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5. REVISED PROCUREMENT STRATEGY AND
ASSOCIATED AMENDMENTS TO THE PURCHASING BY-LAW RÉVISION DE LA STRATÉGIE
D’APPROVISIONNEMENT ET MODIFICATIONS CONNEXES AU RÈGLEMENT SUR LES ACHATS |
That Council approve:
1. The overall procurement strategy in relation to the selection of professional service providers, as outlined in this report; and
Que Conseil approuve :
1. la stratégie d’approvisionnement générale
concernant la sélection de fournisseurs de services professionnels, comme
l’explique le présent rapport; et
2. la modification du Règlement municipal sur les achats, présentée ci-joint comme document 1, permettant de mettre en place plusieurs mécanismes d’attribution de marchés préalablement approuvés par le Conseil.
Documentation
Corporate
Services and Economic Development Committee
Comité des services organisationnels et du développement économique
and Council / et au Conseil
10 November 2008 / le 10 novembre
2008
Submitted by/Soumis par : Marian Simulik City Treasurer / trésorière
municipale
Contact Person/Personne ressource : Phil Andrews, Manager, Supply
Management Division Finance (613) 580-2424 x 25176, phil.andrews@ottawa.ca
SUBJECT:
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REVISED PROCUREMENT STRATEGY AND ASSOCIATED AMENDMENTS TO THE
PURCHASING BY-LAW |
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OBJET :
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RÉVISION DE LA STRATÉGIE
D’APPROVISIONNEMENT ET MODIFICATIONS CONNEXES AU RÈGLEMENT SUR LES ACHATS |
That the Corporate Services and Economic Development Committee recommend Council approve:
1. The overall procurement strategy in relation to the selection of professional service providers, as outlined in this report; and
2. The amendment to the purchasing by-law, attached as Document 1, to enable implementation of the several contract award mechanisms previously approved by Council.
Que le
Comité des services organisationnels et du développement économique recommande
au Conseil d’approuver :
1. la
stratégie d’approvisionnement générale concernant la sélection de fournisseurs
de services professionnels, comme l’explique le présent rapport; et
2. la modification du Règlement municipal sur les achats, présentée ci-joint comme document 1, permettant de mettre en place plusieurs mécanismes d’attribution de marchés préalablement approuvés par le Conseil.
On October 22, 2008, in conjunction with
the Quarterly Report - Efficiency Savings Program, 01 April to 30 June 2008,
City Council approved a number of procurement strategies and contract award
mechanisms recommended by staff. During
the analysis of the procurement issues, the City Manager had also invited the
Consulting Engineers of Ontario (CEO) to propose industry initiated strategies
that may assist the City in moving forward with it's cost savings agenda.
As a result,
Council amended the staff recommendation to require that staff also adopt the
strategies proposed by the CEO, and directed staff to report back on the
"over-all strategy and any amendments to the Purchasing By-Law that are
required to enable these to be implemented."
Overall procurement strategy in relation
to the selection of professional service providers
Supply Management staff are committed to achieving the approved procurement savings over the period ending December 31, 2010. One of the eleven savings opportunities approved by Council was to authorize the Manager of Supply to leverage a number of cost weighting strategies in the evaluation of proposals for professional services, including but not limited to engineering consultants and architects.
The City had previously used a point
system that allocated 80% for technical and qualitative criteria, and 20% for
cost. The revised approach would permit
a full range of financial evaluations, which would be selected for the Request
for Proposal process in relation to the risk level or complexity of the
assignment. In simple terms, a more
complex assignment would have an increased focus on experience, qualifications,
methodolody and innovation, while more routine projects, considered less risky,
would include an elevated emphasis on cost.
In considering the over-all strategy,
our partners in the CEO provided advice and options which staff have summarized
below:
Some of these strategies have already
been adopted, and others are being analyzed by the user departments at the City
to determine feasibility, and the City has appreciated all the efforts and
helpful feedback provided by the local engineering community.
Additionally, staff in Supply Management
have engaged the Office of the Auditor General in this discussion, in that the
concept of an increased focus on cost in engineering assignments was introduced
by the AG in the 2005 Audit of Procurement.
