Timing is everything: Tender and contract language follies in public procurement practices

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    By Giovanni Cautillo

    Special to Ontario Construction Report

    One would believe that most public procurement departments have been in existence for decades, if not longer, and that they clearly have a robust set of criteria that has been painstakingly established over years of methodically “tweaking” their system until it is a finely oiled machine!

    If you voted “yes” to the above statement, you would be completely and unequivocally incorrect!

    The Ontario General Contractors’ Association (OGCA) Board of Directors deliberate a great deal about poor, and at times utterly ludicrous, tender and contract language that is continually being issued from the public buyers of construction. And just when you believe you have seen the absolute worst set of contract documents ever written, yet another public buyer steps up and demonstrates that they can outdo their peers.

    I have surmised that in order to reach this level of absurdity, each public procurement group must consciously decide that they know better than any other of their peers and that they know how to best procure construction services.

    It has been discussed that, historically, the procurement departments at various public buyers are continually going through an ebb and flow process. They will experience a period of change and fluctuation, followed by a period of relative calm, and then the process repeats itself at intervals, pursuant to the departure or acquisition of talent.

    Currently, it seems as if all of the institutional knowledge and construction expertise that existed within the majority of public buyers’ departments has since departed. Perhaps it has been exasperated by COVID-19 or perhaps it was due to the ripple effect that this pandemic had on the supply chain in making what were normal construction items incredibly difficult to obtain. Regardless, from the perspective of the general contractors, the state of the tenders and contract documents is simply going from bad to worse at an exponential rate.

    What has the OGCA done to combat the insanity that currently is public procurement?

    The OGCA has continually provided the industry with a number of services including the review of tender documents and the entire tendering process. This is done in the belief that a clear, concise and equitable set of bidding documents, combined with a fair, open and transparent tendering process, will benefit all the parties involved: the design professional, the contractor and most importantly, the owner.

    The OGCA has also witnessed first-hand success in how public buyers have been reacting to our letters. The vast majority simply issue an addendum responding to the items listed in our submission, and not only acknowledging, but agreeing with our recommendations. This is the easy route and the one that provides the best outcomes for all parties involved.

    Unfortunately, not all public buyers are that accommodating. There are those that refuse to acknowledge our submissions and would rather take a legal stance instead of working with the OGCA toward a mutually beneficial outcome. This is where the OGCA truly believes change needs to occur.      They refuse to work collaboratively with the industry. If this is their starting position at the tender phase, this can be used as an accurate indicator of what the contractor will experience during the life of the project.

    Furthermore, after being adversarial and standoffish, they are shocked that the OGCA strongly recommends qualifying tender submissions from contractors for their own protection … against their potential client: the owner!

    Many instances, when faced with this type of situation, all of the contractors working through the OGCA as the hub, have independently opted not to bid projects that have too much risk thrust down onto the contractor. This sends a very clear message to the public buyers of construction that if change does not occur, the general contractor will not bid their projects.

    A long-term solution to this continuing issue is through the standardizing of contract documents, especially the limitation or elimination of supplementary conditions. It always astounds me how public buyers of construction issue what looks to be a rather straightforward contract, but then invariably attach 90 pages of supplementary conditions. Seriously!

    This brings me to the purpose of this article. With all of the projects being considered and tabled by public buyers of construction, there are currently more projects than there are contractors. This translates into the opportunity for general contractors to be more selective with the projects they pursue.

    The OGCA has recently assisted our members on a number of tenders where the provisions were less than acceptable. In our communication with contractors, they were quick to opt not to bid this project, due in part because they were already busy, but more so because they had the choice of projects that contained better terms.

    From a negotiation perspective, this surplus in projects places contractors in a very good position, and we encourage our members to submit to the OGCA any and all tender matters that contain language that downloads unnecessary risk onto the contractors. Terms that elongate validity periods, where tender documents are not complete or that wantonly remove the upper cap on liabilities, are all quick examples of items that have been adequately addressed and that should not be agreed to by any contractors.

    Please take a moment and review each potential project your company is reviewing as a bid consideration.

    If you have any doubts regarding the language, the odds are that the other contractors considering bidding the project also have doubts. Contact the OGCA for assistance and we would be happy to support our contractors and clearly communicate to the buyers of construction that they need to adjust contracts to be fair, balanced and equitable, otherwise the industry will not bid their work.

                Giovanni Cautillo is the OGCA’s president. This article was originally published in the association’s member eletter. Cautillo can be reached by email at giovanni@ogca.ca or phone at (905) 671-3969.

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