HomeMy WebLinkAboutTR-63-94 THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON
REPORT
Meeting: GENERAL PURPOSE AND ADMINISTRATION COMMITTEE File #
Date: MONDAY, JULY 18, 1994 Res. #
Report#: TR-63-94 File #: By-Law#
Subject: TENDERING - LOCAL PREFERENCE
Recommendations:
It is respectfully recommended that the General Purpose and
Administration Committee recommend to Council the following:
1 . THAT Report TR-63-94 be received for information.
BACKGROUND AND C01-MNT:
1.0 At a meeting held on September 25, 1989, Council approved the
following recommendation (#GPA-676-89) ;
"THAT Staff be directed to investigate and reassess the
tendering process and prepare a report wherein preference is
given to local suppliers" .
Due to the Municipality's involvement in certain legal
matters, it was necessary to delay this report until such time
as the outstanding issues were resolved.
1. 1 This issue is one which the Municipality of Clarington Council
has had to deal with on numerous occasions, and which is not
addressed in our existing Purchasing Policy. However, this
issue has been addressed in the revised Purchasing By-law as
identified in Report #TR-64-94 . This report has been prepared
outlining the pro's and con's of including such a policy, as
well as the alternatives available to the Municipality to
encourage local participation in the bidding process . Also
included are articles and correspondence from various agencies
expressing their opinion on this subject.
PAPER E �eE
iH IS PRIM-R-CLEDPA PER
REPORT NO. : TR-63-94 PAGE 2
TENDERING - LOCAL PREFERENCE
1.2 "Purchasing today is broadly designed as that business
activity directed to the procurement of the materials,
supplies, tools, equipment, facilities and services required
for the maintenance, operation and productive endeavour of the
organizational unit. It is the prime function of purchasing
to secure such requirements at the lowest ultimate cost
consistent with prevailing economic conditions and the
appropriate standards of quality and continuity of service
while establishing and maintaining a reputation for fairness
and integrity" ( 1 - The Purchasing Job: Dimensions and
Trends, S.D. , Zemansky, American Management Association,
Bulletin Number 11, 1961) .
1.3 "The very essence of governmental purchasing is to obtain
competitive bidding, on either a formal or informal basis, in
a market force free of artificial restraints" (2 - Repeal of
"In-State Preference" , Laws on Public Procurement, U.S.
Department of Justice, 1971) .
The purpose of advertising requirements in the newspaper is to
encourage participation by all qualified vendors .
1.4 Often times, it is difficult to get vendors to bid on
Municipal projects . They are fearful that (a) payments will
be slow and (b) paperwork requirements or excessive
specifications will outweigh any potential benefits . Because
of these problems governmental agencies often pay much higher
prices for supplies, services and equipment than private
industry.
j
2 . 0 ADVANTAGE OF LOCAL PREFERENCE
2 . 1 Promotes good-will between Municipality and the local
i
businesses.
2 .2 May help to keep certain tax dollars within the Municipality
thereby, possibly creating opportunity for increased local
employment.
I
REPORT NO. : TR-63-94 PAGE 3
TENDERING - LOCAL PREFERENCE
3 .0 DISADVANTAGES OF LOCAL PREFERENCE
3 . 1 Local preference would directly cause a substantial increase
in the expenditure of public funds by discouraging competition
from outside sources.
3 .2 Taxpayers would be required to pay more taxes for the benefit
of local businesses .
3 . 3 Higher property taxes would discourage new businesses from
locating to the Municipality of Clarington.
3 .4 Other governmental agencies may take reciprocal actions,
hereby creating a competitive disadvantage for Municipality of
Clarington firms . If a contractor's market is confined to its
own locality because everyone else has preferential policies,
it will soon become inefficient and perhaps bankrupt.
3 .5 The probability of collusion increases greatly. A local
vendor may quote a higher price than he otherwise would.
3 .6 May result in lower subsidy grants from the Ministry of
Transportation and Communications as the subsidy is restricted
to that which would have been paid had the low tender been
accepted.
3 . 7 Unless an exception is granted, would eliminate participation
by the Municipality of Clarington in Co-operative purchases
with other public purchasing groups.
4 . 0 PROBLEMS IN IMPLEMENTATION OF LOCAL PREFERENCE POLICY
4 . 1 Establish a definition of a "Local Vendor" ie. : The
Municipality of Clarington or the Regional Municipality of
Durham.
4 .2 Must the "Local Vendor" own or rent property in the
Municipality of Clarington.
4 . 3 Minimum requirements for length of time a "Local Vendor" has
been
located in the defined area.
4 .4 Do branch offices qualify as "Local Vendors"?
4 .5 Does a post office box qualify a company as a "Local Vendor"?
I
REPORT NO. : TR-63-94 PAGE 4
TENDERING - LOCAL PREFERENCE
4 . 6 Should the ownership of' a business be local to qualify it as
a "Local Vendor"?
