NJPA White Paper - Final - July 3, 2014procurementoffice.com/.../2016/06/NJPA-White-Paper-Final.pdfwhitepaper to assist with the broader adoption of its contracting solutions across

Whitepaper:

National Joint Power Alliance’s National Cooperative Contract Solutions and Group Purchasing in the Canadian Public Sector

July 3, 2014

Paul Emanuelli, J.D. Rosslyn Young, J.D.

Procurement Law Office

www.procurementoffice.ca

http://www.procurementoffice.ca

http://www.procurementoffice.ca

About NJPA

National Joint Powers Alliance (NJPA) is established as a public agency serving member agencies across the United States as a municipal contracting agency. NJPA operates under the enabling authority of Minnesota Statute 123A.21. This statute was created in 1978 and revised in 1995 to allow participating government and education agencies to reduce the cost of purchased equipment and products by leveraging their combined national purchasing power through cooperative efforts.

NJPA creates national cooperative contract purchasing solutions on behalf of its member agencies which include all government, education and non-‐profit agencies nationwide and in Canada. This process leverages the aggregation of volume from members nationwide.

NJPA establishes and provides nationally leveraged and competitively solicited purchasing contracts under the guidance of the US Uniform Municipal Contracting Law. The result of this cooperative effort is a high quality selection of nationally leveraged, competitively bid contract solutions to help meet the ever challenging needs of our current and future member agencies.

As a unit of government, NJPA exists for the singular purpose of providing valued services to member agencies. NJPA engages its membership throughout the procurement process in an effort to stay in tune to their individual needs and interests.

With its headquarters in Staples, Minnesota, NJPA has grown to nearly 70 employees servicing over one hundred contracts that have been adopted by a broad range of public sector entities including approximately twenty states. In 2013-‐14, member purchases exceeded $1 billion with 23,000 unique member entities purchasing under NJPA contracts in the last 2 years.

NJPA commissioned this whitepaper to assist with the broader adoption of its contracting solutions across the Canadian public sector.

About the Procurement Law Office

The Procurement Law Office provides specialized services in public procurement law across all sectors of government and regions of Canada, including research and policy development, project support, legal advice and opinions, institutional governance reviews, and template and protocol development. Its affiliate, the Procurement Training Office, has trained and presented to thousands of procurement professionals from hundreds of institutions across Canada and internationally. The Procurement Law Office was selected as 2014 Canadian Public Procurement Law Firm of the Year by Global Law Experts, and received the Corporate INTL 2012 Global Award for Public Procurement Law Firm of the Year in Canada.

Paul Emanuelli, General Counsel and Managing Director, has been recommended by Who’s Who Legal as one of the ten top public procurement lawyers in the world and his textbook Government Procurement (3rd ed., Lexis Nexis, 2012) has been cited by the courts as an authority on the subject of Canadian public sector bidding and tendering law. Paul’s portfolio focuses on major procurement projects, developing innovative procurement formats, negotiating commercial transactions and advising institutions on the strategic legal aspects of their purchasing operations.

Rosslyn Young, Senior Legal Counsel and Deputy Managing Director, is a commercial lawyer with years of experience advising on procurement law both in-‐house and in private practice. Rosslyn is a faculty member for the Osgoode Certificate Program in Public Procurement Law and Practice, and her portfolio focuses on advice and opinions, transactions, template development, and institutional reviews.

Executive Summary ................................................................................................................ 4Introduction and Scope .......................................................................................................... 5 Section 1 – Public Sector Purchasing Groups in Canada: An Overview .................................... 6 1.1 Information Sharing Networks .................................................................................. 6 1.2 Regional Purchasing Co-‐Operatives ........................................................................... 7 1.3 Sector Group Purchasing Organizations (“Sector GPOs”) ........................................... 8 1.4 Provincial Vendor-‐of-‐Record Arrangements (“VORs”) ............................................... 9 1.5 Federal Standing Offers (“SOs”) and Supply Arrangements (“SAs”) ......................... 12 1.6 Shared Services Bureaus (“SSBs”) ............................................................................ 17 1.7 NJPA’s NCCSs .......................................................................................................... 18

Section 2 – Statutory Standards ............................................................................................ 21 2.1 Federal Regime: The International Trade Treaties and Other Statutory Rules .......... 21

2.1.1 WTO’s AGP ................................................................................................................. 22 2.1.2 NAFTA -‐ Chapter 10 ................................................................................................... 23 2.1.3 PWGSC Supply Manual (Policies and Procedures) (“PWGSC Supply Manual”) ....... 24

2.2 Domestic Trade Treaties ......................................................................................... 27 2.2.1 Agreement on Internal Trade .................................................................................... 28 2.2.2 Trade Labour and Mobility Agreement & New West Partnership Trade Agreement 29 2.2.3 Trade and Cooperation Agreement between Ontario and Quebec ........................... 30 2.2.4 Agreement on the Opening of Public Procurement for Quebec and New Brunswick 30 2.2.5 Atlantic Procurement Agreement .............................................................................. 30

2.3 Provincial Statutes .................................................................................................. 30 2.3.1 Public Procurement Act – Nova Scotia ....................................................................... 30 2.3.2 Procurement Act – New Brunswick ............................................................................ 31 2.3.3 Public Procurement Act – Newfoundland and Labrador ............................................ 31 2.3.4 Public Purchasing Act – Prince Edward Island ........................................................... 31 2.3.5 Broader Public Sector Accountability Act – Ontario ................................................... 31 2.3.6 Provincial Statutes in the Municipal Sector ............................................................... 31 2.3.7 Procurement Services Act – British Columbia ............................................................ 32 2.3.8 Statutory Frameworks in the Arctic Territories ......................................................... 32

2.4 Provincial Regulations, Directives and Guidelines ................................................... 32 2.4.1 Broader Public Sector Procurement Directive (“BPS Directive”) ............................... 32 2.4.2 Management Board of Cabinet Procurement Directive (“MBC Directive”) .............. 33 2.4.3 Core Policy and Procedures Manual and the Purchasing Handbook ........................ 34 2.4.4 Territorial Regulations, Policies and Procedures ....................................................... 34

2.5 International Standards .......................................................................................... 40 2.5.1 The UN Model Law Framework Protocols ................................................................. 40 2.5.2 UK Framework Regulations ....................................................................................... 45 2.5.3 The Jamaican Handbook Framework Rules ............................................................... 46

2.6 Conclusion on Statutory Standards ......................................................................... 49 Section 3 – Implementation Recommendations .................................................................... 49

Table of Contents

The Procurement Law Office 4

Executive Summary

Driven by the challenge of fiscal restraint at all levels of government and a growing recognition of the need to leverage the group purchasing power of government more effectively, the Canadian public procurement landscape has seen a proliferation in group purchasing activities in recent years. Initiatives supporting group purchasing in Canada include informal information sharing networks, regional and sector purchasing co-‐ops, provincial and federal standing offer and vendor-‐of-‐record arrangements, and formally-‐constituted shared service bureaus. The National Joint Power Alliance’s (“NJPA”) National Cooperative Contract Solutions (“NCCSs”) offer a number of advantages over the existing group purchasing structures in Canada, including scope and breadth of coverage, increased buying leverage, and more innovative supplier arrangements.

Public purchasing in Canada is governed by web of overlapping and disparate sources, including trade treaties (both international, domestic and regional), statutes and regulations, and guidelines and directives. However, these sources share several themes with respect to the treatment of group purchasing, supplier rosters and master contract arrangements. Generally the Canadian authorities are either silent on or expressly enable group purchasing. Common themes with respect to supplier prequalification, rosters and master contracts include:

• Prohibition on supplier discrimination on the basis of geographic origin and against theuse of biased and branded specifications;

• A requirement for openness and transparency with respect to selection criteria andoperation of second-‐stage selection processes; and

• Prohibition on closed or perpetual source lists or rosters that serve to exclude suppliers.

While the Canadian authorities are generally supportive of group purchasing, they tend to be silent on the implementation of group purchasing. Various international sources, including the United Nations Model Law on Public Procurement; the U.K. framework regulations; and the Jamaica Handbook of Public Sector Procurement Procedures, provide examples of how contract frameworks have been implemented in other commonwealth jurisdictions.

In order to effectively introduce NJPA and its National Cooperative Contract Solutions to Canada, NJPA will need to ensure that its competitive processes meet the general obligations of open, fair and transparent procurement as set out in the various Canadian authorities. We also recommend that NJPA approach senior level Canadian governments with a view to a.) seeking further clarification with respect to the implementation of group purchasing in the Canadian public sector; and b.) encouraging the development of more detailed and consistent protocols for the implementation of group purchasing in Canada.


Introduction and Scope

NJPA has requested that the Procurement Law Office provide a legal review of the relevant legal standards that apply to group purchasing in Canada to help inform the expansion of NJPA’s National Cooperative Contract Solutions (“NCCSs”) into the Canadian public sector. For the purposes of this analysis, we have reviewed and summarized the relevant legislative standards1 of general application2 (the “Statutory Standards”) that apply to the federal government, territories, provincial governments and provincial public sector entities (including provincial departments, agencies and the provincial broader public sector) in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador, but this analysis does not include the province of Quebec or Quebec public sector entities, which operate under a civil law system that is distinct to that province.

This white paper is divided into the following three parts:

Section 1 – Public Sector Purchasing Groups in Canada: An Overview provides a market scan of existing group collaborative purchasing initiatives and structures across Canada and compares NJPA’s activities with that broad spectrum of existing Canadian practices.

1 It should be noted that this analysis focuses on the statutory rules that address group purchasing but does not cover common law (i.e. case law) duties that would apply during a tendering process. Those common law duties apply once a public institution engages in its own tendering process (under the “Contract A” norms that govern certain public and private sector bidding processes in Canada, as well as administrative law rules, that are specific to the public sector). To date, with the exception of some Canadian International Trade Tribunal jurisprudence that is specific to the federal government, those rules do not regulate the decision to source from an existing group purchasing master agreement. There are, however, some administrative law incursions into sole-‐sourcing decisions which could lead to future judicial intervention into the decision to draw from a sourcing list or master agreement in the future. Those same Contract A and administrative law common law duties could potentially apply to NJPA’s creation of news NCCSs arrangements in Canada. In the event that a Canadian public institution’s sourcing from a group purchasing master agreement includes a second-‐stage bidding process, then those common law rules would apply to regulate how that bidding process is conducted and could impose implied contractual and administrative law duties to the specific tendering process established in the particular solicitation document. Such implementation issues, both for NJPA’s discrete solicitations, as well as discrete award procedures for specific assignments, are beyond the scope of this paper. Each institution should seek its own advice based on its specific rules and its specific second stage bidding process and terms. 2 Given the number of public sector entities falling within this geographic area, the scope of this review includes rules of general application for the federal government and across the named provinces but does not include institution-‐specific local rules (i.e. this review does not cover any department and ministry-‐specific rules at the federal and provincial levels, nor does it cover entity-‐specific directives, guidelines, bylaws etc. for federal and provincial agencies or provincial broader public sector entities). It should be noted that the applicable rules continue to evolve over time so this analysis should be relied on for general principles only. Whether any particular public sector entity can avail itself of an NJPA NCCSs in a manner that complies with applicable legal and administrative requirements would require an institution and contract-‐specific analysis.


Section 2 – Statutory Standards provides a summary of the general statutory rules that apply to group purchasing conducted by Canadian public sector entities and would apply to NJPA’s NCCSs if they were used by public institutions across the various levels and sectors of government in Canada.

Section 3 – Implementation Recommendations provides recommendations for the future implementation of NJPA’s NCCSs within Canada with a view to better ensuring compliance with the Canadian trade treaty obligations and related rules required to make the NCCSs accessible to Canadian public sector entities.

Section 1 Public Sector Purchasing Groups in Canada: An Overview

Public sector group purchasing initiatives are proliferating across Canada at a rapid rate. This section surveys a broad range of evolving models, including informal information sharing networks, local and regional purchasing co-‐operatives, sector-‐specific group purchasing organizations, provincial vendor-‐of-‐record arrangements, and public and private shared services bureaus. It then compares NJPA’s procurement activities to those other collaborative purchasing models. Section 1 is divided into the following topics:

1.1 Information Sharing Networks 1.2 Regional Purchasing Co-‐Operatives 1.3 Sector Group Purchasing Organizations (“Sector GPOs”) 1.4 Provincial Vendor-‐of-‐Record Arrangements (“VORs”) 1.5 Federal Standing Offers (“SOs”) and Supply Arrangements (“SAs”) 1.6 Public and Private Shared Services Bureaus (“SSBs”) 1.7 NJPA’s National Cooperative Contract Solutions (“NCCSs”)

1.1 INFORMATION SHARING NETWORKS

There are numerous examples of information sharing networks involving public sector purchasing institutions across Canada. Most of these informal networking arrangements are conducted privately without official public profile or formal organizational structure.

While many of these networks evolve informally based on geographic proximity, others are supported under the umbrella of procurement industry organizations such as the Ontario Public Buyers Association and Atlantic Public Purchasing Association, which are Canadian branches of the U.S.-‐based National Institute of Government Purchasing, and the Ontario University Purchasing Management Association, which is an independent group of Ontario university purchasing professionals.


In these arrangements group members may collaborate and share transactional information, including sample documents and specifications, but they will typically conduct independent and legally distinct procurement processes for their own institutions.

