4. Business integrity and competition among public procurement suppliers in Quebec
This chapter examines the steps taken by Quebec to strengthen the integrity of suppliers in public procurement, as well as measures to ensure that bidding deadlines and regulatory constraints do not undermine competition among suppliers. First, the chapter analyses the controls in place to limit undue influence in communications with the private sector at the market analysis stage. This chapter also explores the enforcement of the contract authorisation regime in certain public procurement contracts and its impact on the adoption of good governance and control measures by suppliers. Finally, the chapter addresses the matter of bidding deadlines, which are shorter in Quebec than in other jurisdictions, and regulatory requirements (approvals, certifications of compliance with technical standards), which sometimes lead to increased risks of collusion and bribery due to weak competition.
The Government of Quebec has made significant efforts in recent years to strengthen business integrity and reduce the undue influence exercised by businesses in the conduct of public procurement. However, these efforts should not be made at the expense of efficient procurement, sound communication with potential bidders, and competition in the conduct of public procurement.
Fostering effective communication with the private sector while reducing the risk of collusion and bribery
To reduce opportunities for bribery and collusion in public procurement processes, several OECD member countries limit direct contacts between public procurement officials and suppliers. Public procurement processes are disseminated through an internet platform through which suppliers can obtain tender documents and submit their bids. The use of these platforms also provides a means of communicating fairly and transparently with potential suppliers in order to, for example, conduct a market analysis before organising the call for tenders.
Maximising the potential of the SEAO for fair and transparent communication with suppliers
In 2011, the regulations on contracts for public and municipal bodies were amended so that tender documents and related addenda are distributed exclusively through the electronic tendering system (SEAO). One of the aims of this measure was to combat collusion and malpractice in public procurement more effectively by avoiding direct contacts between potential bidders, as well as between potential bidders and public procurement officials.
With the advent of this requirement, public and municipal bodies no longer communicate directly with bidders prior to the determination of the winning tender. The purpose of this practice is to avoid giving a company an advantage over its competitors by providing it with insider information. In order to notify potential bidders that a call for tenders has been issued, potential bidders may receive a notification from the SEAO that a call for tender (CFT) has been issued in their area. Public and municipal bodies can also use the SEAO to conduct a call for interest, which allows them to survey the market to find out if there is a product or service to meet a specific need, as well as to issue a notice of intent, which ensures that no other potential contractor can provide an item or service below the public call for tenders threshold. The use of calls for interest and notices of intent are currently not supervised and are little used in practice. However, the use of notices of intent will become mandatory for all direct awards above the CFT threshold on an exceptional basis, where the public body believes it can demonstrate that a call for tenders would not be in the public interest. As part of future developments of the platform, and as noted in Chapter 3, registered suppliers will receive these notices of intent by default, unless they have voluntarily changed their profile settings to not receive them.
The Government of Quebec has put in place targeted communications to obtain feedback on its public procurement processes and to make bidders aware of its ethical and lobbying standards. The Government of Quebec requires contracting authorities to include in their tender documents a questionnaire to find out the reasons why a company did not submit a bid, even though it had obtained the tender documents. In addition, the tender documents outline the rules to be followed under the Lobbying Transparency and Ethics Act and the Lobbyists' Code of Conduct. Each bid must include a statement that the communications between the public body and the bidder, if any, were made in accordance with the Act and the Code. Some contracting authorities also communicate with unsuccessful bidders upon request in order to help them improve their future bids, and encourage them to participate in future calls for tenders. Finally, the MTQ organises biannual round tables to obtain feedback from construction and engineering firms on the conduct of the ministry's public procurement.
Communicating with bidders through a web-based platform such as the SEAO is best practice in line with trends in other OECD member countries (OECD, 2016[1]). Procurement units must exercise great care to communicate fairly and transparently with suppliers to ensure that competition is not unduly distorted. Thus, meetings should be prepared and structured to produce maximum results (Box 4.1) while avoiding the disclosure of strategic information that could facilitate bid-rigging agreements (price evaluation, volumes, etc.). Procurement units can also prepare a template to record and communicate the results of the supplier meetings via the web platform. The results of the meetings may also be used to purchase similar goods, services or work in the future.
Some questions to bear in mind when meeting with suppliers:
Are you interested in this opportunity? If not, why not?
Is the economic model realistic?
Are the business objectives realistic? Are the business opportunities interesting?
In your opinion, what are the main risks?
Can you give an idea of the costs, their main determinants and how they can be minimised?
Can you give a general indication of the likely time frame for preparation and implementation?
Are there other, more effective approaches?
What added value can the supplier bring?
Are there examples of good or bad practice in how other organisations have tried to obtain the same products or services, and what can be done to ensure clarity and improve results?
It is useful to meet with different types of suppliers to bolster policy options; for example, the views of small and medium-sized enterprises (SMEs) may be different from those of large corporations.
Public procurement officials should be present at meetings with suppliers, while on the supplier side, it should be someone with a good understanding of the requirements, who can offer innovative solutions and constructive advice. Both parties should adopt an attitude favouring confidentiality, flexibility and openness.
The objective is to identify procurement risks and expected results. Communicating and meeting with suppliers also allows them to present their views on how the results could be achieved, their perception of the issues, and the timelines, feasibility and affordability of the project.
The results of these meetings help to define requirements that are in line with what the market can provide. The market may also be encouraged to move in certain directions that will allow these requirements to be met in the future.
Source: Based on presentations by Steve Graham, Hadley Graham Ltd, advisers to the United Kingdom Department of Health, at the OECD workshop on “Improving ISSSTE Public Procurement Practices”, Mexico City, 2-4 September 2014.
Several OECD countries have adopted measures to provide a framework for transparent communications and consultations with suppliers, to level the playing field for all businesses, and to mitigate the risk of inappropriate relationships between government officials and suppliers (Box 4.2). For example, although Chile is often described as the country least affected by corruption in South America, public procurement is still a moderate risk there. Thus, the ChileCompra platform has been designed to mitigate the risk of wrongdoings and undue influence as much as possible.
“Welcome to Open Dialogue” in the United States
In 2014, the Chief Acquisition Officers Council (CAOC) created an online platform for stakeholders to discuss issues, barriers and possible solutions related to the federal acquisition process. The objective of the discussions is to identify improvements to the procurement cycle and the management of public procurement, and is part of an effort to improve the efficiency of the federal procurement system.
The dialogue focuses on three main areas: (i) reporting obligations and compliance requirements; (ii) public procurement practices; and (iii) participation of small businesses, new entrants and non-traditional government subcontractors. On the online platform, interested parties submit ideas, answer questions posed by the moderators and comment on other suggestions.
Online consultation of suppliers by the ChileCompra central purchasing department
Before issuing a call for tenders, ChileCompra (Dirección de Compras y Contratación Pública) engages in an open consultation of suppliers, which it announces online via its website www.mercadopublico.cl. The purpose of the consultation is to obtain information on prices, the characteristics of the goods and services desired, the time needed by suppliers to prepare their bids, and any other information that could contribute to the efficiency of the tendering process.
Following online publication of a contract notice (call for tenders), ChileCompra organises round tables with suppliers, also announced on its website. The purpose of these meetings is to inform suppliers of the main objectives of the procurement and to guide them on how to submit a bid. To enhance transparency, meetings are recorded and published online as a file attached to the call for tenders, so that suppliers who were unable to attend can also benefit from the information.
