The devil and the details

Differences between private and public procurement law

December 20, 2011
by Robert Worthington

Purchasingb2b November/December 2011 print edition

The devil lurks in the details. In public versus private procurement, that common expression is especially true. The goal in both is the same—obtain goods and services from the best source, at the best price at the right time. But the roads differ if the purchaser is a private company or a public entity.

The private world
Private companies have more choices in their procurement method (sole source or competitive bid)and in how they conduct that method. Private companies are expected to act in self interest. The nature of the procurement, the marketplace and the degree of need determine which method private companies use. Once that method is chosen, it’s usually drafted in favour of the purchasing organization. Private companies must then only abide by Canadian law (contract, competitive bidding and agency law primarily).

In private companies, procurement, price, offer features, past performance, experience and vendor qualifications are the purchaser’s primary focus. To sole source or invite bids must be justified by a business case—but it’s the purchaser’s choice to sole source.

For private companies running a competition for a contract, this too is the purchaser’s choice, subject only to the law and what the marketplace will accept. In private company procurements evaluation results, a competition’s outcome and contract details with the successful bidder are confidential and bidders who want access to this information must sue—at least to the discovery stage. If a bidder sues (successfully or otherwise), that bidder will rarely, if ever, be invited by the company to bid again.

Public procurement
Public procurement is different. To understand this, let’s divide public procurement into categories, since obligations vary. The categories are:
• federal government;
• provincial government; and
• MASH sector (municipalities, administrative bodies, schools and hospitals).

The enforceability of the obligations owed by public purchasing varies by category. The federal government, for example, must comply with numerous international and internal trade agreements, all of which are enforceable by a vendor or potential vendor under the Canadian International Trade Tribunal Act (CITT Act).

Similarly, provincial governments are “bound” to internal-to-Canada trade agreements, but enforceability by a vendor is limited. No province has a true vendor-complaint remedy providing for compensation to a complaining bidder. Alberta, BC and soon, Saskatchewan have a bidder complaint process arising from the New West Partnership Trade Agreement (NWPTA), but vendor compensation only arises if a bid dispute panel’s recommendations are blatantly ignored. Even then it’s totally discretionary. The same is true for the province’s MASH sectors.

Nevertheless, all these government levels act as though their trade agreement obligations are binding and have set up their procurement processes accordingly.

Generally, when a public organization wants to procure goods or services, most procurements are competitively bid—due to trade agreements and public transparency policies—unless a procurement fits within the very limited exceptions of the trade agreements that may allow sole-source contracting. The vast majority of these competitions are open bidding, with wide notice of opportunity requirements and generous periods of time to bid. The evaluation criteria must be directly related to the product or services being sought and, unless the procurement requires a particular brand or specification, public purchasers must allow “equivalents” or even “alternatives” to their listed product or series. Brand name products are thus generally prohibited as a specification.

If problems arise, public purchasers have few options, again due to trade agreements and policies. Preferences and biases are rarely used, negotiated solutions are the exception and public purchasers are restricted in waivers of bidder non-compliance. If a competition is cancelled without award, the public purchaser must re-tender a contract rather than contract via sole source. Due to federal and provincial freedom of information laws, opportunities to see who bid what, what the winning bid was and what the final contract were are always available—to anyone, including a bidder’s non-bidding competitor.

The focus of the public purchaser—due to trade agreements, public policies, legislation and competitive bidding law—is more upon process and compliance than best-interest offers or running the most cost-effective competition.

The primary goal of private procurement is getting the best goods or services at the optimal time and price. It’s primarily governed by law and market forces.

Public procurement has several and sometimes conflicting primary goals—compliance with trade agreements, Canadian law and government policy and legislation. All vie for precedence in a public arena. We often refer to public procurement as “life in the fish bowl with the cats watching”. Due to the public money involved, public procurement must be more transparent than private, and it can take longer to achieve its goals than with private organizations.       b2b

Robert Worthington, LLB, ( specializes in contract, competitive bidding and procurement law.