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The Rules of Attraction

Government contracts are big business. Here’s how to score a few for yours

Nov 1, 2010

by Shannon Sutherland

The tendering of government contracts is a confusing and corrupt process rife with insider dealing and cozy alliances that discourage genuine competition. At least, that’s what some people were saying last spring after former City of Calgary auditor Tracy McTaggert said there seemed to be a risk of fraudulent activity in the city’s procurement process. She cited the disproportionate use of sole or single sourcing to procure goods and services as well as the disproportionate use of so-called change orders, which substantially increased the value of many contracts, as the basis for her allegations.

The city’s chief financial officer, Eric Sawyer, led a review of approximately 600 procurement purchase orders dated between 2006 and 2009, and while he concluded that McTaggert’s allegations were largely unfounded, he did identify some flaws in the city’s procurement system. In particular, he found that of the 600 cases under review there were 29 purchase orders with insufficient information and nine single-sourced files out of 70 contracts reviewed that had insufficient paperwork. It wasn’t out-and-out corruption, but it warranted further review, and an independent external auditor was assigned to review these and other potential high-risk files.

When news of the allegations broke, some business leaders proposed that City of Calgary contracts should all be available online, arguing that such a system would restore trust, enhance competitiveness and serve as a learning tool for new vendors trying to break into the market. Not everyone agreed, though. “I simply would not want my competitor to have access to my bid, and I think giving competitors access to creative concepts and proprietary information would severely limit who would want to participate in the process,” says Alexis MacMillan, the president of Christie Communications, a company that has scored contracts with the City of Edmonton, the Province of Alberta and even the United Nations. City officials, meanwhile, argue that improvements are being made that would prevent the necessity of doing so in the first place. Since April 2009, the city reports that it has reduced the use of single-sourced contracts to less than eight per cent of all contracts over a value of $100,000, which is down from 33 per cent prior to April 2009 and means that 92 per cent are now awarded competitively.

Still, despite the City of Calgary’s commitment to transparency, government contracts remain an elusive puzzle for many Alberta businesses, the 21st century’s answer to the ancient Silk Road that connected European merchants to the lucrative supply of spices and fabrics in the east. They’re known to exist and proven to be lucrative, but the journey is an intimidating one. But if these companies can’t seem to find their way into the mystical world of government contracts, it’s not because of a lack of signage. Governments, of all levels and sizes, are practically tripping over themselves these days to assure businesses – particularly small- and medium-sized ones – that they do want to do business with them. Government websites are ripe with PDFs of RFP (request for proposal) templates, helpful tips and FAQs, while the procurement hubs at websites like www.merx.com and www.purchasingconnection.ca offer central locations to check out procurement opportunities with the government and learn more about the processes in general.

Shereen Miller, the director general of the small- and medium-enterprises sector in the department of Public Works and Government Services Canada, says that government is trying to make the process easier for businesses. “In 2009/2010, the office of small and medium enterprises in the western region took part in over 120 events in three provinces and two territories in the region,” she says. “We reached out to over 2,500 suppliers and individuals through free seminars, presentations and tradeshows and via email and telephone.” The problem may be that some businesses are just too cynical to respond to these outreach efforts. That’s a shame, given the fact that there is a place for small- and medium-sized businesses in the big pool of government contracts. For example, the majority of businesses that use the Alberta Purchasing Connection, Alberta’s official electronic tendering system, are small and medium enterprises, with more than 80 per cent of users belonging to organizations with a workforce of fewer than 50 employees.

These cynics might argue that the problem isn’t so much access as it is government’s habit of playing favourites, and there’s some truth to that. But, the City of Edmonton’s Dan Lajeunesse says, that’s more a result of the practical advantages of being local than it is about any overt preferences or discriminatory practices being exercised by governments. “Under the non-discrimination rules of various trade agreements that municipalities must adhere to, the City [of Edmonton] cannot show preference to local or Alberta-based businesses,” says Lajeunesse, the manager of the materials management branch with the city. “Given the nature of many of the city’s procurement requirements, businesses located within or close to the city do have a built-in advantage through their quicker responsiveness and lower transportation costs. Also, through the tender/RFP evaluation process, the city can and does give preference to firms that have a history of strong performance on city contracts.”