ChileCompra also has an online forum with a question and answer system for each call for tenders, which is set up before the deadline for the submission of bids. This forum is particularly useful for suppliers who are geographically distant from the capital Santiago (where Chile Compra's offices are located) and require remote access to the Q&A function, thus supporting transparency, fair treatment and free competition.
Relationship management in the evaluation of calls for tenders in Australia
The Government of South Australia's Department of Planning, Transport and Infrastructure (DPTI) has developed a Procurement Management Framework to address potential and significant conflicts of interest in public procurement and to mitigate the risk of inappropriate relationships between public officers and suppliers. Under this policy, DPTI members must immediately report any conflict of interest with a bidding company to the chair of the evaluation panel, including:
1. close family member employed by a bidding company
2. a relative participating in the company’s bid preparation
3. regular contact with an employee of a bidding company
4. having received gifts, invitations or other similar benefits from a candidate company during the period prior to the launch of the call for tenders
5. having recently left a candidate company
6. being interested in a future job offer or other favours from a bidding company.
Sources: Chief Acquisition Officers Council (2014), http://exo.dialogue.cao.gov/; Presentations by Marjorie Ramírez, former head of the Framework Agreements Division of ChileCompra, at the OECD workshop on “Improving ISSSTE's Public Procurement Practices”, Mexico City, 2-4 September 2014; Government of South Australia, “DPTI Procurement Practices and Policies”, www.dpti.sa.gov.au/open_government/proactive_disclosure/details_of_procurement_practices_within_departments.
The Government of Quebec could therefore draw inspiration from the operation of these platforms in order to maximise the potential use of the SEAO. The SEAO could be used to publish notices of intent to call for tenders on a more systematic basis as appropriate, as well as meetings with suppliers as part of its market oversight approach. The online exchange forum function could also be used to strengthen communications with suppliers in a fair and transparent manner.
Developing tools to guide interaction with suppliers appropriately during the market research and knowledge acquisition phase
According to best practices in OECD countries, communication with suppliers is increasingly part of a market oversight and analysis approach. These functions are usually assigned upstream, to a sector technical expert, while procurement professionals work with the sector expert downstream in developing the procurement strategy and overseeing the procurement process. For example, the market analysis process of the Italian public procurement agency Consip SpA provides for well-coordinated dialogue with suppliers when the circumstances of a particular contract justify it (Box 4.3). This enhanced framework stems from the increased powers delegated to the Italian Anti-Corruption Agency (ANAC) following numerous cases of corruption in public procurement exposed by the Italian media.
Consip SpA, the Italian central purchasing agency, is fully owned by the Ministry of Economy and Finance. Consip is responsible for awarding contracts (usually framework agreements) for goods and services for the Italian public sector.
To improve its purchases, Consip has developed an internal procedure on how to conduct a market analysis and how to interact with suppliers (economic operators) during market analysis.
The procedure, described in figure 4.1, identifies the actions to be performed during the market analysis to finalise a “feasibility study”, a stage prior to the design of the call for tenders and the publication of the tender notice.
The entire process is supported by: 1) internal guidelines on market analysis; 2) market consultation questionnaires; and 3) a yearly Sourcing Activities Plan (SAP).
Internal guidelines on market analysis
The internal guidelines on market analysis are intended to guide the interaction with companies during the market consultation phase. The purpose of the market analysis is to collect the following data on the characteristics of the goods and services required:
market size and volume of purchases in relation to market size
market structure: percentage of small and medium-sized enterprises in this market segment or dominance of large companies
main suppliers on the market
maturity of products/services, pricing models and conditions offered by suppliers, potential standardisation of products/services and business capabilities
prospects for market development in the coming years.
This information is useful for defining the procurement characteristics, the tendering strategy, the possibility of sub-division into batches and the reference price.
Information is collected through meetings held with the main professional associations and, where necessary, with individual suppliers, following the guidelines for market analysis.
Market consultation questionnaires and meetings with economic operators
The market consultation begins with the publication of project-specific questionnaires on the e-procurement platform and the Consip website. The questionnaires provided to suppliers aim to gain a better understanding of the characteristics of the market, to guarantee the participation of companies and to ensure the dissemination of information. The questionnaires are valid until the publication of the call for tenders notice.
Meetings with economic operators may take place; these must be requested by e-mail and at least two Consip employees (project leader and category manager) must attend. During the meeting, Consip presents the project-specific market research questionnaire and distributes a copy of its code of ethics. The questionnaire is then completed by all those attending the meeting.
Questions may be asked during the meeting; however, no information beyond what is already published is provided, so that suppliers who are unable to attend the meeting are not disadvantaged. The tendering strategy (if already established) is not discussed and no comparison between potential bidders is made.
Source: Consip SpA.
In Quebec, the Directive Concerning the Management of the Supply, Service and Construction Contracts of Public Bodies provides a framework for communications of influence in public procurement. However, the Directive does not provide any guidelines or standards of conduct for situations where officials wish to acquire specific information on specific contracts. The CSPQ has also developed the guide Reference Process in Contractual Management of Supply and Service Contracts, which provides a comprehensive general reference framework for contract management. Nevertheless, this guide provides limited guidance on the suitability and methodologies for approaching key actors in specific markets.
To enhance its understanding of the capacity of markets to meet its needs, the Government of Quebec could make tools available to public and municipal bodies to conduct market analysis and monitoring activities, including the oversight of exchanges with potential bidders when warranted by circumstances. Box 4.3 provides concrete examples of tools that the Government of Quebec could use to achieve this. In addition, the AMP, as part of its monitoring and recommendation remit, may also suggest specific practices that it deems appropriate based on its findings in the exercise of its activities.
In response to the many cases of collusion and bribery brought before the Charbonneau Commission, the Government of Quebec has implemented innovative and ambitious measures to strengthen business integrity in Quebec. On 7 December 2012, the ACPB was amended to introduce the contract authorisation regime, which involves verifying the integrity of companies wishing to enter into a contract with a public body covered by the ACPB or a municipal body. The arrangement also applies to all subcontractors taking part in a public contract as soon as the value of the subcontract is greater than or equal to the applicable threshold. The United States has also adopted a system of corporate control that includes: 1) a centralised list of companies authorised to contract with the state; and 2) a list of companies that cannot receive federal contracts. However, this control system is not as thorough as in Quebec because it does not include in-company audits such as those conducted by the UPAC (Box 4.4).
In the United States, the System for Award Management (SAM) is a single interface created in 2012 and operated by the federal government. It brings together several databases previously used in public procurement, including a mandatory registration system (Central Contractor Registration) and a list of suppliers debarred from all procurement processes (Excluded Parties List System).
To be eligible to enter into public procurement contracts with the Federal Government, suppliers are required to register in the SAM and to update their data once a year. The information to be provided includes general information (company address, unique identification number) as well as tax and banking data. If the registration was made with the help of a US Federal Contractor Registration case manager, companies receive a Verified Vendor Seal indicating that their information has been verified, thus avoiding any risk of error or omission. This certification can be posted on a company's website provided that the link to the certification document is included.