1.2 REGIONAL PURCHASING CO-‐OPERATIVES

Many public sector entities have expanded their collaborations into more formal, local and regional co-‐operative purchasing arrangements (“Regional Purchasing Co-‐Ops”). These clusters of geographically proximate, but legally separate, institutions tend to focus on common commodity purchases and involve members sharing the workload by taking turns running separate tendering processes on behalf of the group. Members either commit to specific volumes in advance or have the option to buy under resulting master contracts as separate legal entities. Examples of these long standing arrangements include the Niagara Region Purchasing Co-‐Operative, which includes the regional government and the local municipalities, universities and colleges within the region, as well as the Education and Municipalities Working Group (originally the University Purchasing Group), which originally included the University of Toronto, York University, Ryerson University and McMaster University and now also includes the City of Toronto, the City of Hamilton and the Toronto District School Board. By way of another example, universities in British Columbia have recently formed a similar purchasing co-‐operative under the British Columbia provincial government’s Administrative Service Delivery Transformation Initiative and school boards in the lower mainland conduct co-‐operative purchasing through EDCO, an education sector co-‐operative.

Many of the co-‐operative purchasing groups in the Canadian public sector have a long standing history. In fact, a report commissioned by the Ontario Ministry of Education in 2000 entitled Collaboration Among School Boards: Working Together For Better Value noted how school boards in Ontario have a decades-‐old tradition of collaboration both within the education sector and across other sectors of government:

The most common type of cooperative includes two or more coterminous school boards and a variety of other public agencies such as hospitals, municipal offices, conservation authorities, public libraries, universities, community colleges, and public utility offices. However, we also saw cooperatives or joint departments that were composed only of coterminous school boards; cooperatives that included coterminous and neighbouring school boards, as well as other public sector agencies; and a province-‐wide cooperative created in January 1998 by the 12 newly formed French-‐language boards.3

The report notes two distinct approaches to the group purchasing arrangements:

Joint tendering: As described by representatives from one cooperative, joint tendering involves centralized strategic planning with decentralized operations. This means that two or more agencies agree on common specifications for a list of goods and services and then develop joint tenders for suppliers to bid on. To participate in a joint tender, each agency is required to "opt in" before the contract is tendered. This requirement guarantees the total

3http://www.edu.gov.on.ca/eng/document/reports/eic/collaboration.html#3a


volume of goods to be purchased through the contract and allows member agencies take advantage of greater economies of scale.

The outcome of joint tendering is a single contract with a vendor who agrees to supply two or more of the participating agencies with a good or service under a common set of conditions, including price. However, the vendor works separately with the individual purchasing department of each of the agencies. For example, each agency issues its own purchase orders and is billed separately by the vendor.

Piggybacking: In this more informal approach to cooperative purchasing, participating agencies tender individual contracts, but include language in their contracts that enables other public sector agencies to purchase a commodity from the vendor under the same terms and conditions (e.g., price). The piggybacking approach typically involves larger agencies extending the advantages of large volume contracts (i.e. lower prices) to smaller agencies. Because the total volume of potential purchases is not reflected in the original contract, it is possible that agencies using this approach may not receive the lowest unit price possible. Most agencies also include piggybacking language in joint tenders.4

These co-‐operative purchasing arrangements do not typically involve the creation of a separate legal entity or separate administration but instead rely on ad-‐hoc, project specific work-‐sharing arrangements where committees of group member representatives are formed to lead specific procurement projects and each group member ultimately contracts separately with selected suppliers under a common master agreement. Subject to some exceptions where contract volume commitments are formally agreed to under the master agreements, the use of these arrangements remains voluntary among the membership group.

1.3 SECTOR GROUP PURCHASING ORGANIZATIONS (“SECTOR GPOS”)

Sector GPOS also have a long history in North America in both the public and private sectors. As noted in Wikipedia, these organizations tend to be sector-‐specific in both origin and group composition:

In the United States, a group purchasing organization (GPO) is an entity that is created to leverage the purchasing power of a group of businesses to obtain discounts from vendors based on the collective buying power of the GPO members.

Many GPOs are funded by administrative fees that are paid by the vendors that GPOs oversee. Some GPOs are funded by fees paid by the buying members. Some GPOs are funded by a combination of both of these methods. These fees can be set as a percentage of the purchase or set as an annual flat rate. Some GPOs set mandatory participation levels for their members, while others are completely voluntary. Members participate based on their purchasing needs and their level of confidence in what should be competitive pricing negotiated by their GPOs.

Group purchasing is used in many industries to purchase raw materials and supplies, but it is common practice in the grocery industry, health care, electronics, industrial manufacturing

4 http://www.edu.gov.on.ca/eng/document/reports/eic/collaboration.html#3a


and agricultural industries. In recent years, group purchasing has begun to take root in the non-‐profit community. Group purchasing amongst non-‐profits is still relatively new, but is quickly becoming common place as non-‐profits aim to find ways to reduce overhead expenses. In the healthcare field, GPOs have most commonly been accessed by acute-‐care organizations, but non-‐profit Community Clinics and Health Centers throughout the U.S. have also been engaging in group purchasing.5

In Canada, Medbuy is a prominent example of a health sector GPO. As a non-‐profit corporation, Medbuy is a formal legal entity with permanent staff. It has operated for over twenty five years conducting group purchasing for a multi-‐jurisdictional ownership group consisting of hospitals and other health-‐sector entities that currently includes members from Ontario, New Brunswick and Prince Edward Island. In the education sector, Inter-‐University Services Inc. serves as another example of a Canadian, sector-‐specific GPO, conducting group purchasing on behalf of universities in Atlantic Canada.

As with Regional Purchasing Co-‐Ops, Sector GPOs tend to focus on commodity purchases, running joint purchasing initiatives to reduce workload and create economies of scale. Unlike Regional Purchasing Co-‐Ops, Sector GPOs tend to operate under formal legal structures as non-‐profit corporations with permanent staff. Unlike Regional Purchasing Co-‐Ops, which are sometimes sector-‐specific, but may also include public institutions from different parts of the broader public sector (such as regional and local municipalities and universities, colleges school boards and other public institutions operating within the relevant municipal boundaries), the scope of Sector GPOs is typically limited to the sector from which their sector-‐specific members originate. However, Sector GPOs can operate in larger geographic areas than Regional Purchasing Co-‐Ops. As the Medbuy and Inter-‐University Services Inc. examples illustrate, Sector GPOs can operate across provincial boundaries. With respect to contracting structures, as with Regional Purchasing Co-‐Ops, members have the option to buy under resulting master contracts as separate legal entities. The use of the master agreements is typically voluntary among the group members who also form the ownership group of these non-‐profit corporations. In general terms, as noted above, North American GPOs tend to be funded by a mix of supplier-‐paid administration fees tied to the end-‐transactions and through the funding of the purchasing entities in their ownership group.

1.4 PROVINCIAL VENDOR-‐OF-‐RECORD ARRANGEMENTS (“VORS”)

Similar in result to Purchasing Co-‐Ops and Sector-‐Specific GPOs, provincial VORs establish master contracts for a broad range of goods and services that can then be used by a broad range of separate government entities for discrete assignments.

Provincial vendor-‐of-‐record (“VOR”) arrangements were first established by the province of Ontario under Management Board Secretariat (now Ministry of Government Services) in the 1990s to create multiple master framework agreements for use by the various provincial

5 http://en.wikipedia.org/wiki/Group_purchasing_organization


government ministries. These VORs help coordinate central purchasing, reduce duplication and create economies of scale. Many of the master agreements created under this model have an expanded scope beyond the “inner ring” that includes Ontario government ministries and agencies, to an “outer ring” of Ontario broader public sector MASH entities.6

As noted above, these VOR arrangements create standing supplier rosters with common master agreement terms for a broad range of different goods or services. These arrangements can be broader in geographic scope than those created by Regional Purchasing Co-‐Ops and deeper in penetration across government sectors than those created by Sector-‐Specific GPOs.

Once established, VORs typically require the institutions within the defined user group to run separate, invitational, second-‐stage selection processes to select specific suppliers. Those assignments are entered into pursuant to separate sub-‐agreements between the selected supplier and selecting institution. These sub-‐agreements supplement the master agreement terms with assignment-‐specific details.

VOR arrangements tend to limit the maximum dollar value of any specific assignment and run for a finite period of time, after which the VOR RFP is retendered to create a new roster of defined suppliers. The VORs are centrally administered by provincial government staff but similar to Purchasing Co-‐Ops and Sector GPOs, each institution is responsible for running its own second stage process and administering its own discrete assignments. Even at the level of provincial government ministries and agencies, use of the master agreements created by Provincial VORs tends to be voluntary, except in a few discrete areas of mandatory use VORs. Those categories of compulsory use do not extend into the MASH sector. The optional nature of the Provincial VORs, along with the second stage process that requires and creates multiple contract awards within each category, tends to dilute the economies of scale that could otherwise be obtained under province-‐wide multi-‐sector arrangements.

In the mid-‐2000s the province of Ontario also established Ontario Buys, a separate administrative office, (originally overseen by the Ministry of Finance and now overseen by the Ministry of Government Services), to establish sector-‐specific VORs for MASH sector entities. While the previously discussed Sector GPOs tend to be non-‐profit corporations created and owned by group purchasing members within a specific sector, Ontario’s provincial initiative was launched in a top-‐down manner in an attempt to promote group purchasing in the Ontario broader public sector.

6 MASH is the acronym used in Canada to describe municipalities (and municipal entities), academic institutions (the university and college sectors), school boards and the health sector entities. These institutions are often referred to as “creatures of the province” since they are created through provincial legislation, and while constituting independent separate legal entities, are overseen and regulated by sector-‐specific provincial ministries. Their procurement practices are also typically regulated to varying degrees by provincial level governments across the different Canadian provinces.


The Ontario Education Collaborate Marketplace (“OECM”) is one of the entities created under this initiative. As noted on its website, OECM is a relatively new non-‐profit corporation that promotes collaborative purchasing for education sector entities in Ontario:

Ontario Educational Collaborative Marketplace (OECM) was launched in 2007 as a not-‐for-‐profit, Broader Public Sector (BPS) group procurement organization to support Ontario’s publicly funded education institutions.

The goal of OECM is to:

• establish a Marketplace of products and services, through collaboratively sourced agreements aligned with education sector business needs

• promote the adoption of leading integrated supply chain management practices

OECM’s collaborative sourcing approach facilitates consistency and generates significant savings, making it easier and less costly for institutions to procure goods and services. OECM provides opportunities to realize both process and procurement savings, which results in more funds being available for core academic and administrative activities.

Participation in OECM’s Marketplace is voluntary and our objective is to become financially self-‐sustaining. Our operating costs are partially funded by the Ministry of Government Services Supply Chain Ontario and cost recovery fees from OECM’s supplier partners.

OECM is a Broader Public Sector (BPS), not-‐for-‐profit group procurement organization, offering a Marketplace of competitively-‐sourced and priced products and services through collaborative sourcing agreements. Buying through our Marketplace helps Ontario’s publicly funded education institutions and other publicly funded organizations deliver savings and increase efficiencies. This is our purpose -‐ why we exist.

As a relatively young organization, launched in 2007, we have already helped our customers achieve significant savings and efficiencies through OECM's Marketplace of Products and Services.7

As with provincial VOR arrangements and Sector GPOs, OECM’s VOR arrangements are centrally administered by permanent central office staff. In keeping with those other arrangements, the specific institutions within the defined purchasing sphere are responsible for conducting their own second stage selection processes and administering resulting assignments. Like provincial VORs, but unlike Sector GPOs, there is no formal membership required by the sector-‐specific entities falling within the purchasing group, nor is there any ownership or formal oversight or governance role played by the purchasing institutions within the sector-‐specific group.

While funding to create and support the OECM administration was and continues to be provided by the Ontario provincial government, the ultimately objective is to make OECM’s activities self-‐supporting through revenues generated from the savings created through its VOR

7 http://www.oecm.ca/about-‐us/our-‐history


arrangements, so that it more closely resemble other group purchasing organizations in its funding model, if not in its formal governance structure.

1.5 FEDERAL STANDING OFFERS (“SOS”) AND SUPPLY ARRANGEMENTS (“SAS”)

At the federal government level, group purchasing tends to operate within the federal government sphere across the various federal government departments with some participation by more arms-‐length federal government entities. The scope of this group purchasing is similar to the “inner-‐ring” of the province of Ontario’s VORs (including provincial government ministries and certain provincial agencies), but the federal government does not have the same depth of “outer-‐ring” MASH-‐type entities that exist in the provincial broader public sector. This tends to limit the institutional depth of federal government group purchasing arrangements. However, given the federal government’s geographic scope and spending volumes, group purchasing at the federal level offers significant opportunities for economies of scale for certain goods and services within the federal government sphere.

At the federal level, central purchasing is coordinated through the Department of Public Works and Government Services Canada (“PWGSC”) under which umbrella agreements are created under both SOs and SAs. As with the province of Ontario, whose ministries and agencies often create their own VORs for their own discrete purposes, separate federal government departments also create their own discrete SOs and SAs.

