Flexible Solicitation Formats

in Public Competitive

Procurement

Traditional contract law

Offer + Acceptance + $Consideration $ = Enforceable contract

There’s no contract until agreement on all terms is reached and/or a contract is signed

Rules for conducting business, public and private for centuries

Sea Change 1981The rise of Contract “A”

In Ontario v. Ron Engineering Eastern (Ltd.), the Supreme Court of Canada established the “Tendering contract “A””.

Contract “A” meant to bring order and integrity to the tendering process, and remove negotiation from the competitive bidding process.

Contract “A”

• Rules as set out in the tender document binding on both parties upon submission of the bid, until award of a contract.

• If bidder breaks the rules, subject to rejection of bid.

• If Owner breaks the rules, bidder may sue for breach of contract and seek damages.

Contract “A”Pros and Cons

Pros:•Provides certainty of terms and price to both parties•Irrevocability ensures Owner receives goods or services as bid•Can save time, as no negotiation required, all terms are pre-fabricated and agreed upon

Contract “A”Pros and Cons

Cons:•All terms and conditions of the competition and the performance contract must be pre-fabricated•No deviation permitted once tenders close•No negotiation of terms allowed before award•Breaching Contract “A” terms can be expensive

34 years of litigation

• Much “breach of Contract “A”” litigation has resulted due to:– Compliance issues– Interpretation of Contract “A” rules– Attempts by Owners to add flexibility to

the process (reserved rights clauses, exclusion of liability clauses).

– Lost profit damages may make litigation worthwhile

Is there an alternative?

• In 1991, the Supreme Court of Canada ruled in M.J.B. Enterprises v. Defence Construction that procurement entities may use traditional contract law in competitive bidding if they so choose.

An industry such as the construction industry or goods suppliers, where contracts can be pre-fabricated, and certainty in price and terms is desirable, Contract “A” works.

Other industries like services or IT which have difficulty pre-fabricating contract terms find it harder operating efficiently under Contract “A”.

Why flexible formats?

Pros:•Reduces the risk of “lost profit” law suits by operating outside Contract “A”•Allows greater flexibility in the competitive process •Allows for some negotiating to tailor the final contract terms

Why flexible formats?

Cons:•No irrevocability – no deal until the contract is signed – risk of failure to come to terms•May take longer to accommodate a negotiation•No bid security – if a party walks, it’s back to “square one”

Flexible formatsWhat are they?

• Can take various forms:– Non-Contract “A” quote request– Negotiated Request for Proposals (NRFP)• Consecutive negotiation• Concurrent negotiation

Flexible formatsPanacea?

• Flexible formats have pros and cons, and are one more tool in the procurement toolbox

• Flexible formats are subject to all public sector procurement rules and trade agreement obligations

• Non-Contract “A” formats subject to Judicial Review under Administrative Law

Summary

• Contract “A” is still the primary competitive procurement method used in Canada

• Flexible solicitation formats are gaining traction

• As with Contract “A” tendering, flexible formats have to be done right to work well

• If done poorly, flexible formats are still subject to judicial scrutiny