Common Tendering and Contracting Templates: The RFP Template. Daniel Fabiano Fasken Martineau DuMoulin LLP December 4, 2013
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1 Common Tendering and Contracting Templates: The RFP Template Daniel Fabiano Fasken Martineau DuMoulin LLP December 4, 2013
2 Disclaimer This presentation is for general information only, and is not intended as, nor should it be construed as, legal or professional advice or opinion. For specific guidance on the applicability of procurement law to your activities, you should seek legal or professional advice. If you deviate from the templates, consult your professional advisors 2
3 Overview 1. Legal Framework 2. Competitive vs. Non-Competitive Procurement 3. Contract A and Implied Duties 4. Mandatory, Rated and Unrated Elements 5. Evaluation, Short-List 6. Common Pitfalls 7. Changes to the Template 3
4 Legal Framework Trea%es Agreement on Internal Trade (Canada) Ontario- Quebec Trade and Coopera<on Agreement Government Direc%ves BPS Procurement Direc<ve Legisla%on Freedom of Informa,on and Protec,on of Privacy Act Broader Public Sector Accountability Act Case Law 4
5 Competitive Procurement Equipment, Goods, Services (excluding consul%ng) Open compe%%ve procurement required if contract value is $100,000 or more Invita'onal compe''ve procurement recommended for contracts valued between $10,000 - $99,999. 5
6 Competitive Procurement Consul%ng Services Open compe''ve procurement required if contract value is $100,000 or more Invita'onal compe''ve procurement required if contract value is less than $100,000 6
7 Non-Competitive Procurement If procurement is within an excep<on clause under applicable trade agreements, and purchasing organiza<on formally establishes applicability of the clause. Non- applica<on/excep<on clauses (among others): contract is with a public body or a non- profit organiza<on contract is financed primarily from dona<ons that are subject to condi<ons that are inconsistent with the treaty obliga<ons 7
8 Non-Competitive Procurement (Single Sourcing) Single- source permiyed if (among other grounds): unforeseeable situa<on of urgency (but not a failure to plan / allow for sufficient <me) mayers of a confiden<al or privileged nature, disclosure through an open tendering process could reasonably be expected to compromise government confiden<ality, cause economic disrup<on or otherwise be contrary to the public interest no bids in a prior compe<<ve procurement * But not for the purposes of avoiding compe<<on between suppliers or to discriminate against suppliers 8
9 Non-Competitive Procurement (Sole Sourcing) Sole- source permiyed if: only one supplier is able to meet the requirements of a procurement, AND (among other grounds): need compa<bility with exis<ng products, absence of compe<<on for technical reasons the goods or services can be supplied only by a par<cular supplier and no alterna<ve or subs<tute exists purchase of goods under excep<onally advantageous circumstances such as bankruptcy or receivership, but not for rou<ne purchases * But not for the purposes of avoiding compe<<on between suppliers or to discriminate against suppliers 9
10 Legal Framework Trea%es Agreement on Internal Trade (Canada) Ontario- Quebec Trade and Coopera<on Agreement Government Direc%ves BPS Procurement Direc<ve Legisla%on Freedom of Informa,on and Protec,on of Privacy Act Broader Public Sector Accountability Act Case Law 10
11 Supreme Court of Canada: Ron Engineering I will pay you a dollar if you will cut my lawn. Analogy to the procurement process used by the Supreme Court in Ron Engineering case. No obliga<on to cut the lawn exists, but the obliga<on to pay the dollar arises if someone cuts the lawn. 11
12 Legal Concept: Contract A, Contract B definite clear final Ok. I agree. offer contract I will cut your lawn if you pay me $
13 Supreme Court of Canada: Ron Engineering Issuing procurement documents can amount to an offer about how a procurement process will be carried out A bidder is treated as accep<ng that offer when it submits a compliant bid Gives rise to a contractual rela<onship regarding the procurement process (Contract A) that is separate from the eventual contract that is awarded to the successful bidder (Contract B) 13
14 Legal Concept: Contract A, Contract B Contract A: Process Contract 1. Purchaser Issues RFP 2. Bidder Submits Compliant Proposal Purchaser offer Bidder acceptance Contract A Purchaser invitation Bidder offer Purchaser acceptance Contract B Contract B: Final Contract 3. Purchaser Selects Proposal 14
15 Legal Concept: Contract A, Contract B Contract A: procurement process contract arises if there is an irrevocability clause (e.g. proposals irrevocable for X days) or other bidder hurdles (e.g., bond/security) imposes obliga<ons: proponents with compliant bids must stand behind them (excep,on: patently obvious mistakes) purchasing organiza%on must reject non- compliant bids purchasing organiza%on must comply with process 15
16 Legal Concept: Contract A, Contract B Contract B: final contract signed with successful proponent governs purchases from successful bidder 16