The federal government has significantly expanded the central mandatory use of these arrangements in recent years. A report released by Canada’s Procurement Ombudsman in May 2010 entitled Study on Methods of Supply: Standing Offers and Supply Arrangements (the “Procurement Ombudsman’s Report”) provides some useful background on SOs and SAs, explaining how the expansion of these arrangements in recent years has been part of the federal government’s attempt to decrease duplication, increase efficiencies and achieve economies of scale:

5.1 According to the Treasury Board Purchasing Activity Reports, in the last 10 years, the value of federal government procurement has increased by over 40%, while the number of transactions has decreased. The government, therefore, is managing a larger amount of procurement of increasing complexity. The government strives to increase its administrative efficiency, but has to balance these measures against its commitment to fairness, openness and transparency in procurement. Suppliers would benefit from the government’s efforts to simplify and streamline procurement practices. It is in everyone’s interest to reduce the burden of paperwork, time and effort.

5.2 There are two principal methods of supply that are used to streamline the procurement process for specific types of goods and services. Standing offers (SOs) and supply arrangements (SAs) are frameworks for procurement that are meant to:

• reduce the cost of common goods and services used on a government-‐wide basis and purchased on a repetitive basis;


• ensure that procurement processes are timely; and

• attain good value for taxpayers’ dollars.

5.3 A standing offer (SO) is a continuous offer from a supplier to the government that allows departments and agencies to purchase goods or services, as requested, through the use of a call-‐up process incorporating the conditions and pricing of the standing offer. SOs are intended for use where the same goods or services are needed within government on a recurring basis and are commercially available.

5.4 With the use of SOs, suppliers that meet the evaluation criteria and selection methods are pre-‐qualified and issued an SO. An SO is not a contractual commitment by either the government or the supplier. When goods and services available through an SO are needed, departments issue a call-‐up, the supplier’s acceptance of which constitutes a contract. The call-‐up is done relatively quickly. Departments do not conduct a competitive bid solicitation for the goods and services procured under an SO.

5.5 A supply arrangement (SA) serves a purpose similar to that of an SO. An SA is a non-‐binding arrangement between the government and a pre-‐qualified supplier that allows departments and agencies to award contracts and solicit bids from a pool of pre-‐qualified suppliers for specific requirements within the scope of the SA. Departments meet their specific needs by issuing another call for bids – a subsequent, second-‐stage solicitation – to one, some or all of the suppliers on the SA list, depending on the details in the SA.

5.6 With SOs, the terms and conditions, including price, are set as part of the bidding process. But when calls for bids under the SA are issued to listed suppliers, those suppliers have the opportunity to include changes in their bids to reflect market changes, innovation, new technology or pricing adjustments. This is beneficial to both the supplier and the government.

In summary, the report notes that SOs and SAs are similar, in that they both establish master agreement terms similar to the other group purchasing arrangements discussed above, with each institution within the purchasing group enters into and administering its own discrete contacts under the arrangements. Given the de-‐centralized purchasing, demand for the good or services cannot be known in advance and, while estimates are made in good faith, there are no formal contractual commitments to purchase specific volumes.8

The report also notes some significant distinctions between the two models. SOs tend to be for standardized goods and services that are known in advance with pre-‐established pricing that constitutes a legally binding offer (hence “standing offer”) by the supplier to provide the requirement on demand to the institution drawing down on the contract. These arrangements can be entered into with one or more suppliers and although they are often entered into pursuant to a competitive bidding process, they are also at times directly awarded to specific suppliers and can encompass that supplier’s complete catalogue of offerings. In contrast, SAs are established for goods and services that are not fully definable at the outset and pricing is, therefore, not completely defined under the umbrella agreement. These arrangements do not

8 See page ii of the report.


constitute binding contractual commitments by the suppliers. Much like provincial VORs, SAs tend to require an invitational second stage competitive process between suppliers in the particular supply arrangement category to finalize contract terms between suppliers and specific institutions.9

The Procurement Ombudsman’s Report notes that there have been implementation issues with the expansion of the federal government’s SOs and SAs arrangements:

5.8 Most SOs and SAs are put in place by Public Works and Government Services Canada (PWGSC). The department acts as a common service organization and the government’s main contracting arm. In 2005, the government made a significant change in the use of SOs and SAs. It became mandatory for all departments to buy certain high volume goods and services through SOs and SAs managed by PWGSC.

5.9 The government said that these measures to streamline and consolidate procurement would ensure that the federal government better pursues opportunities to reduce the cost of its purchases, by using the size of the federal government to get the best possible price.

5.10 Conceptually, the idea has merit. In theory, these tools should reduce paperwork, speed up the procurement process and lower the cost of goods and services. As with any new initiative, it has to be subject to a quality management system, where the impact and effectiveness of the implementation is monitored and its performance assessed against anticipated results. Gaps need to be identified, decisions made and actions taken to improve the process.

5.11 To date, the emphasis has been on the design and implementation of individual SOs and SAs; the monitoring, quality assurance and corresponding adjustments regime is still under development according to the PWGSC Commodity Management Framework Plan.

5.12 Last year the Office of the Procurement Ombudsman reported that the use of mandatory SOs had an impact on small and medium enterprises in doing business with the government. There is open competition when PWGSC solicits bids to become a qualified supplier. But competition is limited after that. Unsuccessful bidders and new entrants to public procurement are essentially “out” until the existing SO is renewed or refreshed. In some cases, the outcome of a solicitation may result in fewer successful suppliers. The Office also reported that the government’s evaluation and reporting systems were inadequate to measure whether the use of mandatory SOs and SAs had met the government’s original objectives in mandating the use of these procurement instruments. PWGSC reports that there are a number of informal means through which Commodity Management Teams and Commodity Managers gather business intelligence for use in the decision making process.

5.13 However, a recent PWGSC Internal Audit Report found that without a coordinated departmental approach and collaboration by all stakeholders, the impact of standing offers as a beneficial method of supply remains unknown. The lack of integrated and meaningful information on standing offers, and a mechanism to share this information, means that it cannot be used to support planning, decision making and action, or demonstrate the

9 See page iii of the report.


achievement of the government’s shared objective of buying smarter, faster and at a reduced cost.10

The Procurement Ombudsman’s study of SOs and SAs resulted in a number of findings and recommendations for improvement. With respect to the advantage of SOs and SAs, the report noted that that these arrangements tended to lead to great simplification and standardization while reducing duplication and red tape:

• Procurement is faster and less complex if suppliers have been pre-‐qualified.

• Because standard terms and conditions have been previously agreed to, there is less risk and complexity for both the government and the supplier.

• When a department has a requirement that can be procured via a call-‐up, then it does not have to carry out a full competition, and time, effort, and resources are reduced.

• Suppliers benefit if they are pre-‐qualified for SOs. Having competed once to obtain an SO, they can generate business without the need to compete again to meet individual government requirements.

• There is more flexibility in the SAs than in SOs as the government can add customized technical requirements and suppliers can adjust prices and offer innovation or the latest technology. Both the government and suppliers therefore benefit from dynamic competition.

However, while SAs in particular offered great flexibility through customization of specific assignments, they also created additional issues regarding the protocols for awarding contracts. As the Procurement Ombudsman noted, concerns were expressed with the use of both SOs and SAs including confusion caused in some instances by overlapping arrangements. The feedback by federal government departments also noted that there was a need for greater industry-‐specific knowledge by PWGCS administrators who managed these master agreements. That feedback also included concerns over a lack of clarity and transparency over spending limits and call-‐up protocols for the award of discrete assignments:

• In some cases, several different procurement vehicles are in place for the purchase of the same good or service. This added complexity leads to confusion among suppliers and departments.

• PWGSC has had limited success in retaining the industry knowledge and expertise required to successfully manage commodities.

• PWGSC’s rationale for reducing certain contract and call-‐up limits from TB approved levels is not always clear to departments.

10 Page iv.


• PWGSC’s reasons for determining how contractors will be selected at the second stage (right of first refusal, proportional, lowest cost, etc.) are often not readily understood.

In particular, the Ombudsman’s report raised concerns over the protocols for awarding specific assignments and the creation of additional red tape in the process where complex second stages are used. Ultimately, the report notes the need to balance accountability, which calls for transparent competitive practices, with the need to enhance efficiency, which requires result that achieve best value for money in a streamlined and expedited manner:

SAs – How is the number of pre-‐qualified suppliers on a list determined?

5.90 Ensuring access to contract opportunities for the supplier community argues in favour of SO/SA lists with many named suppliers, each having the opportunity to win contracts. However, dealing fairly with a lengthy list of suppliers poses difficulties.

5.91 With respect to SAs, inviting perhaps hundreds of suppliers to bid may be impractical: for suppliers, which are likely to be reluctant to invest the cost in bidding against so many possible opponents; and for government, which could incur the time and expense of having to evaluate hundreds of bids. Conversely, limiting the SA list to fewer suppliers so that resulting calls for bids can be handled more efficiently by both sides could be seen as limiting access.

5.92 Achieving an appropriate middle ground, so that there is a “win-‐win” solution for buyers and sellers, is a delicate balancing act. PWGSC strives to find this balance on an ongoing basis. Consistent reporting and monitoring would go a long way to verifying if this balance has been achieved in any particular procurement tool.

SAs – Impact of bidding twice

5.93 One supplier has informed us that the cost of responding to these solicitations is huge, and it is very frustrating and expensive – not just for [suppliers] but also for the government – to have to continuously compete for business when a valid procurement tool already exists. Others have the same view.

5.94 In order to take advantage of an SA, the second-‐stage solicitation should be simple, fast and not costly to the industry; otherwise, the value added of using this method of supply would be questioned.

The right approach for the right reason

5.95 The SO may be the best approach for commercially available goods and services in common use across government. Many services are very similar to goods – commercially available from multiple suppliers and capable of being divided into standardized categories and priced on a unit-‐of-‐work basis.

5.96 When the call-‐up is made, the total cost is known since the two variables that make up the cost (unit price and quantity) are known. Since the quantity is the same for all suppliers, it is easy to determine which supplier offers best value.

5.97 However, SOs are now in place for more complex requirements that require the development and issue of a statement of work and assessment and evaluation criteria against


which an SO holder submits a proposal including proposed resources, time lines for work completion, and calculations of the likely total cost based on level of effort. When the SO holder has to develop a proposal, and the government has the obligation to evaluate that proposal, the SO is being managed as an SA but with only one supplier. This starts to look like a directed contract, compromising the fairness and openness offered by the original solicitation for the standing offer.11

The concerns over the transparency of the call-‐up protocols for awarding discrete contract assignments will be addressed in more detail below under Section 2 – Statutory Standards under the survey of relevant treaties, statutory provisions and policies applicable to the federal government.

1.6 SHARED SERVICES BUREAUS (“SSBS”)

While group purchasing organizations are created to help coordinate and supplement the purchasing operations of their group purchasing members, SSBs are public or private outsourcing operations that consolidate and replace local purchasing at the departmental or institutional level by delivering an exclusive centrally coordinated purchasing function on behalf of client institutions. Publicly owned models, such as Alberta Health Services and Health Shared Services BC, tend to be sector-‐specific and permanent in nature and, as noted on Health Shared Services BC’s website, focus on providing back-‐office administration in a number of areas, including procurement, so that client institutions can focus on their core business:

Health Shared Services BC finds opportunities and delivers back office programs for health authorities across the province to improve cost effectiveness and enhance service quality. By working collaboratively, delivering common non-‐clinical services such as supply chain management, technology services, and finance and employee services, Health Shared Services BC ensures health authorities get the most value for every dollar spent.

The number one priority of our health care system is making sure that patients get the best care possible. HSSBC is mandated to drive process change to improve the delivery of administrative services within the healthcare system across the province. By reducing costs and risks while increasing predictability, capacity and opportunity, HSSBC enables the health authorities to have more resources available to go to direct patient care.12

While some publicly owned SSBs are established in a top-‐down manner through provincial governments, others are created at the sector level by their constituent members. Plexxus is an Ontario health sector example of this type of SSB:

Created by its member hospitals in 2006, Plexxus is a not-‐for-‐profit shared services organization with expertise in supply chain management, information technology and business transformation. Working collaboratively with our stakeholders, we deliver cost efficient services through scalable systems and processes.

11 Page 13. 12 http://www.hssbc.ca/default.htm


Plexxus member hospitals include: Holland Bloorview Kids Rehabilitation Hospital, Lakeridge Health, Mount Sinai Hospital, North York General Hospital, Rouge Valley Health System, St. Joseph’s Health Centre, The Scarborough Hospital, Sunnybrook Health Sciences Centre, Toronto East General Hospital, University Health Network and Women’s College Hospital.13

While public SSBs tend to be permanent arrangements operating within a particular sector of government, such as the health sector, and providing procurement services as one of a bundle of back office support services, privately owned SSBs tend to term-‐limited arrangements awarded through a competitive bidding process to private corporations that specialize in procurement in a particular industry area, such as property management, engineering or power generation. Instead of providing a large scope of back-‐office services, private SSB arrangements tend to focus specifically on procurement services. The contractual arrangements between the private SSBs and their government clients typically include “downloading” provisions that contractually recognize that the SSB is working as an agent on behalf of the public entity and that the SSB must comply with the open competition obligations that apply to that government entity when it conducts those procurements for the public entity.

