Procurement Myths and Realities Get Back Your Ability to Manage

How to be effective in your job and still comply with the Broader Public Sector Procurement Directive

Ministry of Government and Consumer Services

November 13, 2014

Iris Ko, Director

Sara Volo, Project Lead

Supply Chain Ontario

Agenda

• Introduction to Supply Chain Ontario

• Broader Public Sector Accountability Act

• Broader Public Sector Procurement Directive

• OntarioBuys

• Innovation Procurement

• Ontario Education Collaborative Marketplace

• Questions

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• Develops and implements Ontario Public Sector (OPS) procurement

strategy

• Identifies and implements procurement process improvements

• Provides strategic advice to government on complex and high dollar value

procurements

• Advocates and supports the adoption of leading supply chain and back

office practices among the province’s broader public sector (BPS)

• Supports the implementation of the OPS and BPS Procurement Directive

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Supply Chain Ontario

87%of spend is

with vendors located in

Ontario

50K+vendors

each

year

9 1education/higher

learning sector purchasing

collaborative

200+BPS entities have or are

participating in supply chain or back office initiatives

2.5K +annual

ministry procurements

hospital sector

shared service organizations

60+enterprise VOR arrangements

valued at

$450+ million

$6+ billionannual government procurement spend

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Supply Chain Ontario Cont’d

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Why Procurement Rules are Important

• Multiple trade agreements require Ontario’s procurement processes to be fair, open,

transparent, geographically neutral and accessible to qualified vendors

– "Ontario-Quebec Trade and Co-operation Agreement

– Agreement on Internal Trade

– Canada-United States Procurement Agreement

– Canada-European Union Comprehensive Economic and Trade Agreement (pending

ratification)

• Canadian Commercial Law

– Competitive procurements conducted by ministries are subject to and conducted in

accordance with the laws of competitive bidding (sometimes referred to as contract

A/contract B)

• Bid Dispute

– Every procurement process could be subjected to a formal dispute resolution process with

differing remedies depending on value and whether the procurement is covered by a trade

agreement

• Auditor General/Ombudsman’s Office

– Public procurement processes are frequently the subject of review by independent oversight

entities

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• The Broader Public Sector Accountability Act, 2010 (BPSAA) provides

the authority for the Management Board of Cabinet to issue directives

governing the procurement of goods and services by designated

broader public sector organizations.

• The BPSAA also contains rules on:

• Lobbyists and Consultants

• Compensation Arrangements (Restraint)

• Public Reporting of Expense Claims

• Expense Claims: Allowable Expenses

• Perquisites

Broader Public Sector Accountability Act (BPSAA)

• “designated broader public sector organization” means,

(a) every hospital,

(b) every school board,

(c) every university in Ontario and every college of applied arts and technology and post-

secondary institution in Ontario whether or not affiliated with a university, the enrolments of

which are counted for purposes of calculating annual operating grants and entitlements,

(d) every approved agency designated as a children’s aid society under subsection 15 (2) of

Part I of the Child and Family Services Act,

(e) every community care access corporation,

(f) every corporation controlled by one or more designated broader public sector organizations

that exists solely or primarily for the purpose of purchasing goods or services for the

designated broader public sector organization or organizations,

(g) every publicly funded organization that received public funds of 10 million dollars or more

in the previous fiscal year of the Government of Ontario, and

(h) every organization that is prescribed for the purposes of this definition;

Designated BPS Organizations

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• The BPS Procurement Directive:- provides consistent procurement practices for designated BPS organizations

- establishes that publicly funded goods and services are acquired by BPS organizations through a process that is open, fair, and transparent

- establishes accountability through each stage of the procurement process

- maximizes the value that BPS organizations receive from the use of public funds

• The BPS Procurement Directive substantially aligns with:- Provincial Trade Agreements

- MBC Procurement Directive

• The directive is comprised of:– A mandatory Code of Ethics designed to support an ethical, professional and accountable

supply chain

– 25 mandatory requirements

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BPS Procurement Directive

Accountability Organizations must be accountable for the results of their

procurement decisions and the appropriateness of the

processes.