Fittingly enough, the City of Calgary turns the City of Edmonton’s logic on its head. “We work in reverse, in that if a vendor has not worked well with us in the past or if the vendor has not performed for us in the past, it will be taken into consideration,” says Andrew Mardon, the city’s supply manager. Still, he says, as in Edmonton it’s the merit of a proposal that comes first. “Even if a vendor has performed really well, they still have to apply for each piece of work as if it was their first,” he says. “It’s different in public procurement than in private industry. In private companies, it is about relationships, but that just isn’t the case in public procurement.” The provincial government shares Mardon’s view, and says it evaluates bids based on their individual merit, not factors such as local content or other economic benefits. “This is reinforced by trade agreements with other jurisdictions. These agreements also ensure that Alberta-based businesses can expect the same treatment when competing in other provinces,” says Mike Berezowsky, assistant director of communications for Service Alberta.

If the government is aggressively encouraging businesses to bid on contracts, and there is no compelling evidence of widespread cronyism or insider dealing, what’s preventing Alberta businesses from scoring lucrative government contracts? According to the Government of Canada, companies bidding for contracts fail to win them for three primary reasons: a lack of expertise, a failure to meet the essential requirements of the tender or solicitation and insufficient resources to meet the needs of larger contracts. This isn’t proprietary information, either, and governments at all levels are doing their best to share it with vendors. “Service Alberta’s procurement services do in fact provide formal debriefing sessions for unsuccessful bidders – or successful bidders if they ask,” says Berezowsky. The session includes advising the vendor about the strengths and weaknesses of their proposal or quote, and an opportunity for the vendor to ask questions about these strengths and weaknesses and the RFP or RFQ process in general.

Governments are even working to address the familiar accusations levelled at them about the forests of red tape that companies have to routinely navigate in order to win contracts. The implementation of so-called standing offers, non-binding agreements between government and potential suppliers that outline the terms and conditions that will apply to future contracts, has made doing business with government a less onerous task, MacMillan says. “It is both costly and time consuming to complete an RFP, and this eliminates unnecessarily wasting either. Just getting in a standing offer doesn’t guarantee you work, but particularly if you’ve built a relationship with the client, these are really useful. I know we provided a standing offer to Edmonton Fire Rescue Services, and now I believe they’re doing similar things federally.”

The debate is likely to continue over whether government work is actually accessible to the average Albertan business, but it might just be worth a shot considering the fact that there are billions of dollars in potential business at stake. In the end, it’s about knowing the rules and doing your best within their prescribed boundaries. “We’ve been doing this for 24 years, and I can’t really tell anyone how to be successful every time,” MacMillan says. “But I will say you have to provide solid proposals and you have to remember that regardless of your past relationship, every project is a resume.”

The 5 R’s of Procurement

Request for Information (RFI) – an RFI or Letter of Interest (LOI) is not open for bidding, but the buyer is interested in receiving feedback from suppliers and may re-open or re-issue an opportunity as an open tender at a later date.

Request for Proposal (RFP) – a Request for Proposal, while generally used for contracts valued at $25,000 or more, is often used when the selection of a supplier cannot be based solely on the basis of the lowest price. An RFP is used to procure goods or services from a vendor that provides the best value.

Request for Quotation (RFQ) – an RFQ is normally sent out when a requisition is received for goods and services valued at less than $25,000, and the documents are usually kept simple so that the contract can be awarded quickly.

Request for Qualifications – a document often distributed before initiating the RFP process which is used to gather vendor information from multiple companies to create a pool of prospects.

Request for Standing Offer (RFSO) – standing offers are not contracts, but if and when the government issues a call-up against the standing offer, then there is a contract. These offers are usually provided for a designated term usually between two and five years.

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