1.7 NJPA’S NCCSS

NJPA’s group purchasing initiatives and its NCCSs share many similarities, along with some notable enhancements, when compared to the various models described above. In structure, NJPA appears to most closely resemble a Sector GPO, operating as a government-‐owned, non-‐profit corporation with permanent dedicated staff who establish and administer master agreements that are then used by a group of public sector institutions. As with the other group purchasing models discussed above, the separate assignments are then managed by the separate institutions using the master agreement. Geographically, NJPA’s scope of operations is broader than any of the Sector GPOs in Canada. Canadian GPOs have not obtained national scope even within their respective sectors. By contrast, NJPA’s NCCSs cover all fifty US states and create genuine national master contracts. NJPA’s NCCSs generally focus on the provision of goods, equipment and commodities. With an expansion into Canada, NJPA’s NCCSs would offer Canadian public institutions with access to a continental sourcing solutions in discrete product areas and drive unprecedented efficiencies and economies of scale when compared to other group purchasing models currently used within Canada.

NJPA’s NCCSs offer a broader geographic scope and deeper penetration into different sectors of government when compared to the other Canadian group purchasing models. NJPA’s NCCSs would offer a scope of geographic coverage that is considerably larger than the Canadian federal government’s SOs and SAs, while also offering deeper penetration into all levels and sectors of the public institutions. With an expansion of its NCCSs into Canada, NJPA could accurately be described as a “Continental GPO”, crossing international borders with contract solutions that potentially encompass public institutions at the federal level, along with state,

13 http://www.plexxus.ca/who-‐we-‐are.html


provincial and broader public sectors institutions across all states and provinces in the US and Canada.

As with the federal SOs and SAs and provincial VORs, NJPA’s NCCSs use top-‐down implementation since the geographic scope and number of potential institutions in NJPA’s purchasing group makes member-‐based ownership or administrative control unfeasible. However, unlike the federal and provincial models, the NJPA arrangements are optional for prospective member institutions, thereby expanding the choice of sourcing solutions and significantly increasing economies of scale without imposing top-‐down restrictions or mandatory use protocols.

While group purchasing initiatives in Canada have raised concerns over the adverse impact of larger and larger government contracts on small and medium sized businesses, which are competed out of the market, one of the primary advantages of the NJPA national contract solutions is that they benefit the local economy while creating better pricing for the end client institution.

Based on its strategic focus on specific commodities, goods and services in specific industries, NJPA’s NCCSs serve to consolidate the supply of certain products that are already required and regularly purchased by public institutions, establishing ceiling prices that are far more competitive than the prices that can typically be obtained through institution-‐specific bidding processes. Given the scale of its operations NJPA can exert purchasing leverage at an unprecedented level, forcing the market to adapt to the needs of purchasing institutions, reshaping the manner in which manufacturers deliver their products to the end institutional customers, and re-‐aligning the supply chain for those products. NJPA’s leverage, along with permanent staff that are dedicated to seeking strategic areas of opportunity for creating NCCSs, takes group purchasing to a high level of efficiency both in pricing and in delivery across the supply chain.

This leads to better pricing while re-‐enforcing the role of local suppliers as a delivery mechanism for the products required by public institutions. This market re-‐alignment is created by establishing national contract solutions directly with manufacturers. Rather than relying on local resellers as intermediaries, the contractual relationship between the end purchasing institutions is with the manufacturer at pricing that is typically far more favourable than pricing that can be obtained through local resellers. Local suppliers under national contract solutions act as the delivery agents for the manufacturer as subcontractors, rather than serving as the direct contracting party and serving as a barrier to the manufacturer.

By way of illustration, in the auto industry the end-‐customer must deal with the dealer and cannot deal directly with the auto manufacturers to negotiate pricing or other favourable terms. This arrangement makes the end-‐customer institution dependent on the efficiency of the local dealers who hold the contract to deliver vehicles under fleet purchasing arrangements. These arrangements have the impact of undermining competition at the product delivery level, since the end-‐customer has to deal with whichever dealer the


manufacturer has provided exclusivity within the prescribed geographic area. This has the impact of blocking direct access to the manufacturer and also denying local dealers the opportunity to compete for the provision of value added services. This also restricts favourable fleet rates to selected dealerships, denying other competing dealership access to those favourable rates within the prescribed zone and ultimately undermining competitiveness across the supply chain for those products.

The economies of scale leveraged by NJPA have the effect of enhancing local competition by engaging price competition between different manufacturers at the national level. Local dealers then compete to provide the best delivery, service and maintenance for those national contract products. This helps stimulate local competition by removing barriers to local suppliers obtaining government contracts since they can compete to provide more efficient local delivery, service and maintenance than larger resellers who otherwise tend to squeeze out smaller local suppliers with their favoured access to manufacturers under many group purchasing contracts. Ultimately, this can lead to a more efficient alignment of the supply chain. Instead of marking up costs, inefficient “middle men” are squeezed out to the advantage of manufacturers, local suppliers and government purchasing institutions. To help illustrate these advantages, specific examples of NJPA national contract solutions involving printers and copiers, heavy equipment, and office stationary, are described below:

• Printers and Copiers: In the category of printers and copiers, NJPA’s national contract established a full range of solutions within the industry. All local dealers can access the favourable pricing established under the national contracts between NJPA and the different manufacturers. This aggregated purchasing allows more leverage across the marketplace to change the delivery model for local suppliers in a manner that would not be possible through small locally-‐driven purchasing. This also increases local competition and service levels since the ultimate contract award is not contingent on the efficiency or inefficiency of a single local dealer as the sole delivery stream for the particular product in the particular areas. This results in significant costs savings from the manufacturers list pricing, while allowing local competition on the end delivery of the copiers and printers and related value added services.

• Heavy Equipment: NJPA’s national contract for heavy equipment and related services and accessories represents a similar arrangement. The award of NCCSs in this area is based on evaluations that include competition on the percentage discount from manufacturer’s published list pricing, which is transparently known to help ensure effective price competition. There is an incentive to offer better pricing since the manufacturers know they have to offer better pricing in order to achieve sales given that there is a minimum of three continental competitors. This allows purchasing institutions to obtain quotes for the particular makes and models under the national framework that offers greater aggregate pricing than if they would seek pricing under the traditional dealer driven model from the same local suppliers. The NJPA’s NCCSs thereby serve as pre-‐established, continental SAs or VORs that public institutions can tap into to obtain the best possible pricing while leveraging local competition for delivery, service and maintenance.


• Office Supplies: The provision of office supplies serves as a third example of NJPA’s NCCS

model. In the evaluation process for this contract, NJPA assessed bundle commodity baskets offered by national suppliers as their “hot list”. Unlike copiers and printers and heavy equipment, this competition resulted in a winner-‐take-‐all award since the suppliers are resellers that operate at the national level. Pricing efficiencies are then leveraged in the supply chain by allowing the national resellers to source directly from various international manufacturers and bypass the chains of local retail outlets, creating increased local competition and improved service in the direct delivery of products to the public institution.

As these three examples illustrate, NJPA’s ability to leverage economies of scale at the national and continental level in strategic areas of recurring public sector purchasing helps to significantly improve the pricing and related local competition in the delivery and services related to those specific purchasing categories.

Section 2 Statutory Standards

This section provides a general summary of some of the relevant statutory rules that apply to group purchasing initiatives in the public sector across the various Canadian common law public institutions. These rules are organized under the following headings:

2.1 Federal Regime: The International Trade Treaties and Other Statutory Rules 2.2 Domestic Trade Treaties 2.3 Provincial Statutes 2.4 Provincial Regulations, Directive and Guidelines 2.5 International Standards 2.6 Conclusion on Statutory Standards

2.1 FEDERAL REGIME: THE INTERNATIONAL TRADE TREATIES AND OTHER STATUTORY RULES

The World Trade Organization’s Agreement on Government Procurement (“AGP”) and the North American Free Trade Agreement (“NAFTA”) are the most significant international trade treaties that apply to the Canadian federal government.14 Unlike many of Canada’s domestic trade treaties, which are discussed further below, these international trade treaties do not specifically address buying groups. However, they do contain provisions dealing with pre-‐qualifications and the maintenance of supplier rosters, which are reproduced directly below.

14 This paper does not cover the numerous bilateral international trade treaties to which Canada is a signatory which, like the WTOs AGP and NAFTA apply to the federal government and are enforced by the Canadian International Trade Tribunal. The Agreement on Internal Trade (“AIT”) also applies to the Canadian federal government and is discussed below under the domestic trade treaty section.


2.1.1 WTO’s AGP

The AGP is an international trade treaty that includes numerous trading partners for both the US and Canada. Article 8 – Qualification of Suppliers contains the following provisions which are relevant to the creation of supplier rosters for the purposes of creating master contract arrangements that prohibit discrimination based on place of origin, require transparency in selection criteria, contemplate the acceptance of suppliers prequalified by the other parties and prohibit the use of permanent prequalification lists that indefinitely block supplier access to competition:

Article 8 – Qualification of Suppliers

In the process of qualifying suppliers, entities shall not discriminate among suppliers of other Parties or between domestic suppliers and suppliers of other Parties. Qualification procedures shall be consistent with the following:

(a) any conditions for participation in tendering procedures shall be published in adequate time to enable interested suppliers to initiate and, to the extent that it is compatible with efficient operation of the procurement process, complete the qualification procedures;

(b) any conditions for participation in tendering procedures shall be limited to those which are essential to ensure the firm’s capability to fulfil the contract in question. Any conditions for participation required from suppliers, including financial guarantees, technical qualifications and information necessary for establishing the financial, commercial and technical capacity of suppliers, as well as the verification of qualifications, shall be no less favourable to suppliers of other Parties than to domestic suppliers and shall not discriminate among suppliers of other Parties. The financial, commercial and technical capacity of a supplier shall be judged on the basis both of that supplier’s global business activity as well as of its activity in the territory of the procuring entity, taking due account of the legal relationship between the supply organizations;

(c) the process of, and the time required for, qualifying suppliers shall not be used in order to keep suppliers of other Parties off a suppliers’ list or from being considered for a particular intended procurement. Entities shall recognize as qualified suppliers such domestic suppliers or suppliers of other Parties who meet the conditions for participation in a particular intended procurement. Suppliers requesting to participate in a particular intended procurement who may not yet be qualified shall also be considered, provided there is sufficient time to complete the qualification procedure;

(d) entities maintaining permanent lists of qualified suppliers shall ensure that suppliers may apply for qualification at any time; and that all qualified suppliers so requesting are included in the lists within a reasonably short time;

(e) if, after publication of the notice under paragraph 1 of Article IX, a supplier not yet qualified requests to participate in an intended procurement, the entity shall promptly start procedures for qualification;

(f) any supplier having requested to become a qualified supplier shall be advised by the entities concerned of the decision in this regard. Qualified suppliers included on permanent lists by entities shall also be notified of the termination of any such lists or of their removal from them;


(g) each Party shall ensure that:(i) each entity and its constituent parts follow a single qualification procedure, except in cases of duly substantiated need for a different procedure; and (ii) efforts be made to minimize differences in qualification procedures between entities.

(h) nothing in subparagraphs (a) through (g) shall preclude the exclusion of any supplier on grounds such as bankruptcy or false declarations, provided that such an action is consistent with the national treatment and non-‐discrimination provisions of this Agreement.

2.1.2 NAFTA -‐ Chapter 10

NAFTA is a trilateral trade agreement between Canada, the US and Mexico that contains provisions similar to those contained in the AGP. Article 1009: Qualification of Suppliers in NAFTA sets out the following rules for the prequalification of suppliers which, like the AGP provisions noted above, prohibit discrimination based on place of origin, require transparency in selection criteria, contemplate the acceptance of suppliers prequalified by the other parties and prohibit the use of permanent prequalification lists that indefinitely block supplier access to competition:

Article 1009: Qualification of Suppliers Article 1009: Qualification of Suppliers

1. Further to Article 1003, no entity of a Party may, in the process of qualifying suppliers in atendering procedure, discriminate between suppliers of the other Parties or between domestic suppliers and suppliers of the other Parties.

2. The qualification procedures followed by an entity shall be consistent with the following:

(a) conditions for participation by suppliers in tendering procedures shall be published sufficiently in advance so as to provide the suppliers adequate time to initiate and, to the extent that it is compatible with efficient operation of the procurement process, to complete the qualification procedures;

(b) conditions for participation by suppliers in tendering procedures, including financial guarantees, technical qualifications and information necessary for establishing the financial, commercial and technical capacity of suppliers, as well as the verification of whether a supplier meets those conditions, shall be limited to those that are essential to ensure the fulfillment of the contract in question;

(c) the financial, commercial and technical capacity of a supplier shall be judged both on the basis of that supplier’s global business activity, including its activity in the territory of the Party of the supplier, and its activity, if any, in the territory of the Party of the procuring entity;

(d) an entity shall not misuse the process of, including the time required for, qualification in order to exclude suppliers of another Party from a suppliers’ list or from being considered for a particular procurement;

(e) an entity shall recognize as qualified suppliers those suppliers of another Party that meet the conditions for participation in a particular procurement;


(f) an entity shall consider for a particular procurement those suppliers of another Party that request to participate in the procurement and that are not yet qualified, provided there is sufficient time to complete the qualification procedure;

(g) an entity that maintains a permanent list of qualified suppliers shall ensure that suppliers may apply for qualification at any time, that all qualified suppliers so requesting are included in the list within a reasonably short period of time and that all qualified suppliers included in the list are notified of the termination of the list or of their removal from it;

(h) where, after publication of a notice in accordance with Article 1010, a supplier that is not yet qualified requests to participate in a particular procurement, the entity shall promptly start the qualification procedure;

(i) an entity shall advise any supplier that requests to become a qualified supplier of its decision as to whether that supplier has become qualified; and

(j) where an entity rejects a supplier’s application to qualify or ceases to recognize a supplier as qualified, the entity shall, on request of the supplier, promptly provide pertinent information concerning the entity’s reasons for doing so.

