Chris Roberts, BBA, SCMP, CPPB Procurement Specialist City of Saint John TENDERS AWAY!
Dec 22, 2015
The City of Saint John recognizes that the taxpayers of this City expect and have the right to receive a high level of service at the lowest possible cost and that increased competition results in lower costs.
PROCUREMENT POLICY STATEMENT
Procurement in New Brunswick is subject to a hierarchy of trade agreements, law, and policy. The City is subject to these legal obligations as well as the City’s Procurement Policy.
The City’s Policy expands on the requirements of the Trade Agreements and Province of NB Purchasing Act by detailing:
Spending Authorities for StaffBidding ProcessesContract Administration
PROCUREMENT LAWS, TRADE AGREEMENTS AND POLICIES
Agreement on Internal Trade
Quebec-NB Trade Agreement
Atlantic Procurement Agreement
Goods & Services over $100,000
Construction over $250,000
Goods, Services and Construction over $100,000
Goods over $25,000 Services over $50,000 Construction over $100,000
TRADE AGREEMENTS
A requirement of all of these agreements is that Municipalities must advertise tenders over the stated thresholds on an electronic tendering system approved by the Province.
The City advertises on the Provinces’ system NBON (New Brunswick Opportunities Network).
TRADE AGREEMENTS CONT’D
The Province has implemented two acts that govern procurement of goods, services and construction by public bodies including municipalities.
Crown Construction Act
Public Purchasing Act & Regulation 94-157
NEW BRUNSWICK LEGISLATION
In New Brunswick, construction tendering is governed by this act for most crown corporations. Municipalities are not formally covered under this act but are expected to follow the basic principles as they are consistent with the trade agreements.
Note: If a tender issued by the City indicates that it is being tendered
under the Crown Construction Contracts Act, then the rules and procedures in the Act must be followed.
CROWN CONSTRUCTION ACT
This Act and Regulation cover the procurement of Goods and Services by the Province and public funded bodies including Municipalities.
It defines the tendering process, responsibilities of individuals responsible for procurement and defines circumstances where exceptions can be made.
PUBLIC PURCHASING ACT & REGULATION 94-157
MTV was launched
Metallica was formed
Bob Marley passed away
Contract A was born!!!!
JUMPIN’ BACK IN TIME TO 1981
Ontario vs. Ron Engineering
Ontario issued a formal tender call for a construction contract
RE responded with compliant bid and $150k mandatory deposit
RE was low bid
After closing, RE realized they had made an error, tried to have bid changed
CONTRACT A??? TELL ME MORE!!!
Change refused, contract awarded to another tenderer
Owner kept the bid deposit
RE sued to have it returned
Trial Court: Owner was entitled to keep deposit
Appeal Court: Decision reversed “Contractual doctrine of mistake”
Supreme Court: Reversed again, Owner keeps deposit
RON ENGINEERING CONT’D…
Contract A is an implied, legally binding contract which is formed when a tenderer submits a compliant bid in response to a formal tender-call (i.e. “yes, I accept your off er of entering into a contract per your specifications, terms, and conditions, and I will do the job for X dollars”). Of course, it carries with it some serious obligations. Pricing (i.e. “low bid”) then dictates which tenderer moves on into Contract B (the actual written contract) with the tendering authority to carry out the work.
Irrevocability and bid security are key aspects
CONTRACT A
“We reserve the right to…….”
“The lowest or any tender shall not necessarily be accepted”
“Except as expressly and specifically permitted in these Instructions to Proponents, no Proponent shall have any claim for compensation of any kind whatsoever, as a result of participating in this RFP, and by submitting a Proposal each Proponent shall be deemed to have agreed that it has no claim”
PRIVILEGE CLAUSES
1999 Supreme Court of Canada Decision
MJB were lowest compliant bid
DC awarded contract to lowest cost bid which was non-compliant on the basis that it “contained conditions and qualifications” pertaining to material quantities
Supreme Court ruled that DC had in-fact awarded to a non-compliant bidder and had violated Contract A
MJB were awarded damages
M.J.B. ENTERPRISES LTD. V DEFENCE CONSTRUCTION (1951)
LTD.
