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1. 2010 – PURCHASING YEAR IN REVIEW
2010 – L’ANNÉE DE L’APPROVISIONNEMENT EN RÉVISION
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COMMITTEE RECOMMENDATION AS AMENDED
That Council receive this report and the REVISED Document 1, for information.
Recommandation MODIFIÉES du ComitÉ
Que le Conseil municipal prenne connaissance du présent rapport et le Document 1 RÉVISÉ.
DOCUMENTATION
1. City Treasurer’s report dated 21 June 2011 (ACS2011-CMR-FIN-0037).
2. Extract of Finance and Economic Development Committee Draft Minutes dated 7 July 2011.
Report to/Rapport au :
Finance and Economic Development Committee
Comité des finances et du développement économique
and Council / et au Conseil
21 June 2011/ le 21 juin 2011
Submitted by/Soumis par : Marian Simulik, City Treasurer/Trésorière municipale
Contact
Person/Personne ressource : Jeff Byrne,
Chief Procurement Officer / Agent principal des achats
Finance Department/Service des finances
(613) 580-2424 x25175, Jeff.Byrne@ottawa.ca
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Ref N°: ACS2011-CMR-FIN-0037 |
SUBJECT: |
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OBJET : |
REPORT RECOMMENDATION
That the Finance and Economic Development Committee and Council receive this report for information.
RECOMMANDATION DU RAPPORT
Que le Comité des finances et du développement économique et le Conseil municipal prennent connaissance du présent rapport.
EXECUTIVE SUMMARY
In 2010, the Supply Branch awarded $1.1 billion in contracts, including all purchases awarded under delegation of authority (≥$10,000) and purchases approved by Council, the Library board and the Police board. Of the $1.1 billion awarded, $966.0 million in contracts were awarded under delegation of authority in 2010 and 93.1% of these contracts were awarded as a result of a competitive bid solicitation process. Furthermore, when one takes into account contracts where the City had no option but to award to a specific supplier (for example, contracts pertaining to utilities, patents and copyrights, and where for technical reasons no alternative supplier exists), this percentage increases to almost 99.8% of the total purchasing dollar spent. These figures reflect the City’s strong commitment to awarding contracts on the basis of a competitive procurement wherever possible and are consistent with purchasing activity in 2009.
The City continued to be a strong consumer of local products in 2010, spending approximately 94.6% of the annual purchasing dollar in Ottawa and the surrounding area, for goods and services that are available in the local community. This figure remains consistent with previous years and shows the City’s strong commitment to supporting the local community.
The Supply Branch continued its evolution towards becoming a more strategic organization, as opposed to merely a transactional one. In 2010, the Supply Branch began posting bidding opportunities ≤$50,000 on the City’s website in an effort to increase transparency and competitiveness. The response has been overwhelmingly positive to this new communication method allowing new local suppliers to do business with the City. Moreover, the City’s Purchasing website has continued to evolve to provide both the public and suppliers with the latest purchasing news including; notices of upcoming bid solicitations ≤$50,000, contracts awarded, standing offers, general terms & conditions and how to do business with the City.
In 2010, the value of contracts awarded on behalf of the Information Technology Services Department increased by 46.3% and the Supply Branch identified a need to better serve the City’s technology procurement needs and provide specialized advice to all Information Technology procurements. As a result of its increasing role within the City, and in support of the City’s commitment to Service Excellence, the Supply Branch has realigned its purchasing services and created a new division within its purchasing function specializing in the procurement of Information Technology.
Purchasing staff in the Supply Branch continued to make increasing use of independent fairness commissioners for procurement issues which are either very complex, or have the potential of becoming contentious. In 2010, the City spent $363,377 on fairness commissioner services which is more than double the usage in 2009 and represents an increasing reliance in utilizing resources to ensure transparency in major procurement initiatives.
As part of the solicitation process bidders are encouraged to offer the City a cash discount for prompt payment of invoices. In 2010, the City obtained $464,913 in prompt payment discounts.
