The policies, authorities and guidelines contained in the Government Contracts Regulations and in the "Contracting" volume of the Treasury Board Manual, which apply to all government contracting activities, require procurement to be conducted in a manner that will meet operational requirements in the most cost-effective manner and provide equal opportunity to tender.
The government has determined that its procurement activities should also be consistent with and supportive of such national objectives as industrial and regional development, aboriginal economic development, the environment and other approved socio-economic objectives.
To ensure that maximum benefit to Canada is achieved, therefore, the government has confirmed that all major federal procurements will continue to be reviewed for industrial and regional development opportunities. The government has also recognized that, in certain instances, special provisions may be necessary to develop regional economies and the Canadian industrial base, as well as to support other national objectives.
The purpose of this procurement review policy is to provide an updated statement of the government's procurement policy objectives, to incorporate into the Treasury Board's procurement management policies recent government initiatives in procurement planning, and to ensure that procurement policy and processes support the achievement of the government's objectives. More particularly, this chapter:
Some of the more important elements of the revised process are:
A simplified chart of the process is attached as an annex to Appendix C.
The objective of the government's procurement review policy is to enhance the use of procurement in support of industrial and regional development and other national objectives in a manner that is fully consistent with the government's approved procurement objectives, and with Canada's international commitments within the General Agreement on Tariffs and Trade (GATT), the North American Free Trade Agreement (NAFTA) or other trade rights and obligations. The government's approved procurement objectives are in descending order of priority:
The government has confirmed that all procurements in excess of $2 million must be reviewed for potential regional and industrial benefits. To ensure that this review is carried out in an efficient and cost-effective manner, and in recognition of the diverse interests involved, Treasury Board has established an interdepartmental procurement review process applying to all such procurements.
The major elements of the process, which is described in Appendix C, are:
The terms of reference and the membership of these committees may be found in Appendix B; and
Competition is and must remain the cornerstone of the government procurement process. It is the most efficient way of achieving both the primary and secondary goals of procurement: it gives each bidder the incentive to bring forward its best solution to the operational problem, at a competitive price, as well as to respond more effectively to requirements in support of other national objectives. Moreover, competition ensures that all qualified suppliers are afforded access to government contracts.
Procurement initiatives in support of regional industrial development must, to the greatest extent possible, focus on assisting Canadian firms in becoming competitive in domestic and world marketplaces; procurement is not intended to be used to create or sustain dependent government suppliers.
This policy applies to all departments and agencies listed in Schedules I and II of the Financial Administration Act, and to branches of the Public Service designated as departments for the purposes of the Act. It applies to all acquisitions of goods and services from the private sector, whether or not they form part of a capital project or are financed from capital or operations and maintenance (O&M) funds with the following exceptions:
The mandatory procurement review requirements of this policy do not apply to procurements requiring a special degree of security by or on behalf of:
Notwithstanding this exemption, the above organizations must apply the principles of the policy where appropriate, consistent with the security requirements of their procurements.
In cases of emergency, as defined in the "Contracting" volume of the Treasury Board Manual, departments may enter into contract without submitting the procurement to review pursuant to this policy. Such action should be noted in any subsequent submission or report to Treasury Board or Treasury Board Secretariat, and should also be reported to the Procurement Review Secretariat.
The Treasury Board is responsible for the government's overall procurement policy and process, and for establishing a policy framework that permits procurement to be managed in a manner that will promote the achievement of all procurement objectives. The cost-effective use of funds is of particular concern to TB Ministers. The Treasury Board is also responsible for approving proposals to undertake capital projects and to enter into contracts above the dollar levels delegated to departments.
The Treasury Board Secretariat is responsible for reviewing proposed procurement strategies requiring Cabinet or Treasury Board approval, for consistency with TB policy requirements, particularly the requirement for assessment of proposed socio-economic initiatives described in Appendix A, and for monitoring the Canadian Annual Procurement Strategy process in the context of the Treasury Board's mandate.
Industry Canada is responsible for the coordination and management of the Canadian Annual Procurement Strategy, the process by which the government determines its overall strategy for the use of procurement in support of industrial and regional development.