2010 Supreme Court of Canada Decision
RFP for major highway construction project
BC shortlisted to Brentwood and Tercon
Brentwood were selected for contract
Brentwood’s bid actually involved a joint partnership with an ineligible partner (based on a previous procurement)
Tercon sued
TERCON CONTRACTORS V BRITISH COLUMBIA
SCC ruled in favour of Tercon as BC had violated Contract A
Judges were 5-4 split in favour of Tercon
TERCON CONT’D…
Can’t sleep at night
High blood pressure
A constant state of general terror
The need to be extremely clear in bid documents
Fair treatment of all bidders
Strict adherence to procurement legislation, policies and procedures
WHAT DOES THIS ALL MEAN FOR PUBLIC PROCUREMENT FOLKS?
Materials Management
Procurement of Goods, Services and Construction (excluding Infrastructure) Providing procurement advice Monitoring compliance with this policy , legislation and trade
agreements Notifying management staff of non-compliance
Department Heads
Procurement activities within their department and are accountable for ensuring the objectives of the policy are met.
CITY OF SAINT JOHN PROCUREMENT POLICY
Previous Levels
Counci l over $25,000
City Manager $25,000 or less
Commissioner $15,000 or less
Department Managers $5,000 or less
Line Manager $2,500 or less
New Levels
Counci l over $75,000
City Manager $75,000 or less
Department Heads (*) $25,000 or less
Division Managers (*) $15,000 or less
Line Manager $7,500 or less
SPENDING LIMITS
(*) Title Change
The following contracts are subject to Council approval:
Contracts with a value greater than $75,000
Contracts prescr ibed by Statute to be made by Counci l ,
where the Bid pr ice is h igher than the Budget(s) and the necessary
adjustments cannot be made,
where a Substant ive Object ion has been fi led
where a major i rregular i ty precludes the Award of a Tender to the lowest
b idder,
where a Contract is a result of a publ ic pr ivate partnership (“P3”) opportunity.
COUNCIL APPROVAL
Procurement Methods Project Cost
Petty Cash $75 or less,
Corporate Purchasing Card $2,500 or less,
Request for Quotation or Proposal (Invitation)
Goods Less Than $25,000,Services Less Than $50,000,Construction Less Than $100,000
Request for Tender or Proposal(Advertised)
Goods $25,000 and greaterServices $50,000 and greaterConstruction $100,000 and greater
Request for Standing Offer (Supply Agreement)
Any cost
Non-Competitive Purchase Any cost
BID SOLICITATION METHODS
Why are bids opened publically? Transparency. Tenders, proposals (technical only) and quotes
all opened publically at CSJ and become public record.
Why is it necessary to quote bids both with numerical figures and written-out in full? At CSJ, written supersedes numerical in the event of error
(tough to make decimal error when written-out).
Can a witness to a tender quote be anyone? In our documents: “Each person whose signature appears on
the accompanying Tender has been authorized by the Tenderer to determine the terms of, and to sign, the Tender, on behalf of the Tenderer”
QUESTIONS & ANSWERS
Why does a corporation need a certified copy of a resolution naming the signing authority while a non-corporate entity doesn’t? One person cannot make decisions on behalf of a
corporation. Company designates those with signing authority.
What happens if a bidder does not fi ll out all the fields in the bid form? Can you award anyway at your discretion? Maybe… Depends on how the document was structured.
For typical Contract A/B arrangement, bid would be non-compliant. For RFP with rectification period, different story.
Q&A CONT’D…
Generals often leave out subs and if successful, negotiate for better price. Is this legal? Depends. If tender called for disclosure of all Subs, bid would be
rejected as non-compliant. If tender did not call for disclosure, General is responsible for his/her own dealings. No contractual relationship exists between the Owner and the Subs.
If the bid documents have a mandatory site visit and bidders do not show up, can they still bid? No. For CSJ, mandatory means mandatory.