4 . 7 Are businesses operated from the Municipality of Clarington
residences considered "Local Vendors"? Does the home of a
sales representative qualify as a "Local Vendor" if the
correspondence goes there?
4 . 8 Should the vendor be able to provide the warehouse function as
well as the sales function locally to be certified as a "Local
Vendor"?
4 . 9 A percentage differential must be established and adhered to,
ie. : If percentage differential is set at five percent (5%) ,
what if the difference is five point one percent (5. 1%) ?
5 . 0 CONCERNS FROM OUTSIDE AGENCIES
5. 1 As indicated under the disadvantages, Item #3. 6, the Ministry
of Transportation and Communications restricts their subsidy
to that which would have been paid, had the low tender been
accepted. See Schedule "A" which outlines their position on
the awarding of tenders .
5 .2 In 1987, the National Institute of Governmental Purchasing
Inc. , passed a resolution that opposes all types of preference
policies. See copy of resolution attached, marked Schedule
5. 3 The Canadian Construction Association is adamant in their
position against preference policies and is in fact stepping
up their attack on Provinces and Municipalities that
discriminate against bids from outside contractors. A list of
such groups will be circulated to all Canadian Construction
Association members and will be also given to the media. See
the attached articles from the Daily Commercial News, marked
Schedule "C" and "D" .
5.4 The attached article from Governmental Purchasing, marked
Schedule "E" , entitled "Preference Is Not Preferred" offers
the opinion of various groups and agencies .
I
REPORT NO. : TR-63-94 PAGE 5
TENDERING - LOCAL PREFERENCE
5.5 The British Columbia Court of Appeal recently upheld a lower
court ruling rejecting the practice by Municipalities and
other tender callers of not awarding contracts to the lowest
qualified bidder unless specifically stated in the tender
call. See attached Bulletin from the Purchasing Management
Association of Canada, marked Schedule "F" .
5 . 6 The Ontario Sewer and Watermain Contractors have approached
the Province for assistance in eliminating local preference in
the awarding of contracts. See attached Bulletin from Ontario
Sewer and Watermain Contractors dated January 18, 1990 and
article from Daily Commercial News dated February 19, 1993,
marked Schedules "G" and "H" respectively.
5 . 7 The Federal and Provincial Governments have agreed in
principal to remove most Provincial trade barriers. A Local
Preference Policy is in effect a Municipal trade barrier.
6 . 0 ALTERNATIVE
6 . 1 As an alternative to a Local Preference policy, the
Municipality of Clarington is able to increase participation
in the bidding process by local businesses . Suggested means
are as follows:
6 .2 Search out local firms who offer products and/or services
which the Municipality may purchase.
6 . 3 Meet with the firms, officials and explain the. Municipalities
interest in doing business with them.
6 .4 Explain the rules of the game in the vigorous competition
environment.
6 .5 Encourage the officials of the firms to compete with their
bids . j
6 .6 Educate the firms with respect to bonding and insurance
requirements and how to obtain them.
6 .7 Let them know the fairness and objectivity practiced by the
Municipality in making the awards for bids .
REPORT NO. : TR-63-94 PAGE 6
TENDERING - LOCAL PREFERENCE
7 . 0 OTHER MUNICIPALITIES
7 . 1 Identified on Schedule "C" , attached to Report #TR-63-94 are
the policies of the area Municipalities with respect to Local
Preference. In summary, no area Municipality has a policy
which provides outright local preference.
8. 0 SUMMARY
8. 1 The local vendor already has numerous advantages due to their
geographical location. Examples:
8.2 Local vendors are sometimes better equipped to provide
"service after the sale" that may be required for some
commodities .
8 . 3 Local vendors are usually first aware of new projects that
provide them with the opportunity to assist in the
specification development.
8.4 Transportation costs of the local bidder are usually less .
8 .5 Advertisements are always published locally.
8 .6 Local vendors are more knowledgeable of local business
conditions and requirements .
8 . 7 In accordance with the revised Purchasing By-law, in purchases
under $10,000 . 00, three (3) quotations are required wherever
possible. In many cases, only local vendors are invited to
submit bids .
I
For purchases exceeding $10,000.00 and up to $25,000. 00, three
written quotations are required wherever possible. Once
again, as this is a project which is not advertised, the
number of bidders located outside the Municipality may be
less, and all known local bidders are invited to submit bids.
8 . 8 In summary, the Purchasing Division does not support giving
preference to local vendors. It is staff's opinion that all
bidders should be treated on a fair and equal basis, and that
in an effort to reduce the spending of public funds,
competitive bidding must be encouraged.
i
REPORT NO. : TR-63-94 PAGE 7
TENDERING - LOCAL PREFERENCE
8 . 9 "Since competition is the fundamental cornerstone of the
purchasing process, competitive bidding needs to be encouraged
to the maximum extent possible. Competition goes a long way
toward assuring that the final price is fair and reasonable
both to the supplier and to the client" (3 - Public Purchasing
and Materials Management General, Canadian Institute of Public
Purchasing; The National Institute of Governmental Purchasing,
Incorporated, December, 1983) .