In addition, a company may be suspended or debarred from participation in a procurement process by a federal agency in the event of certain failures specified in the Federal Acquisition Regulation. Examples of such failures include bribery, breach of a previous contract or any offence indicating a lack of integrity. The list of suppliers who are not eligible to receive federal contracts or sub-contracts is available on the SAM website.
Sources: US Federal Contractor Registration, https://uscontractorregistration.com/; Federal Acquisition Regulation https://www.acquisition.gov/browsefar.
To be eligible to enter into a contract with a public or municipal body, the company must obtain a contract authorisation from the AMP following a review of the integrity of the company, its shareholders, partners, directors or leaders, or a person or entity that has, directly or indirectly, legal or de facto control over it (the management of the contract authorisation regime has been transferred from the Autorité des marchés financiers to the AMP, which has held the responsibility for it since January 2019). This integrity review is conducted by the Anti-Corruption Associate Commissioner, within the UPAC, which is mandated to carry out the necessary checks and provide the AMP with all the relevant information when deciding to issue the authorisation.
Defining targets with specific indicators for the exercise of discretionary power under the contract authorisation regime
The ACPB gives broad discretion to the AMP to demand corrective measures from companies wishing to obtain authorisation to enter into contracts with public bodies but that do not meet the high standards of integrity that the public has a right to expect from a party to a public contract, as defined in articles 21.27 and 21.28 of the ACPB. The establishment of clear and transparent objectives for the contract authorisation regime could make it possible to measure its performance against predetermined objectives, thus allowing for the adjustment of the benchmarks for the exercise of discretionary power if necessary.
Setting clear and measurable objectives for the contract authorisation regime
Companies whose integrity is not in doubt receive their contract authorisation within five to ten months without any particular requirements. However, the ACPB requires that the AMP refuse to issue a contract authorisation if the company's majority shareholder, (where this is an individual), or a director or CEO of the company, has been convicted of an offence under annex I of the ACPB within the last five years.
Additionally, the ACPB states that the AMP may refuse to grant (or may revoke) a contract authorisation to a company that does not meet “the high standards of integrity that the public has a right to expect of a party to a public contract”. As stated in the report of the Quebec Auditor General (QAG), “integrity is in itself a concept that can be highly subjective” and in this sense, “the legislator has granted very broad discretionary powers” to the AMP. The ACPB also provides a framework for dealing with what constitutes a lack of integrity on the part of companies. For example, it includes the following:
ties to a criminal organisation;
the fact that the company or any of its directors, CEOs or shareholders have been prosecuted for one of the offences listed in annex I of the ACPB, or any other offence of a criminal nature;
the fact that the company or one of its directors, CEOs or shareholders has repeatedly evaded or attempted to evade the law;
the fact that the company requesting the authorisation is a front for, or the successor to, an undertaking that would not receive authorisation.
This power of intervention of the UPAC and the AMP is generally broader than similar powers of intervention in other jurisdictions (Box 4.5).
Violations of integrity committed by certain companies may lead to the temporary or permanent debarment of a bidder from participation in a public procurement procedure. The 2009 OECD Recommendation which aims to strengthen the fight against corruption calls on the Parties to the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions to “suspend, to an appropriate degree, from competition for public contracts or other public advantages (...) enterprises determined to have bribed domestic public officials”.
The adoption of bidder debarment systems has increased significantly over the last decade, both as an instrument for fighting corruption and as a tool for restoring confidence in public procurement. Several countries and multilateral organisations have developed such systems, but their operation differs from jurisdiction to jurisdiction. In addition, there are wide variations in the grounds for debarment (Hjelmeng and Søreide, 2014), and some countries are reviewing their debarment processes to reduce their rigidity.
European Union
Following the European Union (EU) legislation, there are mandatory debarment rules in EU Member States. According to Article 57 of Directive 2014/24/EU of 26 February 2014 on the award of public contracts, contracting authorities are obliged to exclude an economic operator from participation in a public procurement procedure where the operator has been convicted on the following grounds:
Participation in a criminal organisation;
Bribery;
Fraud;
Terrorist offence or offence related to terrorist activities;
Money laundering or terrorist financing;
Child labour and other forms of human trafficking.
In addition, economic operators must provide contracting authorities with a European Single Procurement Document (ESPD) certifying on their honour that they are not in a situation that could lead to their debarment (Article 59). The contracting authorities may require the production of certificates, declarations and other evidence of the absence of such grounds (Article 60).
Mexico
In Mexico, the Law on Public Sector Procurement, Leasing and Services (Ley de Adquisiciones, Arrendamientos y Servicios del Sector Público, LAASSP) includes various provisions on administrative sanctions for bidders and suppliers who have not complied with their contractual obligations (Articles 59 to 64 of the LAASSP). Penalties can range from a fine (multas) to debarment from public procurement procedures for a period from three months to five years (inhabilitaciones). The list of suppliers that have been sanctioned or debarred at least once is published online. It specifies the reasons for the sanction or debarment, the amount of the fine and the duration of the exclusion. In October 2016, 1 236 suppliers were listed as having been sanctioned or debarred.
The entry into force of the Federal Act on Administrative Responsibilities (Ley general de responsabilidades administrativas, LGRA) in July 2017 enriched the legislative framework for public procurement. Unlike the Federal Law on the Administrative Responsibilities of Public Servants (Ley Federal de Responsabilidades Administrativas de los Servidores Públicos, LFRASP), which it replaced, the LGRA also applies to suppliers and bidders. Article 81 provides for sanctions against companies involved in public sector activities who are found guilty of serious administrative misconduct. These are listed in articles 65 to 72 of the law and include collusion, influence peddling and bribery of public officials. Companies may be prohibited from participating in acquisitions, leases, services or public works for a period of three months to ten years.
Multilateral Development Banks
Under the leadership of the World Bank, the Multilateral Development Banks developed and signed an Agreement for Mutual Enforcement of Debarment Decisions in April 2010 and publicised the list of companies and individuals ineligible to participate in their tendering process. Participating institutions must enforce decisions taken by anyone institution based on the four principles which they unanimously consider to justify sanctions: i) fraud; ii) corruption; iii) coercion; and iv) collusion.
Sources: (Hjelmeng and Søreide, 2014[2]; European Commission, 2014[3]; OECD, 2017[4]).
Agreement for Mutual Enforcement of Debarment Decisions, https://www.adb.org/sites/default/files/institutional-document/32774/files/cross-debarment-agreement.pdf
Given the potential impact of the contract authorisation regime on businesses and in order to exercise its broad discretion in a fair and consistent manner, the AMP has developed a number of benchmarks to ensure that its decisions are consistent with established precedents. Indeed, the AMP has broad powers to compel companies that have committed certain integrity failures (as defined by the AMP), to adopt governance and control measures that can reduce the risk of bribery in the conduct of public procurement. For example, the AMP may issue a demand for corrective action, requiring a company to put in place the necessary measures to ensure that integrity issues do not recur. The AMP may also issue a notice of refusal, which may or may not be maintained following the AMP’s observations of the company’s commitment to put certain corrective measures in place. If the notice of refusal is maintained, the company is entered in the register of ineligible companies (RENA) provided for in the ACPB for a period of five years. Companies are also listed in the RENA if they, or any person related 1to them, are convicted of an offence identified in annex I of the ACPB.
