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Procurement Perspectives: The importance of uniform bidding practices

Stephen Bauld
Procurement Perspectives: The importance of uniform bidding practices

Uniform bidding practice has been talked about for decades.

The main question has always revolved around why every municipality would not just adopt a standard and uniform bidding practice.

In competitive contracting, at least as practised in Canada, there is little dialogue between the municipality that issues the call for tender and the contractors who bid for the contract to which it relates.

The municipality’s tender documents define what it is looking to purchase, lease or otherwise procure. Each bidder’s tender represents the offer of supplying the goods or services to the municipality.

It is vital to any competitive contract award process that the bids received be comparable in all material respects.

To ensure this is so, the terms and conditions governing a tender invariably require bids to be submitted in a standardized form. Indeed, it is difficult to imagine how the process might be conducted absent the use of such a standard form.

Despite the fact that tendering reduces the amount of contractual negotiation, some communication may be necessary to obtain clarification and to correct any errors in the tender documents or process, or to adjust to changing circumstances.

To that end, municipalities invariably reserve the right to issue addenda to the tender documents, where they wish to change unilaterally the specifications or some other aspect of the tender before bids are submitted.

Most municipalities reserve a certain degree of contractual latitude when conducting a competitive contracting process.

In recent years, the number of reserved privileges has increased steadily in reaction to the numerous court decisions that have been handed down in relation to the tender process.

One of the goals of the tender system — at least in most cases — is to secure binding bids from suppliers under which they undertake a legally enforceable obligation to supply goods or services at a specified cost.

Almost invariably for their part, suppliers are wary of committing to such an undertaking, because it exposes them to risk that input costs may increase before the contract is secured. After the contract is secured, the supplier may protect itself by entering into a forward contract, either with its own suppliers or in the general market for the inputs concerned.

In order to allow the tender system to operate, it is therefore necessary to allow suppliers to withdraw bids (in the event of an adverse fluctuation in the price for inputs) before the tender closes and the contract is awarded.

Although provisions of this kind are very common, the practical benefit they afford is a matter of considerable debate.

Forcing an unwilling supplier to take up an unprofitable contract results in a supply relationship that is hostile and damaging from the start. Bid bonds or other security are merely methods of coercing such a take-up.

Since most municipalities realize forcing a contract is a long-term no-win situation, they very often do not enforce them.

It would be a good idea if all municipalities had the same standardized forms sent to all the bidders.

In my experience over the years working with contractors, they want to work for government agencies in a manner that is clear to both parties.

Poorly written documents that need to be interpreted by the contractor only cause issues during the contract.

It would be possible to create standard documents as well as uniform bidding practices across Canada if everyone would agree on the parameters of the standard contract document.

This would help both the contractors as well as the government cut down on all the extra work related to enforcing poorly written and confusing contracts.

Most bidding practices set out to achieve the same objectives, it is the language in the tenders and RFPs that needs to be written in a more uniform manner.

Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com.

Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.

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