The issues with avoiding the competitive process

Oddly enough the Municipal Act has a provision that allows municipalities to avoid the competitive process.

Clause 271(1)(d) of the Municipal Act, 2001 provided that a municipality procurement by-law should specify when a tendering process is not required. A more compelling question is, “When is it permissible to purchase goods or services on a non-competitive basis?”

Although the point is often forgotten, tenders are only one means to the competitive end. The Oakville Purchasing By-law No, 2006-086 deals with this question in section 16(b) as described above, which identifies not only the various methods of procurement that the Town of Oakville may employ, but the circumstances in which each may be put into use. As noted, the circumstances in which non-competitive procurement methods may be employed are limited. In previous columns I have discussed the use of non-competitive procurement in emergency situations. Nevertheless, in practice most public authorities tend to engage in far more non-competitive procurement than their relevant purchasing policies and procedures would indicate is permissible.

The greatest problem in relation to non-competitive procurement, arise in relation to sole sourcing. Where sole sourcing is practiced, the municipality purchases either goods, but more frequently services, from a predetermined supplier, without any effort — or, at any rate, with only the most minimal effort — to obtain a competitive price quotation from alternative sources of supply.

According to one American report, nearly 40 per cent of all government contract spending in the United States is awarded without competition, and one-bid competitions account for 20 per cent of all supposedly competitive awards. This widespread perception supports the general feeling held by many suppliers that so-called competitive procurement projects are biased to discourage competing bids. To cite one example in 2005, the District of Columbia created a special Committee on Government Operations on Contracting. A transaction of concern by it was the following:

“The Office of the Deputy Mayor for Economic Development awarded a one-year $300,000 sole source non-competitive contract to Strategic Advisory Group LLC through OCP on Jan. 19, 2003 to provide services for baseball due diligence. Between August 2003 and January 2005 the contract period was twice extended and the original $300,000 (not to exceed) ceiling was increased by a total of $677,000 to $977,000 which is $23,000 short of the $1 million threshold required Council approval”.

In commenting on this and other transactions, Deborah K. Nicholls, the Auditor of the District of Columbia noted that:

“The regularity with which sole source non-competitive agreements that generally do not comply with applicable procurement and contracting laws and regulations are used by the Executive Office of the Mayor and Office of the City Administrator in addition to the fact that the Office of the City Administrator has influenced the selection of individuals from Oakland, Calif. to perform consulting services under these agreements raises questions about the integrity and fairness of the process and the transactions.”

This example is not without numerous Canadian counterparts. The practice of single sourcing very often leads to abuse and is almost always criticized.

For example, emergency purchasing procedures are followed in unforeseen situations because immediate procurement materials or services are necessary in order to continue operations of an essential department, or for the preservation of health, safety and welfare of the people, or protection of property, when there is a present, immediate and existing danger.

Depletion of stock through normal routine usage is not considered an emergency for the purpose of invoking such procedures, nor is poor planning. Unfortunately, the abuse of the emergency procurement procedure is not only notorious but extensive, and it seems to be omnipresent in most municipalities in North America.

Stephen Bauld, Canada’s leading expert on government procurement, is a member of the Daily Commercial News editorial advisory board. He can be reached at stephenbauld@bell.blackberry.net.