Introduction
The Public Tender Act is the primary piece of legislation governing the acquisition of goods, services and construction by the Government of Newfoundland and Labrador and by agencies of government. The Act provides for a competitive bidding process in which the lowest bid meeting specifications is awarded the contract. It was enacted for the purpose of ensuring that government contracts are awarded in a fair and equitable manner, while achieving maximum cost effectiveness for the public purse. With tens of thousands of contracts valued at hundreds of millions of dollars in government business awarded annually, it is essential that appropriate legislation be in place to ensure accountability for public funds and also ensure expenditures are made in the public interest.
Government today is positioning itself to operate in a more efficient and business like manner. Inevitably this means change, especially in light of the fact that the way business is conducted throughout the world is also changing. In recent years we have seen new technology take on a more prominent role in business transactions, in many instances trade barriers are coming down and local companies are being awarded international contracts. The move toward partnerships between the public and private sectors is proving to be a successful endeavour for both governments and businesses in achieving common goals and objectives.
To stay in tune with this changing business environment, the Government of Newfoundland and Labrador is undertaking a consultation process with local industry groups and government funded bodies to determine if the Public Tender Act is sufficiently responsive to business and industry in this province. While the Act must encourage competitive bidding and ensure the best value for the public, it should also encourage innovation, growth, and provide fair opportunity for local businesses in the province. While the spirit and the intent of the Act continue to be relevant and applicable today, it is recognized that the Act must be regularly reviewed through discussion and debate by and between government and the business community to ensure its application stays relevant. The last comprehensive review took place in 1990/1991 and it is time for another. The purpose of this paper is to outline some of the issues for consideration, explore some options and to ask for input from various stakeholders on what actions, if any, should be taken to strengthen and update the legislation, and foster greater alliances between the public and private sectors while preserving the integrity of the Public Tender Act.
Issue 1 - Price vs. Other Factors
Currently the Public Tender Act stipulates that contracts be awarded to the lowest bidder meeting specifications. While price should continue to be a critical factor in determining how purchases are made, experience globally indicates that numerous other criteria must be considered to ensure best value for the taxpayer. It has been suggested that the evaluation criteria should include a more complete set of factors such as quality, service delivery, life cycle costs, experience, etc., in addition to price, to achieve best value in the awarding of contracts.
Key Questions
Should broader evaluation criteria be taken into account in awarding government contracts or should price continue to be the only consideration?
Should such other factors apply in the awarding of "all" contracts or just under some special circumstances? (e.g. (1) price only criterion below certain value thresholds, (2) broader criteria when a private sector "partner" is involved.)
Issue 2 - Encouraging Innovation
Many local companies have very unique areas of specialization and expertise. These companies are often in a better position than government to devise the most effective means to solving problems, and in particular new innovative approaches, yet the Public Tender Act does not provide for this type of innovation. For example, government is not permitted under the Act to conduct a Request for Proposals (RFP) for the acquisition of most goods, services and construction, in the truest sense. At a time when governments worldwide are seeking innovative solutions to problems, this inability by our province to conduct RFP's is particularly problematic. It is not always possible or practical to identify the answers to government needs in advance, and it would often be better to give companies a general sense of government's requirements and have private sector companies who possess the knowledge and expertise design an appropriate solution to a problem. Indeed, in such cases, it is not cost effective to have government maintain a duplicate array of expertise when it already exists in the private sector.
Another barrier to innovation inherent in the Public Tender Act, is the inability of government to consider proposals without a competitive process. For example, a company may develop and propose an innovative and more cost effective means for providing a service, yet government is currently unable to accept an unsolicited proposal and must issue a public tender. In such a case, the innovative suggestion may be `borrowed' and incorporated in a tender call which is open to all bidders. It is argued that this is unfair to the originator of the idea and stifles suggestions government might otherwise receive from the private sector.
Key Questions
Should there be provision in the Act that would allow for more purchases to be made through Requests for Proposals (RFP's)?