3. Each Party shall:

(a) ensure that each of its entities uses a single qualification procedure, except that an entity may use additional qualification procedures where the entity determines the need for a different procedure and is prepared, on request of another Party, to demonstrate that need; and

(b) endeavor to minimize differences in the qualification procedures of its entities.

4. Nothing in paragraphs 2 and 3 shall prevent an entity from excluding a supplier on groundssuch as bankruptcy or false declarations.

As discussed above, group purchasing at the federal government level appears to be restricted to departmental level purchasing and, apart from that type of purchasing, the relevant legislative frameworks do not appear to directly address multi-‐institutional buying groups.15

The relevant authorities from the federal department of Public Works and Government Services Supply Manual that apply to SOs and SAs are discussed below.

2.1.3 PWGSC Supply Manual (Policies and Procedures) (“PWGSC Supply Manual”)

The PWGSC Supply Manual contains express provisions acknowledging that the AGP and NAFTA (along with the domestic Agreement on Internal Trade which will be discussed further below) apply to the creation and use of federal SOs and SAs. These provisions include a minimum

15 As noted in the Ombudsman Report cited above, the federal legislation and policies pertinent to its study of SOs and SAs included the Financial Administration Act, Department of Public Works and Government Services Act, the trade agreements, the Treasury Board Contracting Policy, the Treasury Board Common Services Policy and the PWGSC Supply Manual (Policies and Procedures).


posting period, have refresh provisions that would allow new suppliers to prequalify on request and also require annual refresh opportunities for new suppliers to prequalify. These federal rules also acknowledge that where individual call-‐ups for discrete assignments are valued above the trade treaty thresholds they must comply with trade treaty competitive bidding requirements since those discrete contract awards are potentially challengeable at the Canadian International Trade Tribunal, the administrative tribunal tasked with reviewing and administering trade treaties at the federal government level (the “CITT”):

3.50.5. Applicability of Trade Agreements to Standing Offers and Supply Arrangements

a. Contracting officers must determine whether any or all of the trade agreements apply toeach procurement.

b. The applicability of the trade agreements (NAFTA, WTO-‐AGP or AIT) to standing offersand supply arrangements depends on three factors:

i. if the department for which the standing offer/supply arrangement is intended issubject to the agreements;

ii. if the good or service is subject to the agreements; and,

iii. if the total estimated value of all the call-‐ups (contracts) against a standing offeror all contracts under a supply arrangement (which determines the totalestimated value of the offer or arrangement) is above the NAFTA, WTO-‐AGP orAIT thresholds.

c. The total estimated value is determined before tendering, at which time it is identifiedwhether or not any of the trade agreements apply. If they do apply, SO s and SA s aresolicited in accordance with the agreements.

d. Subsequent individual call-‐ups/contracts cannot be made under the standingoffer/supply arrangement without considering trade agreement applicability, and maybe subject to a challenge directed to CITT by suppliers.

e. For more information on trade agreements and the use of supply arrangements, see4.10.25.5 International Trade Agreements and Use of Supply Arrangements to4.10.25.20 Ongoing Qualification Process.

4.10.25.5 International Trade Agreements and Use of Supply Arrangements

For bid solicitations and proposed contracts under a supply arrangement (SA), the following applies:

a. Where the estimated value of a proposed contract under the SA is below the applicableNorth American Free Trade Agreement (NAFTA) threshold and/or the World TradeOrganization -‐ Agreement of Government Procurement (WTO-‐AGP) threshold, theseagreements do not apply.

b. Where the estimated value of a proposed contract under the SA is above the applicableNAFTA and/or the WTO-‐AGP threshold, NAFTA and/or the WTO-‐AGP applies to the bidsolicitation.


c. Where NAFTA and/or WTO-‐AGP apply to a bid solicitation under a SA, a Notice ofProposed Procurement (NPP) must be published on the Government ElectronicTendering Service (GETS) and suppliers must be given at least 40 calendar days to bid. Inaddition, a supplier that requests to participate in the bid solicitation under the SA mayapply for qualification. If qualified, the supplier must be included in the SA within areasonable period of time. However, after bid closing, the contracting officer does nothave to delay the contract award process in order to allow a supplier to go through thequalification process.

4.10.25.10.1 Ongoing Qualification Process

Pursuant to International Trade Agreements, the existence of a list of qualified suppliers must be published by an invitation to qualify at least once a year on GETS. The invitation to qualify must contain the conditions to be fulfilled by suppliers to qualify. Suppliers must be allowed to apply for qualification at any time.

4.10.25.15 Agreement on Internal Trade and Use of Supply Arrangements

Where the estimated value of a proposed contract under the supply arrangement is above the AIT threshold, AIT applies to the bid solicitation. Otherwise, AIT does not apply to that proposed contract.

Where AIT applies to a bid solicitation under a supply arrangement, the AIT allows the use of source lists without publication of a NPP, provided that all suppliers on the source list be invited to bid and that they be able to apply for qualification at any time. It is PWGSC policy that suppliers must be given at least 15 calendar days to bid.

4.10.25.20 Ongoing Qualification Process

Pursuant to AIT, the existence of a list of qualified suppliers must be published at least once a year by an invitation to qualify on GETS or predetermined newspapers. The invitation to qualify must contain the conditions to be fulfilled by suppliers to qualify. Suppliers must be allowed to apply for qualification at any time.

It should be noted that in its March 1999 determination in Re Polaris Inflatable Boats (Canada) Ltd.,16 the CITT confirmed that the duty to compete contract awards under the trade treaties goes beyond the creation of master agreement SO or SA and also applies to the discrete call-‐up assignments made under those master agreements. The case involved the creation of a National Master Standing Offer for the acquisition of a rigid hull inflatable boats, parts and accessories. The complainant was awarded a master agreement but took issue with the manner in which the product orders were managed in favour of a competing contractor on the roster. The CITT found that the treaty requirements continued to apply beyond the award of the master agreement. For the purposes of the treaty requirements, the CITT determined that the procurement process remains alive until the government actually orders a service or product under the master agreement:

16 [1999] C.I.T.T. No. 20.


[T]he Tribunal’s jurisdiction over any procurement process in relation to a designated contract extends to any aspect of that procurement’s process, up to and including the award of a contract. It is widely accepted in the procurement community that a standing offer is not a contract. Rather, it is a framework agreement which sets out pre-‐negotiated terms and conditions against which specific orders (call-‐ups) can be made by authorized users. It is these call-‐ups which are the actual contracts.

Though it is correct to say that the procurement process is significantly engaged and performed once a standing offer is issued, it is not correct to conclude, as the Department does, that the procurement process is completed. In the Tribunal’s opinion, the process for the procurement of goods or services, acquired by means of standing offer, and, by way of consequence, the Tribunal’s jurisdiction to receive complaints, conduct inquiries and make determinations, continue until (1) the last call-‐up against that standing offer is made, and (2) until potential suppliers are satisfied that the last contract has been awarded in accordance with the criteria and essential requirements specified in the tender documents or that the time frame prescribed to file a complaint has expired.17

For master agreements that are intended to permit multiple ongoing assignments, the trade treaty obligations would therefore presumably apply for the duration of the master agreement. This re-‐enforces the concerns raised by the Procurement Ombudsman’s Report discussed in Section 1 regarding the need for transparent call-‐up procedures for the award of discrete assignments under master agreements.

2.2 DOMESTIC TRADE TREATIES

Canada and its provinces and territories are subject to an overlapping web of domestic trade treaties, which operate at the national and regional level across the country. The main trade treaty that applies across Canada is the Agreement on Internal Trade (the “AIT”), a domestic trade treaty to which all ten provinces, two of the three territories (excluding Nunavut) and the federal government are party.18 The AIT applies to most public sector entities in Canada, including the federal and provincial governments, government agencies and crown corporations and to the broader public sector MASH entities.

In addition to the AIT, there are a series of regional trade treaties entered into by groups of provinces to promote regional trade issues within Canada. These regional trade treaties include:

• Trade, Investment and Labour Mobility Agreement – Alberta and British Columbia

• New West Partnership Trade Agreement – Alberta, British Columbia and Saskatchewan

• Trade and Cooperation Agreement Between Ontario and Quebec – Ontario and Quebec

17 Ibid., paras. 29-‐30. 18 Chapter Five of the AIT is the section that specifically addresses government procurement, but for ease of convenience for the purposes of this white paper, we refer simply to the AIT.


• Agreement on the Opening of Public Procurement for Quebec and New Brunswick – Quebec and New Brunswick

• Atlantic Procurement Agreement – New Brunswick, Nova Scotia, Newfoundland, Prince Edward Island

While there are notable differences between the various domestic trade treaties across Canada, particularly in relation to the contract value thresholds that apply to open competition for goods, services and construction, overall those treaties share the following common elements, which are also common to the international trade treaties discussed above that apply to the federal government:

• The requirement to conduct open, fair and transparent competition for purchases over the applicable monetary thresholds;

• Reciprocal non-‐discrimination provisions allowing for equal access to suppliers from other jurisdictions within the trading block; and

• Restrictions on the use of biased or branded specifications.

Outside of the federal procurement sphere, where compliance with the applicable trade treaties including the AIT may be subject to legal challenge at the CITT, trade treaties are generally “non-‐justiciable” in Canadian courts.19 While the trade treaties contemplate the creation of dispute panels, they are only able to award monetary damages for party-‐to-‐party disputes (meaning province to province) and to date do not allow for monetary penalties for supplier-‐initiated disputes. Accordingly, the dispute panels are not a common avenue of challenge by Canadian suppliers.

With respect to how the above-‐noted trade treaties address group buying, we have set out the relevant provisions below.

2.2.1 Agreement on Internal Trade

The AIT is divided into sections that apply to various sectors of government, as set out below.

The main component of Chapter Five of the AIT applies to the provincial governments, the federal government and named associated agencies of both levels of government. This section of the AIT is silent on group buying.

19 However, recent jurisprudence suggests that compliance with broader standards including trade treaties may inform a court’s analysis of the reasonableness of a procurement decision, especially where those standards are incorporated into guidelines, policies and statutes.


Annex 502.3 to the AIT covers Crown Corporations. This Annex contemplates Buying Groups in Section D. and specifically provides as follows:

1. Entities subject to this Annex who participate in group purchasing activities throughBuying Groups shall ensure that the activities of such buying groups are carried out in amanner consistent with this Annex.

2. Buying Group means an organization, involving two or more entities, created to achieveefficiencies and economies of scale by combining the purchasing requirements andactivities of the members of the group into one joint procurement process. BuyingGroups include cooperative arrangements in which individual members administer theprocurement function for specific contracts for the group, and more formal corporatearrangements in which the organization administers procurement for group members.Buying groups may involve a variety of entities, including public sector, private sectorand not-‐for-‐profit organizations.

3. The Parties agree not to direct the procurement activities of Buying Groups so as todiscriminate against out-‐of-‐province suppliers for procurement covered by this Annex.

Annex 502.4 of the AIT applies to the MASH sector or the Broader Public Sector across Canada, which consists of hospitals and other health and social services entities, municipalities, school boards, and publically funded universities and colleges. This Annex treats Buying Groups in a similar manner:

1. Entities covered by this Annex that participate in group purchasing activities throughbuying groups shall ensure that the activities of such buying groups are carried out in amanner consistent with this Annex.

2. No Province shall direct the procurement activities of buying groups in a mannerinconsistent with this Annex.

3. Buying group means a group of two or more members which combines the purchasingrequirements and activities of the members of the group into one joint procurementprocess. Buying groups include cooperative arrangements in which individual membersadminister the procurement function for specific contracts for the group, and moreformal corporate arrangements in which the buying group administers procurement forgroup members. Buying groups may involve a variety of entities, including public sector,private sector and not-‐for-‐profit organizations.

2.2.2 Trade Labour and Mobility Agreement and New West Partnership Trade Agreement

The Trade Labour and Mobility Agreement (originally signed by British Columbia and Alberta) and New West Partnership Trade Agreement (expanded to add Saskatchewan to the western trading block) are very similar in coverage to the AIT and contain the following provisions relating to buying groups:

a. A government entity participating in a buying group shall ensure that any procurementundertaken through the buying group is carried out in a manner consistent with thegovernment entity’s obligations under this Agreement.


b. Notwithstanding paragraph (a) but subject to paragraph (c), this Agreement does notapply to procurements of a government entity undertaken through a buying group thatincludes a participating non-‐government entity if the buying group is not controlled ordirected by one or more government entities.

c. If a government entity participates in a buying group as described in paragraph (b) then:(i) the government entity must ensure that any specific procurement in which thegovernment entity participates is undertaken by that buying group in a mannerconsistent with the government entity’s obligations under Article 4; and (ii) thegovernment entity has no obligations under this Agreement relating to any specificprocurement of that buying group in which the government entity does not participate.

2.2.3 Trade and Cooperation Agreement between Ontario and Quebec

The Trade and Cooperation Agreement between Ontario and Quebec, a regional trade treaty, is

silent on buying groups.

2.2.4 Agreement on the Opening of Public Procurement for Quebec and New Brunswick

The Agreement on the Opening of Public Procurement for Quebec and New Brunswick, another regional trade treaty is similarly silent on buying groups.

2.2.5 Atlantic Procurement Agreement

The Atlantic Procurement Agreement between Canada’s four Atlantic Provinces (New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland) is also silent on buying groups.

