August 21, 2009

Roadbuilding focus

Local preference policies setting the clock back on tendering process

ROB BRADFORD

guest columnist

One of our most important jobs at the Ontario Road Builders’ Association is to promote fairness and transparency in the public tendering system.

Each year in fulfilling that mandate, our members call on us to remind certain municipalities of their responsibilities in conducting a fair tendering process according to widely-accepted fundamental principles.

Recent involvement in this area has included issues related to acceptance of non-compliant tenders. In one case, a contract was awarded to a second low bidder that had not properly executed the bid bond and was allowed to correct this “minor problem” after bids were opened. In another case, a second low bidder missed some items in the tender and was awarded the project after the municipality changed the scope of the work — after the tender opening. Another example: a contract was awarded to a bidder that did not carry a prequalified subcontractor in the bid, but was allowed to correct that after the tender award.

From the municipal perspective these might be “minor issues,” as one told ORBA, but in each case, they produced a non-compliant bid which should not have been accepted. Taking such liberties with the public tendering system might seem minor in their singularity, but when it is occurring in municipalities across Ontario, it raises significant concerns for the system.

The most frequent abuse of the public tendering system by municipalities is the practice of local preference policies. In some cases, the tender documents advise that final bids will be adjusted by up to 10 per cent to favour local contractors. In even more alarming instances, an adjustment factor allows altering the final bids after tender opening, with no indication to bidders except a notation in the contract documents than an unspecified adjustment could be made.

Application of local contractor preference policies present a serious threat to the fairness and transparency of the public tendering process. They are not supported by the industry. It should be noted that municipalities are not the only culprits here. Contractors have been known to promote the local preference practices in their local areas.

Local preference policies are unfair to bidders, especially in cases where the potential bid adjustment is not known at the time of bidding. There is a considerable investment of time and money in preparing a bid. It is not acceptable for an owner to accept a bid, only then to have the contractor discover that their chances of winning the contract were limited by arbitrary local preference bid adjustments.

Local preference policies should also be of concern to local taxpayers because they will increase the cost of the work where municipalities are already struggling to catch up with huge infrastructure deficits.

As other contractors come to understand they are at a disadvantage in a local area, the number of bidders will be reduced, prices from local contractors with the advantage will rise and the municipality will receive fewer competitive bids for its work, again driving up costs for taxpayers.

One argument used to justify local preference policies is that the economic benefit to the community will outweigh higher tender prices. But if a local contractor is able to win more work in their own area, they will have difficulty getting work in neighbouring communities that seek to protect their local contractors as well, so has anything been gained?

What happens if local bidding preference policies were to become even more widespread in Ontario? In the extreme, it supports the fragmentation of the industry with contractors protecting local territories and all nature of arrangements made to share the marketplace and award contracts based on factors not acceptable in terms of fair and transparent public tendering.

Such a trend in our industry would turn back the clock 50 years and give rise to business practices that are not in the best interests of taxpayers.

Should we be erecting municipal trade barriers in Ontario, thereby suggesting each municipality is an independent economy?

Surely it is in the best interest of Ontarians to ensure free movement of goods and services within our own province.

The request to Ontario municipalities is that they support our efforts to protect a fair and transparent public tendering system.

This does not leave room for local preference policies, accepting non-compliant bids, accepting late tenders, conducting negotiations after tender closing or any of the many other practices that have been adopted by some municipalities and pose a threat to the system.

Rob Bradford is Executive Director of the Ontario Road Builders’ Association

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