At council last night there were several issues that relate to procurement. It was a long session, and challenging at times, not least because procurement is a complex and sometimes contentious process. So here’s a rundown of how it’s supposed to work, including the laws and policies that structure the process, as well as some critique and suggestions for how we might do better.
Why Have a Procurement Process?
To start, why do we have a procurement process at all? Why don’t we just open the yellow pages and pick a contractor, or work with contractors we already have established relationships with? In many ways that would be simpler, and could possibly achieve the same results, right?
Whenever we spend public money, we have a high standard for ensuring that it’s money well spent (and a high standard for making it clear what those standards are, and that we followed those procedures). This is in part to ensure that we all get good value for our tax money, and in part to prevent corruption. By having a public bidding process in which contractors compete for the job, we can both set a standard for the qualifications of contractors and set the conditions for competitive pricing. Contractors are invited to submit documents showing their qualifications and expected pricing, in sealed envelopes that will not be opened until the bidding has fully closed, and then each bid is evaluated on the basis of criteria agreed upon beforehand.
With regard to high standards, the process we heard about at length last night placed a high emphasis on quality: 20% of the “points” each bid could achieve were related to the qualifications of the firm, their staff, and their subcontractors. Each bid contained information about the firm’s experience and completed jobs from the past decade, as well as resumes for their staff. The goal of this part of the process is to make sure that we don’t get a contractor who has bitten off more than they can chew, and who won’t find the job overly challenging because they’ve done similar jobs before. This section of the evaluation had a cutoff: of a possible 20 “technical” points, we only accepted submissions with 14 or more points–so no matter how low of a price we were offered by a firm, we wouldn’t sacrifice quality.
With regard to price, that’s the reason the bids are submitted in sealed envelopes and only opened after bidding has closed. Nobody can know what price each firm will charge until all of the bids are in. This is especially important because the price is worth 80 points in the scoring. The lowest bid is awarded 80 points, and each higher bid has points deducted based on how much higher their price was compared to the lowest bid.
In the end, we are presented with a report showing the scores of the various bids, combining their technical and price scores for a total out of 100. The report indicated that 4 of the 6 total bids did not make it past the quality cutoff, leaving us with only two bids to choose from. One of those options had the lowest price; the other had the second-lowest price, but had a higher technical score, and won the contract.
The Legal Framework of Procurement
The Municipal Act requires that municipalities have a procurement policy. I recently took a course on municipal finance, which included procurement issues, and from what I’ve learned I think that Brighton’s procurement policy is excellent, balancing the need to get good value for public money and have accountability for spending with practical considerations of making it easy for staff to do their jobs, including spending money, without having to jump through too many hoops.
One of the keys of the policy is setting thresholds over which we need more intensive processes to ensure that accountability and good value. Should we need to hold a public bidding process in order to purchase office supplies, or can we just run down to the store? Well, it depends: are we buying office supplies in bulk, spending hundreds of thousands of dollars at a time? (Thankfully, no.) By setting thresholds for these more intensive processes, we aim to find the sweet spot where staff can do their day-to-day work without needing special approvals or processes, while still giving proper scrutiny to larger expenses.
For example, we have a “Qualified Supplier Roster”, which is a list of suppliers who have proved their ability to provide the quality and kind of goods we need on a regular basis, a quality control process that only needs to be done once to get on the list. Once on the list, that supplier can be called upon for goods and services that amount to less than $50,000 a year. So if we need something, and we know we can get it from someone on our list, and it costs less than $50k, we don’t need to have a public process for making that purchase. But if we need something that costs more than that, we need to go through a public procurement process even if the winning firm was already on our list, because that cost threshold matters.
Similarly, individual departments within the municipality have cost thresholds that govern their own spending. Staff don’t need to fill out a form and get an approval for petty expenses that arise from their work: if they need more supplies, or to hire a contractor for a small job, they can just do it so long as it’s under their department’s threshold. Different levels of staff have different thresholds, and any expense over $100,000 requires council approval. But you’ll notice that we have a bias toward public accountability: even though they could make purchases under $100,000 without council approval, we regularly get requests from staff to make purchases under that threshold for the sake of transparency and accountability. That’s one of the reasons I’m proud of the trust that I see in our staff around procurement: the policy sets a standard for public trust, and our staff regularly exceed that standard.
For expenses under that $100k threshold for council approval but above the $50k/year threshold for Qualified Suppliers, our staff have to go through what’s called a Request for Quotations (RFQ), which is to say they have to look around for the best price and document that search in writing (of course it’s more complex than that, but that’s the idea). For expenses over $100k, the process is called Request for Tender (RFT). In both cases, these are used for items or services that are fairly straightforward. When we need to evaluate the suppliers to qualify their goods or services, we do the more stringent Request for Proposals (RFP) process that I described above.