A payment without reference is a legitimate payment method permitted within corporate procedure and is recognized in the Purchasing By-Law. As payments without reference do not go through the Supply Branch, an assessment of their compliance with the Purchasing by-law can only be made after the fact. In 2010, 4 suppliers, representing 0.3% of suppliers paid without reference to a contract, were paid in a manner not in compliance with the Purchasing By-law. The Supply Branch worked with each non-compliant department to educate those involved on the proper procedure for acquiring goods and services. This working relationship proved successful as there were no repeat non-compliant transactions from 2009 to 2010. Going forward, the Supply Branch has identified a need to further monitor payments without reference and work with clients to establish more appropriate payment methods where possible. In support of this, in 2011 these reviews will be conducted on a monthly basis versus yearly in order to provide more timely information to the client departments.
In addition to an in-depth statistical analysis of City purchasing, this report also includes information on supplier performance, value assessment on health & safety as a condition of contract award, sustainable purchasing, the fuel hedging strategy, financial agreements and the annual report on sponsorship and advertising.
RÉSUMÉ
En 2010, la Direction de l’approvisionnement a accordé des contrats d’une valeur totale de 1,1 milliard de dollars; cette somme comprend tous les achats effectués conformément à la délégation de pouvoirs (10 000 $ ou plus), et les achats approuvés par le Conseil, le conseil d’administration de la Bibliothèque publique d’Ottawa et la Commission de services policiers. Des 1,1 milliard de dollars, c’est 966 millions de dollars qui ont été octroyés à des contrats en vertu de la délégation de pouvoirs en 2010. Au total, 93,1 % de ces contrats ont été conclus à la suite d’un processus d’appel d’offres concurrentiel. Si l’on prend en considération que la Ville n’avait à l’occasion pas le choix du fournisseur à qui elle accordait le contrat (dans le cas, par exemple, des contrats touchant aux services publics, aux brevets et aux droits d’auteur, ou si, pour des raisons techniques, aucun autre fournisseur n’était disponible), ce pourcentage atteint près de 99,8 % des dépenses en approvisionnement. Les données précédentes, qui correspondent à celles des activités d’approvisionnement de 2009, reflètent l’engagement ferme qu’a pris la Ville en vue d’octroyer, dans la mesure du possible, les contrats à la suite d’un appel d’offres concurrentiel.
La Ville s’est encore montrée une grande consommatrice de produits locaux en 2010. Elle a réalisé environ 94,6 % de ses achats de biens et services à Ottawa et dans la région environnante. Cette statistique s’apparente aux données des années précédentes et témoigne du dévouement de la Ville au soutien de la communauté locale.
La Direction de l’approvisionnement évolue toujours dans le but de devenir une organisation plus stratégique, et non pas simplement transactionnelle. En 2010, la Direction de l’approvisionnement a commencé à publier les appels d’offres de moins de 50 000 $ sur le site Web de la Ville, dans le but de favoriser la transparence et la compétitivité. Cette nouvelle méthode de communication a engendré une réaction fortement positive, car elle a permis aux nouveaux fournisseurs locaux d’offrir leurs services à la Ville. De plus, le site Web de l’approvisionnement de la Ville continue d’évoluer et fournit maintenant, tant au public qu’aux fournisseurs, les dernières nouvelles concernant l’approvisionnement, dont les avis sur les prochains appels d’offres de moins de 50 000 $, les contrats qui ont été accordés, les offres à commandes, les conditions générales et la façon de faire des affaires avec la Ville.
En 2010, la valeur des contrats accordés au nom du Service de technologie de l’information a augmenté de 46,3 %; la Direction de l’approvisionnement a compris qu’elle devait mieux répondre aux besoins de la Ville en technologie et fournir des conseils spécialisés relativement aux achats de technologie de l’information. En réponse à l’importance grandissante de ce rôle au sein de la Ville, et dans le but d’appuyer l’engagement de celle-ci à l’égard de l’amélioration des services, la Direction de l’approvisionnement a restructuré ses services d’approvisionnement en créant une nouvelle division qui se spécialise dans les achats de technologie de l’information.