Should government be able to approach the private sector, as a partner in solving a problem?
Issue 3 - Economic Development
Trade barriers are coming down throughout Canada and the world {e.g. North American Free Trade Agreement (NAFTA), Agreement on Internal Trade (in Canada), and Atlantic Procurement Agreement (Atlantic Provinces)}. This is a positive step for local companies now permitted to bid on contracts in the national and international arenas. In most other provinces, with the notable exception of Newfoundland and Labrador, exemptions are nevertheless permitted on the basis of economic development factors, although this approach is generally used sparingly.
Key Question
Should there be provision in our Act to recognize economic development as a factor in tender evaluation?
Issue 4 - Thresholds
At the present time, Newfoundland and Labrador's Public Tender Act requires a tender call for all goods, services and construction over $7,500.
Various trade agreements also set thresholds for calling tenders open to all resident bidders. The Atlantic Procurement Agreement (APA) sets thresholds of $25,000, $50,000 and $100,000 for goods, services and construction respectively.
Contracts above the thresholds outlined in the APA are open equally to all bidders from any Atlantic Province. In some jurisdictions, restrictions may be placed on bidders for contracts below this threshold (ie., open to local companies only, guarantee of local jobs, etc.). This is not the case in our province where the threshold is set at $7,500 and it is open to all bidders without provincial restrictions.
As well, Newfoundland is the only province of the four Atlantic provinces that must tender for public works by legislative requirement. The requirement to tender for leased space is also unique to this province compared to all of Canada.
Key Questions
Should the threshold requiring tender calls be changed? Should there be different thresholds for different kinds of purchases (i.e. goods, services and construction)?
Should this province introduce requirements for local content in the awarding of contracts below the APA thresholds, in keeping with practice in other provinces in Atlantic Canada?
Should the provision for tendering leased space be removed, in keeping with other Canadian jurisdictions?
Issue 5 - Advertising Tender Calls
The growth in the information technology sector has changed the way most companies do business. Already government is making use of a website (//public.gov.nf.ca/ tenders/default.htm) for posting tender calls. This site can be accessed by numerous companies at the local, national and international levels. However, current legislation requires all public tenders to be advertised in "a generally circulated newspaper". This poses problems for smaller government funded bodies such as small towns whose purchases frequently are of interest to only local or regional suppliers. Having to advertise in larger newspapers is costly, particularly when more local media publications can effectively reach the pool of prospective bidders. Furthermore, and especially for larger public institutions, a more cost effective way of doing business is to post tender calls electronically. This also reaches an even wider audience at a much more cost effective rate.
Key Question
Should government and agencies of government continue to be bound by legislation to advertise all tender calls in a generally circulated newspaper, or should they be given the flexibility to use the website; or more local media publications for advertising tender calls?
Conclusion
This review of the Public Tender Act coincides with the changes occurring in business and industry today. To keep pace with the rest of Canada and the world, the Government of Newfoundland and Labrador must make every effort to ensure it operates in an efficient, cost effective and business like manner, while at the same time helping Newfoundland and Labrador companies to grow and flourish on the local and national scene. Consequently, it is prudent to regularly check the status of any legislation which has significant economic ramifications for this province. This review is an open minded endeavour and it is our intention to ensure we have legislation which maximizes opportunities for big and small companies throughout this province, while ensuring the key principles of our provincial Public Tender Act are retained.
We encourage your participation in this process and request submissions to the Department of Works, Services and Transportation no later than March 23, 1998. Please reply in writing to: Don Osmond, Assistant Deputy Minister (Works), Department of Works, Services and Transportation, P. O. Box 8700, 5th Floor, Confederation Building, West Block, St. John's, NF A1B 4J6
Any requests for additional information should be directed to: Government Purchasing Agency, Department of Works, Services and Transportation, P.O. Box 8700, St. John's, NF, A1B 4J6, Attn. Larry Cahill (729-3343) or Vanessa Newhook (729-3332).