What Criteria Do We Use?
When we evaluate bids in an RFP process, we get to choose the criteria. The criteria used in the RFP we awarded last night were straightforward: it was a review of the experience of the people who would be doing the work, to ensure their capacity and quality. One of the questions asked by the firm who didn’t win the RFP was why we didn’t consider their policy of hiring local workers, which is a great question to ask before the RFP is released; the answer in this case is that where workers were from was not considered at all in the criteria that were determined before the RFP went out in the first place. A good question, but too late to be considered.
So why didn’t we consider it? There are some things that we cannot consider, and I’ll use another item from last night’s agenda to illustrate. We supported a motion from another municipality calling on the provincial and federal governments to carve out space in trade agreements to allow for municipalities to prioritize local procurement. As it is, we’re not allowed to give special consideration for domestic suppliers of goods or services that are included in international trade agreements, even when those trade agreements are being actively violated through the imposition of tariffs.
The other reason why we don’t always consider things like the impact on local employment in our procurement process is that the more complex our procurement process is, the longer it takes and the more expensive it gets. I recently heard this described as the “everything bagel problem”: when a government uses its procurement process as a tool for achieving other goals, no matter how worthy, our attempts to try to do everything end up sometimes achieving less. (Everything bagels are my personal favourite, but I digress.) One example Ezra Klein has been talking about is the American procurement model for wind and solar energy under Biden: their procurement process had so many rounds of public engagement, and so many requirements for labour and environmental standards, that it became a multi-year process that resulted in almost no new energy projects being started. The standards were too high, too complex, and had too many opportunities for roadblocks.
Criticisms and Suggestions
My criticism of procurement models as they currently stand is not their intent (which is to ensure accountability and transparency for public spending, and good value for dollar), or even in their structure (our procurement policy is excellent). And I’m not even against the idea of using procurement to further other goals, like economic development, environmental standards, and social equity. And I’ll preface what follows by saying that I’m far from an expert on procurement, and that this conversation has been active for decades around the world. But I have a few thoughts on how we might do better.
Plain Language
First and foremost, RFPs are difficult to read. There isn’t necessarily a standard format, though most follow similar structure; and most have more or less the same content, but not always the same criteria, so reading them thoroughly is very important; but they’re often written in the jargon of whatever department has issued them, by people for whom communication is not their specialty. Most municipal RFPs are written by the Public Works or Planning departments, both of which have specialized language and technical specifications that can be challenging even for the initiated. In a document with lots of technical specs, it can be easy to skim over a detail that turns out to be important for the proposal. Last night we heard that some of the bidders had not submitted all of the required paperwork, despite having two time extensions; could it be that they just didn’t notice that it was required? It’s impossible for me to know if it was unclear in the RFP document or if the bidders simply didn’t read the document carefully, but I’ve seen enough RFP documents to be able to believe that a requirement could be easy to miss.
Some would argue that having a highly technical, jargon-filled document is a good thing, because it weeds out unqualified applicants. I am reminded of an old story about Van Halen: the band always included a requirement in their contract that specified that their dressing room must have a bowl of M&M’s of only a certain colour, and that this arbitrary requirement served to show them a venue’s attention to detail. When you have a show that includes dangerous pyrotechnics and expensive equipment, the venue’s attention to detail matters a lot. If they got to their dressing room and didn’t find the right M&M’s, the story goes, they would even consider cancelling the show altogether. Similarly, if a company is going to be engaging in a multi-year contract to build a $50 million dollar wastewater treatment plant, we want to know that they are able to read and fully understand the whole RFP.
I get that logic, to an extent, but I think in general we should be aiming for plain language in everything that we do. That doesn’t mean that we should replace technical tables and language with pages and pages of explanation that are redundant for people who know what they’re doing, but it does mean that we need to take a lot of care to ensure that everything we do can be understood by just about anyone. Nobody should lose a bid just because the RFP was unnecessarily difficult to read, or we’ll end up awarding contracts to firms that have the best capacity to handle paperwork, not necessarily the firms with the best capacity to build sewage plants.
An important distinction here is the difference between something that is complex (has multiple interrelated parts, timing, and impacts) and something that is complicated (difficult to understand). Most things that are complex are also complicated, but it’s entirely possible to make something simple complicated through a lack of care, or in the case of Van Halen’s M&Ms, as a deliberate choice to force people to pay closer attention. We cannot avoid complexity, but even complex things can be made less complicated through having clear communication and processes.