Public Works and Government Services Canada (PWGSC) is responsible for developing procurement strategies for consideration by the Procurement Strategy Committee and the review committees, and for implementing procurement strategies, within the framework of its clients' needs, its legislative mandate and government policy. Supply and services Canada will chair the Procurement Strategy Committee specified in this policy, and will operate and maintain the Procurement Review Secretariat.
Industry Canada, the regional departments and agencies and other policy departments are responsible, within their mandates, for identifying procurements offering potential benefits in support of their programs, providing a rationale or statement of benefits expected when requesting individual procurement review or a specific procurement strategy, and for the evaluation of bidders' proposals for benefits relevant to their mandates.
Operating departments are responsible for the achievement of their approved project and procurement objectives, and for incorporating the government's socio-economic decisions into their procurement and project management activities.
The Treasury Board Secretariat plans to evaluate this policy on a regular basis. TBS will assess, in conjunction with affected departments, its effectiveness and impact on departmental operations and performance. Evaluation approaches will include: reviews of documents on departmental monitoring information, internal audits, program evaluations and other reports; interviews and focus groups with key departmental representatives involved with the implementation of the policy and with experts in the field; and other evaluation strategies when appropriate.
The Procurement Strategy Committee will play a major role in the evaluation of this policy. All departments and agencies involved in the process are encouraged to forward comments, both positive and negative, on their experiences with it and recommendations for improvement to the Strategy Committee or to the Procurement Review Secretariat for review and inclusion in reports to the committee's members and to Treasury Board. Reports to the Treasury Board should normally be made annually, and at least every three years.
Industry Canada, in concert with the regional departments and agencies and other interested parties, is responsible for the evaluation of the effectiveness of procurement in support of industrial and regional development. For other national objectives, evaluation of the effectiveness of the procurement lever is the responsibility of department responsible for the policy being supported. Results of such evaluations should be reported to the Procurement Strategy Committee and included in any reports made to TB.
Monitoring the achievement of the benefits being sought in individual procurement strategies is the responsibility of the department whose program will be supported by those benefits.
This policy is issued under Section 7 of the Financial Administration Act.
This policy replaces Chapter 305 of the Administrative Policy Manual.
Please direct enquiries about this policy instrument to the organizational unit in your department responsible for this subject matter. For interpretation of this policy instrument, the responsible organizational unit should contact: TBS Public Enquiries.
1.1 Given the scarcity of government resources, it is essential that all the potential benefits of the procurement function be identified and realized to the extent possible. It is equally important that procurement be used in the most efficient manner possible, and that all anticipated benefits, both operational and those in support of other national objectives, be attainable at justifiable levels of cost and risk. When optional procurement strategies are to be considered, they must be supported by sufficient information to enable the government to make informed decisions.
1.2 Use of procurement to support other national objectives may sometimes involve additional costs, directly through higher procurement costs, or indirectly, through increased risk, delay, or higher downstream costs. It is recognized that the benefits expected from a procurement strategy and their associated costs can be very difficult to quantify. Nevertheless, proposals to take specific procurement actions to support socio-economic goals must be supported by an analysis of both the potential costs and benefits, as described below.
1.3 The factors set out in this section have been developed primarily to assist in identifying those procurement strategies that offer the best opportunities for achieving regional and industrial benefits. Proposals to promote other national objectives should be supported by a similar analysis, drawing on the principles of this Appendix to the extent practicable. The Procurement Strategy Committee may provide special guidelines for other areas as appropriate.
1.4 Any recommendation to adopt a procurement strategy other than one which would best serve the primary procurement objectives of operational requirements, accessibility and fairness must address the extent to which the proposal meets each of the factors described in Section 2 below. As well, it must be supported by an assessment of the cost implications (Section 3) where the operating department, or others affected, can demonstrate that the proposal will entail significant costs or risks for the achievement of the operational objective or to the carrying out of departmental programs. It is recognized that not all proposed procurement actions will rank high against all the factors; guidance on the relative weight to be given to the factors may be provided by Ministers, either through the CAPS process or by other means, and may vary from case to case or by sector. The strategy committee may also provide guidance on the weighting of the factors and the depth of analysis required for particular procurements or groups of procurements.