8. 10 Staff do however, recommend that as identified in Report #TR-
64-94, the Revised Purchasing By-law, that the following
paragraph be added:
Paragraph 5 . 1 - Local Preference
5 . 1 Local Preference - If in the determination of the
Purchasing Agent, if a competitive market exists and two
or more bids are received and are identical in price,
provided quality, service and delivery are similar, then
priority of acceptance shall be first for a Local Bid, if
any, and then for a Regional Bid, if any, otherwise the
lowest responsible bid shall be accepted.
Respectfully submitted, Reviewed by,
VaAl
y ,
I
Marano, H.BSc . ,AMCT. , W.H. Stockwell,
Treasurer Chief Administrative Officer
MM*LB*ld
Attachments
i
i
i
Ontario — SCHEDULE "A"
i
Ministry of
Transportation and District #6
Communications Municipal Section
5000 Yonge Street
Willowdale, Ontario
3 - M2N 6E9
Tel: (416) 224-7456 1987 09 17
L. Kotseff
Town of Newcastle RO �4n Terperance Street Bowcnanville, Ontario T �1 1989
L 1C 3A6
TOWN OF NEWCASTLE
Dear Sirt PUKHASING DEPARTMENT
Re: Awarding of Tenders - "�
The advertising of a tender and the subsequent award of a
contract results in a very significant transfer of public funds S
to the private sector, The manner in which this transfer takes
Place, mast not only be done in a formal and open manner, but
appear to be so to the public and private sector. It is our
experience that when a road authority deviates frrm well
established practices in tendering projects and awarding them,
that the contracting industry and ultimately the general taxpayer
suffers.
It is apparent that the lamer the number of bidders- on -a`- "
project, the more c0nPetitive bid prices are likely to.be. when
an owner acquires a reputation for the�unconventional.>iri"awarding
tenders, we have noted a deterioration tin the bidding"Onvirormtent r.
and decrease in the number of bidders. The result is rathet
regrettable. -
I understand Town Council, recently awarded asmajor road
construction contract to ether than the low bidder. I.can,4 --
'sYnpathize with the reasons Council had for making this decision.
however the t a n and s
In so doing,, , y se Precedent en��.�t;,.el ., :�-�
message to contracting' industry' thdt an`unpze;k ab1�F a i ,YT
has been added to the process of.acguifing work `i i ,
'Ire Ministry takes the approach that ii j
>n'spor�s tell-; WI
decision rests with the Tofn. We do however discourage this
action by restricting our subsidy to that which would haves been -?
paid, had the low tender been accepted* i feel compelled to
bring his matter to
� your attention and would appreciate if your �
Council members were made aware of the Ministry's concerns, in `
the hope that the practice of accepting other than the low tender
does not became cc mmn practice.
Yours truly, :
PCG/el P.C. Ginn
b.c.c. J.K. Robinson District Municipal Engineer' -`:R,
R.L. Hanton
Pilo #gsn'I_l n_n1
SCHEDULE "B"
NATIONAL INSTITUTE OF GOVERNMENTAL_ PURCHASING, INC.
115 HILIWOOD AVL NUE f All S CH!_:RC H VIRGINIA 22046 • i'Ii{ ', ; ; - :•u,
RESOLUTION
PREFERENCE
WHEREAS, the National Institute of Governmental Purchasing,
Inc, advocates the use of the free, open competitive process for public
procurement , and
WHEREAS, the National Institute of Governmental Purchasing ,
Inc . supports all efforts to include everyone to participate on. ;a-n,
equal basis in this process, and'
WHEREAS, the practice of preference laws or regulations
results in reduced competition and increased prices;
NOW THEREFORE B- l7 R F SOL .'E D
c1t Jv
of Governmental Purchasing , Inc. is opposed to a.l types of preferencc
law and practice and views it as an impedi,nent to cost effective
procurement of goods, services and construction in a free enterprise
S\'ste7:.
A true copy of a Resolution approved by the National Institute of
Governmental Purchasing , Inc. 's Board of Directors at a Board Meeting
in Arlington, Virginia on March 7 , 1987 .