One of the several AG recommendations at that time was that:
"Adoption of evaluation methodologies that better reflect price differences in proposals for professional services, such as standard deviation, low bid or price per point could lead to significant cost savings."
As a result, and with input from the
main City users of these types of professional services, staff propose that the
following general strategies for the weighting of cost in professional service
contract awards be adopted, with some examples of the associated risk
categories provided:
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Risk |
Examples |
Strategies |
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High |
·
large complex studies, such as the
Transportation Master Plan ·
EA studies or other assignments that
are multidisciplinary, involving many agencies, stakeholders, and include
challenging public consultation ·
most large bridge design assignments
·
larger capital projects which may
include a requirement for the vendor to provide additional insurance ·
public consultation with
stakeholders, or presentations to Committee and Council are key ·
multi-member proponent team or
consortium, requiring specialized sub-consultants · work plan or contract schedule is critical. |
· 80% of points are devoted to non-financial criteria, and 20% are cost based · the preferred partner (highest points) would be called upon to reduce the city cost by an amount between 3% to 5%. |
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Medium |
·
low risk projects but with large
capital budgets ·
some of the more prescriptive
studies, wherein tasks are legislated, such as some EA's ·
some requirement for public
consultation, and for specialized sub-consultants, although the project is
not considered complex |
· "cost per point" where the initial evaluation is 100% non-financial, including issues such as firm experience, qualifications of key team members, work plan and methodology, potential for cost savings, level of effort and schedule, innovation, etc., and the pass grade for compliance is in the 75% range. · the financial proposal is sealed in a separate envelope, and cost is divided by point score for only those firms achieving the minimum pass grade, with award to the proponent offering the lowest cost per point. This approach tends to allocate 50% to cost weighting. · lowest responsive bid approach described below |
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Low |
·
routine road, water, and sewer
rehailitation projects ·
local street projects ·
small intersection planning and
design studies ·
small capital budget with little or
no public consultation ·
limited involvement of specialized
sub-consultants |
· using a pre-qualification process, or a proposal with a qualifications based minimum pass grade, or in most instances both, in order to ensure that vendor experience, qualifications of key team members, project scope, work program, and level of effort are acceptable to the City. · once a proponent passes the qualifications based evaluation, only those sealed financial proposal envelopes are opened, with the award at that point to the proponent providing the lowest responsive bid. |
In assigning the evaluation method, an
initial staff analysis would seek to determine the level of risk or complexity
associated with each individual assignment, and only then consider the most
appropriate procurement strategy.
Although these methods will be used in the majority of cases, it is also
recognized that other ratios of cost weighting may be appropriate for some
Request for Proposal and Request for Standing Offer opportunities.
The governing concepts for assigning
financial weighting in engineering proposals will be to ensure design quality,
obtain environmental and economic sustainability, and to leverage the unique
market position of the City as the major local consumer of consulting
engineering services to control spending.
Purchasing By-Law amendment
In addition to reporting to Council on
the over-all strategy for the cost focus in awarding contracts as a result of
the Request for Proposal process, the revision to the purchasing by-law
attached as document 1 will serve to formalize the several procurement
strategies approved by Council on 22 October 2008.
The Purchasing
By-law amendment was prepared by Legal Services, and the report also
incorporates input received from the Consulting Engineers of Ontario.
The concepts discussed, and the by-law amendments have a direct
relation to the procurement savings targets approved by Council as part of the
Corporate Efficiency Savings Program.
Amendment to the
Purchasing By-law - Document 1.
Following Council approval, the Supply Management Division will
manage the implementation of the revised procurement strategies and contract
award mechanisms, and continue to report on procurement savings realized as a
result.
Document 1
A by-law of the City of Ottawa to amend By-law No. 50 of 2000 with respect to the purchasing of goods, services and construction for the City of Ottawa.