Transparency Organizations must be transparent to all stakeholders.

Wherever possible, stakeholders must have equal access to

information on procurement opportunities, processes and

results.

Value for Money Organizations must maximize the value they receive from the

use of public funds. A value-for-money approach aims to

deliver goods and services at the optimum total lifecycle cost.

Quality Service

Delivery

Front-line services provided by Organizations, such as

teaching and patient care, must receive the right product, at

the right time, in the right place.

Process

Standardization

Standardized processes remove inefficiencies and create a

level playing field.

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BPS Procurement Principles

• Goal– An ethical, professional and accountable supply chain

• Personal Integrity and Professionalism – All BPS supply chain participants must act, and be seen to act, with integrity and

professionalism. Honesty, care and due diligence must be integral to all supply chain activities within and between BPS organizations, suppliers and other stakeholders. Respect must be demonstrated for each other and for the environment. Confidential information must be safeguarded. Participants must not accept gifts and favours, provide preferential treatment, publicly endorse suppliers or products or engage in any other activity that would create, or appear to create, a conflict of interest.

• Accountability & Transparency – Supply chain activities must be open and accountable. In particular, tendering, contracting

and purchasing activities must be fair, transparent and conducted with a view to obtaining the best value for public money. All participants must ensure that scarce public sector resources are used in a responsible, efficient and effective manner.

• Compliance & Continuous Improvement– All BPS supply chain participants must comply with this Code of Ethics and the laws of

Canada and Ontario. Participants should continuously work to improve supply chain policies and procedures, to improve supply chain knowledge and skill levels, and to share leading practices.

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Supply Chain Code of Ethics

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25 Mandatory Requirements

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25 Mandatory Requirements - HighlightsMR #3. Competitive Procurement Thresholds

• Organizations must conduct an open competitive procurement process

where the estimated value of procurement of goods or services is $100,000

or more before tax. – The $100,000 threshold refers to the total value of the procurement.

– For procurements that span multi-year periods, the total would be the value of all the years

combined. When determining the total value of a procurement that contains options for

extension, the value of all extensions should be included in the total value.

• Organizations must competitively procure consulting services irrespective

of value.

• Organizations must not reduce the overall value of procurement (e.g.,

dividing a single procurement into multiple procurements) in order to

circumvent competitive procurement thresholds.

Goods, Non-Consulting Services and Construction

Total Procurement Value Means of Procurement

$100,000 or more Open competitive process

Consulting Services

Total Procurement Value Means of Procurement

$0 up to but not including $100,000 Invitational or open competitive process

$100,000 or more Open competitive process

Competitive Procurement Thresholds

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• Prior to commencement, any procurement of consulting services must be approved in accordance with the Procurement Approval Authority Schedule for Consulting Services below.

Procurement Approval Authority Schedule (AAS)

for Consulting Services

Procurement

MethodProcurement Value Approval Authority

Invitational

Competitive

$0 up to but not

including $100,000

Organization’s AAS for goods and

non-consulting services

Open Competitive Any value Organization’s AAS for goods and

non-consulting services

Non-

competitive*

$0 up to but not

including $1,000,000

President, CEO or equivalent

$1,000,000 or more Board of Directors or equivalent

*Exemption-based only14

Consulting Services

• Consulting Service Provider

– "Consultant" means a person or entity that under an agreement, other than an

employment agreement, provides expert or strategic advice and related services for

consideration and decision-making.

– "Consulting Services" means the provision of expertise or strategic advice that is

presented for consideration and decision-making.

• Non-Consulting Service Provider

– A “Non-consulting Service Provider” is an individual/company who contracts to provide

services, other than consulting services to another individual or business. Examples may

include “consultants” such as property brokers, head hunters or trainers.