L IS E. ANG R, CP O
Executive Vi P esiden
and Secretar
A Non-Profit Educational and Technical Organization of Governmental Purchasing Agencies
FOUNDED IN 1944
i
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Distributor For. 100 ea(6 w� nw
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4345 Steeles Ave.W. 665-0016 A V D CON�U�.1 ION RECORD ao<ks, sM D2 es, wallboard„ and other
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SCHEDULE "E"
' I
By John Short
"I realize it's probably a lost cause because I locally policy has a similar appeal to municipal and
don't even have the support of the manufactur- county government. Closer examination shows that
ers on this,"the author of a bill to give business- such a policy has many disadvantages with adverse
men an in-state preference in getting contracts effects both on government and the firms that the policy
for state and municipal purchases told the Wis- purports to assist.As the Milwaukee Chapter of NAPM
consin Assembly Tourism and Economic De- pointed out at the legislative hearing, the intended goal
velopment Committee at a recent hearing on the of increasing business for Wisconsin firms was certain-
legislation. ly a laudable goal, but in their opinion the bill would
not result in good legislation for the people of Wiscon-
The author was the only person to back the bill which sin nor create any more business for Wisconsin firms in
would have required that Wisconsin firms be given a the long run.
chance to match low bids received on state and muni- "Preferential treatment on bids is entirely contrary
cipal purchase contracts from out-of-state bidders. to good purchasing practice, subsidizes in-state firms,
Opposition came not only from the Wisconsin Asso- restricts competitive bidding, discourages out-of-state
ciation of Manufacturers and Commerce, but also vendors from bidding, invites collusion among in-state
from the Printing Industries of Wisconsin, the major vendors,and results in denying taxpayers the best qual-
graphic arts trade association, the Milwaukee Associa- ity at the lowest price," William Mohaupt, President of
tion of Purchasing Management and concerned public The Wisconsin Association of Public Purchasers and
purchasers from the state' and local units of govern- Purchasing Administrator.for Milwaukee County told
ment. the Assembly Committee.
Not all preferential legislation meets with opposition. William 1. Beam, Purchasing Agent of the Milwaukee
A dozen states have overt in-state preference laws. Area Technical College, advised the Committee that
Many municipalities have ordinances requiring them to these shelter type laws would not stand up in the market
extend a local preference. Some states and local units place and would die quickly when put to the test in the
of government practice preference as a matter of policy business world. He said public purchasers spend a lot
rather than law. of valuable time in research of the best product to per-
The surface appeal of some type of preferential treat- form the function. They would be very naive to think
ment of in-state vendors or in-state manufactured prod- that they had a local corner on the market of the best
ducts is quite compelling to state legislatures. A buy- products available and would soon shrivel in isolation.
In
John Shore, a native of Wisconsin, is an administrator in the Mirch 1975 The Council of State Governments
Wisconsin State Department of Administration. He served as published State acrd Local Corrrnment Ptrrclrcisirrg, at
Director of the State Bureau of Purchases and Services for ten indepth study of public purchasing with findings that
years• and is currently chairman of the National Association of preference is arguably unconstitutional as a barrier to—)
State Purchasing odiciats- Committee on Research. He is co-
chairman of NASPO Liaison Committee to the Coordinating interstate commerce;preference is in direct conflict with
Committee on a Model procurement Code. A self-proclaimed the principles of competition and precludes the pur-
er
refugee from the University of Wisconsin's School o/Journalism,
Short brings a wealth of purchasing experience to his discus, chas from obtaining the best competitive price; and
sion of in-state preference procurement policy. potenti•�l sources of supply are red iced.
22 GOVERNMENTAL PURCHASING / FEBRUARY 1973
/ 4
i
SCHEDULE "F"
�V
Purchasing Management Association canadienne
Association of Canada de esti n
g o des achats
LANDMARK DECISION UPHELD
A British Columbia Construction firm has emerged as the victor in a court case involving apparent local
preference in the awarding of contracts.
Roger Tanner, president of Chinook Aggregates Ltd,of Vernon,BC won a major victory in court that
will effect the way construction contracts are tendered and awarded across Canada.
The BC Court of Appeal upheld a lower court ruling rejecting the practice by municipalities and other
tender callers of not awarding contracts to the lowest qualified bidder unless specifically stated in the tender
call.
The original decision handed down in October 1987 stated that theMunicipal District of Abbotsford was
wrong in 1985 when it did not award the contract to Chinook Aggregates,despite the fact it submitted the
lowest bid. Instead a local firm received the contract because Abbotsford had an unadvertised policy
of favouring local firms whose bids were within 10 per cent of the lowest bid.
The clause,"The lowest or any tender not necessarily accepted"gave the municipality,in their opinion,
the right to award the contract to whomever.
The judge ruled that because the original tender call did not mention preference to local firms and
because Tanner's company met the qualifications,except local residency, as low bidder,it should have
received the contract.
George Ouimet, an expert in tendering contracts and on whose testimony the Judge leaned heavily,
testified that the phrase"any tender will not necessarily be accepted"was included in a tender call to allow
the owner to cancel the project that would prevent him from awarding the contract if neccessary. As he
stated,This clause is not used or intended in the industry to allow the owner to arbitrarily award the contract
to just any bidder or contractor."