2.3 PROVINCIAL STATUTES

Only some provinces have chosen to regulate their purchasing through legislation. The use of statutes to regulate government purchasing is most common in the Atlantic Provinces, which are currently in the process of revising, updating and modernising their statutes and related statutory frameworks. We outline some of the relevant legislative provisions applicable to the provincial governments below.

2.3.1 Public Procurement Act – Nova Scotia

Nova Scotia’s Public Procurement Act, SNS 2011, c 12, expressly treats buying groups, which are defined in Section 1 of the Act to mean “a procurement organization created for the purchasing requirements and activities of its sole or several member public sector entities and excludes buying groups designated through a public tender process”. For the purpose of the Act “buying groups” are included in the definition of “public sector entities” and all the relevant sections of the Act that apply to public sector entities apply to buying groups.


2.3.2 Procurement Act – New Brunswick

New Brunswick’s Procurement Act, SNB 2012, c 20, similarly defines “buying group” in Section 1 of that Act to mean “a group purchasing organization that obtains best pricing from prospective suppliers based on volume for its members.” The Act then goes on to enable the province to participate in buying groups in Section 8 of the Act, which provides “If the Minister is satisfied that a buying group’s procurement practices conform with the spirit and intent of the Act, the Minister may join the buying group.”

2.3.3 Public Procurement Act – Newfoundland and Labrador

The Province of Newfoundland and Labrador is currently in the process of implementing new procurement legislation. The old statute, the Public Tender Act, RSNL 1990, c P-‐45, which currently still applies, is being replaced with the Public Procurement Act and the corresponding Public Procurement Regulations. The new legislation is currently making its way through the legislature. Under this proposed legislation a public body can “delegate its purchasing authority in writing to another public body for the purpose of group purchasing” (emphasis added). It also provides that a public body can use buying groups to acquire commodities, but they require the province’s approval. The draft procedural manual requires the public body to prepare a business case for approval and states that the engagement of a buying group must be done through an open competitive process.

2.3.4 Public Purchasing Act – Prince Edward Island

Prince Edward Island’s governing legislation, the Public Purchasing Act, RSPEI 1988, c P-‐32, does not address buying groups.

2.3.5 Broader Public Sector Accountability Act – Ontario

In Ontario, the government chose to regulate certain aspects of the broader public sector through the Broader Public Sector Accountability Act, 2010, SO 2010, c 25 (the “BPS Accountability Act”). With respect to procurement, the act enables the passing of directives mandating procurement practices within the Ontario BPS. The Ontario Government has passed such a Directive, which is addressed below.

2.3.6 Provincial Statutes in the Municipal Sector

In addition, many provinces include sections in their municipal statutes that address public procurement. For example, the Ontario Municipal Act 2001, SO 2001, c 25, mandates the creation of policies and procedure to address procurement practices, but does not include any further detail as to how those procurement practices should be managed. This Act confers “broad authority" on municipalities to “enable the municipality to govern its affairs as it considers appropriate”, and provides that “a municipality has the capacity, rights, powers and privileges of a natural person for the purpose of exercising its authority”. The Act does not


appear to place any restrictions on a municipality's ability to provide for joint procurement initiatives or the use of buying groups within its procurement policies and procedures.

2.3.7 Procurement Services Act – British Columbia

In British Columbia, the Procurement Services Act, SBC 2003, c 22, authorizes the relevant Minister to enter into contracts on behalf of government ministries through the Shared Services and Procurement Services branches. The actual implementation of these services is addressed in guidelines, which we speak to below.

2.3.8 Statutory Frameworks in the Arctic Territories

While the statutory frameworks of the Yukon, Northwest Territories and Nunavut do not appear to address buying groups, their relevant regulations, policies and procedures are discussed below.

2.4 PROVINCIAL REGULATIONS, DIRECTIVES AND GUIDELINES

In addition to the formal instruments such as trade treaties and legislation, many provincial governments have promulgated internal directives and guidelines to address procurement activities across the public sector. The Ontario provincial government in particular has chosen to regulate its public procurement function through two directives. The first, promulgated under the Management Board of Cabinet Act, RSO 1990, c M.1 the covers the province itself, as well as many provincial agencies. The second, promulgated pursuant to the BPS Accountability Act referenced above, applies to the broader public sector.

2.4.1 Broader Public Sector Procurement Directive (“BPS Directive”)

The BPS Directive is silent on buying groups. However, the government also issued a companion document, the Broader Public Sector Procurement Directive Implementation Guidebook, which addresses the subject in Section 8:

Collaborative procurement is a coordinated event that facilitates purchasing on behalf of multiple organizations. Collaborative procurement may be facilitated through (but not limited to) Buying Groups, Group Purchasing Organizations (GPOs) and Shared Service Organizations (SSOs). The goals of these organizations are to 1) leverage the increased buying power of aggregating total spend with other organizations; 2) standardize processes by streamlining through one centralized buying organization; 3) minimize risks and improve process controls; and 4) generate savings/efficiencies that benefit the collective participants.

Buying Groups and GPOs include two or more members that combine the purchasing requirements and activities of the members into one joint procurement process. These organizations may represent cooperative arrangements in which individual members administer the procurement function for specific contracts for the group or more formal corporate arrangements in which the organization administers procurement for group members. Both Groups may involve a variety of entities, including public-‐sector, private-‐


sector and not-‐for-‐profit organizations. Typically, group purchasing organizations have an established governance and membership framework, while buying groups may adopt a less formal governance and membership structure.

An SSO is an independent non-‐profit organization that leverages the collective purchasing power of its members to obtain optimum total life-‐cycle cost from suppliers. It also provides back-‐office services (such as strategic sourcing, procurement, accounts payable and logistics) that help to achieve process efficiencies.

Organizations that participate in group purchasing activities through buying groups, GPOs or SSOs must ensure that the activities of these entities are carried out in a manner consistent with the Directive.

2.4.2 Management Board of Cabinet Procurement Directive – February 2014 (“MBC Directive”)

The MBC Directive has been revised to specifically address what it refers to as “joint procurements”. These new requirements are more stringent than other rules applicable to group purchasing and include a requirement for prior approval for each contemplated joint procurement. It is unclear whether a blanket permission would be permitted for continued participation in initiatives such as NJPA’s NCCSs:

A Joint Procurement means a Procurement by multiple organizations from the public sector, who in order to achieve efficiencies and economies of scale, leverage their joint purchasing requirements and activities.

Ministries participating in Joint Procurement must seek legal advice early on in the procurement planning stage and before the Joint Procurement arrangement is signed.

Ministries must obtain prior approval to proceed or participate in a Joint Procurement. The justifications provided must include considerations of the planning requirements as specified in Section 4.1 Procurement Planning – Ministries.

When a ministry is undertaking the procurement process jointly with other partnering organizations, it must:

• comply with Ontario’s Trade Commitments;

• consult with Risk Management and Insurance Services, Ministry of Government Serviceson insurance, indemnity and other risk management issues;

• consult with the Ministry of Finance on tax compliance and related issues;

• reference the Contractor Security Screening Operating Policy and/or consult with theSecurity Services and Contingency Planning Branch, Ministry of Government Services;

• reference the Business Continuity Planning / Continuity of Operations PlanningOperating Policy and, if necessary, seek assistance from the ministry’s BusinessContinuity Coordinators;


• reference the Information Security and Privacy Classification Policy on requirements toprotect and store confidential personal and program information;

• consider environmental sustainability in the Procurement;

• for IT projects, reference the Policy on the I&IT Project Gateway Process; and

• reference the Guidelines for Ownership of Intellectual Property in Custom SoftwareDevelopment and the Management and Use of Information & Information TechnologyDirective.

It should be noted that the above sections only apply to Ontario government ministries, but do not extend to provincial agencies (referred to as “Other Included Entities” under the MBC Directive). The MBC Directive is silent on group purchasing as it relates to Ontario provincial agencies.

2.4.3 Core Policy and Procedures Manual and the Purchasing Handbook, Chapter 6 – British Columbia – January 2010

British Columbia has similarly passed internal guidelines mandating how procurement should be managed at the provincial level. While British Columbia’s Core Policy and Procedures Manual and the Purchasing Handbook are silent on group buying, the policies do reference the importance of ensuring that “government buying power is leveraged through corporate supply arrangements (CSAs) and demand aggregation, wherever practical” (Section 6.1 of Chapter 6 – Core Policy and Procedures Manual). Currently, this goal is being accomplished through the use of Corporate Supply Arrangements with specific suppliers who agree to supply goods and services at lower than list prices. These CSAs are currently entered into by the Procurement Services Branch; however, there is nothing express in the policy framework that would limit use of other CSAs, assuming that such contracting arrangements had the approval of the Procurement Services Branch and other relevant approval authorities.

2.4.4 Territorial Regulations, Policies and Procedures

The Arctic territories occupy a unique position within the Canadian public procurement landscape. While they enjoy quasi-‐provincial status and legislative powers, their powers are derived from federal statues, rather than through constitutional powers from which the provinces derive their powers. However, for the purposes of the trade treaties, they are classified in the same category as the provinces (except for Nunavut, which is not a party to the treaties) and they do not fall under the federal jurisdiction of the CITT. While their statutory frameworks do not appear to expressly address group purchasing, Yukon and the Northwest Territories are subject to the above noted AIT provisions respecting group purchasing. At the same time, their practices in the area of group purchasing tend to resemble the federal government more than the provinces through the use of SOs and SAs. Their regulatory and policy framework reflects this federal influence, as discussed below.


2.4.4.1 Yukon’s Consolidated Contracting and Procurement Regulation and Contracting and Procurement Directive (“Yukon Directive”)

The Yukon Directive expressly addresses the use of SOs and SAs in a manner similar to the federal government, with provisions that read as follows:

PART V – Procurement Tools

Contracts and standing offer agreements in excess of three years

(1) No contract or standing offer agreement, including renewals or change orders, will exceed three (3) years without Management Board approval.

(2) Contracts or standing offer agreements entered into with Management Board approval pursuant to subsection (1) will be identified in the contract registry(ies) maintained pursuant to Section 30 (Contract Registry).

Supplier Directory

The Deputy Minister will maintain and issue a Supplier Directory for use in implementing the provisions of this directive.

The Deputy Minister will decide which requirements, in compliance with applicable trade agreements, must be met by a prospective bidder or proponent in order to be added to the Supplier Directory.

Upon request and having met the requirements in Section 38, the name of a prospective bidder or proponent will be added to the Supplier Directory at any time.

A procurement authority may decide the method by which names are selected from the Supplier Directory for procurements that are below the thresholds for formal solicitation methods (that is, for low-‐cost procurements under the thresholds in Sections 19(1)(a), 19(2)(a), 19(3)(a) and 19(4)(a).

Screened qualified source lists (for potential contracts)

The Deputy Minister may establish and maintain corporate supply arrangements, including screened qualified source lists, as may be appropriate for implementing the provisions of this directive.

Pre-‐qualified source lists (for planned contracts)

(1) Where a procurement authority pre-‐qualifies bidders or proponents before issuing a request for bids or proposals for contracts, it will establish a pre-‐qualified source list pursuant to this directive, which will be valid for up to one year and up to three years if an extension is authorized by the Deputy Minister. As defined in this Directive, a pre-‐qualified source list is “a list of bidders or proponents who meet the evaluation criteria specified for planned contracts”.

(2) The procurement authority will define the scope of each pre-‐qualified source list in terms of the specific contracts which are contemplated.


Procurement authorities will publicly advertise for bidders or proponents to submit their qualifications for pre-‐qualified source lists.

Responses to requests for qualifications issued pursuant to Section 43 will be considered proposals as defined by this directive, and will be evaluated accordingly. Notwithstanding Section 53 (Form of evaluation criteria), for pre-‐qualifying bidders or proponents, price is not a mandatory criterion.

A procurement authority will not add the name of a bidder or proponent to pre-‐qualified source lists except through the evaluation and acceptance of the proponent’s qualifications submitted in response to the request for bids or proposals.

If a procurement authority proposes to undertake procurement for which there is a valid pre-‐qualified source list, the procurement authority must invite all persons included in the list to submit bids or proposals, as the case may be, in respect of the procurement.

2.4.4.2 Northwest Territories Procurement Guidelines

The Northwest Territories Government Procurement Guidelines contain the following provisions that relate to what they refer to as Supply Service Arrangements (“SSAs”) which require invitational second stage processes to award discrete call-‐ups when those assignments are valued above prescribed dollar value thresholds:

Supply Service Arrangements

A Supply Services Arrangement (SSA) is an offer from a vendor to supply services and under the terms and conditions stated in the SSA.

PW&S establishes Supply Services Arrangements for services for use by all departments and agencies of the GNWT. The following information is provided to guide the user in understanding and utilizing the SSA process.

Supply Services Arrangements are not contracts. They are Arrangements that pre-‐qualify contractors to provide specific services on and as and when required basis over a defined period of time. They may be used in contracting for services only. There is no legal obligation to contract

A new individual contract is made each time a new purchase is ordered or released under a Supply Services Arrangement.

Definition

A Supply Services Arrangement means an Arrangement where a contractor has been pre-‐qualified to participate in an invitational competitive process for specific services, on an as and when required basis during a set period.