The contract authorisation regime has had a positive impact on corporate governance. For example, more competition has been noted among engineering firms, as stated by the former Inspector General of the City of Montréal and the CEO of the Association des firmes de génie-conseil du Québec (Champagne, 2018[5]). While increased perceptions of greater competition among engineering firms is a positive development, further analysis is needed to gain a full picture of its impact on public procurement.
Nevertheless, following a report of the Auditor General of Quebec that questioned the consistency and appropriateness of the requirements demanded from certain companies that had received a request to implement corrective measures (VGQ, 2018[6]), the AMF is currently developing an action plan to put in place mechanisms to ensure the relevance and consistency across proposed measures. Beyond the establishment of enhanced institutional mechanisms for control of the requirements imposed, the AMP could set specific and measurable objectives that the authorisation regime aims to achieve. Prior identification of specific objectives could greatly facilitate the identification and application of solutions to each problematic situation within a company, thus ensuring greater consistency and objectivity. As an indication, Table 4.1 includes examples of objectives, monitoring measures and impact indicators that could be set in advance by the AMP to assess the performance of the contract authorisation regime.
These targets could be published to ensure natural justice for companies, which would further strengthen the incentives for companies to demonstrate good governance and integrity in the conduct of their business. Publication of the objectives would also increase transparency and accountability in the administration of the contract authorisation regime, including the AMP's interpretation of the term “high standards of integrity that the public has a right to expect from a party to a public contract or public sub-contract” included in the ACPB.
Prioritising controls on riskier public procurement contracts
Under article 21.17.1 of the ACPB, the government has broad discretionary powers to determine which contracts will be subject to the contract authorisation regime of the ACPB. The TBS could use this authority in the enforcement of the contract authorisation to target contracts that are at higher risk.
Considering extending the contract authorisation regime to more public contracts based on a risk analysis
The scope of the contract authorisation regime is currently limited to construction contracts over USD 5 million and service contracts over USD 1 million. This may exclude several high-risk markets from the scope of the contract authorisation regime.
It is understandable that a certain amount of restraint is exercised in defining the scope of the contract authorisation regime. As of July 2018, before the enforcement of the contract authorisation regime was transferred to the AMP, the AMF had received 5 478 requests for authorisation under these thresholds, and if the government decided to follow through on its commitment to lower the threshold for all government contracts to USD 100 000, approximately 20 000 companies would have to apply for contract authorisation. According to the information provided by the AMF, the time taken to obtain an authorisation can vary from 5 to 10 months based on the best case scenario, or even longer in cases where major issues are detected. Thus, the scope of the contract authorisation regime should be extended by the Government of Quebec only on a well-considered basis, taking account of internal capacities to safeguard procurement efficiency.
That being said, the government may consider using its discretion under article 21.17.1 of the ACPB to subject certain additional public procurement contracts to the contract authorisation regime based on risk analysis, audit results and the strategic importance of certain stakeholders to ensure the integrity of public procurement. For example, few construction site oversight contracts require authorisation given the USD 1 million threshold. In addition, for technical reasons, procurement sub-contracts within public construction contracts are not subject to contract authorisation because the regulations do not recognise them as public sub-contracts. However, there are several documented cases where the supply of raw materials for major construction sites is embezzled, replaced with inferior materials, and overestimated in terms of volumes delivered (PwC, 2014[7]). The supply of computer equipment through the Shared Services Centre of Québec has also been identified as a risk area by the QAG (VGQ, 2016[8]).
Nevertheless, any such decisions to extend the scope of the regime should be taken in the light of the capacity to analyse a higher volume of applications, and after ensuring that it does not lead to disproportionate delays in obtaining authorisation - which may affect the efficiency of public procurement.
Regulatory requirements (technical standards, product certifications and approvals2) imposed on suppliers play a key role in public procurement. Their primary aim is to ensure that products and public works undertaken comply with the health, quality or safety requirements of public authorities or minimise the environmental externalities of suppliers' activities.
However, excessive regulatory requirements may reduce the number of potential suppliers, exposing procurement officials to risks of bribery and increasing the risk of collusion between suppliers or for example, between certain producers and installers of equipment in the field of urban infrastructure. These areas of limited competition also expose procurement officials to risks of bribery. These requirements equally contradict the “access” principle of the OECD Recommendation on Public Procurement, which emphasises the need to “encourage broad participation from potential competitors, including new entrants and small and medium enterprises”.
Lambert-Mogiliansky and Sonin (2006) show that the risks of collusion involving bribery are particularly high when competition is weak and the market is characterised by a small number of medium-sized firms with a comparable cost structure (Lambert-Mogiliansky and Sonin, 2006[9]). This market structure applies to numerous cases of collusion in the construction industry highlighted by the Charbonneau Commission.
For example, the asphalt paving market has resulted in bid-rigging agreements among a small number of suppliers of goods with a comparable cost structure. These collusion practices in Montreal in the 2000s were based on territorial sharing of government contracts among five companies, depending on the location of each asphalt plant. This cartel had ensured profit margins of 30% for the companies involved, well above the industry average of 4-8% (CEIC, 2015[10]). Since then, the Government of Quebec has taken several measures to encourage competition between asphalt mix suppliers, notably by increasing the presence of mobile asphalt plants (Bégin et al., 2016[11]).
However, these regulatory requirements have different characteristics depending on whether they relate to product approval, or standards and certification. Indeed, the purpose of approval is to strictly define the products that a contracting authority may purchase, whereas standards and certifications oblige bidders to demonstrate the conformity of products and services with these requirements. In the former, the market is frozen since only approved products can be acquired, while in the latter situation the market is restricted as the procurement officer defines the characteristics of the products and services provided by the companies. The main consequence of this difference is that the risks of bid-rigging are more present in the purchase of approved products, while the risks of bribery increase in markets requiring specific technical standards or certifications because of weak competition. The solutions provided by the Government of Quebec must, therefore, take these differences into account.
Defining strategies to limit collusion on approved products
In Quebec, public and municipal bodies have the option of approving items “to ensure, before issuing a call for tenders, that the item meets a recognised standard or an established technical specification” (Regulation respecting certain service contracts of public bodies - RCAOP, article 573.1.0.2 of the CTA and 936.0.2 of the MC). Notices of approvals from government agencies are published at least once a year on the SEAO. The list of approved goods is also posted on the SEAO. Any CFT after approval is restricted to approved goods only and may result in a contract of up to 3 years.
The MTQ is the public body that manages the largest number of approval programmes in Quebec. These programmes are designed to ensure the use of reliable, quality products, particularly for the construction and maintenance of road networks, while streamlining the procurement process. Other public bodies (Shared Services Center of Quebec, health-related shared procurement groups) and municipalities also manage their own approval programmes.
Many MTQ approval programmes for very specific products involve only 2 or 3 suppliers located in Quebec3. This kind of market structure calls for increased vigilance with regard to the risk of collusion and bribery among clients. Although suppliers from Canadian regions with which Quebec has trade agreements are admitted to the approval programmes, they generally go through distributors or manufacturing agents located in Quebec. The increased vigilance must therefore also extend to these various intermediaries.
Measuring the tangible effects of these strategies and systematically assessing the impact of approval programmes on competition
Nevertheless, the impact of these strategies needs to be assessed to ascertain their relevance. In particular, in practice, few non-Quebec equipment installers or suppliers (foreign or from other Canadian provinces) are currently certified by the MTQ, although it must be noted that these suppliers often call upon Quebec partners or distributors to have their products approved.