Mr. Justice Legg stated in his Reasons for Judgement:
"I agree with counsel for the respondent that it is inherent in the tendering process that the owner is
inviting bidders to put in their lowest bid and that the bidders will respond accordingly. If the owner
attaches an undisclosed term that is inconsistent with that tendering process, a term that the lowest
qualified bid will be accepted should be implied in order to give effect to that process."
It is anticipated that this decision will have a significant impact on the construction industry across
Canada. Michael Atkinson,director of the Canadian Construction Association in Ottawa,believes it will
put an end to the practice by government, at all levels, of awarding contracts based on local preference
without it being clearly stated, and virtually ends the practice of bid shopping.
Mr.Tanner's lawyer,Bob Moffat said,"The court has given a clearer meaning to this clause and defined
it to in effect mean that there have to be good business reasons or pre-stated conditions for the tenderer
not to award a contract to the lowest bidder."
Tanner believes this decision is the first of many. He is currently aware of 15 to 20 cases nationwide
that will now proceed as a result of this ruling.
i
. iWti�.JnAIIINlIC Ut Itlf.- �..uN./lll W .l...a' W•U.u..M I...,
the COtlCepi Ot pt'CtcrGiivai ttGOt-
has bevti concerned with the issue of in-state preference meet for local vendors.'
-since the beginning of the Association in the late 1940's.
NASPO has adopted resolutions expressing its c%pposi- Y
tion to in-state preference on a half.dozen occasions. others which follow the practice administratively.
NASPO has also closely monitored the status of in- The thoughtful public purchasers recognize a dual
state preference legislation. In 1970 the NASPO Com- concern in administering their. purchasing programs.
mittee on Competition in Governmental Purchasing They are charged with the purchase of materials, sup-
conducted an indepth survey of in-state preference plies, equipment and contractual services at the lowest
policy and practice. A summary of that survey, with possible cost consistent with utility. At the same time
an update from data collected for preparation of Pur- they have an obligation to enlarge the competitive cli-
chasing By the States, Fifth Edition, June 1977, follows: mate and to see to it that there is nothing which would
` 1970 1977'
Yes No Yes No
1. Overt In-state Preference 12 31 - 121 32 .
Z. Percentage Advantage to in-state Bidders
3% 2 3
5% 6 4
10% 2 3
3. "Tie-Breaker" In-state Preference in case of tie bids only 38 10 39 5
4. Reciprocity 7 9
"1977 Data from Purchasing By the States, Fifth Edition, June 1977 Draft
(1) Idaho reports preference in Printing only.
-There has been no change in the number of overt in- be an impediment to local or in-state firms'from flour-
state preference laws. In fact, most of these laws date ishing in that competitive environment. Public pur-
back 40 to 50 years. The states do report a growing chasers also recognize that these two concerns may at
number of efforts at the introduction of in-state pre- times seem to be in conflict; they need not.be.
ference laws. The Wisconsin State Bureau of Purchases and Ser-
The majority of states have the provision, usually vices suggests a resolution of this conflict in a "white
statutorily imposed, that in case of tie bids preference paper" on the subject of in-state preference prepared
will be given to an in-state bidder. While this is clearly over ten years.ago to have a document ready to re-
"in-state preference" such "tie-breaker." awards impact spond to the issue at any time. The paper has been up-
neither the cost to the state nor freedom of competition. dated a number of times and was the basis for informa-
As one state purchasing official puts it. "It beats flipping tion provided the Assembly Committee at the recent
/a coin", hearing.
just who is an "in-state"bidder is ad trouble- The paper points out that public purchasers know the
some to many states. There is no question with manu- essence of private enterprise is free competition and
facturers, processers, wholesalers, distributors or re- only through full and free competition can free mar-
tailers owned and operated solely within the given state, kets, free entry into business, and opportunities for the
but most states indicate that they also accept any busi- expression and growth of personal initiative and indi-
ness with a branch office or warehouse in-state and a vidual judgment be assured. Such competition and re-
substantial number accept any vendor with a bona sulting economic well-being cannot be realized unless
fide mailing address in-state. the actual and potential capacity of local and in-state
In the early 1960's only two states,.had reciprocity business is encouraged and developed. The paper sug-
laws, i.e. applying sanctions only against vendors from gests the emphasis should be on appropriate measures
states which had in-state preference acts. The 1970 sur- taken before going to bid rather than imposing an arti-
vey identified 7 such states and by 1977 there are 9 ficial restraint on competition at time of award.
which have statute law of reciprocity and a number of The public purchaser wants to treat all prospective
bidders equally. There are operational patterns which
- - can be followed to give a little more equality to in-
"Preferential treatment on bids is state and local bidders.
entirely contrary to good purchasing Generic specifications are preferable, but it is impos-
., sible with the myriad requirements of governmental
(�fdCtICOS... (continued on page 34)
GOVERNMENTAL PURCHASING / FEBRUARY 1978 23
43
Preference Is Not Preferred lesion among in-state vendors..."