• Employee

– An “employee” is typically on payroll, with deductions made at source. An individual may be

hired on a full or part time, temporary or permanent basis. The organization reserves the right

of direction and control over the employee’s actions, has the power to dismiss the individual

and provides the tools and equipment for the job.

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Service Providers: Definitions

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“Consultant”is a person or entity that under an agreement, other than an employment agreement, provides expert

or strategic advice and related services for consideration and decision-making.

Technical Consulting

i.e. strategic advice related to actuarial science,

appraisal, community planning,

employment/ placement,

engineering, health sciences, interior design, realty, social

sciences

PolicyConsulting

i.e. the provision of advisory services to

provide policy options, analysis and evaluation

Communication Consulting

i.e. the provision of strategy and

advice in conveying information

through various channels and

media

Management Consulting

i.e. helping improve performance, primarily through the analysis of existing problems and development of plans

for improvement, including organizational change management

assistance and strategy development

Information Technology Consulting

i.e. advisory services that help

clients assess different technology

strategies, including aligning their technology

strategy with their business or

process strategy

Further Clarifications

• An individual or organization is considered a “consultant” if they provide the

following services:

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• Your organization must develop, review and approve evaluation criteria for

competitive procurements before conducting the procurement process.

• All competitive procurement documents must clearly outline any mandatory,

rated and other criteria that will be used to evaluate the submissions,

including the weight of each criterion.

25 Mandatory Requirements - HighlightsMR #9. Evaluation Criteria

• The BPS Procurement Directive includes several requirements related to evaluation

criteria intended to ensure that vendors are selected for public procurements in a fair

and transparent manner.

• Specifically, the Directive requires organizations to:

– Determine the evaluation criteria for procurements prior to beginning the competitive

procurement process. This helps determine the type of competitive document you will use.

– Include the evaluation criteria and evaluation methodology in the procurement documents so

suppliers understand how they will be rated.

– Follow the evaluation criteria outlined in the competitive procurement documents when

selecting the winning submission.

– Award the bid to the submission that receives the highest evaluation score and meets all

mandatory requirements set out in the competitive procurement document.

• In other words, the evaluation process and scoring must be 100% consistent with

what was in the competitive document that bidders responded to.

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Using evaluation criteria to procure best value for money

• There are three types of evaluation criteria, which correspond to three stages in the

evaluation process.

• Mandatory

– Mandatory evaluation criteria identify the minimum requirements that are

essential to the successful provision of goods or services.

– These requirements are rated on a pass/fail basis.

– Bids that fail to meet the mandatory requirements are given no further

consideration. In other words, bids that fail to meet the mandatory criteria are

disqualified. There should be no evaluation of the rated or price criteria for

disqualified submissions.

– Mandatory evaluation criteria must be designed so that a “meets” or “does not

meet” response is easy to determine.

– Mandatory criteria should be kept to a minimum to ensure that no bid is

unnecessarily disqualified.

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Types of evaluation criteria used in RFPs

• Rated

– Rated evaluation criteria are used to determine the relative technical merit of each proposal.

– Rated evaluation criteria provide a means to assess and distinguish one proposal from another.

– Each rated evaluation criterion should have a weight or score assigned to allow respondents to know how much each criterion is worth in the overall scoring.

– Rated criteria may include:

• Quality, quantity, transition costs, delivery and servicing

• Environmental considerations

• Capacity of supplier to meet the business need

• Supplier’s experience

• Alternative strategies or solutions

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Types of evaluation criteria used in RFPs cont’d

• When can you consider an alternative strategy for your business requirement?

− Organizations may request suppliers to provide alternative strategies or solutions

as a part of their submission.

− Organizations must establish criteria to evaluate alternative strategies or solutions

prior to the commencement of the competitive procurement process.

− Alternative strategies or solutions must not be considered unless they are

explicitly requested in the competitive procurement documents.

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Types of evaluation criteria used in RFPs cont’d Alternative Strategies

• Price

– Price is the third component of the evaluation process.

– The proposed price/cost is considered separately from and after scoring the mandatory and

rated criteria.