The MTQ has strengthened the consideration of competition in its approval processes. A market analysis expert is now a member of the approval committees, and the periodic review of approval programmes currently includes market analysis. The Ministry has a team of eight analysts who carry out work on competition, including a monitoring dashboard based on key indicators.
The MTQ's work extended to all of its contracts, with no apparent prioritisation of approved goods contracts. Only the periodic reviews of approval programmes (once every three years) gave rise to specific assessments of their impact on competition. More regular monitoring of competition was introduced in December 2018, including an annual review of products. The MTQ could continue to strengthen its regular monitoring of competition (establishment of indicators, market studies) within its various approval programmes.
Other public agencies and municipalities that manage approval programmes could also assess their impact on competition, for example by developing a dashboard based on the MTQ model. The systematic presence of a market analysis expert on approval committees could be made mandatory, including in municipalities.
On the other hand, and particularly if the strategies developed do not produce the expected effects, procurement officials also have the option of using specific procurement strategies that can minimise the risks of rigging agreements among bidders. In France, for example, the Union of Public Purchasing Groups (Union des groupements d'achats publics) has implemented certain procurement strategies to limit the risks of collusion in markets with little competition. To this end, framework agreements (task order contracts and delivery order contracts) have been drawn up requiring a degressive distribution of volumes between suppliers according to their ranking following a competitive bidding process. These techniques can be used to minimise the risk of collusion, among other things (OECD, 2017[12]).
Conducting a systematic audit of the risks of collusion within the CFTs of approved goods
The small number of potential suppliers of approved goods increases the risk of them colluding to “share” the market between themselves, which also entails risks in terms of integrity. The AMP or the contracting authorities should conduct a systematic analysis of the risks of collusion in markets for approved goods, including using data from the SEAO. Such an analysis presupposes a greater digitalisation of public procurement, as discussed in Chapter 3. Rolling out electronic bid submission would make it possible, in particular, to collect the data necessary for the systematic analysis of collusion risks, as shown in Box 4.6.
Korea - System for the analysis of cartel indicators in public procurement
The Korean Fair Trade Commission (FTC) works closely with the government regulators to identify transactions that pose a risk of anti-competitive agreements or cartels. In addition to its traditional tools (reporting by competitors or by one of its members), in 2006 the Bureau developed an automated cartel analysis system based on indicators (Bid-Rigging Indicator Analysis System, BRIAS).
The system uses data from the Korean electronic tendering system (KONEPS). It analyses a dataset including the price of each bid (which is compared to a reference price), the number of bidders, the method of procurement, etc. The system applies a formula that generates a score reflecting the probability of rigging. Beyond a certain threshold, the system suggests that users collect more data on a suspicious procedure. A high threshold may also give rise to an investigation into a specific purchasing process, where appropriate. Each month the system analyses the data collected from KONEPS on the procurement processes of the previous month. For goods and services, the system analyses all processes above USD 423 000, while for public works, all those above USD 4.2 million are screened.
United Kingdom - Cartel detection tool available to contracting authorities
The United Kingdom Competition and Markets Authority (CMA) provides a free cartel detection tool for contracting authorities. This tool automatically analyses bids and tender documents received. The system's algorithm uses this data to run empirical tests on bid prices, the number and timing of bids, and the tender documents to generate a ‘suspicion score’ for each procedure.
Contracting authorities can set up tests based on their knowledge of each specific market and the suppliers involved in the tender. The detailed results of each test are available to users.
Sources: Competitions and Markets Authority, Cartel screening tool for procurers (Available at: https://www.gov.uk/government/publications/screening-for-cartels-tool-for-procurers/about-the-cartel-screening-tool#case-study-cornwall-council); (OECD, 2016[13]).
Quebec could draw on these two examples to implement collusion risk analysis tools based on SEAO statistics. In addition, the Government should prioritise the markets for approved goods (or markets comprising approved goods) in the implementation of full digitisation of the entire contract management cycle.
Considering centralisation of municipal approval programmes
The approval of goods by each municipality creates additional costs and delays for suppliers. Indeed, they must prepare approval files for each municipality and make themselves available to take part in possible on-site demonstrations. The multiplicity of registration processes could discourage new entrants and foreign suppliers, or suppliers resident in other Canadian provinces.
Moreover, municipalities do not always have the means and critical mass to conduct competition impact analyses or collusion risk audits. Quebec could therefore examine the advisability of entrusting municipal approval programmes to the centre of expertise under the aegis of the MAMH or the Société québécoise des infrastructures. The Shared Services Centre could manage information technology approval programmes. Another option would be to provide for mutual recognition of product approvals among municipalities, or to make it mandatory to register through multi-municipal joint procurement groups, such as those that already exist for medical devices.
This more centralised approval process could attract a larger number of suppliers, as it would allow access to larger procurement volumes. Increasing the number of potential suppliers whose products are registered would discourage collusion schemes between suppliers by stimulating new entrants from neighbouring provinces (such as Ontario) in the case of calls for tenders in the Montreal metropolitan area.
Harmonising standards and certification requirements and encouraging supplier innovation
In Quebec, as in many OECD countries, public bodies and municipalities frequently refer to technical standards and require their suppliers to provide products that are certified as complying with these standards. In Quebec, most of these standards are issued by the Bureau de normalisation du Québec (BNQ) or another organisation accredited by the Standards Council of Canada (SCC). Some calls for tenders require suppliers to comply with an American or European standard (EC standards). Public bodies also contribute to the formation of new standards: the Régie de l'Assurance maladie du Québec (RAMQ), for example, contributes to the formation of a technical standard for wheelchairs under the aegis of the BNQ.
By facilitating the compatibility of products and services, the adoption of standards normally has a favourable effect on competition as it promotes diversity of supply and allows purchasers to easily compare different products, thus reducing information asymmetries. Standards are also an important element in product innovation, as innovative products certified to technical standards are more readily accepted by consumers and clients (OECD, 2017[14]). However, technical standards may also delay innovation and thus access to new market entrants, particularly in cases where two conditions are met: 1) The installed base (the number of products that are being used) relative to an older standard is significant and 2) An innovative product is not compatible with the old standard. (Forrell, Solaner and Org, 1986[15])
In Canada, the technical standards and certification requirements faced by economic actors may vary from province to province. Many standards and certification requirements have differences that create technical barriers to internal trade (Standards Council of Canada, 2018[16]). In some public procurement contracts, these differences may result in a reduced pool of potential suppliers, creating fertile ground for bid-rigging by suppliers. These agreements increase the risk of bribery among procurement officials.
In order to mitigate the “anti-competitive” impact of regulatory standards and requirements on public procurement, the recommendations below present 3 tools available to the Government of Quebec.
Continuing efforts to harmonise standards and certification requirements within Canada and with Ontario
Canadian provinces are engaged in efforts to harmonise standards and certification requirements, which is one of the objectives of the Canadian Free Trade Agreement (CFTA) that will come into effect in 2017. The Standards Council of Canada is engaged with Canadian industry associations in identifying standards-related barriers to interprovincial trade.