The Council of the City of Ottawa enacts as follows:
1. Section 20 of By-law No. 50
of 2000 entitled “Being a By-law respecting the purchasing of goods, services
and construction for the City of Ottawa”, as amended, is amended by adding the
following subsection thereto:
20. (12) Supply Management shall determine the most
appropriate cost weighting assignment in specific Request for Proposal calls in
accordance with, not limited to, the following general criteria:
(a)
20% of the
evaluation criteria for more complex or high risk assignments;
(b)
50% cost
weighting (cost per point) in the evaluation for medium risk assignments; or
(c)
lowest cost
compliant proposal where a prequalification, a technical pass grade or a standing
offer is in place.
2. Section
21 of the said By-law No. 50 of 2000 is amended by adding the following
subsection immediately after subsection (4):
21. (4a) In circumstances where competition results
in a large number of offers from vendors, which offers exceed the needs of the
City, Supply Management is authorized to approach the highest ranked vendors to
negotiate lower unit rates for the goods or services in return for a reduction
in the number of firms authorized to provide the goods or services to the City
or the offer of a firm contractual commitment by the City.
3. Section
21 of the said By-law No. 50 of 2000 is further amended by adding the following
subsections immediately after subsection (8):
21. (9) A call-up against a standing offer may
be made in an amount to a maximum of $150,000 and exceptions to this maximum
amount may be made by Supply Management, where it is of the opinion that there
is a financial advantage to be achieved by the City.
(10) All standing offers for Professional Services shall include wording that the hourly, per diem or other unit rates offered by the proponent will apply for call ups up to a maximum of $100,000 and for call-ups greater than $100,000, the hourly, per diem or other unit rates will be discounted by a minimum of five percent (5%).
4. Section 24 of the said By-law No. 50 of 2000 is repealed and the following Section is substituted therefor:
24. (1) Where a reasonable likelihood exists that, on completion of a Contract, it will be necessary to award a follow-on Contract for goods or services to the existing supplier, Supply Management shall ensure that the possibility of a follow-on Contract will be identified in the original bid solicitation.
(2) All Request for Proposal documents for Professional Services should include wording that the hourly, per diem or other unit rates offered by the proponent will apply for the initial Contract award and that for a follow-on Contract, the hourly per diem or other unit rates will be discounted by minimum of five percent (5%).
5. Subsection (2) of Section 32 of the said By-law No. 50 of 2000 is repealed and the following subsections are substituted therefore:
32. (2) Where a Contract contains no option for renewal, Supply Management is delegated the authority to extend the Contract for a period of time no greater than two years from the date of expiration provided that:
(a) Supply Management and the Director agree that based on market conditions or an analysis of future conditions cost savings or cost avoidance can be obtained by a renewal; and
(b) the supplier’s performance and vendor relations with the supplier have both exceeded the requirements of the Contract.
(3) The authorization of the Director pursuant to subsections (1) or (2) shall include a written explanation of why the renewal is in the best interest of the City and shall include comments on the market situation and trends.
(4) Inflationary increases for Contract renewal shall be limited to fifty percent (50%) of the Statistics Canada annual Consumer Price Index unless, the supplier can demonstrate, to the satisfaction of Supply Management, that the supplier’s costs have increased significantly from the original Contract price and the supplier’s cost increases can be independently verified by the City.
6. The said By-law No. 50 of
2000 is amended by adding the following headings and Sections immediately after Section 42:
STRATEGIC
SOURCING
43. (1) The City may consider procuring goods and services using e-auction or reverse auction bidding strategies in situations where,
(a) the goods or services are standard commodity items which can be clearly identified;
(b) a strong competitive vendor base exists;
(c) vendors can be invited initially to participate through a transparent process such as the internet and be prequalified; and
(d) on-line training is available to all participants in advance of the actual event.
(2) Where the possibility of a Best and
Final Offer (BAFO) phase has been introduced in the procurement solicitation
document, the City may invite two or more of the highest rated short-listed
firms to take part in the BAFO phase where each firm will be given the
opportunity to improve on their initial bid or proposal.
SUBSTANTIVE COMPLIANCE
44. Supply Management is authorized to include a clause in competitive bid solicitations permitting the award of a contract to a low bidder where, in the sole opinion of Supply Management and the Director, although the specifications are not technically met, the vendor response is substantively compliant or the non-compliance of the response is immaterial to meeting the performance outcome.