When the government is the sole or primary customer for a product, decisions to create or maintain a single-source Canadian capability must take into consideration the long-term costs that can arise from a continuing non-competitive situation. Once such a source is established and develops entrenched interests, it can be extremely difficult to withdraw support. There should be over riding strategic reasons (e.g., defence considerations) to establish a firm that will remain essentially dependent on government purchases. This is particularly important where government purchases are not large enough to provide the economies of scale necessary to compete internationally.
The extent to which the proposed procurement strategy contributes to the development or maintenance of the defence industrial base, particularly with respect to the development and manufacture of identified strategic materials.
3.1 Any recommendation to adopt a procurement strategy that, in the opinion of the operating department, will result in increased cost or risk, either directly or indirectly, must be supported by:
The Procurement Strategy Committee, chaired by PWGSC, will provide a link between the government's industrial and regional benefits policy, direction on other national objectives, and their implementation through individual procurements. The committee will base its general direction to review committees on inputs from the CAPS process, other relevant Cabinet direction, and from departments that set policy.
The Procurement Strategy Committee will:
(a) identify those acquisitions or groups of acquisitions that will require consideration by a review committee. This determination will be based largely on analysis of departmental acquisition plans, information on procurements received outside the plan, and on industry sector information provided by Industry Canada and the regional departments and agencies;
Note: Individual review committees will not normally be held for procurements below $20M. Individual reviews will not be held for procurements that are subject to international agreements such as the GATT or NAFTA.
Note: because of the cost and time involved, for both industry and government, use of relative weighting for industrial and regional benefits proposals should be restricted to procurements over $50M except in special circumstances.
The committee may decide, subject to any conditions deemed appropriate, to exempt particular classes of procurement (by type or dollar value) from the requirement for procurement review, including the requirement to be reported in the annual plan.
The procurement review committees will:
Procurement review committees will be chaired by the contracting authority. The chairperson will call for representation from other departments as the situation demands, and in accordance with any guidance provided by the Procurement Strategy Committee.
3.1 The role and functions of these committees in the planning and implementation of projects over $100 million are set out in the Treasury Board policy on Major Crown Projects. The requirements of this appendix are to be read in the context of that policy.
3.2 The senior project advisory committee (SPAC) will carry out the procurement review functions of the PRC for the project, including all significant associated procurements handled through the project office.
3.3 The SPACs must, in making their recommendations to the project manager, consider any specific direction given by Cabinet with respect to the project under consideration, in addition to the general guidance provided by the Procurement Strategy Committee. The committee's recommendations may take the form of either a separate record of review, or the information required (Section 3 of Appendix C) may be incorporated into the minutes of the committee.
3.4 These recommendations must be included in subsequent submissions to Cabinet or TB for approval, as detailed in Policy Requirement 4.7.
4.1 A number of committees now exist for the review of specialized areas of procurement, such as repair and overhaul and ammunition. These committees may also, subject to the direction and guidance of the Procurement Strategy Committee, perform the functions of a procurement review committee, as described in Section 2 above.
5.1 PWGSC in cooperation with the other contracting authorities, will provide a central secretariat to support the Procurement Strategy Committee and to assist the chair of the PRCs and other review committees in coordinating and managing the decision-making process of the committees. The functions of the Secretariat include:
1.1 The successful implementation of the process laid out in this appendix is highly dependent on the cooperation and goodwill of all concerned. The process is intended to be carried out with a view to the efficient use of time and resources; the formality of the proceedings and the level of detail of supporting documentation should be tailored to the size and complexity of the procurement at issue. Particular care must be taken to ensure that the process is carried out in a timely manner, to avoid unnecessary and costly delays in the procurement process that could harm the ability of the operating departments to carry out their objectives. By the same token, operating departments must provide early notification and sufficient information to enable the policy departments to carry out their mandated objectives.
A simplified flow chart of the procurement review process is attached as an annex to this appendix.