17 Terms of Contract A Express Terms: RFP terms (process, requirements, eval. criteria) Implied Terms: Statute, treaty Direc<ves, policies, prac<ces Common law, including fairness and related du<es Industry customs 17
18 Terms of Contract A (Implied Terms) Over- arching duty of fairness (reasonableness, good faith) 1. The duty to disclose material informa%on 2. The duty to reject non- compliant bids 3. The duty to conduct a fair compe%%on 4. The duty to award the winning bidder(s) 5. The duty to award the contract as put forward in the procurement documents 18
19 Terms of Contract A (Implied Terms) 1. Duty to disclose material informa%on: All material informa<on disclosed provided with the average bidder in mind Disclose informa<on about the contract that could: impact a bidder s decision to bid or influence the bidder s pricing Disclose evalua<on criteria Correct / complete informa<on. Unreliable informa<on disclaimed 19
20 Terms of Contract A (Implied Terms) 2. Duty to reject non- compliant bids: Non- compliant bids are normally disqualified But, may be deemed substan<ally compliant Substan%al compliance simple omissions or irregulari<es no missing material facts no unclear meanings no mischief concern for integrity of the process 20
21 Terms of Contract A (Implied Terms) 3. Duty to conduct a fair compe%%on: Transparent process, consistent with RFP rules No arbitrary rule changes Avoid conflict of interest Avoid unfair advantage or bias 21
22 Terms of Contract A (Implied Terms) 4. Duty to award the winning bidder(s): Highest score! 5. Duty to award the contract as put forward in the procurement documents: No material changes to final contract Final contract must be consistent with the form ayached to the RFP reflect assump<ons consistent with those of the RFP 22
23 Breach of Contract A: Possible Consequences legal challenges from unsuccessful proponents damages (inc. lost profits) injunc<ons (interrupt purchasing, opera<ons) Auditor General public inquiries 23
24 Reserved Rights For example, reserve the right to: waive formali<es and accept proposals that substan<ally comply with the requirements of the RFP, in the purchasing organiza<on s sole discre<on select a proponent whose proposal does not reflect the lowest cost cancel the RFP process at any stage and issue a new RFP for the same or similar requirements Most of the reserved rights are at sec<on 2.27 and 2.28 of the RFP template (Equipment) 24
25 Reserved Rights and Risk Reserved rights may override the implied terms of Contract A and allow for flexibility but are not risk free Courts will not enforce reserved rights in all circumstances Must be stated clearly in the procurement documenta<on Use of reserved rights should be a last resort 25
26 Mandatory vs. Rated Elements Careful DraUing! Dis<nguish between mandatory and op<onal elements Mandatory: must, shall Op<onal: should, may, can Intended/Procedural: will Special designa<ons, like must (M) or should (R) are risky 26
27 Mandatory vs. Rated Elements Fail to meet mandatory element results in disqualifica<on Fail to fulfill rated element may result in lower score Careless use of language in RFP could result in mandatory requirements framed as op<onal: failure to meet needs? immaterial elements framed as mandatory: disqualifica,ons? vague language, bid disputes or legal claims 27
28 Mandatory / Rated vs. Unrated Elements An element that is neither mandatory nor rated cannot impact outcome (scoring, etc.) Consider: Request for par<cular informa<on (e.g., financial statements) Oral presenta<ons Site visits In- house trials How will this be scored / impact scoring? How will new informa,on be incorporated into the process (e.g., arising during oral presenta,on)? 28
29 Evaluation Criteria Evalua<on criteria and weigh<ngs must: Be developed before procurement process begins Be included in the procurement documents Differen<ate between mandatory and rated requirements Not change, unless an addendum is issued in the same manner as the original document 29
30 Evaluation Criteria The procurement documents must include: Weigh<ng for rated requirements Descrip<ons of any short- lis<ng processes Descrip<ons of the price/cost evalua<on methodology Minimum score thresholds Tie break method 30
31 Short-List Candidates A short- list should be driven by minimum scoring thresholds The template includes guidance on minimum scoring (e.g., s. 4.1) Mee<ng threshold moves the proposal to next stage of evalua<on Basing a short- list on factors other than minimum scoring (e.g., top 5 candidates) has some risk Advise candidates that they have / have not made the short- list 31
32 Common Pitfalls in Preparing an RFP Insufficient due diligence Unclear need or specifica<ons Unnecessary mandatory requirements Missing mandatory requirements 32
33 Due Diligence / Research Phase Due diligence, informal/formal research can mi<gate/avoid: Pricing and budget issues Ill- defined needs Incomplete or burdensome/unnecessary specifica<ons When procuring for complex or innova<ve solu<ons, dialogue with prospec<ve vendors is essen<al There is no need to make due diligence a rigid process 33
34 Due Diligence / Research Phase Formal research: Request for Informa<on (RFI) Request for Expression of Interest (RFEI) Request for Supplier Qualifica<on (RFSQ) Incen'vize vendors! Consider building in a vendor presenta<on or mee<ng, in addi<on to wriyen submission 34
