HomeMy WebLinkAboutTR-92-96 THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON
REPORT
Meeting: ENERAL PURPOSE AND ADMINISTRATION COMMITTEE ( Jb-
0� File#
[date: MONDAY, DECEMBER 2, 1996 Res. #
Sy-Law# Ck) sac)
Report#: TR-9 2-9 6 File#:
Subject: PROPOSED CHANGE TO PURCHASING BY-LAW #94-129
BID BONDS VERSUS CERTIFIED CHEQUES
Recommendations:
It is respectfully recommended that the General Purpose and
Administration Committee recommend to Council the following:
1 . THAT Report TR-92-96 be received;
2 . THAT Purchasing By-law #94-129 be amended, Paragraph 6, Item
6 . 03d) , Release of Information to Bidders and Paragraph 10,
Bonds and Deposits, as identified in Schedule "A" attached.
BACKGROUND AND COMMENT:
In response to the attached letter marked Scheduled "B" , from
Salvatore (Sam) Morra, Executive Director, Ontario Sewer and
Watermain Construction Association, Council approved Resolution
#C-438-96 in May 1996, which read as follows :
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"THAT the correspondence dated May 9, 1996, from Salvatore
(Sam) Morra, Executive Director, Ontario Sewer and Watermain
Construction Association requesting that the Municipality
review its policy regarding tendering securities and consider
accepting the use of bid bonds on capital projects, be
received;
THAT the correspondence be referred to the Treasurer for
review and the preparation of a report to be submitted to the
General Purpose and Administration Committee; and
THAT Salvatore (Sam) Morra be advised of Council' s decision. "
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With respect to this review, a survey was distributed to ten local
government purchasing managers requesting their participation
regarding the use of bid bonds versus certified cheques or
equivalent as tender security.
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PA PI L 808
PAPER RECYCLE
iH 4S IS PRIMED Q'!RECYCLED PAPER
REPORT NO. : TR-92-96 PAGE 2
With respect to acceptance of bid bonds, the survey (see Schedule
"C" attached) , resulted in four (4) NO responses and five (5) YES
responses . Exceptions are the Durham Region who require Special
Approval to use bid bonds on large contracts and the Town of Whitby
who use bid bonds for contracts less than $50, 000 . 00 and a
certified cheque or bid bond required for contracts over
$50, 000 . 00 .
There have been many occasions in the past where a contractor has
been unable to bid on a Municipality of Clarington contract as they
had too many outstanding certified cheque bid deposits that had not
been released.
Therefore, based on the information gathered in the survey, it is
the recommendation of staff that the Purchasing By-law be amended
as per Schedule "A" attached.
This change is in accordance with Industry Standards and will allow
more competition for Municipality of Clarington projects .
Yr �ecMarano,lly submitted, Reviewed by,
,/ "v
H.BSc. ,AMCT. , W.H. Stockwell,
Treasurer Chief Administrative Officer
MM*LB*ld
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SCHEDULE "A"
Page 8, Section 6 . 03 d) RELEASE OF INFORMATION TO BIDDERS
CURRENTLY READS :
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"where a deposit is required for tender documents, such fee shall
be paid to the Corporation by cash, money order, bank draft or
certified cheque . If applicable, refunds shall only be made when
all required tender documents are returned to the Corporation in
good condition. "
AMENDED TO READ:
"where a deposit is required for tender documents, such fee shall
be paid to the Corporation by cash, money order, bank draft, or
certified cheque . Bid Bonds will be accepted for tenders valued
over $50, 000 . 00 . If applicable, refunds shall only be made when
all required tender documents are returned to the Corporation in
good conditions . "
Page 11, Section 10, BONDS AND DEPOSITS
CURRENTLY READS :
All tenders requiring bid deposits shall have such deposits made
payable to "The Corporation of the Municipality of Clarington" and
shall be in the form of a certified cheque, bank draft, money order
or cash and shall be enclosed in the same envelope as the tender.
Bid deposits shall be submitted in accordance with the following
schedule, unless otherwise specified by the Purchasing Agent .
AMENDED TO READ:
All tenders requiring bid deposits shall have such deposits made j
payable to "The Corporation of the Municipality of Clarington" and
shall be in the form of a certified cheque, bank draft, money order
or cash and shall be enclosed in the same envelope as the tender.
Bid bonds will be accepted for tenders valued over $50, 000 . 00 .
Bid deposits shall be submitted in accordance with the following
schedule, unless otherwise specified by the Purchasing Agent .
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WSCHEDULE "B"
ONTARIO SEWER AND WATERMAIN CONSTRUCTION ,ASSOCIATION
May 9, 1996
Faxed to: (905) 623-5717
The Corporation of the Municipality of Clarington
40 Temperance Street
Bowmanville, ON .L1C 3A6
Attention: Mayor Diane Harare and Town Council
Dear Mayor Hamre and Town Council:
We are writing to you today to express our concerns in regards to promotin the use of bid bonds
as a farm of tender security for your capital projects.
The use of bid bonds on capital projects will lower the overall project cost because a contractor
will not have to build in the interest costs associated with certified cheques Bing held for days or
weeks or sometimes even months. Also, the bid bond provides a very accep table form of security
while increasing available working capital to contractors and thus in reasing competition.
Furthermore, the process of obtaining a bid bond more aptly lends itself to the time sensitive
tendering process.
We respectfully request that your municipality review its policy regarding te idering securities and
consider accepting tbQ use of bid bonds on capital projects. In the altcr wive, we respectfully
request that the use of bid bonds be considered in replacing the certified heque of the second
bidder after the tender has closed.