Nonetheless, there is little, if any, participation of suppliers from other Canadian provinces in public procurement processes in Quebec. For example, the Régie de l'Assurance maladie du Québec reports that bidders resident in other Canadian provinces do not participate in its CFTs, with technical standards presenting a major barrier. One way to increase the participation of suppliers from other Canadian provinces is through the harmonisation of technical standards and certification requirements among provinces. Harmonisation does not mean the outright adoption of the standards and certification requirements of other provinces, but rather the gradual development of common standards. The Government of Quebec could therefore continue its contribution to the harmonisation of standards and certification requirements at the federal level to remove technical barriers to increased competition in public procurement. Besides, better co-ordination between standards assessment bodies (SAB) and federal, provincial and municipal regulators is needed to avoid the development of non-harmonised requirements in newly regulated sectors (Standards Council of Canada, 2018). The Government of Quebec could contribute to the reconciliation of standardisation requirements as part of the modernisation of the CFTA.
The 2009 Ontario-Quebec Trade and Cooperation Agreement (OQTCA) includes provisions for regulatory co-operation (Chapter 3, including Article 3.6). In the absence of harmonisation at the federal level, the harmonisation of technical standards and certification requirements between Quebec and Ontario, particularly with respect to construction work, can be a powerful tool for increasing competition in public procurement in the Greater Montreal area. For example, a joint committee on regulatory co-operation (Article 3.6 of the OQTCA) could be convened or reactivated between MTQ experts and representatives of the Ontario Ministry of Transportation.
The MTQ, as the main contractor for construction work, recognises technical evaluations of products in other jurisdictions similar to Quebec under three of its approval programmes. This has paid off, with a manufacturer of road marking paint in Ontario being approved by the MTQ since 2017. However, it is the only Ontario manufacturer approved by the MTQ. The Ministry could therefore continue its efforts by initiating a study of Ontario suppliers to identify potential barriers to submitting their products to its approval programmes. The inclusion of a non-response form (which already exists in the CFT files) would provide the Ministry with information on why suppliers from other Canadian provinces are not participating in its approval programmes.
As a result of internal analyses of competition in its procurement markets, and as part of the review of its approval programmes, the Ministry could more frequently recognise comparable Ontario road equipment standards in segments where the level of supplier competition is unsatisfactory. The choice of Ontario makes sense given the province's pool of potential suppliers and its geographical proximity to densely populated areas of Quebec (notably the Montreal metropolitan region). Indeed, Ontario accounts for a significant share (36%) of construction employees in Canada.
In addition to the MTQ, other public bodies such as the RAMQ or the City of Montréal could consider recognising comparable standards and certifications in effect in Ontario in certain instances of public procurement with a low level of competition. In all cases, such recognition would necessarily be subject to a thorough technical examination by the relevant Quebec authority.
Fostering supplier innovation through innovative product evaluation processes and public procurement programmes
Fostering innovation among suppliers is a means of stimulating competition and often of promoting access to public procurement for new entrants (sometimes innovative SMEs), thus increasing the level of competition. The access of new entrants also helps to thwart the administrative corruption schemes that accompany collusion in many tenders. Indeed, the literature (Compte, Lambert-Mogiliansky and Verdier, 2005[17]) demonstrates that facilitating the arrival of new entrants who are not involved in the corruption networks of established actors is a means of restoring fair competition between suppliers.
However, new products or technologies may not meet the established technical standards referred to in CFTs and approval programmes. To foster innovation among suppliers, contracting authorities could set up an evaluation process for new products and new technologies, similar to that practised by the MTQ.4
For municipalities that manage approval programmes, the implementation of such a process could be problematic due to a lack of specialised staff and financial resources. For this reason, the implementation of such a process could go hand in hand with the centralisation of approval programmes managed by municipalities.
Public bodies could also engage in a pre-commercial innovation approach, involving the use of research and development services to create innovative products that are adapted to their needs and that can be tested to ensure compliance with the requirements covered by existing standards. The development of these pre-commercial innovations may require a specific government programme, such as the federal government's “Build in Canada” procurement innovation programme (Box 4.7).
The Build in Canada Innovation Program helps innovators move through the final stages of research and development, from the laboratory to the marketplace. The BCIP enables them to test their innovations in an operational environment, within the structures of the Canadian Federal Government.
The BCIP awards public contracts to contractors whose innovations are at the pre-commercial stage through an open, transparent and competitive procurement process. These contracts lead to an operational test phase. The Departments concerned provide contractors with an assessment of the operational performance of their innovative goods and services. In this way, the BCIP enables innovators to enter the market with a positive first experience of using their innovations. With the assistance of the Office of Small and Medium-sized Enterprises (OSME) of Public Services and Procurement Canada (PSPC), the BCIP also informs innovative SMEs on how to participate in Canada's federal procurement.
Source: Country response to (OECD, 2017[18]), “OECD Survey on Strategic Procurement for innovation 2015”, in Public Procurement for Innovation: Good Practices and Strategies, Annex C, OECD Publishing, Paris.
Maintaining high levels of performance and quality requirements without unduly restricting competition
In Quebec, regulations allow public bodies to require suppliers to implement a quality assurance system, including an ISO standard. In terms of quality assurance, the standard generally used is ISO 9001: 2015 (ISO 9001: 2008 in its previous version). A comparable system is in place in the area of environmental specifications (the most common is ISO 14001) that may be required of suppliers by contracting authorities, except in the construction field.
However, the public body may opt for an alternative system known as “preferential margins” if it judges that the requirement to comply with ISO standards “unduly reduces competition”. The system of preferential margins makes it possible to accept bidders who do not have a quality assurance system that meets the standard. However, it gives an advantage to bidders with compliant quality assurance systems at the tendering stage: their prices are fictitiously reduced by a margin of between 0 and 10% (for award purposes only). The use of a quality assurance system is mandatory in only one case: that of a contract for information technology professional services, with a value exceeding USD 2 million. However, the head of the contracting authority may authorise a waiver of the enforcement of this obligation if he or she considers it appropriate.
OECD field research has shown that public bodies have different practices in requiring ISO-compliant processes of their suppliers.
The implementation of a quality assurance system in accordance with ISO 9001 or an environmental performance system in accordance with ISO 14001 generates costs and requires a significant investment by suppliers' employees. According to the Business Development Bank of Canada, the entire ISO 9001 certification process can take between 8 and 18 months and costs between USD 12 000 to 50 000. The cost of registration checks, usually ranging from USD 2 000 to USD 30 000 per year5 may be too high for SMEs and new entrants wishing to participate in public CFTs. They can therefore reduce the level of competition in public procurement by restricting the pool of potential suppliers to established actors already holding certificates of conformity to standards.
The Government of Quebec should consider the possibility that contracting authorities may not be able to require compliance with ISO standards for public procurement involving small amounts. Indeed, SMEs and new entrants for whom ISO certification could represent insurmountable costs are generally interested in calls for tenders for lower value contracts.
In cases where the contracting authority deems the reference to an ISO standard indispensable in the context of a procurement process involving lower award amounts, using a system of preferential margins might be preferable. Indeed, this system provides an incentive for all economic operators (including SMEs and new entrants) to comply with ISO quality assurance standards and to obtain their certification from an accredited conformity assessment body without limiting competition.