Incentives Toward Values
One of the biggest challenges we have with procurement is that not all projects are the same, but standards and rules are by definition universal. It’s very difficult to have a rule that suits every situation, so we often yo-yo back and forth between regulating and de-regulating. Two motions on the agenda last night called on the province to back away from Bill 5, which allows the province to create a “special economic zone” where no regulations apply, allowing them to fast-track whatever projects they choose. It also allows them to specify “preferred proponents”, which is to say, to skip the process for developers of their choice, something that our procurement process specifically does not allow us to do except for expenses under $50k/year. The province is trying to make development projects faster and cheaper by outright skipping the processes that keep them accountable. They’re opting for the plain bagel, dry, rather than an everything bagel with extra toppings. Can we find middle ground by exploring incentives instead of requirements?
I’ll borrow an idea from a Planning change we recently made. Brighton now defers collecting Development Charges on new developments that meet our requirements for social benefit, with criteria including affordability, accessibility, and sustainability. Developers love this because it means they don’t need to finance the cost of the Development Charges, which makes their build cheaper and simplifies their cashflow; and we love it, because in order to get that deferral of the charges they need to meet a higher standard for the development. Would it be possible to have those values, and others, included in our procurement processes in a way that embeds those values in the way we grow our community without straying into the Everything Bagel problem?
What if we identified metrics for things like local economic impact, labour and environmental standards, etc., and included them as an incentive in the procurement process rather than as requirements? When they are requirements, they exclude bidders who might have otherwise done a good job; when they are incentives, they don’t necessarily exclude those bidders who haven’t been able to navigate a more complex RFP document with these extra items, and they don’t necessarily make the RFP process take longer while bidders get these ducks in a row, but they might inspire changes in the project. It might be as simple as a bonus for hitting a certain threshold of local workers, something that could happen after the project is awarded and verified as the project develops.
Thresholds and Judgment to Reduce Costs
Another item we discussed last night was the process of awarding community grants. This is not a matter of procurement, but it has some of the same requirements of transparency and accountability, and those have proven to be time-consuming when they result in council spending entire sessions discussing how to disburse small amounts of money. We have opted to explore having municipal grants disbursed by the Brian Todd Memorial Community Fund, which already disburses grants of their own; it seemed a good synergy.
One item of discussion in relation to that was whether the BTMCF requires audited financial statements before they disburse any funds. One of my colleagues places a very high value on accountability for use of public funds, which is of course a good thing; whereas I tend to find such requirements fairly onerous and think they should be reserved for large expenses, which also makes sense2. Setting a threshold there, as we do with our procurement policy, could be very beneficial. But where is the threshold? If I wanted to do a nice project for our community, and asked for $500 in grant money to do it, and agreed to show my receipts, should I be required to show audited financial statements that would likely cost as much as I was asking for in grant money? Should I be required to register as a charity, or incorporate? Doing any of those things would absolutely prevent me from doing that good thing that I wanted the grant money for; it would likely cost more than the grant, as well as a significant amount of time and frustration.
Bringing it back to procurement, this is an example of how important it is to get the thresholds right. I can give a personal example: back before I was elected to council, for a time I was setting up a consultancy, and attempted to bid on some projects. Over and over again we found that government contracts, even relatively small ones, not only had overly complicated RFP documents, but also required significant costs just to fulfill bidding requirements. Things like proof of insurance are logical, but it amounted to thousands of dollars of expense just to meet the basic requirements of a complete bid; a promise to purchase the required insurance if awarded the contract would not suffice, and as a new firm just getting started, we just didn’t have the money. Ultimately we opted not to continue, as the requirements for bidding were so high that only well-established firms would be able to compete, regardless of our expertise or other value we could offer, even on smaller projects.
Our recent changes to the procurement policy raise the thresholds, and the kinds of projects I had tried to bid on in the past likely would not even have RFPs if we were doing them here in Brighton today. This means we have more flexibility to hire small businesses and local talent with unique value to offer, which is very much a good thing. At the same time, we still require the more stringent process for high-value items like our wastewater plant: one bidder told me they’d spent $40,000 developing their bid, which seems like a high cost, but for a $50M project that can only be handled by a major company that makes some sense. Even so, reducing barriers to bidding can give us more choices, and make the bidding process less contentious; and the lower the amount of public money being spent, the lower the threshold should be for barriers to entry.
So on the whole, I think we have strong processes that are doing a good job of being fair and transparent, upholding public trust and shaping a corporate culture of trust as well as getting us good value for dollar. And I think we’re on the right track in terms of making these processes stronger over time and getting more than just economic value from our procurement processes.