35 Common Pitfalls in Administering an RFP Discussion: All proposals received in response to an RFP are over- budget. The hospital s budget is $150,000 Pricing proposals: Bidder A $210,000; Bidder B $250,000; Bidder C $290,000 Pricing is worth 30% of the total score Score Bidder A Bidder B Bidder C Excluding price (70) (78.5%) (85.7%) (90%) Including price (100) You are the purchasing organiza<on. What do you do? 35
36 Common Pitfalls in Administering an RFP Discussion: The purchasing organiza<on expects Vendor A to be successful in an RFP (Vendor A is the incumbent; has an excellent reputa<on in the industry). Consider the following separately (not cumula<vely): 1. Vendor A s proposal is late by 3 hours 2. Vendor A s proposal is missing the C.V.s of proposed team members. Proposed team members are the same as those currently performing the work. The C.V.s were requested (i.e., the proponent should provide biographies ), and are scored out of 8 points (8% of overall score). 3. Vendor A s score is 84. Vendor B s score is 82 (but its pricing is within budget). The purchasing organiza<on wants to nego<ate Vendor A s pricing, as Vendor A s pricing is over- budget. Vendor A refuses to nego<ate its price. You are the purchasing organiza<on. What do you do in each situa<on? 36
37 Possible Changes to the RFP Template 1. Permit nego<a<on of the agreement 2. Non- binding procurement process (no Contract A) 3. Include a best and final offer process 37
38 Negotiating the Agreement Including the form of the final agreement as part of the procurement allows: for a fair comparison of proposals suppliers to consider the contract terms in their pricing Template default is that proponents must agree (no nego<a<on) Template can be changed to permit nego<a<on. Advisable to: require all changes to form of agreement to be included in proposals score proponents on degree to which each will accept the form of agreement 38
39 Negotiating the Agreement Important: Develop evalua<on criteria regarding contract changes, and disclose them in procurement documents Terms that are essen<al or mandatory to the agreement should be iden<fied to proponents so that proponents know what is out- of- bounds / not subject to nego<a<on Advisable to keep nego<able terms at minimum level What is open to be nego<ated? Must not deviate in material way from procurement documents Seek legal advice in connec<on with substan<ve nego<a<ons or changes 39
40 Negotiating the Agreement Advantages: Vendor friendly Less likely to preclude bids because vendors cannot agree to terms More reasonable approach Disadvantage: Developing evalua<on methodology is challenging Less certainty for purchaser Time- consuming Legal advice Risky: cannot materially change the form of contract 40
41 Non-Binding Process (No Contract A) By removing elements which give rise to Contract A, can avoid some of the disadvantages, rigidity and risk of the tradi<onal procurement process No irrevocability period; no bid security; no special hurdles Advisable to include an express disclaimer of Contract A Advantages: Avoids restric<ons on dialogue and informa<on- sharing Avoids risk of liability Disadvantage: Cannot bind proponents: proponents can walk away or change proposal at any <me up to signing a contract 41
42 Best and Final Offer (BAFO) In a BAFO process, proponents submit an ini<al proposal, but are given a chance to amend their proposal to: revise pricing fix deficiencies address proposed contract terms The concern is that all suppliers be treated fairly, and that vendor confiden<ality is respected. A BAFO process must be described in the RFP to be used 42
43 Best and Final Offer (BAFO) Uncommon can be used in complex procurements if purchaser is uncertain of specifica<ons/requirements Advantages: Dialogue between vendors and purchaser, leading to a beyer understanding of purchaser needs and vendor solu<ons Vendor pricing will be more ayuned / refined Can allow vendors to fix proposal deficiencies Disadvantages: Longer, resource- intensive procurement process Legal advice 43
44 Best and Final Offer (BAFO) Sample BAFO Process: 1. Evalua<on of proposals (without considering price) 2. Short- list qualified bidders 3. Compe<<ve dialogue : technical aspects of the vendor solu<ons discussed with each short- listed vendor; the purchaser advises vendors of issues with their proposal 4. Call for final submissions from short- listed vendors 5. Vendors submit revised proposals 6. Evalua<on of final submissions 44
45 Best and Final Offer (BAFO) Compe%%ve Dialogue (Vendor s Perspec%ve) Were weak or deficient areas of the proposal iden<fied? Has a strategy been iden<fied to remedy this? Were strengths in our solu<on iden<fied? Consider how to beyer leverage strengths. If the project is beyer defined, do our compe<tors have a strength in this area? If so, has a strategy been iden<fied to beat this? If the project is beyer defined, can we change or remove subcontractors, or input goods/services/consumables to lower our price? 45
46 Questions / Discussion? Daniel Fabiano Partner Fasken Mar<neau DuMoulin LLP dfabiano@fasken.com 46
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