This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
This article describes how the British Columbia provincial government, the University of Toronto, and the City of Lethbridge were all early adopters in the use of negotiated RFP formats in the Canadian public sector, and provides implementation recommendations for institutions who are planning their own negotiated RFP deployment.
BC Looks for Solutions, Not Off-The-Shelf Answers
The British Columbia (BC) provincial government officially launched a negotiated RFP program that it called “Joint Solution Procurement” in the early 2000s. That program was given a positive review by the BC Auditor General in 2008. In its 2008 audit report entitled An Audit of Joint Solution Procurement and the Revenue Management Project, the BC Auditor General explained that “Joint Solution Procurement is a process intended to solve complex business problems where there isn’t a clear “off the shelf” solution. It seeks to use private sector expertise to provide a range of options.”
As the report noted, through these negotiated RFP processes, the BC government was able to successfully conclude contracts in a number of highly complex areas:
With the support of a dedicated support team, ministries have completed a total of ten contracts worth $1.6 billion. These contracts cover a wide range of services including the administration of Medical Services Plan and Pharmacare premiums, tax revenue collection, and the provision of high-speed internet connections.
The BC Auditor General also concluded that these procurements were conducted in accordance with good procurement practices:
This audit looked at whether generally accepted principles of good practice for outsourcing large services such as these are incorporated into the process used by government. It also looked at one of the first projects completed to see if these principles were followed in practice. We concluded, from our work, that the Joint Solution Process and the outsourcing of revenue management substantially met the principles of good practice identified. We found that strong guidance and support are provided for ministries using the process.
The BC Joint Solution Procurement program, and the positive feedback from the BC Auditor General’s office, helped serve as a catalyst to further expansion of the program across the Canadian public sector. In fact, in 2019 the BC government expanded its initiative to now include what it refers to as “Opportunity Statement” NRFPs that feature supplier-proposed solutions, streamlined evaluations, and more due diligence during contract award negotiations to better ensure that contract specifications meet project objectives.
University Wins National Award and Sets the Standard for Public Procurement
In 2009, the University of Toronto adopted the Consecutive Negotiations RFP format as its default tendering format for all non-construction procurements. In 2012, its innovations in this area were recognized with the National First Prize of the Canadian Association of University Business Officers Quality and Productivity Award. As the University stated in its June 2012 media release:
University of Toronto’s new Negotiable RFP is a public procurement method with a state-of-the art legal mechanism developed in collaboration with the Procurement Law Office. This innovation allows unprecedented flexibility for clients to tailor deliverables to best meet their project needs. Prior to the Negotiable RFP, the conventional procurement process locked the buyer into an agreement that could not change. More importantly, the process has resulted in significant negotiated enhancements above and beyond solutions proposed by the market. This is a significant advantage especially in highly intensive research environments such as U of T, where technologies often change faster than the RFP process life cycle.
As further detailed in the award abstract, the negotiated RFPs resulted in increased process compliance, supplier participation, and customer savings:
The results of the change have far exceeded expectations. One year after implementation, process compliance rose from 50% to 99%, the number of RFPs submitted rose from 70 to 113 (a 60% increase in use of the RFP process) and hard dollar savings generated by the negotiation step in excess of any amounts proposed in the original RFP responses amounted to $1.1 million. There have also been significant other equipment enhances that cannot be quantified.
Endorsement by thought leaders in the procurement field underscores the effectiveness of promoting transferability through education. Says Paul Emanuelli, General Counsel of the Procurement Law Office and author of “Government Procurement”: “The U of T NRFP initiative was instrumental in acting as a catalyst to further adoption of the negotiated approach within the university sector in Ontario and, by serving as a case study through the Osgoode program in Toronto and Trinidad and through the CPPC conference in Quebec City, as a standard setting exercise across the broader public sector within Ontario, across Canada and around the Commonwealth.”
The University’s abstract also noted how NRFPs led to better solutions:
Since it was first implemented in 2010, a growing number of organizations in Canada and abroad want to learn as much as they can about the NRFP. Many already have a sense of the unprecedented, positive and proven impact this innovative RFP program has made in revolutionizing the procurement business in Canada and abroad, with potential to extend far beyond academic arenas. Already, research-intensive, decentralized institutions (many publicly-funded) have seen immediate value in the NRFP’s ability to, for the first time:
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introduce significant flexibility to the RFP process without compromising legal requirements and remaining true to transparency and fairness, and
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enhance quality and value to our customers by exploring what existing and potential product solutions are available and accessible.
The University’s award-winning program was a leading example of the broader adoption of negotiated RFP formats across Ontario’s broader public sector in recent years.