(continued from page 23;
purchasing to avoid the judicious use of the 'bran) •
name or equal" specification for many purchases, fro- in the Decision process. Finally, in-state or local ven-
ducts of in-state or local manufacturers should be dons should be reminded that they enjoy a natural geo-
specified whenever possible and first if more than one graphic advantage in sales engineering.
brand name is used. Valid support of in-state and local vendors is better
When generic specifications are used, they are de- accomplished in the construction of technical and pro-
rived in part from specification meetings with manufac- cedural spkifications rather than in an arbitrary award
turers. local and in-state manufacturers in the field of bids.
should alwa,-4*be parties to spec meetings.While generic'' In-state and Total preference is inequitable because it
specifications cannot. be' sewictive,` they should be .- results in part of the tax dollar being spent In subsidy
framed with an awareness of'the potentials for local initead of--value. Sound governmental -purchasing
production."To'service a'contract. particularly to meet equates with the concept of best value procurement,
the specified delivery, a contractor is usually required i.e. award to the lowest responsible bidder meeting the
to maintain an extensive inventory. Geographical con- specifications. The mission of the public purchaser is
sklerations rill for-nearby warrhousug and in some to conserve public funds and to spend one penny more
problems situations this can be spelled out as man A#- for whatever.,rcason is not doing that job.
tort' in the.procedural specifkatlons of the solicits. The public .purchaser agts in agency for his state,
tion for bids, county, municipal► or school district and for the
freigkt'is part of the'comractoes selling cost and local taxpayars. This is a stewardship of critical responsi-
vendors have a built-in advantage when bids tali for booty. Implicit in this stewardship is a grant of discre-
delivery f�o.b. destination, tion and any infringement results in proportionately
Frequently the element of service is important, either poorer purchasing perforrumce. The purchasing agent
in lsustaltat#on or In nwintenanm and if service is who has his market place artificially constrained can not
identified as a eriterica in award at the time the sauci- aren+ciae the kgpen u" and initiative which are the hall-
tation of bkis goes oud, it certainly can weigh heavily "~arks of the professional public purchaser.
i
4' 4
SCHEDULE "G" �o
meeting the
challenge ��G11
0SK) `ri
of the
future ontario
W sewer & watermain
contractors association
6299 AIRPORT ROAD,SUITE 702,MISSISS4UG4,ONTARIO, L4V 1N3 (416)677.0470
{ .L• E' ~
January 18, 1990 291
[PURCHAS EB 6 1990
OF NECASTLE `
NG DEPARTMENT
TO: Ms. P. Barrie
Clerk
Town of Newcastle
40 Temperance St.
Bowmanville, Ontario
L1C 3A6
(� fto
of
FROM: R.W.A. Cochran
Executive Director
OSWCA
RE : Awarding of Contracts in Ontario
The position of the Ontario Sewer & Watermain Contractors
Association is that contracts for public work should be awarded
to the lowest qualified bidder.. There-has been a tendancy in- the
past on the part of some municipalities to favour the lowest
local bidder .
I refer you to the article "Chinook wins its appeal against
Abbotsford" in the December , 1989 issue of CCA National
(attached) . This article describes a case heard in the British
Columbia courts where a contract was awarded to the lowest local
bidder rather than to the lowest qualified bidder . The outcome
of this case after appeal , was that the court upheld the lower
courts decision to award the contract to the lowest qualified
bidder .
I
This may be of interest to you .
i
� 4
Published by
Canadian Construction '
Association
December 1989
Chinook wins its appeal against Abbotsford
In what may p�C•to be a landmark did'riot overridetthat term since it is pality had breached the implied
decision regarding the competitive, •customary,and expected that such term and its duty to treat all bidders
bidding process in Canada,the B.C. ` preference policies would be brought fairly and not to give any of them an
Court of Appeal recently ruled that to the attention'of bidders. unfair advantage.
where competitive bids are solicited Municipal' appeal. On appeal, Mr. Justice Legg in his written
for construction contracts there is Abliotsford maintained the trial decision states as follows:
an implied condition the owner will judge had erred in finding the bidding "I agree with counsel for the
award the contract to the lowest_ oontraci oontaintd an implied term respondent that it is inherent in the
qualified bidder. contrary.to the express language of tendering process that the owner
The Municipal District of Abbots- the Instructiowfo Bidders.The B.C. is inviting bidders to put in their
ford, B.C., invited bids in 1985-on—- C66i of Appeal, in upholding the lowest bid and that bidders will
a gravel crushing contract by public lower court's decision, disagreed. It. respond accordingly. If the owner
advertisement. Chinook Aggregates ruled the language in the Instructions' attaches an undisclosed•terni'that
Ltd.,of Vernon,B.C.,was the lowest to Bidders did not give the owner the is inconsistent with the tendering
bidder.Abbotsford awarded the con- right to apply a local preference process,a term that the lowest qua-
tract to the second bidder, a local policy where that policy was not lified bid will be accepted should
contractor, solely on the basis of an disclosed in the bid documents. be implied in order to give effect
undisclosed preference policy favour- The court also found the munici- to that process."
ing local firms whose bids are within
10 per cent of a low bid from out-of- Stronger and better apprenticeship
town firms.