– The bid administrator should open the pricing envelope after the rated criteria are scored.

– The details: Weights and scores

– Each procurement document must clearly indicate the weights and scores for each type of

evaluation criteria.

– A few points to keep in mind:

– You should allocate the maximum justifiable weighting to the price/cost component of the

evaluation criteria.

– Where feasible, you should perform a sensitivity analysis on the selected criteria and

assigned weighting before finalizing the criteria in the procurement document.

– You must document all evaluation scores and notes and include them in the procurement file.

Note that this information is part of the public record and subject to audit.

– Detailed notes are helpful in the event of a vendor debrief or bid dispute.

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Types of evaluation criteria used in RFPs cont’d

• Mandatory Requirement #9 – Evaluation Criteria, states that maximum justifiable weighting

must be allocated to the price/cost component of the evaluation criteria. Maximum justifiable

weighting does not require organizations to allocate the largest percentage of weighting to price,

but rather, it is intended to encourage organizations to assign maximum weighting to price that is

appropriate for the given procurement, in the context of value for money with price being one of

multiple criteria. It is important to recognize that the allocation of weighting to price will vary by

type of procurement, and in some instances, price will be the predominate factor, while in other

instances, specifications may be more important.

• Organizations should assess weighting on a case-by-case basis. For example, when procuring a

life saving device, reliability may have a higher weighting than price. Conversely, when procuring a

good or services such as stationery, price would likely have a higher weighting. In the spirit of

value for money when all other things are equal, price should be given the most significant

weighting possible.

• Each organization has the discretion to determine what the maximum justifiable weighting for the

price/cost component should be. To reiterate, this does not mean that price has to be the highest

overall evaluation component, but rather, that each criteria of the evaluation (and the assigned

weighting) has been carefully thought through.

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Types of evaluation criteria used in RFPs cont’dMaximum Justifiable Weighting

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• Organizations should employ a competitive procurement process to achieve

optimum value for money. It is recognized, however, that special

circumstances may require organizations to use non-competitive

procurement.

• Organization may utilize non-competitive procurement only in situations

outlined in the exemption, exception, or non-application clauses of the

Agreement on Internal Trade (AIT) or other trade agreements.

• Prior to commencement of non-competitive procurement, supporting

documentation must be completed and approved by an appropriate

authority within the organization.

25 Mandatory Requirements - HighlightsMR #21. Non-Competitive Procurement

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• Procurements and the resulting contracts must be managed responsibly and

effectively.

• Payments must be made in accordance with provisions of the contract. All invoices

must contain detailed information sufficient to warrant payment. Any overpayments

must be recovered in a timely manner.

• Assignments must be properly documented. Supplier performance must be managed

and documented, and any performance issues must be addressed.

• To manage disputes with suppliers throughout the life of the contract, organizations

should include a dispute resolution process in their contracts.

25 Mandatory Requirements - HighlightsMR #22. Managing the Contract

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– For services, organizations must:

• Establish clear terms of reference for the assignment. The terms should

include objectives, background, scope, constraints, staff responsibilities,

tangible deliverables, timing, progress reporting, approval requirements and

knowledge transfer requirements.

• Establish expense claim and reimbursement rules compliant with the

Broader Public Sector Expenses Directive and ensure all expenses are

claimed and reimbursed in accordance with these rules.

• Ensure that expenses are claimed and reimbursed only where the contract

explicitly provides for reimbursement of expenses.

25 Mandatory Requirements - HighlightsMR #22. Managing the Contract cont’d

• To support implementation of the BPS Procurement Directive, the Ministry

of Government and Consumer Services website offers:

– The Directive in English and French, available in HTML and in PDF format

– FAQs on the Directive

• In addition:

– The BPS Procurement Directive Implementation Guidebook has been developed and is

available online

– The BPS Procurement Directive Toolkit is available online

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BPS Procurement Directive Implementation Support

• The strategic role of procurement in enhancing public services delivery and

outcomes is increasingly being recognize by government and other key

stakeholders.

