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HomeMy WebLinkAboutCOD-014-04 r-.... _~._~ Cl~-!Qglon REPORT CORPORATE SERVICES DEPARTMENT Meeting: GENERAL PURPOSE AND ADMINISTRATION COMMITTEE Date: April 19th, 2004 Report #: COD-014-04 File#_ By-law # Subject: LOCAL PREFERENCE Recommendations: It is respectfully recommended that the General Purpose and Administration Committee recommend to Council the following: 1. THAT Report COD-014-04 be received; 2. THAT the paragraph 5.1, Local Preference, of ~urchasing By-law 94.129 remains as is: -ti,J /" Submitted by: ....' ~- , rie Marano, H.B.Sc., C.M.O. Director of Corporate Services (-\ f.J;u.J2.._X __S./J , ~ Reviewed bY::) ~ Franklin Wu, Chief Administrative Officer MMlLAB\km 1201 '. REPORT NO,: COD-014-04 PAGE 2 BACKGROUND AND COMMENT The issue of local preference is one that local governments have struggled with for many years. EXISITING POLICY The Municipality of Clarington last addressed this issue in 1994. At that time Council approved the addition of the following clause to Purchasing By-law 94-129, Paragraph 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 iowest responsibie bid shall be accepted. " At the request of Council, staff have re-investigated this issue to determine if the existing policy is stiil appropriate. LEGISLATION From a legal aspect, there are currently two pieces of legislation in Ontario that prohibit a iocal preference policy which are as foilows: 1) "The Discriminatory Business Practices Act (R.S.O. 1990, Chapter D12, the purpose of which is: to prevent discrimination in Ontario on the ground of race, creed, colour, nationality, ancestry, place of origin, sex or geographicai location of persons employed in or engaging in business. R.S.O. 1990." In accordance with this legislation "engaging in business, includes seiling goods or services to or buying goods or services from". The act further states: "No person in Ontario shall engage in a discriminatory business practice." For the purposes of the act, person includes a partnership, sole proprietorship, unincorporated association and governmental agency. Where a corporation is convicted of an offence under the act, a maximum penalty may be imposed upon the corporation of $100,000.00. 1202 .." REPORT NO.: COD-014-D4 PAGE 3 BACKGROUND AND COMMENT (Cont'd) 2) Agreement of Internal Trade The Canadian Government implemented the Agreement of Internal Trade, the purpose of which is: "to ensure equal access to government procurement for all Canadian suppliers _ in a transparent and efficient manner - in order to reduce purchasing costs and to contribute to the development of a strong economy." It is specified within this Agreement that all Municipalities are to follow and abide by the agreement. This Agreement states that: "Governments are not permitted to discriminate against suppliers of another province or territory. This includes local price preferences, biased technical specifications, unfair registration requirements or unreasonable time constraints. >> The key principle of this agreement is as follows: Non Discrimination - Cannot adopt or maintain procurement measures that discriminate against suppliers. i.e. No Local Preference Policies are permitted under the agreement. Professional Associations In addition to the above legislation, the National Institute of Government Purchasing (NIGP) has passed resolution #1016 which reads as follows: RESOLUTION Number: 1016 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 an equal basis in this process, and Whereas, the practice of preference laws or regulations results in reduced competition and increased prices: 1203 '. REPORT NO,: COD-014-04 PAGE 4 BACKGROUND AND COMMENT (Cont'd) Now Therefore, BE IT RESOLVED that the National Institute of Governmental Purchasing, Inc. is opposed to all types of preference law and practice and views it as an impediment to cost effective procurement of goods, services and construction in a free enterprise system. The above resolution was adopted by the Board of Directors of the National Institute of Governmental Purchasing as its official meeting on the 7th day of March, 1987." Other Municipalities in Ontario In preparation for this report, staff surveyed twenty-five (25) surrounding municipalities and it was determined that for tendering purposes there was no city, municipality, region or town which operates under a Local Preference Policy nor did any of the areas surveyed have any intent of implementing such a policy. Most felt that such a policy is in direct conflict with the Discriminatory Business Practices Act (noted above) See Schedule "A" attached for survey result. Impact from a Local Preference Policy 1. Prices will rise by the level of the percentage of preference given, and possibly, go even higher because of the restriction on competitive and open bids. For example a 5% preference on an annual expenditure of $23 Million could the raise contract award by $1.15 million or more. 2. We would be in direct violation of the Discriminatory Business Practices Act (R.S.O. 1990, Chapter D.12) and the Agreement of Internal Trade. 3. Taxpayers would see an increase in taxes for the benefit of local businesses to meet the higher costs. 4. Higher property taxes would discourage new businesses from iocating to the Municipality of Clarington. With the loss of the new business locai employment would not increase. 5. 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 locaiity because everyone has preferential policies, it will soon become inefficient and ineffective. 6. A local vendor may quote a higher price than he otherwise wouid. 7. Unless an exception is granted, it may eliminate participation by the Municipality of Clarington in co-operative purchase with other public purchasing groups. 