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February 20, 2013

Terms governing tenders need to be more consistent

I recently was in New York visiting several private and public sector clients and my meetings involved reviewing large public sector tenders. I noticed the rules are very different, from country to state to municipality, when it comes to how tenders are written.

What jumped out at me, as the biggest contrast, was that the documents are more to the point and less about trying to stuff every piece of risk protection into the tender form for construction, to goods and services. Maybe it was just the ones I was reviewing but I don’t think so. The client told me “they are very standard when it comes to asking for what they want and less formal when it comes to the rules that would apply in Canada”. I guess you could view that statement in several different ways that would be both good, and bad for the person bidding the tender.

I don’t know why I would be surprised, but I was because as I reviewed the document it was clear that the state was going to end up with exactly what they wanted. It sure looked to me like any rules were not going to get in the way of the end result.

Stephen Bauld

Procurement

Stephen Bauld

As a contrast to how we do things in Canada some, but by no means all, municipal purchasing bylaws contain extensive set of rules governing the manner in which the municipality is to conduct its tenders (and similar contract competitions). There are inherent risks in the incorporations of provisions of this nature into any purchasing bylaw. If any instructions of this kind are included, it is best that the bylaw make it very clear that they are intended as being directive or indicative only, rather than prescriptive. Unfortunately, a light-handed approach is not often encountered.

Instead, bylaw provisions of this nature have a tendency to sink to the level of detail that is not desirable in any law business and legal reasons. On a business level, giving minute directions constitute micro-management. Almost invariably, they impose an unduly cumbersome process on the conduct on a tender. They prevent or at least deter the municipal staff from responding effectively to the dynamics of market conditions.

These problems pale, however, in comparison to the legal problems to which such an approach to drafting gives rise. There is an inherent tendency, when drafting up instruction to bidders, as to how something is to be done to specify what is perceived in the abstract to be the optimal manner of conducting the activity in question. Even when there is something to be said for the description that is provided, no law should prescribe the ideal as the minimum standard that must be attained.

Where such an approach is taken, then every deviation from the ideal constitutes a breach of law. Any such breach raises questions about the authority of municipal staff to act, unless they have adhered perfectly to the instructions that have been given. Perfection would not be a realistic expectation even if every tender were conducted under ideal conditions.

In reality, ideal conditions are rarely encountered, as is perfect performance. Indeed, deviations from perfection are very often the inevitable result of the fact that real world tenders are not conducted under ideal conditions. For this reason, laws should not set down a code of perfection. Rather, they should prescribe the minimum standard of acceptability: the point at which even by the rough and tumble standards of free market capitalism, what is going on is just plain unfair or otherwise improper.

The end result sits someplace between one country going with the “get it done” philosophy, and another country following the letter of the law.

Stephen Bauld, Canada’s leading expert on government procurement, is a member of the Daily Commercial News editorial advisory board. He can be reached at stephenbauld@bell.blackberry.net.

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