Major problems in government procurement are delays between bid solicitation and the eventual award of a contract and the related concern regarding the number of tenders that are cancelled. These problems stem from a shortage of in-house project managers, legal disputes over contract awards and the complexity of government decision making.
Construction procurement perspectives
This is the first installment of a two-part article on delays in the awarding of government contracts. For the second and final installment, please see Government budget process can complicate bidding
Like all customers, governments and other public sector entities have an obvious interest in conducting their business in a way that encourages prospective suppliers to bid for their contracts.
However, supplier trade journals and Internet discussion sites make clear that there is a great deal of uncertainty and suspicion among suppliers concerning the public procurement process. The biggest problems are delays between bid solicitation and the eventual award of a contract and the related concern regarding the number of tenders that are cancelled.
As the recent Canadian and American experience with respect to stimulus spending brought home, there is no such thing as a “shovel-ready public work project.” Unfortunately, any costs attributable to delays occurring prior to the contract award are usually absorbed by the contractors bidding. This undermines interest in government work.
Many different factors complicate the government contract-award process. While little can be done to avoid such problems, contractors need to be familiar with the unique aspects of government operation that contribute to delay. Among the most common causes:
Inadequate project management resources
Governments are the most significant purchasers of both new and repair construction in Canada. However, few governments have sufficient staff resources to carry out major capital work effectively. A private sector entity that carried on $150 million a year in new construction would likely see this as a major part of its overall operation. It would therefore hire project and contract managers and other professionals to coordinate and supervise that aspect of its operation. The same is unlikely to be true of a government. For governments, aside from those departments (such as roads) that carry out construction on a routine basis, capital projects are a means to an end. Particularly in the current environment (where hiring freezes are common) such work must be carried out by the existing staff who invariably have other pressing responsibilities besides the quick completion of the project. It is not that governments do not appreciate the need for project management. They simply do not have adequate resources available. This aspect of government contracting has follow-on implications throughout the construction process.
Disputes over the contract award process
The Canadian law of tender continues to grow more complex, with a resulting greater risk of civil liability to a government that fails to adhere to the standards that the courts have imposed on the award of contract by way of tender or RFP. Where an unsuccessful bidder disputes the way in which the tender was conducted, delay in the award of the contract often occurs.
Complexity of the government decision-making process
Even a small municipality or school board can be large in comparison to the private sector entities with which it deals. Large, bureaucratic organizations have difficulty in matching the operating efficiency of smaller entities. This is especially serious when dealing with organizations that carry on a diverse range of activities. Municipal, provincial and the federal government are very diverse, and extensive internal consultation is often required before any critical decision can be made. This sets governments apart from even large business corporations, which, while comparable in size, tend to focus on one or two lines of business.
Stephen Bauld, Canada’s leading expert on government procurement, is president and CEO of Purchasing Consultants International Inc. and a member of the Daily Commercial News editorial advisory board. He is also the co-author of the Municipal Procurement Handbook. He can be reached at stephenbauld@bell.blackberry.net.
The Municipal Procurement Handbook, by Kevin P. McGuinness & Stephen W. Bauld, is available from the Lexis Nexis book store online.
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