred: we will give extra marks for suppliers who offer the following features

59. Functional Requirements Nice to Have: if it’s a tie or very close, we will pick the supplier who offers the most of these Prohibited: Sometimes there are features that you do not want at all. Ideally, identify minimum satisfactory requirements, and leave it to bidders to offer more. Always leave it open to suppliers to offer value added bids (beyond your minimum specification)

60. Assumptions and agreements Make sure the contract RFP language is as clear as it possibly can be. The RFP should include a form of agreement that is suited to the procurement to be made. This is an important job for branch legal counsel If you are buying bathing suits for lifeguards Do not include provisions to relating to automobile insurance or welding insurance.

61. Assumptions and Agreements Never write a contract on the assumption that you can have your cake and eat it to. Things to avoid: Extended warranty periods outside the normal warranty Not only are these expensive, they are hard to enforce Asking the vendor to assume risks relating to matters within our control Unrealistic demands for quick completion

62. Assumptions and Agreements Efforts to impose contract conditions which depart significantly from standard market practice generally have an adverse effect on willingness to bid and contract price. For instance, governments often include “fair wage” provisions in their RFPs, either to limit bids to unionized contractors or to require non-union contractors to pay union rates.

63. Assumptions and Agreements Wilson Bridge, connecting Maryland and Virginia illustrates the potential effects. In 2000, a union- only requirement was imposed. Only one bid received Bid price was 78% above the estimate budget (exceeding it by $370 million). The same project was then re-tendered, this time without the union-only restriction. This time five bids were received, The winning price was $45 million below budget.

64. Assumptions and Agreements Many types of common provision in government contracts inflate price: Atypical insurance coverage For the most part, just adds cost Non-exclusive contracts How many bridges do you plan to build across the Mississippi? Try to employ industry standard language where possible: you are not the only one making assumptions.

65. Contracting with the Crown Specifications

66. What are the Specifications? Who What When Where Why 66

67. Would Market Research Help? Formal: Request for Information Informal: Internet search Talk to the experts / other ministries Talk to other governments 67

68. RFP Contents Distinguish Between Needs And Wants Assume you wish to purchase something that can transmit pictures between the main office and a job site, Are movies needed: how many frames per second. How many pictures per hour Color or black and white? Maximum size of the image Resolution needed. Every feature adds to the price

69. RFP Content This is where research comes in If there is only one supplier offering colour, but there are a dozen offering black and white, there will likely be a substantial difference in the price of colour It may be nice to have, but how necessary is it? Do not use one or two product descriptions as the basis of your specifications.

70. Jargon and Acronyms Be careful when using industry jargon—it often does not mean what you think (especially in relation to high tech) Avoid “Government Speak” as no one outside government understands it Consider the following: “My ADM wants advice regarding an RFP for ADR relating to BUDs for ABCs and other parts of the BPS. Can we do this by AFP? Need by EOD!” “No. AFPs are for IO. Do by normal RFP or RFT. Have you done a RFI? Do you plan to PQ?” “No. TFYH” “YW”

71. Jargon Acronyms abound in government documents, but they confuse people. Sometimes, you have to wonder whether people were paying attention when they made up. Someone once pointed out to Bill Gates that if you combined Windows CE, Windows ME and Windows NT, you would end up with Widows CEMENT. He thought it was hilarious, but his marketing department was furious.

72. Avoid Legal Speak The successful proponent will be required to comply with the points recently articulated by the SCC affirming the OCA and set out in the ORs interpreting O. Reg. 213 under the LSA. 72

73. Organization It is not enough to make sure that the content is complete and accurate Need to make sure that the document as a whole is organized Anything you write for business should be thought through and organized. Most important information is what you want to buy Should be very close to the front of the document

74. Organization Be sure that the organization of the document Make mandatory requirements very clear If a contractor requires 10 years of experience in an industry, make this clear up front Do not put it on page 47. Deal separately with optional items. Cross reference so that it is easy to locate related information Try to get all information relating to a subject in the same place.

75. Covering the Bases Anticipate the questions/information the suppliers will want to ask or receive, and gather the information in advance. Due diligence is an essential process, and any supplier worth their salt will want to have a clear understanding of what they are being asked to take on. 75

76. Covering the Bases, cont’d. If the information provided is insufficient, expect arguments and delay. Vague documents provide a very weak basis for eventual litigation. Open the door for claims of change orders. 76

77. Polishing off the Draft There are no good writers, only good re- writers. Have an outsider read it and provide comments regarding The language: is it clear The overall objective: ask the commentator what he or she thought you are trying to buy Overall organization:

78. Contracting with the Crown Evaluation

79. One of the most controversial aspects of public procurement More subjective the process, more that it is open to criticism. On the other hand, a process that is too objective tends to remove necessary discretion from the government’s choice of contractor Can result in a poor choice of contractor 79

80. Structuring the Evaluation Not just enough to have clear criteria Also need a qualified Evaluation Team:  Should be a multi-disciplinary team  Consider technical / financial / IT expertise  Project Lead a must  Consider adding someone who knows nothing about the procurement  Minimum 3 evaluators recommended (odd number) 80

81. Evaluator Confidentiality Each evaluation member signs conflict of interest and confidentiality form When not in use all evaluation material must be locked up in a secure manner Evaluators should not discuss individual proposals with anyone other than the evaluation team Cannot use ideas from proponents who are not selected to perform the work 81

82. Evaluator Conflict of Interest Evaluators are required to disclose any affiliations with any proponent Must report both actual and perceived conflicts A continuing obligation 82

83. Evaluation, cont’d. Decide what attributes the winner should have Why are these attributes important? The proposals you get back in response to your RFP will differ. Each company that responds will have different strengths. Some will focus on lowest cost; others on best quality; still others on most complete feature set. Decide up front whether you are looking for the lowest cost, the fastest delivery, or some combination.