• Ontario intends to increase the ability to use procurement proactively and

strategically to support innovation development and adoption, especially in

healthcare sector.

• As part of the effort, our ministry has developed an Innovation Procurement

Initiative that will enable and foster innovation in Ontario by– Building on best practices of other jurisdictions

– Aligning with other innovation initiatives across government

– Addressing challenges and creates opportunities

– Leveraging the OntarioBuys program

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Innovation Procurement

Stakeholders report operational and policy challenges - some real, some

perceived - as barriers to conducting or supporting innovation procurement

Challenges

• Fiscal constraints

• Complexity of the public sector (funding models, independent governance structures and

differing program objectives)

• Scarce access/dialogue with purchaser or payer bodies

• Insufficient ability/capacity to use procurement proactively and strategically

• Organizational culture (risk aversion)

• Change management impacting multiple stakeholders

• Data availability, measurement of success and ability to replicate and disseminate

success stories

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Procurement Challenges

R&D (pre- commercial development) Commercialization

Product

idea

Solution

design

Prototype First test

products

Commercial end

products

Adoption

Generally, this is

where Ontario

BPS procurement

activities start

and suppliers

push products to

BPS

Valley of death: Gap between

development and commercial sales.

Many products and companies fail at the

demonstration and scale up stage

Public and private support

typically end at the first test

product stage

Product Development Lifecycle

Current Landscape

R&D (pre- commercial

development) Commercialization

Product

idea

Solution

designPrototype First test

productsCommercial

end products

Adoption

Buyers & End

Users start

the cycle by

identifying

needs

Product Development Lifecycle

Engage

Innovation

Community

This model is consistent with initiatives led by European jurisdictions

Demand Pull Model

• Stronger and integrated government policy and funding programs to leverage

public sector spend to incent innovation

• Leadership ability to drive

innovation

• Strategic procurement skills

• Opportunities for economic

development

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Innovation Procurement Strategy and

Anticipated Outcomes

• Hospital Supply Chain Network (HSCN) – HSCN is a national network, dedicated to developing and implementing leading practices,

enhancing efficiency and effectiveness through professional development programs, and to

provide networking opportunities where hospital supply chain professionals can share

experiences and solutions to common challenges.

• HSCN developed a framework and guidelines for competitive procurement

documents to support innovation procurement. The lessons learned from

this project will be transferrable to the education sector.

• To do this, HSCN reviewed, and revised current RFP and agreement

templates and created new supporting templates and tools for the

procurement of innovation.

• HSCN will provide training on the use of the new templates to hospital

buyers and guidance materials on developing specifications and evaluation

criteria that can be used in outcome or solutions based RFPs.

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Innovation Procurement Initiative Highlights

Innovation Procurement Tools and Training

• Investigating procurement processes that support innovation

– Early market engagement strategies: Strategies that allow buyers to work with vendors in

ways that are open, fair and transparent.

• The strategies help buyers to:

– to learn about market capabilities and what is available,

– let the vendor community know about upcoming procurements, and

– discuss what the priorities and needs of the buying organizations are.

• Examples of early market engagement strategies: Reverse trade shows, design

competition

– Innovation Procurement Models: Procurement models that support innovation. These models

can be more complex than specification based procurements. The models tend to have

more flexibility and more collaboration with vendors than traditional procurement models.

Examples include:

• Procurement for a “solution” rather than a requirement

• Multi-stage procurements

• Multiple vendor/collaborator procurements

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Innovation Procurement Initiative Highlights

Explore New Procurement Processes

Contact Information

Iris Ko

Director, Strategic Policy and Innovation Branch

Supply Chain Ontario

Iris.Ko@ontario.ca

416 314-1919

Sara Volo

Project Lead

Supply Chain Ontario

Sara.Volo@ontario.ca

416 326-9675

For more information, visit:www.doingbusiness.mgs.gov.on.ca

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