We respectfully submit the following partial list of municipalities which acce t bid bonds as tender
security:
Brampton, City of
Carleton Place, Town of
Dryden, Town of
Fort Frances, Town of
Gloucester, City of
Grimsby, Town of
Halton, .Region of
Hearst, Town of
Kingston, City of
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OSWC'A 5045 Orbitor Drive, Unit 12, Suitc 300, Mississauga, Ontario L4W 4Y4 TEL 9 5 629-7765 FAX 405 629-0587
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Kirkland Lake, Town of
Leamington, Town of
London, City of
Muskoka, District of
Nepean, City of
Niagara-on-the-Lake, Town of
North Bay, City of
Orangeville, Town of
Oshawa, City of
Ottawa, City of
Ottawa-Carleton, Region of
Owen Sound, City of
Parry Sound, Town of
Perth, Town of
Peterborough, City of
Pickering, Town of
Prescott, Town of
Renfrew, Town of
Sault Ste, Marie, City of
Smith Falls, Town of
Tecumseh, Town of
Thessalon, Town of
Thunder Bay, City of j
Metropolitan Toronto Works.Dept.
Vaughan, City of
Vanier, City of
Wailaceburg, Town of
Waterloo, City of
Waterloo, Region of
Wlutchurch, Town of
Windsor, City of
Please let me know Council's thoughts regarding this initiative, Thank you f Jr your time and
consideration.
Respectfully yours,
Salvatore Sam) Morra, P. Eng.
Executive Director
cc: Ms, R Barrie, Clerk
Mr. D. Patterson, .Manager of Operations, Works Department
8 1 2 TOTAL PAGE . 002
BID BOND VERSUS CERTIFIED CHEQUES SCHEDULE "C"
The following is a list of responses to my questionnaire re bid bonds versus certified
cheques as tender security. The questionnaire was mailed to ten local government
purchasing managers with nine responses.
1. Does your municipality/town/region accept bid bonds as a form of tender security
for capital projects?
Ajax No
Belleville No
Durham Region No - Special Approval required to use bid bonds on huge contracts
Region of York No
Kingston Yes
Oshawa Yes
Peterborough Yes
Pickering Yes
Whitby Yes - less than $50,000.
Over $50,000 Bond or certified cheque
2. What were some of the reasons that helped you make the decision to accept bid
bonds?
Industry standards and By-Law
Use of a Bid Bond does not tie up the bidders cash during the bid evaluation and
award process
Commonly used in the industry f
Not practical to request certified cheque on large projects
To Help Competition
3. Do you agree that accepting bid bonds increases the amount of working capital to
contractors and thus increases competition among contractors?
2 -No
2 - Yes
1 -Not sure
Not sure to working capital
Yes to competition
All cheques except first three can be picked up after tender opening. Usually not a
drain on a company
4. Do you agree that the use of bid bonds requires the contractor to be financially and
technically prequalified by the surety and that the surety considers the contractor to
be a good credit risk, fully capable of performing the contract's obligations.
3 - Yes
For the same reasons performance and material bonds guarantee financial stability of
the contractor
Similar is achieved through the submission of an agreement to bond for performance
The Bid Bond is not to establish credit risk alone. It is to act as a deterrent to not
entering into a contract
That's the theory
Similar is achieved through the submission of an agreement to bond for performance
5. What were the reasons behind your decision not to accept bid bonds? If applicable.
Time Delay in getting money to complete the retender. Certified cheque is cash on
hand
Now Evaluating - Main Reason - More Risk, can be delays in getting resolution
from surety
Cheques provide undisputed immediate security.
Bid bonds,create a third party involvement which serves the interests of the bidder
more than that of the public entity. 813
Page Two
Summary
6. Should the contractor fail to enter into the construction contract or fail to provide the
required security, what has been your experience with the surety company with
regard to cashing a bid bond? Advise the time frame from request of cashing to
actual receipt of monies?
No problem as yet
Hasn't happened
Limited experience in defaults - one claim in last two years processed promptly
7. Alternatively, if you do not accept bid bonds, do you give the second bidder the
option of replacing his certified cheque with a bid bond after the tender has closed?
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3 - Yes
Not Usually
Second and third place cheque returned upon council acceptance of first place
bidder. First cheque is returned when contract is signed by both parties.
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THE CORPORATION or THE MUNICIPALITY OF CLARINGTON
13Y-LAW NO. 96-zs
being a by-law to amend the Purchasing By-law, By-law No.
94-129,as arnended respecting Environmental Consulting and
Professional Services
WkfERF..AS at its meeting on December 9, 1996, Council approved the recommendations
contained in Report #PD-163-96, as arnended,
NOW THEREFORE THE COUNCIL OF THE CORPORATION OF THE MUNICIPALITY
OF-CLARINGTON ENACTS AS FOLLOWS:
1. Paragraph 5.13 of By-law No. 94-129, as amended, is further arnended by adding
the following at the end of the first sentence thereof:
"Where the initiating Department is the Department of
Planning and Development and the Consulting and
Professional Services are to be provided by one of the firms
indicated in the Municipality's Roster of Consultants for the
preparation of Environmental Studies referred to in Report
#PD-163-96, a purchase order for the services may be issued
for the Municipality by the Director of Planning and
[development."
By-law read a first time this 9th day of December, 1996.
By-law read a second time this 9th day of December, 1996.
By-law read a third time and finally passed this 9th day of December, 1996.
mayor
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