There is a close link between the integrity of the system, the degree of competition in the CFTs and the deadline for submission of bids. When the duration of CFTs is limited, it does not allow for a competitive environment and represents a risk to integrity. In its handbook for public officials involved in public procurement, the World Bank (2014[19]) states that a bidding deadline which is too tight can make it very difficult for regular bidders to prepare sound tender applications, and on the contrary favours the selection of bidders who have bribed the public procurement officials. Furthermore, a deadline that is too short may encourage some bidders to try to obtain insider information before the publication of the CFT in order to better prepare their bids. Such cases have been uncovered in Quebec by the Charbonneau Commission, for example in the case of water meters in Montreal (Faubourg Contrecoeur).
Further adjusting bid submission deadlines according to the size and complexity of the CFTs
Several empirical analyses confirm the link between procurement integrity, bid submission deadlines and the competitive environment in a given CFT. Fazekas, Tóth and King (2016[20]) have shown that tight bid submission deadlines in CFTs are associated with higher indirect indicators of corruption (e.g. share of CFTs with only one bidder or only one compliant bidder). Furthermore, based on data from the European public procurement journal TED between 2009 and 2014, Fazekas and Kocsis (2017[21]) show that “extreme” bidding periods (very short or very long) are positively correlated with the existence of contracts where only one bidder submits an offer, which is symptomatic of corruption risks. Extreme bidding periods are defined on a case-by-case basis according to the rules in force and market practices in the different countries.
Quebec has recently increased the minimum bidding period for certain calls for tenders
Different practices are observed in OECD countries relating to the issue of deadlines for the submission of public procurement bids. For example, a minimum time limit exists in European Union countries, whereas in the United States, federal public procurement rules give greater freedom to public bodies: they only specify that the contracting authority must give bidders sufficient time to prepare their bids.
In Quebec, current regulations prescribe a minimum 15-day submission period for all CFTs from public and municipal bodies. However, contracting authorities may allow a longer period to ensure optimum competition conditions. Following the publication of a CFT, a bidder may also ask the public or municipal body to extend the period. If the organisation accepts, an addendum is published on the SEAO and is available to all bidders.
Nevertheless, since 2017, a minimum 30-day bidding period (25 days in the case of electronic bidding) has been stipulated for certain major CFTs covered by the CETA (the Canada-European Union Comprehensive Economic and Trade Agreement): CFTs for goods and services over USD 365 700 and construction contracts over USD 9.1 million6.
Some OECD countries have included a minimum period for bid submission to open calls for tenders in their regulatory frameworks:
European Union: Directive 2014/24/EU of the European Parliament and of the Council of 26 February provides that public contracts exceeding the thresholds requiring the use of an open procedure must provide for a minimum bidding period of 35 days. Below these thresholds, the bid submission period is governed by national legislation.
Australia: federal public procurement rules set a minimum bidding period of 30 days.
Chile: The Public Procurement Law provides for a minimum 30-day period for calls for tenders from CLP 238 645 000 (USD 375 000).
New Zealand: article 31 of the Government Rules of Sourcing provides for a minimum of 25 days for open calls for tenders.
Sources: (European Commission, 2014[3]; Australian Government, 2017[22]; New Zealand Government, 2011[23]; Ministry of Finance, Chile, 2004[24]).
At first glance, the minimum periods in Quebec are therefore significantly shorter than those in other jurisdictions (Box 4.8). However, public and municipal bodies have the option of providing longer periods, and this is a relatively common practice as shown in Table 4.2.
Furthermore, since the introduction of the extended minimum period for public procurement subject to the CETA in 2017, the most significant procurement processes are subject to longer submission periods, thus coming closer to international practice for purchases of amounts above the CETA thresholds (see above).
Developing guidelines defining targeted average submission periods according to procurement categories
In terms of deadlines, the central issue is not so much the question of minimum periods as their adaptation to the complexity of the relevant tender. In the case of Quebec, the bid submission periods for some CFTs may not be suitable for the complexity of the bids and the reality of the market, which may increase the risk of integrity violations due to lack of competition.
As shown in Table 4.2 above, average submission periods are generally longer than the minimum 15-day period (Table 4.2), suggesting that contracting authorities were consistently setting longer submission periods, even before the CETA came into effect in 2017. This shows a certain adaptation of bidding periods to the characteristics of each call for tender.
However, the actual bidding periods for construction works appear to be very close to the other procurement categories (services and supplies). For example, in 2015-16, average bid submission periods were 27 days for supply and service contracts and 24 days for construction. When the CETA entered into force in July 2017, it increased the minimum biding period for CFTs to 30 days, thus increasing the average bidding period for CFTs above the threshold. Below the thresholds, however, the submission periods have not changed significantly and remain very similar for the different procedures (26 calendar days for construction works and 23 for service and supplies contracts). Given that the thresholds are much lower for contracts for supplies (USD 365 700) than for construction works (USD 9.1 million), the problem of bidding periods that are too short is particularly acute for construction works. Statistics on the extension of the period for submission of bids during the tender process suggest that the periods for some CFTs may be too short. For example, addenda that extend the period for bid submission account for a considerable proportion of CFTs: more than a third (35%) of the CFTs of public bodies have been subject to such an addendum for 2016-17, and slightly more than 27% for municipal ones. , the share of CFTs subject to such addenda is increasing, accounting for 31% (public bodies) and 22.1% (municipalities) respectively of all CFTs over 2014-15. A number of contingencies may arise that force the government body to rethink its planning. However, these increasingly frequent submission prolongation addenda may indicate that the contracting authorities sometimes underestimate the submission period required given the complexity and size of their CFTs.
Accordingly, the Government of Quebec could encourage public bodies and municipalities to further adapt the deadline for submission of bids to the complexity of the CFTs, particularly in the case of construction works. For example, it could develop guidelines defining target average bidding periods for each contracting authority and by purchasing category. This is particularly important since planning for future purchases is only very occasionally published in Quebec, as discussed in more detail in Chapter 2.
Adjusting the target average bidding periods based on the publication of advance information notices and electronic submissions
This report recommends that the Government of Quebec consider the mandatory publication of advance information notices and procurement plans of public and municipal (Chapter 2). Average bidding periods could be shorter in cases where the advance notice of information (via the SEAO) or procurement plans are published. Moreover, this period could be reduced when the public or municipal body requires electronic bid submission. Australia and the EU provide examples of adjustments to the bid submission periods of CFTs based on these criteria (Box 4.9).
In the European Union,, the minimum bid submission period is 35 days for open procedures, but it is reduced to 30 days if electronic submission is accepted. It is further reduced to only 15 days if a pre-information notice has been published.
In Australia, federal procurement rules set a minimum bidding period of 25 days for an electronic CFT and 30 days for a non-electronic CFT. However, the bid submission period may be shorter (between 10 and 25 days) if a detailed procurement plan has been published on the electronic procurement platform AusTender between 40 days to one year before the publication of the procurement notice.
Sources: (European Commission, 2014[3]; Australian Government, 2017[22]).
Adjusting the minimum bidding period for Invitations to Tender (ITT)
ITT (Invitation to Tender) is an unpublished procedure that allows contracting authorities to solicit bids from certain suppliers (see Chapter 2). The regulations set a minimum period of eight days for the submission of bids.
