TENDERS AWAY! Chris Rober ts, BBA , SCMP, CPPB Procurement Specialist City of Saint John DISCLAIMER I am NOT a lawyer! Procurement vs. Contract Administration PROCUREMENT POLICY STATEMENT 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 LAWS, TRADE AGREEMENTS AND POLICIES 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 Staff Bidding Processes Contract Administration TRADE AGREEMENTS A greement on Internal Trade Goods & Ser vices over $100,000 Construction over $250,000 Quebec-NB Trade A greement Goods, Ser vices and Construction over $ 100,000 Atlantic Procurement A greement Goods over $25,000 Ser vices over $50,000 Construction over $100,000 TRADE AGREEMENTS CONT’D 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 ). NEW BRUNSWICK LEGISLATION 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 CROWN CONSTRUCTION ACT 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. PUBLIC PURCHASING ACT & REGULATION 94-157 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. JUMPIN’ BACK IN TIME TO 1981 MTV was launched Metallica was formed Bob Marley passed away Contract A was born!!!! CONTRACT A??? TELL ME MORE!!! 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 RON ENGINEERING CONT’D… 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 CONTRACT A 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 of fer 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 PRIVILEGE CLAUSES “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” M.J.B. ENTERPRISES LTD. V DEFENCE CONSTRUCTION (1951) LTD. 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 noncompliant bidder and had violated Contract A MJB were awarded damages TERCON CONTRACTORS V BRITISH COLUMBIA 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 CONT’D… SCC ruled in favour of Tercon as BC had violated Contract A Judges were 5-4 split in favour of Tercon WHAT DOES THIS ALL MEAN FOR PUBLIC PROCUREMENT FOLKS? 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 CITY OF SAINT JOHN POLICY FOR THE PROCURMENT OF: GOODS SERVICES AND CONSTRUCTION CIT Y OF SAINT JOHN PROCUREMENT POLICY 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. SPENDING LIMITS Previous Levels New Levels C o u n c il over $25,000 C o u n c il over $75,000 City Manager $25,000 or less City Manager $75,000 or less Commissioner $15,000 or less D e p a r t me n t H e a d s ( * ) $ 2 5 , 0 0 0 o r l e s s D e p a r t me n t M a n a g e r s $ 5 , 0 0 0 o r l e s s Division Managers (*) $15,000 or less Line Manager Line Manager (*) Title Change $2,500 or less $7,500 or less COUNCIL APPROVAL The following contracts are subject to Council approval : C o n t r a c t s w i t h a v a l u e g r e a te r t h a n $ 7 5 , 0 0 0 C o n t r a c t s p r e s c r ib e d b y S t a t ute to b e m a d e b y C o u n c i l , w h e r e t h e B i d p r i c e i s h i g h e r t h a n t h e B u d g et ( s ) a n d t h e n e c e s s a r y a d j u s t me n t s cannot be made, w h e r e a S u b s t a n t i ve O b j e c t io n h a s b e e n f i l e d w h e r e a m a j o r i r r e g ula r i t y p r e c l ud e s t h e Aw a r d o f a Te n d e r to t h e l o we s t b i d d e r, w h e r e a C o n t r a c t i s a r e s u l t o f a p u b l i c p r i va te p a r t n e r s hi p ( “ P 3 ” ) o p p o r t uni t y. BID SOLICITATION METHODS 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 greater Services $50,000 and greater Construction $100,000 and greater Request for Standing Offer (Supply Agreement) Any cost Non-Competitive Purchase Any cost QUESTIONS & ANSWERS 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” Q&A CONT’D… 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 fill 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 specified, 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 2 nd 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 first 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 dif ferent 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 fine 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 suf ficient 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 greater Services $50,000 and greater Construction $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 fifteen days after the date the tender is first advertised, exclusive of the date the tender is first 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. Necessar y 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. THANKS FOR YOUR TIME! HAPPY TENDERING.