84. Evaluation, cont’d. The RFP should explain the general basis for award of contract Opinions differ as to how much detail should be provided You do not want to limit the exercise of reasonable discretion Remember that bidders tend to tailor their bids to the requirements that you have identified For instance: “Experience in building bridges on Mars? Of course we have!”

85. Evaluation, cont’d. Do not try to put a percentage value on individual items Better to deal with broad categories Imagine 100 things that go in a building: Elevators, floor tile, windows, electrical wiring, plumbing fixtures, lights There are hundreds Put a 1% value on each, and a 40 story building with no elevators scores about the same as one with six.

86. Evaluation, cont’d. An example of poorly balanced criteria weightings

87. Evaluation, cont’d. So financial capability is only given 10% of the final score? This means that a contractor which scored zero on such capability could still win the contract if he or she offered the prospect of a “good financial return”. How can financial capability be worth less than the marketing plan?

88. Evaluation, cont’d. As noted earlier, a prudent purchaser identifies his or her minimum requirements Leaves sufficient discretion to award points for those who exceed them. Maybe consider moving away from “soft” criteria like “references” and “experience” towards allowing points for value added offers.

89. Evaluation, cont’d. Some guidelines: Do not double count essentially the same criteria. Objectively measurable criteria are more transparent than subjective Make sure that scores are compiled by same people.

90. Evaluation, cont’d. Ask proponents to answer questions that will facilitate the evaluation process, as for example by asking them to provide examples of how, when and how often their business has demonstrated its ability to meet a specified criterion. For example, do not just ask them to provide an example of a similar work project in the past (e.g. a prior work assignment relating to data analysis). Ask them to provide an example illustrating how their thorough and detailed analysis of a body of raw data allowed them to advise a client as to how better to attain some objective.

91. Consensus Session After individual evaluation is completed, all evaluation team members attend a consensus meeting to determine final scores All members must reach consensus on each evaluation criteria per submission  If in stalemate call legal Evaluators must document comments/notes in scoring booklet justifying score (helpful for debriefing) Do not average scores Project Lead collects all documents from all evaluators at the end of the session and keeps on file 91

92. Getting it wrong: Maine school computer contract Maine selects suppliers by RFP. For the last 12 years, Apple has fulfilled that contract after winning a rigorous RFP review and evaluation process. In the summer of 2012, Maine Department of Education began its next RFP Department focused its requirement to hardware & software (as rather than on learning) 92

93. Getting it wrong, cont’d. RFP identified 5 finalist solutions. Governor selected the 4 th rated supplier (HP) as the state primary supplier, However, school districts are the actual customers, and they can choose any of the 5 proposals. Most of them preferred their existing supplier. 93

94. Getting it wrong, cont’d. HP workshops made clear that HP did not understand Maine's context and educational technology requirement. More than 80% of districts selecting Apple solutions. Too few districts selected HP, which led to changing of pricing and services. 94

95. What we learn from this Be sure that you have a clear idea of how specifications and evaluation criteria service the overall goal of the procurement. Make sure that secondary considerations do not dictate the choice of supplier Keep the RFP Focused on main area of concern. 95

96. Contracting with the Crown General Approach to the Process

97. Key stakeholders Identify all key internal stakeholders and make sure they are adequately involved in the RFP process. Particularly important in relation to IT procurement—need to engage with clusters. 97

98. Top 10 Drafting Tips Use full sentences and paragraphs to describe your requirements Indicate who will be doing what Focus on the detail that matters Avoid acronyms unless they are defined first Do not use multiple names or identifiers to refer to the same person or thing (Vendor, Supplier, Contractor …) Do not use terms such as: they, us, we, our, you, me, etc. Use headings to organize the text but ignore headings when drafting a sentence Use numbering so that a clause can be easily identified in other documentation Repeat only when repetition is necessary to improve clarity Don’t assume. What is missing? 98

99. The Agreement Congratulations you have a supplier … Now the work begins! 99

100. Drafting approach Ask open questions that enable the suppliers to genuinely differentiate themselves from their competitors, rather than ones that confirm what you already know or could otherwise guess. Ask supplies to describe past projects where they have faced similar requirements 100

101. Drafting approach References are usually not all that helpful. Ensure that you get customer references from a number of directly comparable projects. Ask all referees the same questions. Do not ask for general answers, cover specifics 101

102. Drafting Approach clear on your objectives: e.g. cost reduction, service improvement, service/resource flexibility etc.. Note that these objectives are usually mutually exclusive. If client wants both, ask him or her to prioritize. 102

103. Staff Resouces Identify your own core team (legal, commercial, financial, HR, etc.) who will be involved in the contracting process. Confirm that they have sufficient time to devote to it. For larger deals in particular, it needs to be recognised that this is not the kind of thing that can be balanced with the ongoing requirements of a “regular job". 103

104. When to Cancel an RFP Evidence of bid-rigging Evidence that one party has an unfair advantage Where it is determined that specifications were seriously wrong. Where outside factors have biased the process Where there is a genuine change in the scope of the project 104

105. When to cancel When the price ranges of the suppliers suggest a widely different understanding of the proposed procurement. When goods or services concerned are no longer required 105

106. When to cancel If you have to cancel, cancel as early as possible, 106