Procurement Overview

Overview of Key Procurement Tools

Key Facts

Background

• PSPC has put in place a number of standing offers and supply arrangements that must be used before any new procurement is considered in accordance with the Treasury Board.

Standing Offers

• Standing offers are used to meet recurring needs of departments or agencies (e.g. printing services, office equipment, specialized services).
• A standing offer is an offer from a potential supplier to provide goods and/or services at pre-arranged prices, under set terms and conditions, when and if required.
• A standing offer is not a contract until the government issues a “call-up” against the standing offer. It offers the following advantages:
  • Quicker processes, involving less paperwork;
  • Pre-set and negotiated terms; and
  • Lower government administrative costs.

The National Master Standing Offer (NMSO) for McKinsey & Company

• PSPC established a non-competitive NMSO with McKinsey & Company to support federal departments and agencies that require benchmarking services.
• These services consist of functional tools, databases, and expert support to measure their performance against similar Canadian and international organizations in order to identify deficiencies and opportunities for improvement.
• Such services may be used to support complex programs, including digital modernization and other large transformation initiatives. McKinsey & Company holds exclusive rights to provide this type of benchmarking through its proprietary survey- based diagnostics.
• These data sets are based on information obtained from McKinsey's clients through proprietary surveys and there are no authorized resellers of this information.
• When a department or agency issues a call-up against the NMSO they do so because they need McKinsey’s product suite in particular.
• To date, National Defence has raised 12 call-ups against this standing offer. All of them are over the call-up limitation of $200,000, which requires PSPC to authorize the call-up and act as the contracting authority.

Supply Arrangements

• Supply Arrangements (SA) are used when goods or services are bought on a regular basis.
• This arrangement may be used when a standing offer is not suitable due to variables in the resulting “call ups”.
• A SA is a non-binding arrangement between Canada and a pre-qualified supplier allowing departments and agencies to award contracts and solicit bids from a pool of pre-qualified suppliers for specific requirements within the scope of the supply arrangement.
• SA’s include a set of predetermined conditions that will apply to bid solicitations and resulting contracts.
• Many supply arrangements include ceiling prices which allow client departments to negotiate the price downward based on the specific requirement.
• Supply arrangements does not have expiry dates. That is because supply arrangements are established to allow for regular refreshes of qualified suppliers and to allow competition among pre-qualified suppliers for each contract.
• Advantages of a Supply Arrangement include:
  • Save time and money by prequalifying suppliers and establishing standard terms and conditions that will apply to a specified range of goods or services; and
  • Flexibility for client departments to either solicit bids competitively or negotiate for their specific requirements to obtain the best value possible.

Supply Arrangement for McKinsey & Company

• Both Supply Arrangements for McKinsey & Company were established through a competitive process by Public Services and Procurement Canada.
• These Supply Arrangement provides solutions-based informatics and professional services, business consulting / change management, and project management services.
• National raised a call-up against Supply Arrangement in January 2013 to support the Defence Renewal Team project.
• In September 2022, National Defence raised a call-up against a Supply Arrangement to obtain high-level recommendations on the current state review of Canada’s Defence Supply Chain.

Non-competitive process (sole source)

• Under Section 6(b) of the Government Contracts Regulations, a requirement under $25,000 for goods or $40,000 for services and construction services, can be procured through a non-competitive process.
• In August 2019, National Defence awarded a sole-source contract to McKinsey & Company. The contract had a value of $24,860 for a workshop on digital use cases to support the implementation of the Royal Canadian Navy’s digital strategy.

Authorities, Limitation, and Restrictions

• Standing offers and supply arrangement are mostly established by PSPC. However, departments and agencies may also establish their own standing offers.
• Individual call-ups are limited to a maximum total dollar value as specified in the standing offer and supply arrangement.
• In the case of SAs for McKinsey & Company, the limitation of call-ups is $200,000 (applicable taxes included). This means that if a requirement exceeds this amount, National Defence must send this requirement to PSPC for processing, approval and issuance under the terms and conditions of the Standing Offer.

Security Requirements

• National Defence follows the Security Policy for the Government of Canada and includes a Security Requirement Checklist in each contract file to ensure:
  • Security screening of private sector organizations and individuals who have access to protected and classified information and assets;
  • Safeguarding of government assets, including IT systems; and
  • Specify the necessary security requirements in terms and conditions in any contractual documentation.