Purpose

Supply Services Arrangements are intended to increase the level of cost-‐effectiveness and service to users, by:


• consolidating volumes and standardizing requirements

• reducing the time required to acquire standard or specialized services;

• reducing the overall administrative costs of acquiring frequently required or specialized services;

• Maintaining competitive, best price expenditures.

Commitment of Funds

As Supply Services Arrangements do not contain legal obligations to contract for all or any services, they are not considered to be contracts. Consequently, there is no requirement for the commitment of funds. When individual releases are made in the form of a Service Contracts, then funds must be committed and reported for values of $5,000 and over in accordance with FAM 1701, Commitment Accounting.

Contracting Methods

Establishing Supply Services Arrangements

The establishment of Supply Services Arrangements should result from a clearly defined need and utilized by Procurement Shared Services and departments on an as and when required basis.

Supply Services Arrangements are established through a Request for Qualification process (RFQ) to prequalify contractors for frequently required or specialized services that are required on an as and when required basis.

In order to meet the GNWT requirements, it is the GNWT intention from time to time, throughout the Supply Arrangement period, to invite new suppliers to submit proposals to pre-‐qualify and be added to the list of suppliers pre-‐qualified to provide the services described in the Supply Arrangement through publication by the GNWT of a Supply Arrangement Refresh notice posted on the GNWT Contract Opportunities web page. This process will also permit pre-‐qualified suppliers to qualify for requirements for which they are not already qualified.

The frequency of subsequent Supply Arrangement refresh publications will be at the sole discretion of the GNWT, Procurement Shred Services section.

The GNWT may issue an unlimited number of supply arrangements and may continue to issue supply arrangements to pre-‐qualified suppliers throughout the Supply Arrangement period.

The use of Supply Service Arrangements are not mandatory, and the GNWT reserves the sole right to procure services on any SSA by any other means it deems appropriate.

Release against a Supply Service Arrangement

The Supply Service Arrangement establishes a list of pre-‐approved contractors.

Releases against a Supply Service Arrangement will be subject to the following limits and authorities;


• for service contracts less than $5,000 or professional consulting contracts less than $25,000 for which the GNWT contract regulations apply, the GNWT can enter into a contract with any vendor listed on the pre-‐approved list or any other vendor they choose;

• for contracts greater than $5,000 or professional consulting contracts greater than $25,000, but less than $200,000 the GNWT will engage in an invitational competitive process with all contractors on the pre-‐approved SSA list for the specific service required;

• For contracts greater than $200,000 the GNWT will engage in a public competitive process and standard GNWT contracting regulations and guidelines will apply.

• All purchases estimated to be over $5,000 for goods and services, must be processed through Procurement Shared Services, unless other arrangements have been made with PSS

The application of BIP is applied during the invitational competitive process with all contractors on the pre-‐approved SSA list for the specific service required.

2.4.4.3 Government of Nunavut Contracting Procedures Manual

The Nunavut Contracting Procedures Manual expressly addresses the creation of Standing Offers, which it refers to as SOAs and describes as follows:

14. ABOUT STANDING OFFER AGREEMENTS (SOAS)

14.1 Standing Offer Agreements (SOAs) Are Not Contracts

14.1.1 Another procurement option available to many GN departments is something called a standing offer agreement (SOA).

14.1.2 CGS establishes SOAs for commonly used services and products for use by all departments and agencies of the GN.

14.1.3 In cases where CGS has established an SOA, GN departments do not need to engage in a contracting process to acquire goods or services covered by the SOA.

14.1.4 The following information is provided to explain the SOA process.

14.1.5 Directive 808-‐4 of the Financial Administration Manual provides the following definition of standing offer agreement:

“A Standing Offer Agreement means a price agreement between the Government and a supplier, wherein the supplier agrees to provide, on demand, specified goods or services under specified conditions during a set period at a defined price or discount structure.”

14.1.6 SOAs are pricing arrangements that the government makes with suppliers or contractors covering anticipated requirements over a defined period of time. They may be used in contracting for goods or services. There is no legal obligation incurred.


14.1.7 SOAs are intended to increase the level of cost-‐effectiveness and service to users by: i. reducing the time required to acquire standard goods or services; ii. reducing the overall administrative costs of acquiring low cost, frequently required goods and services; and iii. maintaining competitive, best price expenditures.

14.1.8 With respect to goods contracting, SOAs provide the opportunity to establish, through an RFT or RFP process, pricing agreements that will offer lower costs for frequently-‐required goods and services, through the consolidation of demand. This is also known as achieving ‘economies of scale’.

14.2 Establishing an SOA through an RFT or RFP Process

14.2.1 The establishment of SOAs should result from a clearly defined need. Where such agreements are requested by program managers, there should be prior discussions establishing the scope of the requirement and a commitment from the department or departments to use the agreement.

14.2.2 CGS Purchasing, Logistics & Contract Support has arranged a wide range of SOAs on behalf of the GN. Information regarding these agreements may be obtained from the CGS Purchasing office.

14.2.3 SOAs should be entered into only after a competitive process in accordance with the Contract Regulations. You should incorporate an estimate of the amount of work or goods into the RFT documents, as an anticipated volume may result in more favorable pricing being offered.

14.2.4 Whenever possible, the request documents should clearly indicate that the resulting SOA will be non-‐exclusive. In certain circumstances, it may be practical to have SOAs for certain requirements exclusively with only one business. However, consideration for the livelihood of other businesses and the impacts on the marketplace must be considered before awarding exclusive SOAs.

14.2.5 Standard templates have been developed for the establishment of SOAs via an RFT or RFP process. Contact CGS Purchasing, Logistics & Contract Support for support and/or assistance with establishing your SOA.

14.3 Awarding Individual Contracts

14.3.1 A public officer can order goods or services under an established SOA provided they are a contract authority. This activity is not considered to be a sole source under the Contract Regulations since the SOA will have been established through a formal contracting process.

14.3.2 Some of the methods that may be used to issue contracts against SOAs include: i. Local Contract Authority (LCA); ii. Service Contract (SC); iii. Purchase Order (PO) through CGS Purchasing by requisition only; iv. VISA through CGS Purchasing by requisition only.

The Nunavut Procurement Procedures Reference Guide also contains the following explanation of the SOs:

The government may enter into a standing offer arrangement with a potential supplier to provide goods or services under specified terms and conditions including pricing. However, this does not form a contract until an order is placed against the “standing offer”. Such


arrangements are often made to reduce delays in fulfilling repetitive orders for the same goods or well defined services.

This is similar to the federal government’s use and description of SOs, however these rules (see 14.3.1 in particular) appear to allow for direct call-‐ups without further competition with the creation of the SO serving as the competitive process.

2.5 INTERNATIONAL STANDARDS

The Canadian Statutory Standards enumerated above establish some governing principles that apply to group purchasing and, to generalize broadly, tend to accept group purchasing so long it is conducted in a manner compliant with the competitive bidding norms contained within the trade treaties and other governing rules. However, these rules tend to be silent when it comes to addressing how to implement group purchasing arrangements in a treaty compliant manner. Furthermore, with the exception of the federal and territorial rules governing SOs and SAs and related “call-‐up” protocols, as well as equivalent rules addressing VOR arrangements in other governance standards, including the BPS Directive and the MBC Directive20, the Statutory Standards tend to also be silent on the administration of master agreements even within institutions, let alone between them through group purchasing initiatives. In this section we therefore briefly describe some international standards which can be drawn from to help inform and guide the implementation of group purchasing master agreement frameworks within Canada.

2.5.1 The UN Model Law Framework Protocols

In December 2011, the General Assembly of the United Nations ratified the 2011 edition of the United Nations Commission on International Trade Law Model Law on Public Procurement (the “UN Model Law”). The updated UN Model Law replaced the 1994 edition and contains some notable updates, including the recognition of the use of master agreement arrangements that are referred to as “Framework Agreements”. Similar to federal SOs and SAs, to provincial VORs and to NJPA NCCSs, the Framework Agreement provisions contain detailed protocols for the creation and use of master agreements with multiple assignments. The UN Model Law recognizes both closed Framework Agreements (using a limited number of prequalified suppliers for a finite number of years) as well as open Framework Agreements (which are indefinite in duration and therefore require more robust refresh protocols to allow new suppliers into the arrangement). Since NJPA’s NCCSs more closely align with the closed Framework Agreement model, the provisions that apply to those types of arrangements under the UN Model Law are reproduced below:

20 The various provincial standards speak to the administration


Article 32 Conditions for use of a framework agreement procedure

1. A procuring entity may engage in a framework agreement procedure in accordance with chapter VII of this Law where it determines that:

(a) The need for the subject matter of the procurement is expected to arise on an indefinite or repeated basis during a given period of time; or

(b) By virtue of the nature of the subject matter of the procurement, the need for that subject matter may arise on an urgent basis during a given period of time.

2. The procuring entity shall include in the record required under article 25 of this Law a statement of the reasons and circumstances upon which it relied to justify the use of a framework agreement procedure and the type of framework agreement selected.

…

Chapter VII. Framework agreement procedures

Article 58 Award of a closed framework agreement

1. The procuring entity shall award a closed framework agreement:

(a) By means of open-‐tendering proceedings, in accordance with provisions of chapter III of this Law, except to the extent that those provisions are derogated from in this chapter; or

(b) By means of other procurement methods, in accordance with the relevant provisions of chapters II, IV and V of this Law, except to the extent that those provisions are derogated from in this chapter.

2. The provisions of this Law regulating pre-‐qualification and the contents of the solicitation in the context of the procurement methods referred to in paragraph 1 of this article shall apply mutatis mutandis to the information to be provided to suppliers or contractors when first soliciting their participation in a closed framework agreement procedure. The procuring entity shall in addition specify at that stage:

(a) That the procurement will be conducted as a framework agreement procedure, leading to a closed framework agreement;

(b) Whether the framework agreement is to be concluded with one or more than one supplier or contractor;

(c) If the framework agreement will be concluded with more than one supplier or contractor, any minimum or maximum limit on the number of suppliers or contractors that will be parties thereto;

(d) The form, terms and conditions of the framework agreement in accordance with article 59 of this Law.

3. The provisions of article 22 of this Law shall apply mutatis mutandis to the award of a closed framework agreement.


Article 59 Requirements for closed framework agreements

1. A closed framework agreement shall be concluded in writing and shall set out:

(a) The duration of the framework agreement, which shall not exceed the maximum duration established by the procurement regulations;

(b) The description of the subject matter of the procurement and all other terms and conditions of the procurement established when the framework agreement is concluded;

(c) To the extent that they are known, estimates of the terms and conditions of the procurement that cannot be established with sufficient precision when the framework agreement is concluded;

(d) Whether, in a closed framework agreement concluded with more than one supplier or contractor, there will be a second-‐stage competition to award a procurement contract under the framework agreement and, if so:

(i) A statement of the terms and conditions of the procurement that are to be established or refined through second-‐stage competition;

(ii) The procedures for and the anticipated frequency of any second-‐stage competition, and envisaged deadlines for presenting second-‐stage submissions;

(iii) The procedures and criteria to be applied during the second-‐stage competition, including the relative weight of such criteria and the manner in which they will be applied, in accordance with articles 10 and 11 of this Law. If the relative weights of the evaluation criteria may be varied during the second-‐stage competition, the framework agreement shall specify the permissible range;

(e) Whether the award of a procurement contract under the framework agreement will be to the lowest-‐priced or to the most advantageous submission; and

(f) The manner in which the procurement contract will be awarded.

2. A closed framework agreement with more than one supplier or contractor shall be concluded as one agreement between all parties unless:

(a) The procuring entity determines that it is in the interests of a party to the framework agreement that a separate agreement with any supplier or contractor party be concluded;

(b) The procuring entity includes in the record required under article 25 of this Law a statement of the reasons and circumstances on which it relied to justify the conclusion of separate agreements; and

(c) Any variation in the terms and conditions of the separate agreements for a given procurement is minor and concerns only those provisions that justify the conclusion of separate agreements.

3. The framework agreement shall contain, in addition to information specified elsewhere in this article, all information necessary to allow the effective operation of the framework agreement, including information on how the agreement and notifications of forthcoming


procurement contracts thereunder can be accessed and appropriate information regarding connection, where applicable.

…

Article 62 Second stage of a framework agreement procedure

1. Any procurement contract under a framework agreement shall be awarded in accordance with the terms and conditions of the framework agreement and the provisions of this article.

2. A procurement contract under a framework agreement may be awarded only to a supplier or contractor that is a party to the framework agreement.

3. The provisions of article 22 of this Law, except for paragraph 2, shall apply to the acceptance of the successful submission under a framework agreement without second-‐stage competition.