Award-Winning BAFOs Transform Alberta Tendering
The City of Lethbridge offers a third case study into the early adoption of negotiated RFPs within Canada. As announced in November 2013 at the Canadian Public Procurement Council’s annual conference in St. John’s, Newfoundland and Labrador, the City was the recipient of Summit Magazine’s Leadership in Public Procurement Award for 2013. The award was the culmination of a procurement governance overhaul commenced several years prior at the City of Lethbridge that featured the deployment of flexible tendering formats, such as the Dialogue RFP.
As noted by the City’s then Procurement Manager Craig Milley during his presentation at the St. John’s conference, Lethbridge’s senior leadership was all too aware of the negative results flowing out of an audit of the City of Calgary’s procurement operations in 2009 and 2010. To their credit, the Lethbridge leadership team decided to adopt proactive measures to avoid becoming another Alberta municipal case study. The journey that led to the Dialogue RFP began with an assessment of Lethbridge’s procurement practices and with the realization that its current suite of inflexible, high-risk tendering formats needed a significant overhaul.
As Milley noted, fixed-bid tendering was resulting in significant performance issues and post-award cost increases. Recognizing that the problem presented an opportunity, the City’s solution was to implement more flexible tendering formats.
This decision was supported by an independent legal review of the City’s procurement practices, which included recommendations on how to deploy a suite of flexible, low-risk tendering formats and integrate that deployment into an organizational governance framework.
That deployment included the use of a simplified Request for Quotations (RFQ) format for construction projects. The RFQ operated under traditional contract law rules instead of the fixed-bid tender law rules that generate most of the tendering lawsuits in the construction industry.
Another tool in the City’s revamped tendering toolkit was the Dialogue RFP, with its use of short-listing, dialogue, and a best-and-final-offer (BAFO) process. As with the simplified RFQ, the Dialogue RFP operates under traditional contract law, enabling the post-bid discussions that facilitate the clarification of contract responsibilities before the contract is awarded. Milley’s team deployed this format to reduce the performance issues and cost overruns associated with fixed-bid, no-dialogue tendering, and the Dialogue RFP delivered on that promise. As noted in Lethbridge’s award submission, the City deployed the Dialogue RFP on two high-profile projects:
- a $40 million project for a community ice centre with twin hockey rinks and curling facility; and
- a $26 million project for the renovation and expansion of police headquarters.
In both of these projects, Lethbridge leveraged the flexibility afforded by the Dialogue RFP. It engaged in concurrent discussions with the short-listed finalists to better refine project details at the critical pre-award design stage. According to Milley, this concurrent dialogue helped ensure that project objectives were understood by all parties, that project risks were mitigated, and that competitive tension remained in the process prior to contract award. In his St. John’s address, Milley was careful to note that once the tendering format overhaul was completed, the Dialogue RFP was successfully implemented using internal staff resources.
While achieving significant savings – over $500 000 in post-bid reductions in the early years, and counting – the City was also able to avoid the large transactional costs commonly associated with using external advisors in complex projects. Furthermore, to counter the fear of pre-award delays, Milley statistically recorded how the Dialogue RFP led to much faster contract awards when compared to the two-staged prequalification invitational bid process commonly used in similar projects. The significant measurable benefits attributable to the Dialogue RFP format supported its broader deployment. As Milley noted, the Lethbridge story can serve as a blueprint for implementing the format across other public sector institutions.
Implementation Recommendations
Those who are alive to industry trends know that the Lethbridge story reflects a movement that reaches well beyond southern Alberta. In fact, the 15 largest municipalities in Alberta, amongst others, have all adopted the use of negotiated RFP formats, reflecting some of the deepest municipal adoption rates across Canada. In fact, public and private sector institutions in all parts of Canada are adopting flexible tendering formats to mitigate risk, increase flexibility, and better serve their institutions. These Canadian turnaround stories show that even in the most rigidly Contract A process contract jurisdiction in the world, procurement innovation remains within reach. Organizations across Canada and worldwide that are interested in implementing negotiated RFPs should take the following seven steps:
- Adopt treaty-compliant, legally vetted NRFP templates.
- Update to negotiated-RFP-friendly policies and procedures.
- Develop an industry strategy to select the right projects.
- Create a rollout plan to control internal deployment.
- Implement enhanced evaluation protocols.
- Ensure appropriate training, especially on negotiations.
- Get launch support from experienced advisors.
As evidenced by recent developments across the Canadian public sector, negotiated RFP formats have proven to be a superior operating system for competitive bidding and will continue to see accelerating adoption rates across the public sector within Canada and globally. However, purchasing institutions should leverage proven deployment strategies when launching their negotiated RFP programs so their project teams can meet their operational objectives on time, on budget, and by the rules.