The existence of this policy was not if task force report has any say
disclosed to bidders.The Instructions
to Bidders did contain, however, Apprenticeship in Canada will be human resource strategies and the
a statement that "the lowest or strengthened and better promoted low participation rate of women in
any tender will not necessarily be if the 28 recommendations from apprenticeship programs were all
accepted." the report of federal task force covered in the task force report.
Court action.Chinook brought an on apprenticeship training are The task force established in-July
action for damages against Abbots- implemented. by Barbara McDougall, minister of
ford. At trial, a B.C. County Court The report,presented at a sympo- employment and immigration,as one
concluded the municipality had sium in Calgary,Dec. 14-15,calls for of six to review various aspects of
breached an implied term of a bid- the establishment of a Federal federal labour force strategy, had
ding contract that the lowest qualified Apprenticeship Board that would business and labour representatives
bidder would be awarded the con- have balanced representation from trying to find workable solutions
tract. It based its findings of a bid- business and tabour. The board to training problems.
ding contract on the 1981 decision' would provide advice on new appren- "This was not an easy forum in
of the Supreme Court of Canada in ticeship funding agreements as which to develop recommendations
the Ron Engineering case as :yell as thdy-are negotiated between federal for meaningful reform," -said-John- -
the more recent Federal Court judg- and provincial governments. Halliwell, CCA vice-president and
ment in Best Cleaners. Another recommendation asks for business co-chairman of the task
The court relied upon expert testi- the identification of apprenticeship as force. "But we did find sufficient
mony as to the custom and usage of a separate training program with a common ground to work out what
the construction industry to find the budget apart from the existing skill we believe are important sugges-
existence of the implied term and fur- shortages program within Employ- tions for the future of this form
ther ruled that the qualifying lan- ment Canada. of training.
guage in the Instructions to Bidders National training standards, better "Apprenticeship..is a proper and
_:r:'ter.'':°,•:_ X.:= --; r ;r u. r:< - .. . desirable method to provide ad-
`-' " vanced education and skill training
Chr/Stmt3S /neSSc3ge.. for workers, and it deserves strong
The`Christmas'season is-always wspcciaF.Ilme=of•year when we are reunited support from government, business
witli family.and,friends.Af not in person by way of phone calls and cards.Hope-. and labour," said Halliwell.
ftilly,':for we-Canadians, this.holiday season:will-also be a'time to count our The task force operated under the
blessingfor the-gifts we enjoy as&citizens of.this great nation. guidance of the Canadian Labour
As the-year:ends, we move�into°a-decade:of high-hopes for a more peaceful Market and Productivity Centre.
would:Yet:it.will be a demanding�decade i.t�so many otheiIways, not the least CCA Second Vice-Chairman Jake
of which will be to'find the ways to leave our:children and future generations Thygesen,an Alberta contractor and
an environment-where they too may'enjoy health and prosperity. member of the Alberta Apprentice-
To all our members and all our readers best wishes for a very Happy Christmas ship Board, also represented the
-and 1990_from the Officers, Directors and Staff of CCA. association on the task force.
i46
S '
,,cca 'pre .erence ouawVants l tl d '...
7 �� "_!,. (S. 'f•`fit.`� 't�i.>FU
;�•°^+ � �a �h 'i:, ;s.
ee
B JANICE WALI11' U, { .'"It`;sa}is;the a and in=
Y pUrpos Morra:,That s„in a DECISIONS VARY
'TORONTO D C N `”I":
tent.of of tt�e act is-to prevent m om Court decisions on the issue
B;;TY ,
'Ontario se�veand(waterni}iiu> discrimrnation in Ontario on ��you' ioot'fio*�n �' of local preference vary across
+ : .� the ounds of race ali 'we' the country.In B.C.;the Court
contractors;want local. fer ' ip ty;5 ",not g
r +f, �•. color"'nationality, ancestry, ,.�;"�+:``:,..;,.; of has ruled a munici
ence eliminated'in the award;{. ou; . - Appeal
ing of.co�s, and are'asiC-`'':�place of origin, sex or geo-r Y-Lorl'Roth, a partrie pality breached the term`s of
rovin f � •`. graphical location of persons1F
ing the p ce or 6elp,:s � Construction Law tender call by awarding a con
The Ontario Sewer and:Wa-�r employed in of engaging in of:.Cassels. Brock; tract to a local company atudl
termain Contractors Associa- business,".said Mona "What .well,.:said'the "" `� bad not submitted the low
we' 'akig {te int }.ttion (OSWCA) is preparing'a o, stateinent" in the� � '"`a bid The court decided't=..ar
do,is•to`-u hold this ` -
brief to send to the Ministry of. P �o� purpose, among"ottierl owner cannot base the award--
clause.,,.- :-,- `. , . •., ; :-. , tt
Consumer and. Commercial is to prevent disciinirri *,.ing of a contract.on an_undisr,
r ..Tb6; -ministry"would not
Relations on the'matter.It will *: the 'grounds`of Ygeogra' RCdosed preference.
