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Weekly UpdatesThe GFOA Research and Consulting Center recently assisted its first Canadian client with the procurement of an enterprise resource planning system (ERP). Each of GFOA's government clients is subject to a unique set of policies, procedures, and regulations that affects the way they do business. However, this project gave GFOA its first look at the implications of Canadian law on the procurement of enterprise technology systems.
LEGAL UNDERPINNINGS
In the U.S., requests for proposals for ERP systems generally fall under regular contract law, whereby the purchaser (the government) negotiates cost as well as terms and conditions with any or all of the bidders. Often, purchasers are not obligated to select any of the bidders.
By contrast, the Supreme Court of Canada ruled in 1981 that there is a distinction between regular contract law and competitive contract law. Two contracts are involved in the competitive contracting process. The first is the automatic, implied contractual obligations between the purchaser and the bidders as expressed in the RFP (referred to as "Contract A"). The second is the actual contract between the purchaser and the winning bidder (referred to as "Contract B"). Thus, the purchaser enters into a Contract A with each vendor that submits a bid, obligating both parties to comply with the terms of the RFP. Only one Contract B, the performance contract, is formed between the purchaser and the winning bidder. Essentially, the final contract award should not differ in material terms from the contractual structure envisioned by the RFP, as this was the "good faith" doctrine put forth by the purchaser and agreed to by the bidder.
The underlying purpose of this ruling was to ensure fair and equal treatment of all bidders by requiring a structured and objective procurement process that is disclosed upfront in the RFP. This does not mean that all bidders must be treated the same, but rather that all bidders must be given an equal opportunity to win the work.
THE SAME, BUT DIFFERENT
Organizations in Canada must therefore ensure that they develop thorough and detailed RFP documents, such that the desired performance contract drives the procurement process from the beginning. It is essential that the desired terms and conditions are clearly written and well understood by the bidders. After all, the more detailed the RFP, the lower the risk of a court having to interpret "implied" terms. This is why our Canadian client sought GFOA's assistance. Having successfully negotiated numerous ERP contracts in the U.S., we were able to help this government structure its procurement process and RFP document in such a way that a favorable performance contract could be reached.
GFOA followed its proven methodology throughout the procurement process with this client. First, GFOA consultants performed a detailed needs assessment to establish the business case for an ERP procurement. We then mapped existing business processes to better understand the client's business requirements. The information from the needs assessment and process maps was ultimately used to draft the RFP document.
Unlike standard practice in the U.S., Canadian law required that the RFP disclose upfront the detailed evaluation criteria and evaluation process the government would use to select the winning vendor. In addition, the RFP disclosed the specific points to be negotiated in the final contract. The mandatory submittal requirements (the minimum requirements that must be met for a bid to be considered a qualified response for consideration and evaluation) did not differ significantly from those used in the U.S. Besides the presentation, the only real difference was the inability to remedy "minor" omissions or errors, which many U.S. procurement policies allow.
While the content of the RFP was more comprehensive than what our U.S. clients typically include in their solicitation documents, the resulting evaluation and selection process did not differ dramatically. GFOA's recommended process includes a very detailed, formal evaluation plan, which is crafted during the RFP development process and finalized before any RFP responses are opened. The evaluation plan explicitly states the overall objective of the procurement, the decision makers involved, the various levels of evaluation and the sequence of steps, the evaluation criteria for each level, and the scoring mechanism. Some governments use highly quantitative criteria that rely on points and weighting; others use more subjective, qualitative criteria.
Each method has its merits, but the most important point is that the specific details of the evaluation plan need to be clearly and distinctly outlined. Not only does this help to define and frame the process for the individuals involved, but it serves as a guidebook to the procurement process and a roadmap to the ultimate decision. When followed (and this should not be downplayed as it is easy to get distracted), the evaluation plan helps to simplify and streamline a complex procurement process, and, perhaps more importantly, helps to minimize procurement protests in a volatile and competitive ERP industry.
In short, our Canadian client included in the RFP-and thus divulged to the vendors--more information about the evaluation process than is typically seen in the U.S. The process of determining and documenting this information early in the procurement, however, was not new or different.
CONCLUSION
Under Canadian law, it is possible to construct language in an RFP that eliminates any Contract A obligations, allowing the purchaser more flexibility to get the best deal from competing bidders. However. governments that do so should proceed with caution, given the limited history of court decisions on these types of RFPs. Even if not legally required, many of the practices that are required to comply with Contract A obligations are good business practices, imposing a structured discipline that brings fairness and equality to a complex procurement.
GFOA's first experience with a Canadian ERP procurement affirmed that our procurement methodology is flexible enough to assist a very diverse client base, ranging from small special districts and municipalities to large cities and counties, regardless of their location.
PATRICK SUTTON BURGER is a senior manager in GFOA's Research and Consulting Center.
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