Chris Roberts, BBA, SCMP, CPPBProcurement SpecialistCity of Saint John

TENDERS AWAY!

I am NOT a lawyer!

Procurement vs. Contract Administration

DISCLAIMER

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?

POLICY FOR THE PROCURMENT OF:

GOODS SERVICES

AND CONSTRUCTION

CITY OF SAINT JOHN

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…

THANKS FOR YOUR TIME!

HAPPY TENDERING.