VENDOR INITIATIVE
45. (1) After the procurement process is complete and a Contract has been awarded, the City will permit the successful vendor to propose operational or strategic improvements that result in cost savings, which cost savings do not, in the opinion of the Director, have a negative impact on service delivery.
(2) Approval of an operational or strategic improvement is conditional upon the vendor quantifying the cost savings and agreeing to share the cost saving equally with the City.
(3) Any approval pursuant to subsections (1) and (2) will be recorded in the contract file and a revised purchase order will be prepared.
ENACTED AND PASSED this day of , 2008
CITY CLERK MAYOR
REVISED PROCUREMENT STRATEGY AND ASSOCIATED
AMENDMENTS TO THE PURCHASING BY-LAW
RÉVISION DE LA STRATÉGIE D’APPROVISIONNEMENT ET MODIFICATIONS CONNEXES AU
RÈGLEMENT SUR LES ACHATS
ACS2008-CMR-FIN-0049 city-wide / À l’Échelle de la ville
Responding to questions from Councillor
El-Chantiry with respect to a pre-qualification process when awarding contracts,
Mr. Kent Kirkpatrick, City Manager, indicated the current report did not
propose any changes in terms of the pre-qualification approach. He referenced discussions held at the
previous meeting, at which time staff had committed to bringing forward a report
in the new year on how the City managed its overall capital projects as well as
how the City contracted for engineering services and pre-screened these
services on the basis of past experience.
Further, he referenced the memo from the City Solicitor, listed as an
Information Previously Distributed item on the present agenda, and the fact
that the City’s Purchasing By-law contained a clause with respect to supplier
performance. Therefore, he submitted
that the By-law would not need to be amended, but staff would provide a
technical briefing session and meet with Councillors to talk about how the
By-law was applied.
Councillor Deans felt the proposed overall
procurement strategy was far superior to what the City originally had and that
it addressed the concerns expressed by the industry in terms using a different
ratio for high risk, complex projects versus low-risk projects. In closing, she asked that staff report back
to Committee in a year to show how well the strategy had worked.
Councillor Wilkinson referenced Mr. O’Connor’s
memo and asked if a clause should be added in the by-law regarding litigation
exclusion. Mr. Kirkpatrick suggested
addressing this in the new year, through the report he referenced earlier. Mr. Carey Thomson, Manager of Legal
Services, concurred with the City Manager’s proposal in this regard.
Councillor Wilkinson referenced a letter from
the Consulting Engineers of Ontario (CEO) and a statement contained therein
with respect to engineering typically being 10% of total project costs and the
CEO’s suggestion that reducing engineering cost by 5% would typically lead to
an overall increase of average construction costs by about 5% on a $1M
project. She wondered why this would be
the case. Mr. David McManus,
representing the Consulting Engineers of Ontario, explained that more
effort expended in design and construction administration would directly result
in cost reductions at construction, at about a 10 to 1 payback. Therefore, he submitted that if the City
limited the efforts in engineering design, it could end up paying more for
construction costs.
Councillor Desroches felt that in procurement,
the City benefited from healthy competition between bidders. He believed that in a healthy market,
companies would be hungry for work and would submit their best bid; one that
combined their skills and an awareness of price. Mr. Guy Cormier, representing the Consulting Engineers of
Ontario, indicated that what the Councillor referenced was the difference
between healthy competition and cut-throat competition. He submitted that the CEO was warning
Committee that perhaps the sector was approaching this line. He noted that engineers were obliged by law
to protect the public but they were not obliged to protect the interests of the
public. He re-iterated that this was
the fine line the CEO was putting to the City; engineers’ professional
obligation versus their interest in doing a good job.
Following these exchanges, Committee voted to
approve the report recommendations.
That the Corporate Services and Economic
Development Committee recommend Council approve:
1. The overall procurement strategy in relation
to the selection of professional service providers, as outlined in this report;
and
2. The amendment to the purchasing by-law,
attached as Document 1, to enable implementation of the several contract award
mechanisms previously approved by Council.
CARRIED