Buyer Beware: Piggybacking and Onboarding are Sole-Sourcing

By: Paul Emanuelli

There is a great deal of confusion about “piggybacking” or “onboarding” and a long legacy of misuse of these practices in the Canadian public procurement industry.

You will not find a specific written prohibition in the treaties on this topic because “piggybacking” and “onboarding” are informal terms made up by the industry, not official terminology that is typically adopted in trade treaties or statutes. Therefore, asking “Tell me where it says I can’t piggyback on onboard!” is the wrong question. The right question is, “Show me where it says I can piggyback or onboard and not conduct an open tendering process as otherwise required under the treaties.”

To answer the latter question, I have put together the following analysis on frameworks, piggybacking and onboarding:

  1. The obligation under the treaties is to have an open competition any time an anticipated contract value reaches the applicable treaty contract value thresholds (unless you fall under an exemption or exclusion).
  2. Typically, this obligation is met by doing your own tendering processon a one-time basis.
  3. This obligation can be met by creating framework arrangements (known in industry by a number of terms, some formal and some less so, such prequalification lists, rosters, suppliers lists, vendor of records, standing agreements, standing orders, etc.). However, the rules and applicable case law and audit reports in Canada, the UK, the US, Australia etc. are clear that you need to have transparency in how you call up work under these frameworks. Otherwise, this is improper sole-sourcing and a breach of open competition duties. It is also a breach of the proper stewardship of public spending as identified in multiple public audits within Canada and more globally.
  4. While frameworks are sometimes also used for group purchasing by multiple institutions, the same standards apply. Under the treaties, there needs to be transparency in (a) how you establish a prequalified list of suppliers, and (b) how you award any specific assignment from the prequalified list of suppliers. You cannot contract directly in a non-transparent manner because your organization or another organization set up a standing agreement (either through a prequalification process or directly, with either a single or multiple suppliers) and added a “piggybacking” or “onboarding” clause into the standing framework agreement. There is a simple reason for this: irrespective of what you put into the contract terms, suppliers do not have the authority to give you (or another organization trying to buy under your contract) an exemption from your obligations to open tendering (see rule #1 above), so those clauses, unless supported by the rest of the protocols described in this analysis, are useless as a defence against what would otherwise be improper sole-sourcing.
  5. Under Canadian rules, proper prequalification framework purchasing (whether within one organization and its departments, or multiple organizations) requires transparency at the front-end, which for treaty compliance purposes would include a disclosure of the involved organizations in the initial prequalification solicitation and then transparent protocols on the call-up process to award work through second-stage competitions. For lower value assignments, you may be able to establish a call-up process without tendering through a rotational right of first refusal process so long as you pre-established it in your original rules and then ensure that you are managing that rotational system fairly to distribute the work. Otherwise, you need to invite all suppliers prequalified in the particular category. Therefore, compliance requires more than simply “naming the entities” in the original prequalification. It also requires a formal second-stage process.
  6. In the US, there are statutory (meaning written in law) permissions to onboard onto another institution’s framework. For example, New York State entities can piggyback on federal standing contracts in some situations, but even if they can do this, they still have to follow second-stage call-up protocols to invite all suppliers on the list. They cannot simply sole-source from the list. For more information about this, check out the recording and slides from my February free webinar, Managing Fair Evaluations, where I discuss an example where a New York entity tried this and had the contract voided in a legal challenge (slide 30, Comptroller General Strikes Down Piggyback Purchase).
  7. In Canada, we typically don’t even have the statutory permission to piggyback or onboard in the first place, so that option under rule #6 (direct to second stage) is a non-starter and you’re back to rule #1 or rules #3-4 for proper compliance.

In the meantime, if you have any specific questions about frameworks, feel free to follow-up with me directly. And remember: “piggybacking” or “onboarding” = sole-sourcing unless you set up the proper transparent framework to make it otherwise.