Package deals

From the June 2024 print edition

When dealing with portfolios that include multiple, relatively small contracts for the same type of good or service, public institutions should avoid the unnecessary costs and delays associated with fragmented spending and should instead develop portfolio management strategies that direct repeat purchases into treaty-compliant, open framework agreements that leverage prequalified supplier rosters.

Paul Emanuelli is the general counsel of The Procurement Office and can be reached at [email protected].

Through the proactive and strategic development of open framework agreements, public institutions can address an area of widespread inefficiency and waste, while also enabling further supplier participation in the government procurement cycle. The Canadian Free Trade Agreement (CFTA) and Canada-Europe Comprehensive Economic and Trade Agreement (CETA) both contain protocols, adopted under those treaties in 2017, that regulate the use of framework agreements.

The CFTA regulates the prequalification of suppliers and now requires an annual re-posting where supplier prequalification lists will be used for more than three years. It also prescribes general disclosure requirements surrounding the evaluation and use of supplier lists and standing arrangements, including the call-up processes for awarding specific work under those frameworks. The CETA provisions are similar to the CFTA rules, but the CETA rules include the ongoing obligation to allow new suppliers onto existing suppliers lists through refresh procedures. Compliance with these rules is critical to defensible awards under framework agreements.

The federal sector
In fact, the award of specific assignments to prequalified suppliers under master agreements has long been subject to legal challenge in the federal sector. For example, in its March 1999 determination in Re Polaris Inflatable Boats (Canada) Ltd., the Canadian International Trade Tribunal confirmed that the duty to compete contract awards under the trade treaties goes beyond the award of master agreements and also applies to the specific work awarded under those agreements. However, the federal government was initially slow to adapt to this ruling. More than a decade later,
in a May 2010 report entitled Study on Methods of Supply: Standing Offers and Supply Arrangements, Canada’s Procurement Ombudsman made a series of recommendations to improve the transparency of awards under master agreements.

To address the lack of clarity in this area, the federal government ultimately amended its Supply Manual to require minimum posting periods for second-stage selection processes, refresh provisions to allow new suppliers to prequalify on request, and annual refresh opportunities for new suppliers to prequalify onto master agreements. Those changes were also reflected in the above-noted trade treaties.

While most of the scrutiny on improper “piggy-backing” or “onboarding” onto existing agreements has historically been directed towards the federal government, the trend has changed in recent years, with greater attention being paid to the transparency of provincial and broader public sector practices. For example, in its November 2016 report on workstation support services entitled Workstation Support Services Contract: An Audit of Due Diligence, the British Columbia Auditor General raised concerns over provincial onboarding practices. The report found that the provincial government onboarded an additional 50,000 workstations onto an existing contract, which was originally valued at $300 million, thereby adding an additional $395 million to the original contract award. The audit found inadequate due diligence and a failure to explore other procurement options for the services in question. The Auditor General recommended that the government establish better practices to manage any future onboarding initiatives.

Municipal practices
More recent bid protests have brought greater attention to the sole-sourcing, prequalification, and onboarding practices of municipalities. For example, in April 2017 in PMH Insights Inc. v. Parkland County, an arbiter found that Parkland County’s software sole-source breached trade treaty rules. The arbiter ruled that the County failed to properly document its expenditure to establish that the contract award value fell below the trade treaty open tendering thresholds and found the County in breach of its open competition duties.

In March 2018 in Parkland Geotechnical Consulting Ltd. v. The City of Red Deer, an arbiter found that the municipality breached trade treaty rules by using unnecessarily restrictive conditions in a pre-qualification process. The arbiter ruled that reducing the roster list to only five consultants and extending the duration of the closed framework arrangement to five years was too restrictive to competition and was in violation of open competition rules. In February 2022 in Société de transport de Montréal regarding contract management of the Bellechasse Transit Centre, Montreal’s Inspector General determined that a construction management agreement clause that allowed the onboarding of direct awards to third parties breached applicable public procurement rules.

Moving forward, public institutions should identify areas of recurring low-value purchases and consolidate those portfolios into transparent framework agreements. With proper planning, their procurement cycles can achieve greater efficiencies while also complying with applicable trade treaty rules.