If proper records are not kept and delivered by the contractor to the Owner, what recourse does the Owner have? Depends. Owner would likely only be able to hold back appropriate
amount.
Q&A CONT’D…
If a contractor fails to provide a construction schedule as specifi ed, what recourse does the Owner have? Construction schedule is usually due early in the project. Owner
could delay start of project until schedule is submitted.
When is a bid bond necessary? How much does it typically cost? What does a contractor need to do to become a bondable company? Necessary when requested by the tendering authority Costs run from $5 - $8 per $1,000 Bonding companies typically audit contractors quarterly and
annually Better financial shape of Contractor = more bondable, and lower
bonding rates
Q&A CONT’D…
When is it necessary to request a performance bond? What is involved with obtaining one? Necessary when Owner wants assurances that contract will
be completed. Similar to bid bond as far as auditing, etc.
How does a contractor get a release for the bonds? Why do only some insurance companies follow-up with release of the bonds? Bonds have an expiry date. Can be extended if needed.
Q&A CONT’D…
When is it more appropriate to request a certified cheque in lieu of a bid bond and why is it normally for 10% of the bid? CSJ typically allows for both as bid security. It is typically
left up to the bidder as to whether they want to tie up capital in the form of a cheque or pay the cost of the bond. 10% typically used as it is a “reasonable” amount.
When does a certified cheque, used in lieu of a bid bond, get returned to the contractor? What paperwork should be used for this transaction? If unsuccessful, after award. If successful, either returned
(by registered mail) or incorporated into performance security. Typically handled with email for paper-trail.
Q&A CONT’D…
If no performance bond is required, what should the Owner do to protect themselves against an unacceptable product? CSJ will retain an appropriate amount from the Mechanic’s
Lien Holdback:“If deficiencies are identified and remain outstanding prior to the release of Mechanics’ Lien Holdback, then the City may retain from the Mechanic’s Lien Holdback an amount equal to twice the Engineer’s estimate of the cost of remedying the deficiencies until the said deficiencies are remedied to the satisfaction of the Engineer.” – CSJ General Specification, 6.20.02.b
Q&A CONT’D…
If a Contractor fails to obey the stipulated procedures, whether not getting approval prior to advancing to the next task, concealing items prior to acceptance, or for notifying of a fertilizer application, is the full cost to uncover the item the responsibility of the Contractor? Depends on contract.
“If any work should be covered without the approval or consent of the Engineer, it must, if required, be uncovered for examination and made good at the Contractor's expense.” – CSJ General Specification, 7.14
Why is a 15% holdback commonly applied? When and how should the holdback be released? 15% is common for Mechanic’s Lien. Released when
payment of Subs is evident.
Q&A CONT’D…
What is the legal definition of Substantial Completion? Depends on how contract defines it.
“The Engineer shall issue a Certificate of Substantial Completion once the Engineer is satisfied that the Work has been substantially completed, and the Work has passed any final tests required under the Contract, and the Contractor has given a written undertaking to complete any outstanding work expeditiously.” – CSJ General Specification, 6.19.01
E.g. for CSJ it could be after base asphalt is laid
Why are deficiencies typically valued at twice their estimated value? It typically costs more to bring in a 2nd Contractor to
remedy a deficiency left by the original.
Q&A CONT’D…
Why should a Contractor ask for a written Certificate of Completion? Good record keeping For requirements defined by bonding company (if
applicable) To mark beginning of warranty period For Mechanic’s Lien
Why does the fi rst progress billing claim typically not need a statutory declaration while all subsequent ones do? Statutory declarations serve to show that expenses have
been paid for the previous period. The first progress billing typically doesn’t encompass enough time to make a statutory declaration relevant.
Q&A CONT’D…
What is a Commencement of a Lien and how is it diff erent than a warranty period? Sub/Supplier would file Lien against the property under the
Mechanic’s Lien Act. Warranty period typically begins after Final Completion date.