4. In a closed framework agreement with second-‐stage competition and in an open framework agreement, the following procedures shall apply to the award of a procurement contract:

(a) The procuring entity shall issue a written invitation to present submissions, simultaneously to:

(i) Each supplier or contractor party to the framework agreement; or

(ii) Only to those suppliers or contractors parties to the framework agreement then capable of meeting the needs of that procuring entity in the subject matter of the procurement, provided that at the same time notice of the second-‐stage competition is given to all parties to the framework agreement so that they have the opportunity to participate in the second-‐stage competition;

(b) The invitation to present submissions shall include the following information:

(i) A restatement of the existing terms and conditions of the framework agreement to be included in the anticipated procurement contract, a statement of the terms and conditions of the procurement that are to be subject to second-‐stage competition and further detail regarding those terms and conditions, where necessary;

(ii) A restatement of the procedures and criteria for the award of the anticipated procurement contract, including their relative weight and the manner of their application;

(iii) Instructions for preparing submissions;

(iv) The manner, place and deadline for presenting submissions;

(v) If suppliers or contractors are permitted to present submissions for only a portion of the subject matter of the procurement, a description of the portion or portions for which submissions may be presented;

(vi) The manner in which the submission price is to be formulated and expressed, including a statement as to whether the price is to cover elements other than the cost of the subject


matter of the procurement itself, such as any applicable transportation and insurance charges, customs duties and taxes;

(vii) Reference to this Law, the procurement regulations and other laws and regulations directly pertinent to the procurement proceedings, including those applicable to procurement involving classified information, and the place where those laws and regulations may be found;

(viii) The name, functional title and address of one or more officers or employees of the procuring entity who are authorized to communicate directly with and to receive communications directly from suppliers or contractors in connection with the second-‐stage competition without the intervention of an intermediary;

(ix) Notice of the right provided under article 64 of this Law to challenge or appeal decisions or actions taken by the procuring entity that are allegedly not in compliance with the provisions of this Law, together with information about the duration of the applicable standstill period and, if none will apply, a statement to that effect and the reasons therefor;

(x) Any formalities that will be required once a successful submission has been accepted for a procurement contract to enter into force, including, where applicable, the execution of a written procurement contract pursuant to article 22 of this Law;

(xi) Any other requirements established by the procuring entity in conformity with this Law and the procurement regulations relating to the preparation and presentation of submissions and to other aspects of the second-‐stage competition;

(c) The procuring entity shall evaluate all submissions received and determine the successful submission in accordance with the evaluation criteria and the procedures set out in the invitation to present submissions;

(d) The procuring entity shall accept the successful submission in accordance with article 22 of this Law.

Article 63 Changes during the operation of a framework agreement

During the operation of a framework agreement, no change shall be allowed to the description of the subject matter of the procurement. Changes to other terms and conditions of the procurement, including to the criteria (and their relative weight and the manner of their application) and procedures for the award of the anticipated procurement contract, may occur only to the extent expressly permitted in the framework agreement.

While Canadian public institutions have not formally adopted Framework Agreement protocols (although the federal and territorial SO and SA protocols contain principles similar to the UN Model Law rules) the neighbouring Commonwealth jurisdictions of the United Kingdom and Jamaica, which share a similar common law legal system with Canada, have implemented their versions of framework agreement protocols. Those rules are reproduced below.


2.5.2 UK Framework Regulations

The UK Public Contracts Regulations 2006 contain Framework Agreement protocols that actually predate the 2011 UN Model Law. The UK protocols establish governing rules for the creation and use of Framework Agreements that contemplate transparent protocols to create and use these master agreements which require second-‐stage competitions where more than one supplier is selected under a framework arrangement:

Framework agreements

19. (1) A contracting authority which intends to conclude a framework agreement shall comply with this regulation.

(2) Where the contracting authority intends to conclude a framework agreement, it shall—

(a)follow one of the procedures set out in regulation 15, 16, 17 or 18 up to (but not including) the beginning of the procedure for the award of any specific contract set out in this regulation; and

(b) select an economic operator to be party to a framework agreement by applying award criteria set in accordance with regulation 30.

(3) Where the contracting authority awards a specific contract based on a framework agreement, it shall—

(a) comply with the procedures set out in this regulation; and

(b) apply those procedures only to the economic operators which are party to the framework agreement.

(4) When awarding a specific contract on the basis of a framework agreement neither the contracting authority nor the economic operator shall include in that contract terms that are substantially amended from the terms laid down in that framework agreement.

(5) Where the contracting authority concludes a framework agreement with one economic operator—

(a) it shall award any specific contract within the limits of the terms laid down in the framework agreement; and

(b) in order to award a specific contract, the contracting authority may consult in writing the economic operator which is party to the framework agreement requesting that economic operator to supplement its tender if necessary.

(6) Where the contracting authority concludes a framework agreement with more than one economic operator, the minimum number of economic operators shall be 3, insofar as there is a sufficient number of—

(a) economic operators to satisfy the selection criteria; or

(b) admissible tenders which meet the award criteria.


(7) Where the contracting authority concludes a framework agreement with more than one economic operator, a specific contract may be awarded—

(a) by application of the terms laid down in the framework agreement without re-‐opening competition; or

(b) where not all the terms of the proposed contract are laid down in the framework agreement, by re-‐opening competition between the economic operators which are parties to that framework agreement and which are capable of performing the proposed contract in accordance with paragraphs (8) and (9).

(8) Where the contracting authority is following the procedure set out in paragraph (7)(b), it shall re-‐open the competition on the basis of the same or, if necessary, more precisely formulated terms, and where appropriate other terms referred to in the contract documents based on the framework agreement.

(9) Where the contracting authority is following the procedure set out in paragraph (7)(b), for each specific contract to be awarded it shall—

(a) consult in writing the economic operators capable of performing the contract and invite them within a specified time limit to submit a tender in writing for each specific contract to be awarded;

(b) set a time limit for the receipt by it of the tenders which takes into account factors such as the complexity of the subject matter of the contract and the time needed to send in tenders;

(c) keep each tender confidential until the expiry of the time limit for the receipt by it of tenders; and

(d) award each contract to the economic operator which has submitted the best tender on the basis of the award criteria specified in the contract documents based on the framework agreement.

(10) The contracting authority shall not conclude a framework agreement for a period which exceeds 4 years except in exceptional circumstances, in particular, circumstances relating to the subject of the framework agreement.

(11) In this regulation, a “specific contract” means a contract based on the terms of a framework agreement.

(12) The contracting authority shall not use a framework agreement improperly or in such a way as to prevent, restrict or distort competition.

2.5.3 The Jamaican Handbook Framework Rules

Similar to the UK provisions, Volume 2 of the Government of Jamaica Handbook of Public Sector Procurement Procedures (which are passed pursuant The Public Sector Procurement Regulations, 2008) also establishes formal rules for the creation and use of Framework Agreements, which include a detailed description of different uses for frameworks, the need for specificity in call-‐up assignment terms, and further explanatory notes on issues including avoiding volume guarantees when providing volume estimates:


APPENDIX 4

FRAMEWORK AGREEMENTS (FAs)

Procuring Entities may enter into Framework Agreements (FAs). Under these Agreements, a contractor commits to supplying the purchaser with goods and related services "as and when" required and on a pricing basis, according to stated terms and conditions. Framework Agreements may be used to supply off-‐the-‐shelf, readily available products. A Framework Agreement is not a contract, therefore, quantities and delivery dates cannot be determined in advance. Any “call-‐up” made against an FA represents acceptance, by a purchaser, of the terms and conditions. As such, it is the “call-‐up” which forms the contract that would be submitted for approval by the Head of the Procuring Entity, NCC or Cabinet, as the value warrants.

Framework Agreements can be made between:

(a) a single contractor and a single purchaser;

(b) a single contractor and multiple purchasers;

(c) multiple contractors and a single purchaser; and

(d) multiple contractors and multiple purchasers.

Framework Agreements should be used when the overall requirements are known, but the specific quantity and delivery date of any particular good may not be known. Bids shall be solicited for the selection of a contractor to provide the necessary goods as and when they are required.

The Bidding Documents shall state that the Procuring Entity does not necessarily intend to enter into a contract – that is, currently, or ever. Rather, the intention is merely to establish the best source of a future supply, based upon firm prices and pre-‐determined conditions over a specified validity period.

NOTE: Care should be taken when providing contractor(s) with an estimated quantity of goods and related services. In general, contractors will quote lower prices if there is a reasonable possibility that a firm amount will be ordered. If possible, the Bidding Documents should provide contractors with the minimum estimated quantity which may be ordered. Until an actual call-‐up document is issued, NO GUARANTEE shall be given that any amount will be ordered. The contractor may withdraw from the FA under pre-‐determined conditions, and would then have no further obligation to fill orders which are issued after the agreed withdrawal date.

A4.1 CRITERIA FOR ESTABLISHING FRAMEWORK AGREEMENTS

The following criteria should be satisfied in order to establish a Framework

Agreement with a contractor:

(a) the goods and related services should be clearly identified;

(b) the goods and related services should be commercially available; and


(c) the prices should be pre-‐determined and firm.

A4.2 CHARACTERISTICS OF FRAMEWORK AGREEMENTS

Framework Agreements should have the following characteristics:

(a) unit prices established as a result of a Competitive Bidding process;

(b) delivery dates stipulated in terms of a time period from the date of the call-‐up;

(c) stipulations regarding the limit on total expenditure;

(d) stipulated limits on individual call-‐up expenditure; and

(e) a stipulated validity period -‐ usually, FAs are valid for at least twelve (12) months. The period of validity should be the expiry date, or when the limit on total expenditure is reached, whichever comes first. For multi-‐year FAs, there may be a clause allowing for a price increase due to inflation.

Framework Agreements shall be concluded through competitive tender.

NOTE: Procuring Entities shall obtain approval for Direct Contracting when seeking to establish a Framework Agreement with one contractor, when other contractors are available.

When a call-‐up against a FA is done, the call-‐up shall show the exact quantity and description of the required goods and related services, the packing and routing instructions, the delivery points and dates. The unit price and total price of the callup, including freight, shall be confirmed; and the contractor should be requested to acknowledge receipt of the call-‐up.

GoJ may enter into Framework Agreements on an annual basis for the supply of commonly used disposable goods and services, e.g. GoJ’s Framework Agreement for the supply of fuel. These agreements may be entered into by the Ministry of Finance on behalf of GoJ, and reflected in an annual GoJ Schedule of Framework Agreements (“Schedule”). Contracts awarded will be in respect of goods and services for the following entities:

(a) Central Government Ministries;

(b) Central Government Departments; and

(c) any other Procuring Entity (at its option)

Applicable procedures will be contained within the Schedule that is disseminated to Procuring Entities one month prior to the start of each fiscal year.

While not binding on Canadian public sector entities, the Framework Agreement protocols contained in the UN Model Law, in the UK regulations and in the Jamaican handbook are generally consistent with the federal SO and SA protocols and can help inform the treaty-‐compliant implementation measure for the use of group purchasing master agreements.


2.6 CONCLUSION ON STATUTORY STANDARDS

As highlighted above, there are numerous examples of Statutory Standards relevant to group purchasing arrangements from which general guiding principles can be drawn to help inform the implementation of NJPA NCCs within the Canadian public sector. Those rules are summarized below and integrated with the implementation recommendations contained in Section 3.

Section 3 Implementation Recommendations

Upon reviewing the Statutory Standards that apply to Canadian public sector entities, a number of general rules and themes emerge which can be summarized into the following findings and recommendations:

• In general terms, the Statutory Standards do not appear to contain any prohibitions against the use of NJPA’s NCCSs by Canadian public sector entities. The Canadian rules are either silent to group purchasing or, where they do address the subject (particularly in domestic trade treaties and related rules), encourage group purchasing as a means of achieving greater efficiency and economies of scale within the public sector. There would therefore appear to be no requirement of any statutory amendments or trade treaty amendments in order to enable the use of NJPA’s NCCSs.

• With respect to the implementation of master agreement arrangements such as NJPA’s NCCSs, the Statutory Standards require that they be implemented in a manner that is consistent with the open competitive bidding norms established under the trade treaties and related rules. The Statutory Standards do not contain any specific implementation rules or protocols for group purchasing so the same governing rules that apply to any other public sector tendering process would also apply to group purchasing initiatives.

• As with any other group purchasing initiative that creates a master agreement with multiple assignments from multiple institutions (such as SAs, SOs, VORs etc.), the process for creating NJPA’s NCCSs would have to comply with the open competitive transparency requirements contained in the Canadian trade treaties and related rules. This would include: (i) the use of public solicitations with public postings using methods recognized within Canada; (ii) clearly identified and scoped requirements with anticipated purchasing volumes; clear and finite terms setting out the duration of the arrangement; and refresh protocols where applicable; (iii) transparent process rules and evaluation criteria for the award of NCCSs to specific suppliers.

• The award of a discrete contract assignments by Canadian public sector entities that use NJPA’s NCCSs should be conducted in accordance with the transparent selection


protocols established under each separate NCCSs arrangement. All internal approvals would have to be obtained by the public sector entity to confirm that the sourcing decision falls within the general and institution-‐specific public procurement rules. Since each NCCS will vary in detail, there would be no single rule-‐compliant method for a Canadian public sector entity to source its requirements under these master agreements. However, depending on the details of the particular NCCS, the sourcing mechanisms could include: (i) direct call-‐ups by the Canadian public sector entity where a winner take all NCCSs has been established for a particular category of requirements and appropriate internal approvals are obtained by the institution; and (ii) simplified invitational request for quotation processes when call-‐ups are required from a roster of different suppliers offering the same requirements.

• While it would not be feasible in an arrangement of the size and scope of NJPA’s NCCSs to identify every single public sector purchasing institution by name that has decided or may decide to use an NCCSs, the transparency and defensibility of NCCSs in Canada would be enhanced if NJPA established a membership group of Canadian public sector institutions that have expressed interest in using these master agreements so that this information could be disclosed with each solicitation.

• To help facilitate the expansion of NJPA’s NCCSs within Canada, it is also recommended that NJPA seek formal recognition from the senior level governments (federal, provincial and territorial), as well as potentially from the Internal Trade Secretariat, confirming that NJPA’s NCCSs are an acceptable method for Canadian public sector institutions to source their requirements.