1204 "., REPORT NO.: COD-014-04 PAGE 5 BACKGROUND AND COMMENT (Cont'd) 8. By not accepting the lowest responsive bid, the Municipality would be creating a subsidy for a few business taxpayers at the expense of all residential and business taxpayers. This would be the result of paying the local vendors a higher price for service and / or good(s) which could be obtained from another source at a lower price. How Do You Define a Local Vendor? 1. Would it only appiy to businesses located with the Municipal limits? 2. How do you respond to a taxpayer living within the city who owns a business located elsewhere? 3. Must the business own property within the Municipality? 4. How long must a business be established within the Municipality to qualify? 5, Does the home of a sales representative qualify as a local vendor? 6. Does the making of payments to a company address outside of Clarington disqualify them as a local vendor? 7. Should the ownership of a business be local to qualify? 8. Should the business have paid local property taxes to qualify? 9. Should a warehouse or small branch office qualify a firm as local? 10. Does a post office box quality a company as a "Local Vendor"? 11. Are businesses operated from the Municipality of Clarington residences considered "Local Vendor"? 12. Should the vendor be abie to provide the warehouse function as well as the sales function locally to be certified as a "Local Vendor"? Local Company Advantages Local vendors already have numerous advantages over an outside company as follows: 1. Local vendors are sometimes better equipped to provide "service after the sale" that may be required for some commodities. 2. Local vendors are usually first aware of new projects that provide them with the opportunity to assist in the specification development. 3. Transportation costs of the local bidder are usually less. 4. Advertisements are always published locally. 5. Local vendors are more knowledgeable of local business conditions and requirements. 1205 REPORT NO.: COO.Q14-o4 PAGE 6 BACKGROUND AND COMMENT (Cont'd) 6. As per the Purchasing By-law, purchases under $10,000.00, three (3) quotations are required wherever possible. In many cases, only local vendors are invited to submit bids. 7. For purchases exceeding $10,000.00 and up to $30,000.00, three (3) written quotations are required wherever possible. Once again, as this limit would relate to a project which is not normally advertised, the number of bidders located outside the Municipality may be less, and all known local bidders are invited to submit bids. 8. When bids are tied, the local company is selected based on the ground everything else is equal. 9. Local vendors are better able to provide commodities when we rely on them to stock the items in lieu of the Municipality warehousing parts. i.e. small automotive repair parts. 10. Local vendors are better able to provide mobilization function when required for demolition and construction projects, which gives them an inherent pricing advantage. 11. Local vendors may be better able to comply with "response time" requirements placed on service contracts where travel time is taken into consideration. Alternative to a Local Preference Policy 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: 1. Search out local firms who offer products and / or services which the Municipality may purchase. 2. Meet the firms' officials and explain the Municipalities interest in doing business with them. i.e. Supplier Information Night 3. Explain the rules in the vigorous competition environment. 4. Encourage the officials of the firms to compete with their bids. 5. Make them more aware of the fairness and objectivity practiced by the Municipality in making the awards for the bids. 6. Continue with existing practice where 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. ~ ". REPORT NO.: COO-014-D4 PAGE 7 BACKGROUND AND COMMENT (Cont'd) Summary By implementing a Local Preference Policy the Municipality of Clarington would be in direct contravention of the Agreement of Internal Trade (section 1.2) and Ontario's Discriminatory Business Practices Act (section 1.1) Staff's recommendation to not alter the current By-laws would enable the Municipality of Clarington to continue to purchase on a non-restrictive, competitive basis by allowing all qualified vendors equal opportunity to conduct business with the Municipality. This will allow for the Municipality to show their tax payers that they are operating in a fair non-prejudice manner and in the best interest of their tax dollars. In summary, staff does not recommend 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 the tight publiC funds, competitive bidding must be encouraged. CORPORATION OF THE MUNICIPALITY OF CLARINGTON 40 TEMPERANCE STREET, BOWMANVILLE, ONTARIO L 1C 3A6 T(905)623-3379 F (905)623-4169 1207 , ~ .c. Local Preference IIIIII'III'I'~ .111"'11111;, ',"'Ull.oCillll1i~~fere~~~I,poli~1 ""1' '.,',111 "II, ",.1,1,1111,. 1I1"III,TiI. or NQ 'Ii! , II', 1111"". Areas within the Province of Ontario City of Brampton No If all things equal then preference will be given to Brampton based businesses City of BurlinQton No City of Hamilton No City of Kingston No The Agreement on Internal Trade removed any form of local preference City of Kitchener No City of London No City of Oshawa No City of Ottawa No City of Pickering No Discriminatory Business Practice City of Sudbury Tenders - NO Proposals - an evaluation process encouraging outside vendors to work with local vendors City of Toronto No City of Waterloo No City of Windsor No Capital Region District No Removed when NAFT A introduced Niagara Falls No Peel ReQion No ReQion of Durham No Region of York No Richmond Hill No Town of Ajax No Town of Markham No Town of Peterborough No Town of Whitby No No intention of implementinQ Town of Whitchurch- No Stouville TownshipofScuQoQ No , " Q.iIlfSilife ot"tlle ~rovjl'ce"~ O~t"riQ ""I. .,' '..."1111""'",' .i1111111.,i!'III'1 JIE re I,. City of Saskatoon No Cochrane Yes Put not applied as of vet Deita, BC No GVRD, BC No No restriction of the competitive tendering process to any iurisdiction Region of Halifax No ReQion of Halifax Saint John No Strathcona County No 1208