The public sector sole-source dilemma

As public purchasers we are faced with the dilemma of how to avoid sole sourcing and, at the same time, still meet the needs of our internal client departments.

November 2, 2011
by LouAnn Birkett

Purchasingb2b: September 2011 Print Edition

The issue of sole sourcing in the public sector has received much publicity over the past few years, and even more attention over the past few months. While there’s no question we’re seeing greater emphasis these days on accountability, openness and transparency, as public purchasers we are faced with the dilemma of how to avoid sole sourcing and, at the same time, still meet the needs of our internal client departments.

Before exploring the options available to avoid sole source situations we need to first distinguish between sole and single source. Some may argue there’s no difference, as both lead to the same outcome of dealing with one supplier.

A single source situation occurs when there’s only one option available for the purchaser to consider. The situation might arise with a unique service or product that no one else offers. Or, a sole source situation may be the result of a previously made purchase or commitment. For example, if you’ve previously purchased a specific manufacturer’s equipment it could be that the manufacturer specifies who is authorized to service that equipment. Single source purchases may also be the result of an emergency requirement where there is not the luxury of time to get competitive bids. Delaying the purchase may result in risk of additional cost, damage to public property, disruption of essential service or safety risk.

A sole source situation occurs when the purchaser makes a decision to avoid the competitive bid process and buy from a sole source. This situation that has created much distress in the world of public procurement as it violates public trust in the system and flies in the face of transparency. It also puts the purchaser at a disadvantage when negotiating a contract and can result in increased costs to taxpayers.

There are various reasons why a client department may stipulate a sole source, including personal preferences; lack of expertise to develop the specifications; fear of receiving an inferior product or service; or perhaps it’s simply the quicker solution.

In an ideal world, sole source situations would never be an option. Unfortunately, this is not always the case. As public purchasers we must be proactive in trying to avoid them. These actions will help reduce sole source purchases:

Implement and enforce a sole source procurement policy
The policy and procedure should outline under which situations sole sourcing may be permissible, as well as the approvals needed before entering into an agreement. If there is no policy in place it is difficult to challenge client departments on the need to sole source. To be effective the policy needs to be endorsed by both senior management and any appropriate governing bodies, such as municipal council, to send a clear message to all staff.

Train staff on sole source procurement policy
To simply distribute the policy isn’t effective.  Staff must be trained on both the mandate and the process.

Make client departments accountable
For those situations where a sole source can’t be avoided, client departments must justify why a competitive process is not a viable solution.  The reasons must be sound and defensible.

Prequalification of suppliers or product
A prequalification before the purchase helps to ensure only qualified vendors are able to submit to the competitive bid request. While this adds time and administrative cost to the process, it also does provide assurance to the client department that a low price will not become the key consideration in the final award and therefore the quality is not jeopardized.

Avoid hidden sole source requirements
Often, a sole source requirement can be buried within a tender or request for proposal.  For example, a construction tender may have references to named manufacturers’ products for various pieces of equipment. This creates a sole source situation for future needs such as replacement parts, servicing or expansion. This situation can be avoided by providing an option in the specifications of “or approved equivalent”.  To do this, a mechanism to approve the proposed equivalents and to advise all bidders of the approved equivalents prior to the tender close is required. While this solution still eventually results in a sole source situation for future needs, it does provide a competitive bid process upfront and allows all bidders equal opportunity to propose a solution.

Separate apples from oranges
Occasionally, we are all tempted to deal with a supplier because they can offer a full solution that includes different products or a combination of products and services. But buyer beware, this type of situation could, in fact, be a sole source scenario. It may not be the best choice for you, and will tie your hands regarding who will be able to deliver the solution.
Sole source purchases need to be used as little as possible. As public purchasers, we must continue to work with our client departments to develop solutions that will ensure taxpayers’ dollars are spent wisely.  b2b

LouAnn Birkett, purchasing manager, Region of Durham, can be reached at