Who is liable if a worker is hurt on the job and that worker was not wearing the stipulated safety equipment? Can’t answer, more of an OHSA question. CSJ ensures all
Contractors working on City property have WorksafeNB coverage (where applicable).
Q&A CONT’D…
When a contract carries a fi ne for each day the project is late, how is a settlement typically reached for weather or shipping delays? For weather delays, typically behind closed doors, unless Contract
specifically addresses. For shipping, Contractor is responsible.
For a Unit Price Contract, if Owner fails to have an Inspector on site to record and measure, who is responsible for discrepancies in the quantities? Should Contractors get approval for quantities above the estimate prior to delivering the materials to the site? CSJ addresses as such:
“The Engineer shall determine the amount, if any, to be added to, or deducted from, the Tender Price, in respect of any additional work done, or work deleted pursuant to the Engineer’s order. The Engineer shall, in his absolute discretion, determine whether all such work shall be valued using the Schedule of Quantities and Unit Prices .” – CSJ General Specification, 6:17
Q&A CONT’D…
If the bid documents stipulate that a Contractor may be held liable for costs associated with extra Consultant inspections due to the Contractor not completing all the deficiencies before requesting an inspection, is this a legal recourse to withhold that Consultant’s fees from the final billing? Contract specific.
If a Contractor is not willing to perform a task within a reasonable timeframe, can the Owner have it done by another party and charge it against the contract, assuming suffi cient notification to do so has been given? If the task in question is a part of the performance of the
contract, yes.
Q&A CONT’D…
If the plant list varies from the plants shown on the drawing and the Contractor is stipulated to notify the Consultant of discrepancies and in fact doesn’t, is the Contractor responsible for the extra plants shown on the plan but not on the list? I don’t know. Unless it is specifically spelled-out in the
contract which documents supersede others, it is open for interpretation. In the above example, there would be a lot of nasty fighting. For CSJ:“This division shall be read in conjunction with and take precedence where they may prove at variance with the City of Saint John, General Specifications, Municipal Operations & Engineering.” – CSJ General Specification, Div 3
Q&A CONT’D…
What obligation does a Consultant have to record and monitor payments to the Contractor by the Owner? What should Consultants do to stipulate their role in Contract Administration of this type? Depends on contract between Owner and Consultant.
Consultants should clearly articulate and negotiate their role.
What should a Sub do if the GC requests more work than in the tender? Refuse with revised contract? Go to Owner/Consultant? Yikes. Firstly, Owner has no contract with Subs. Legally,
they would be within their rights to negotiate with the GC to resolve.
Q&A CONT’D…
What rationale is there for invited tenders compared to publically invited tenders? Dictated by value of contract (see table)
Q&A CONT’D…
Procurement Methods Project Cost
Petty Cash $75 or less,
Corporate Purchasing Card $2,500 or less,
Request for Quotation or Proposal (Invitation)
Goods Less Than $25,000,Services Less Than $50,000,Construction Less Than $100,000
Request for Tender or Proposal(Advertised)
Goods $25,000 and greaterServices $50,000 and greaterConstruction $100,000 and greater
Request for Standing Offer (Supply Agreement)
Any cost
Non-Competitive Purchase Any cost
Q&A CONT’D…
Is there a minimum requirement for an advertising period for public tenders? It seems to vary from Owner to Owner? The New Brunswick Regulation 94-157 Under the Public
Purchasing Act States:“For tenders requested by public advertisement under paragraphs 4(1)(a) and (b) of the Act, the tender shall not specify a closing date sooner than fi fteen days after the date the tender is fi rst advertised, exclusive of the date the tender is fi rst advertised and the closing date.’ – Item 14
Why is it necessary to acknowledge receipt of all addenda in the bid? Good idea to send in acknowledgement so tendering authority
can have notice that bidder’s have received addenda. Necessary to submit signed addenda with bid as proof that changes have been included in the price.
Q&A CONT’D…
What happens if the Contractor significantly misses the completion deadline they committed to in the bid. Depends on contract. Could be penalties imposed, could be
negotiated, etc.
Q&A CONT’D…