This minimum period is shorter than in many other OECD countries (Box 4.9). For example, in New York State, a minimum submission period of 15 days applies to all types of procedures below the CFT threshold. In Chile, the periods for submitting bids in response to private calls for tenders are the same as those for public calls for tenders and depend on the estimated value of the contract (20 days above CAD 89 000 and 10 days above CAD 8 900) and the complexity of the goods and services to be procured.
The Government of Quebec could therefore encourage public and municipal bodies to adapt the submission periods for responding to ITTs based on the complexity and value of the contracts and to apply, where appropriate, the same period as for a CFT (15 days), particularly in the case of construction contracts.
Increasing the 7-day period for addenda impacting on bid prices
Although the periods for submitting bids are, especially for the most complex and costly ones, generally in line with international practice, response times granted to bidders following substantial changes in the tender documentation pose an additional risk of corruption in the public procurement process concerned. In their empirical research on CFTs in Hungary, Fazekas, Tóth and King (2016[20]) found that a bidding period shorter than the legal deadline, in particular where weekends are improperly counted as working days, increases the likelihood that a single bidder will be declared compliant (a bribery risk factor) by about 20%.
Any addendum to the tender documents which may affect bid prices (change in technical specifications or quantity) stipulates a minimum 7-day period between its publication and the closing date of the CFT. If necessary, the contracting authority must postpone the deadline of the CFT to comply with this minimum period.
This type of change requires bidders to re-examine their bids, sometimes thoroughly. In France, in the event of a substantial change to an open call for tenders with an impact on price, administrative case law requires the contracting agency to relaunch a new public call for tenders, again respecting the minimum bidding periods.7 To avoid the risks of bribery inherent in short bid preparation times, the Government of Quebec should increase this period by a further 7 days to bring it closer to the minimum period for the submission of CFTs (15 days).
Communication with the private sector
Maximising the potential of the SEAO for fair and transparent communication with suppliers
Developing tools to guide interaction with suppliers appropriately during the market research and knowledge acquisition phase
Using enhanced controls on business integrity
Setting clear and measurable objectives for the contract authorisation regime
Considering an extension of the contract authorisation regime to more public contracts based on a risk analysis
Considering the total acquisition cost criterion instead of the price criterion to ensure the true comparability of bids, and establishing a Selection Committee when using the price criterion
Reconciling regulatory constraints with high levels of competition
Measuring the tangible effects of these strategies and systematically assessing the impact of approval programmes on competition
Conducting a systematic audit of the risks of collusion in the CFTs of approved goods
Considering the centralisation of municipal approval programmes
Continuing efforts to harmonise standards and certification requirements within Canada and with Ontario
Fostering supplier innovation through innovative product evaluation processes and public procurement programmes
Maintaining high levels of performance and quality requirements without unduly restricting competition
Adapting bid submission periods to the reality of the markets
Developing guidelines defining target average bid submission periods according to purchasing typologies
Adjusting the average target bid submission timeframes based on advance information notices and electronic submissions
Adjusting the minimum bid submission period for Invitations to tender (ITT) to the complexity and size of the contract
Increasing the 7-day period for addenda impacting on bid prices
References
[22] Australian Government, D. (2017), Commonwealth Procurement Rules: Achieving value for money, https://www.finance.gov.au/sites/default/files/commonwealth-procurement-rules-1-jan-18.pdf.
[11] Bégin, L. et al. (2016), “Rapport du Comité public de suivi des recommandations de la Commission Charbonneau”, Éthique publique vol. 18, n° 2, https://doi.org/10.4000/ethiquepublique.2789.
[10] CEIC (2015), Rapport final de la Commission d’enquête sur l’octroi et la gestion des contrats publics dans l’industrie de la construction, https://www.ceic.gouv.qc.ca/fileadmin/Fichiers_client/fichiers/Rapport_final/Rapport_final_CEIC_Integral_c.pdf.
[5] Champagne, S. (2018), “Plus de concurrence depuis la commission Charbonneau”, La Presse, http://www.lapresse.ca/affaires/portfolio/ingenieurs-conseils/201802/21/01-5154755-plus-de-concurrence-depuis-la-commission-charbonneau.php.
[17] Compte, O., A. Lambert-Mogiliansky and T. Verdier (2005), Corruption and Competition in Procurement Auctions, WileyRAND Corporation, https://doi.org/10.2307/1593751.
[3] European Commission (2014), Directive 2014/24/UE du Parlement européen et du Conseil du 26 février 2014 sur la passation des marchés publics et abrogeant la directive 2004/18/CE, http://data.europa.eu/eli/dir/2014/24/oj.
[21] Fazekas, M. and G. Kocsis (2017), “Uncovering High-Level Corruption: Cross-National Objective Corruption Risk Indicators Using Public Procurement Data”, British Journal of Political Science, pp. 1-10, https://doi.org/10.1017/S0007123417000461.
[20] Fazekas, M., I. Tóth and L. King (2016), “An Objective Corruption Risk Index Using Public Procurement Data”, European Journal on Criminal Policy and Research, https://doi.org/10.1007/s10610-016-9308-z.
[15] Forrell, J., G. Solaner and E. Org (1986), “Competition, Compatability and Standards: The Economics of Horses, Penguins and Lemmings”, Department of Economics, Institute for Business and Economic Research, UC Berkeley, https://escholarship.org/uc/item/48v4g4q1 (accessed on 7 September 2018).
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[24] Ministry of Finance, Chile (2004), Reglamento de la ley N° 19.886 de bases sobre contratos administrativos de suministro y prestación de servicios, https://www.leychile.cl/Navegar?idNorma=230608.
[23] New Zealand Government (2011), Mastering Procurement: A structured approach to strategic procurement, https://www.procurement.govt.nz/assets/procurement-property/documents/guide-mastering-procurement.pdf.
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[14] OECD (2017), Public Procurement for Innovation: Good Practices and Strategies, OECD Public Governance Reviews, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264265820-en.
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Notes
← 1. This refers to shareholders, chief executives and directors.
← 2. In Quebec, approval is a procedure for product validation by the contracting authority prior to the publication of the CFT itself.
← 3. An example of this is the HOM 5660 - 101 programme “Semi-Rigid Guardrail End Devices”. Under another programme (“Systems for Lighting and Light Signalling Structures” HOM 6310), there are only two approved products, supplied by installers who purchase from the same US manufacturer.
← 4. The MTMDET's evaluation process for new products and technologies allows manufacturers of innovative products to submit them for in-depth review. Refer to the Ministry's website for further details on this process: https://www.transports.gouv.qc.ca/fr/entreprises-partenaires/entreprises-reseaux-routier/guichet-unique-qualification-produits/Pages/evaluation-produits-nouvelle-technologie.aspx.
← 5. Presentation of the ISO standard on the Bank's website, https://www.bdc.ca/fr/articles-outils/operations/ iso-autres-certifications/pages/processus-certification-iso.aspx
← 6. Thresholds valid in July 2018, subject to change according to the evolution of exchange rates. The original thresholds are expressed in IMF Special Drawing Rights.
← 7. EC, 16 November 2005, Ville de Paris, No 278646. Text of the judgement available at https://www.legifrance.gouv.fr/affichJuriAdmin.do?oldAction=rechJuriAdmin&idTexte=CETATEXT000008223687&fastReqId=1479551974&fastPos=1.