Policies on Conflict of Interest in Procurement

Details

Conflict of Interest Act

• The Conflict of Interest Act came into effect 2007 with the purpose of advising contracting officers to pay particular care to avoid entering into non-competitive (sole-source) contracts with any family members of any Minister, and to include clauses in procurement contracts for Ministerial appointees regarding the restrictions on their actives.
• It is a responsibility of contracting officers to ensure the integrity of a procurement process. If there is any doubt that what is being done (or asked by the client to be done) might bring the integrity of the process into question, the contracting officer should consider suspending the procurement process until the issue is resolved. Issues that cannot be resolved satisfactorily at the contracting officer level must be referred to a higher authority within the organization.
• The government has a set of rigorous rules when hiring former public servants to avoid unfair advantage and conflict of interest during the procurement process. There are directives and policies set in place to create a fair, open, and transparent procurement process.

Integrity Regime:

• The Integrity Regime was introduced in 2015 to ensure Canada does business only with ethical suppliers. The Regime helps foster ethical business practices, ensure due process and uphold the public trust. It generally applies to procurement and real property transactions over $10,000.
• The Regime is applied across government through agreement between Public Services and Procurement Canada (PSPC) and other federal departments and agencies.
• There are three components in the Regime:
  1. Ineligibility and Suspension Policy: set out when and how a supplier may be declared ineligible or suspended from doing business with the government.
  2. Integrity directives: provide formal instructions to the federal departments and agencies that follow the policy.
  3. Integrity provisions: clauses that incorporate the policy into solicitations and the resulting contracts and real property agreements.
• Reasons why a supplier will or may be ineligible to do business with government:
  1. The supplier or any of its affiliates have been convicted of certain offences under the Criminal Code or under a number of acts such as the Competition Act, Lobbying Act, and Corruption of Foreign Officials Act.
  2. The supplier entered into a subcontract with an ineligible supplier.
  3. The supplier provided a false or misleading certification or declaration to Public Services and Procurement Canada.
  4. The supplier provided a false or misleading certification or declaration to Public Services and Procurement Canada.
• Call-ups against standing offers do not require the integrity verification process with the Registrar as it was previously completed when setting up the standing offer or supply arrangement.
• When a supplier fails to meet the Regime, possible consequences could include:
  1. Renders a supplier convicted of a listed offence in Canada or abroad, as ineligible for a period of ten years to enter into contract with the Government;
  2. Suspends a bidder for up to 18 months if they have been charged or have admitted guilt, in order to protect the interest of the Government;
  3. Considers the degree of involvement of the bidder in the wrongdoing that resulted in the affiliate’s conviction in the determination of ineligibility;
  4. Includes due process to recognize the efforts of suppliers to address wrongdoing;
  5. Mitigates the potential of circumvention of the regime by imposing an ineligibility period on prime contractors who enter into contracts with ineligible sub- contractors; and
  6. Imposes an administrative agreement to provide the Government with additional assurances on conducting business with specific suppliers.

How the Integrity Regime Works in Practice

• All solicitations must include the appropriate standard instructions and general conditions, which include the Integrity Provision.
• During the solicitation process, bidders / offerors / suppliers must provide a complete list of names of all current directors or the names of the owners of the corporation.
• The bidders / offerors / suppliers must provide a complete list of all foreign criminal charges and convictions pertaining to itself, its affiliates and its proposed first tier subcontractors.
• When the bid evaluation team has determined a winning bidder, the contracting officer must run the Integrity Database Services (IDS) to determine whether additional information is required from the bidders / offerors / suppliers. There are two possible results:
  1. If the result is a No Match (supplier is not ineligible), the contracting officer is responsible to proceed with awarding the contract.
  2. If the result is Ineligibility confirmed, the government will not consider this supplier and will restart the Integrity Regime process with the next compliant vendor.

Note: if there are no other compliant bidders or the procurement is directed on a non- competitive basis to one supplier, Public Interest Exception (PIE) might apply to the requirement. In the case of McKinsey’s contracts awarded by National Defence, the Department did not invoke PIE because most of the contracts were call-up against standing offer and supply arrangement.