outline a specific ,case in give: a,• general 'ruling, but location. But tb,6.actual`' The Court of Appeal of.On'
which a municipality passed ':asked Mc)rra to'submit-a writ=� sions in the-ad afire less� OLy- tario, isi'contrast, has allowed`
over the lowest qualified bid- ;ten,•,account of-a particular said ..=L�7. a� `
t local preference in the award`
case iri which local preference-) t .� ::
she der on a job and awarded the ,'• , .: . The :w ay.. discrunin o ling of a contract because the
contract to�a local company xwas.tlie'.basis for.awarding a. business:_piadice are ' r
p 'contract",:. .. -•r� �e •contiacti;doeuments contained'
whose bid was higher. �g =�eAGu' ' ''re trar,fez serried in the act appeals to- a`cJause-that said the `'lowest
The association hopes the :" -:h`;; ': make that concept;poten
Mali or'any..tender"would not new
ministry will decide :that zac,z,sazd the.ministry.will ,
Y £' applicable to a preference'fozx essarily;..be accepted AcmE
eview�thi-6- inforrination from. > ,
choosing a contractor on:the y the use of local subtrades,lrrt 'Building'&Construction Ltd,
Corr and..decide.whether ,
basis of local preference.vio- ' y yr. ...y not necessazily to a prefei�erice the low,bidder which feels,
later the Discriminate Busi= p f• ,-' y' O° vendon of; yr•.;1'
Discriminatory for local general contractors, wipnged in that case,.has ap-%
soecrfic case.' Roth said 'Q; -' '' plied4fa�e-leave to appeal tha�.y
Hess Practices Act. :'. y ,a ,,, t., v
orra4 ,protested to mu-" �� V
It's simply a matter of pro-- c••; ,.gyp !.c,u: , `What the act appears to,lie decisron to''the Supreme C oul
leering the sanctity of the ten- 'met councils'.when they`; going :after`when.it'sa ills" of Canada:} .'` T''
i deting 11aV ,iV1Wai COnt2�tCts 66 the; YS r t, a ! + T'
Ott.: process, rarer OSWCA :"w�• t- �.. _ criminatery Business practi { Acmes will 'argue that an
—?,. ference Lastr: o. ;.r: ':.a t.T'
assistant executive 'director and;' to define-them b'`ex awntrr who ca1Ls for tendei3 '
Ocid of•. ,example;,'he' .. .
Sam Morra in an interview, s: b;Haniltot Township ampler is not to deal:with a srt must make clear from the star
Municipalities almosf `al->;' �� . Y�,<: • uation .where it's one ,on;,one wh it might not `acce the.
was award contracts. to'the c011 (° CObOt11g) >#ii y
Y port, the .lowest but where`it's one person.try rowest bid In other words,
lowest qualified bidder,;said ed ing to make another person ';'will argue that;apreference foi
bi t•on a $157 000
Morra. But during recessions for? ,' v et , refuse to do business with a' local co mpams;;_must."be
sewer and ad re- , �..-.
especially, he said, they at . cons ction; ' third person Mated tIVEM.':'. :
times pass over the''•lowest':, ,..But, despite However, Roth d if,OSj
Mo s efforts, c de- WCA submits its s cific case
bidder to award contrails to
local companies. ctde o awaiid clue
p big r bidder, ch wasta to the Ministry-of onsuM'cr
HAPPENING MORE and Commercial lationst
<. , r local mpapy 4
,I ve seen it happen more rn4 .. -and it decides the low It qu
the last two years .than I've" This is likely-.the - t ified bid should not ha ,
seen in the pasta It's because ;association will.submit r the passed over,that decisto 'ii any
of local pressure.". ;ministry for a':ieview- *aid help create a"mindset"
Morra asked the ministry• Mona t,'r °��
� • '. � municipalities and others that
for .a general ruling• about "In this day.slid age;when the lowest qualified bid ust
whether awarding contracts on.* we're trying;.to lower trade be accepted
the basis of a local preference barriers across;the world, it
violate'z;the purpose clause in -'seems ludicrous that" we're
the Discriminatory Business erecting unici '''
g pal ones,"said
Practices Act,
I