1.2 The Procurement Strategy Committee will determine, based primarily on an analysis of departmental acquisition plans, those procurements to be subject to procurement review on a case-by-case basis, and will notify departments accordingly, within six weeks after departmental plans are received, subject to sufficient information being available to allow an informed decision. For procurements under $20M, a decision to hold a PRC must be supported by an explanation as to why individual review is desirable. No PRC is required for a procurement included in a departmental plan that has not been identified for review by the Procurement Strategy Committee.
1.3 Where procurements were not included in departmental plans, operating departments will notify the Procurement Review Secretariat as soon as it becomes aware of the new procurement. Any member of the Procurement Strategy Committee may request a PRC for procurements not included in the plan, or for a procurement that was previously reviewed but not identified, but in respect of which new information has become available. In both these circumstances, the Procurement Strategy Committee will then determine whether or not a PRC review should take place and so inform the contracting authority and the operating department.
1.4 Upon receipt of a request for consideration of a procurement case, the Procurement Review Secretariat will identify a chairperson for the case, who will schedule a meeting date, identify the composition of the committee and have background material prepared for the case under consideration.
1.5 The background material must include, to the greatest extent possible, the following:
1.6 In their deliberations, the procurement review committees will be guided by:
2.1 When appropriate, any of the committees involved in the review process may invite representatives from industry to participate in the consultation process, to bring their expertise to bear respecting possible industrial benefit opportunities. This representation may be drawn from broadly based national associations, from individual firms possessing a particular expertise, or from industry consultants. Care must be exercised to ensure that this industrial participation is carried out in a way that will not create any conflict of interest or jeopardize national security or commercial confidentiality. In order to avoid this possibility, industry representatives will not participate in the committee's/final considerations and decisions.
3.1 Output from the committee shall be in the form of general direction and guidance expressed as specifically as possible, given the information available at the time. This advice will be contained in a record of review/which eventually will be included in the Treasury Board submission for program or project approval and will be forwarded to the Ministers for consideration and approval in principle of the procurement course recommended. The record of review will accompany any subsequent internal government procurement documentation.
3.2 The record of review will contain the views and recommendations of the committee, a description of the industrial and regional or other benefits to be sought, considerations of incremental costs and funding options, and any relevant international considerations. In addition, it should contain an assessment of the risks associated with the achievement of national objectives, and of any impact the recommended procurement strategy might have on the risk of achieving the performance, time and cost objectives of the operating department, as well as a plan for monitoring the achievement of the expected benefits. The record of review must also include the separate views of any committee members not in accord with the committee's conclusions and recommendations.
4.1 Where the acquisition involves expenditures that are above the client department's delegated project approval level, approval in principle of the procurement method proposed will normally be obtained from the Treasury Board as part of the project approval. Otherwise, policy requirement 4.5 will apply. Supporting documentation for the procurement strategy will include a copy of the record of review, a summary of the analysis prescribed in Appendix A, where applicable, and the views of any department(s) that are at variance with the strategy proposed. Where the procurement has been exempted from review, the submission should so state, and give the basis for the exemption.
4.2 The contracting authority will process all contracting documentation in accordance with existing policies, guidelines and procedures, taking into account the advice provided by the procurement review committee. Particular care must be taken to clearly identify socio-economic considerations in the bid solicitation documentation, to ensure that contractors have a clear understanding of the evaluation criteria. The contracting authority will obtain advice, as required, from the appropriate members of the PRC. Results of the contracting action will be reported back to the Procurement Review Secretariat, as part of its reporting and monitoring functions, and may be requested from the Secretariat by any member.
4.3 Requests to Treasury Board for approval to enter into a contract will contain a section dealing with socio-economic considerations, including any funding implications. If the procurement strategy has not received Treasury Board approval through a program or project submission, the submission should include the supporting documentation described in subsection 4.1 above.
4.4 When the request to enter into contract does not conform to the recommendations of the PRC, the contracting authority will provide PRC members with an explanation of the contracting decision, before carrying it out. If a Treasury Board project or contract approval is required, the reasons for deviating from the PRC recommendation must be included in the submission.