Le personnel responsable des achats de la Direction de l’approvisionnement fait plus souvent appel aux commissaires indépendants à l’équité dans le cas de problèmes d’approvisionnement qui sont très complexes ou qui pourraient devenir litigieux. En 2010, la Ville a versé des honoraires de 363 377 $ aux commissaires à l’équité, ce qui représente plus du double de la somme versée en 2009, et ce qui laisse entendre qu’on aurait plus souvent recours à des ressources favorisant la transparence durant les initiatives importantes d’approvisionnement.
Dans le cadre d’un appel d’offres, les soumissionnaires sont invités à offrir à la Ville un escompte pour paiement rapide des factures. En 2010, la Ville a reçu des escomptes pour paiement rapide totalisant 464 913 $.
Le paiement sans référence est une méthode de paiement acceptée en vertu des procédures de la Ville et reconnue dans le Règlement sur les achats. Puisque les paiements sans référence ne sont pas traités par la Direction de l’approvisionnement, l’évaluation de leur conformité au Règlement sur les achats ne s’effectue qu’après coup. En 2010, quatre fournisseurs, ce qui représente 0,3 % des fournisseurs payés sans référence à un contrat, ont été payés d’une façon non conforme au Règlement sur les achats. La Direction de l’approvisionnement a informé le personnel de chacun des services concernés de la procédure appropriée d’approvisionnement de biens et de services. Cette intervention s’est révélée utile, puisqu’aucune transaction non conforme n’a été effectuée entre 2009 et 2010. En outre, la Direction de l’approvisionnement a jugé opportun de surveiller davantage les paiements sans référence, et s’affaire à établir des méthodes de paiement plus appropriées avec les clients dans la mesure du possible. En 2011, cette initiative sera soutenue par la réalisation mensuelle des évaluations (et non annuelle), ce qui permettra de fournir les renseignements plus rapidement aux services clients.
En plus d’une analyse statistique approfondie des achats de la Ville, le présent rapport fournit également des renseignements sur le rendement des fournisseurs, une évaluation de l’importance du critère de la santé et de la sécurité dans l’octroi d’un contrat, de l’information sur l’approvisionnement responsable et sur la stratégie de couverture contre les fluctuations des prix du carburant, les accords financiers ainsi que le rapport annuel sur les commandites et la publicité.
BACKGROUND
The Supply Branch was requested by the City Treasurer, to provide to committee and council, an annual report which would summarize the purchasing activity for the year and provide updates on the objectives and future goals for the Supply Branch. This report analyzes purchases made by the City on a statistical, as well as a strategic basis in order to provide a clear picture of the operations of the Supply Branch for the year 2010. In the long term, the report should grow into a useful tool used by both management and client groups within the City to determine purchasing trends and significant purchases made throughout the year by City Portfolios and Departments.
The majority of the information contained in this report is drawn from quarterly reports prepared for committee and council throughout the year. These reports are a requirement of the Purchasing by-law and require all contracts ≥$10,000, which are awarded under delegated authority, be reported. These reports identify all contracts awarded by Supply and categorize them by Consulting Services, Professional Services, Follow-on Contracts or Amendments and Non-Competitive rationale when applicable.
Four Quarterly Reports were provided to Council for the year 2010:
1) January 1 to March 31, 2010;
2) April 1 to June 30, 2010;
3) July 1 to September 30, 2010; and
4) October 1 to December 31, 2010.
Document 1 of this report provides a consolidated summary of the information provided in the above referenced reports showing the total value purchased from each vendor for 2010 under delegation of authority.
DISCUSSION
Section 1: 2010 Purchasing Summary
In 2010, the Supply Branch awarded $1.1 billion in contracts, including all purchases under delegation of authority (≥$10,000) and purchases approved by Council, the Library board and the Police board. Of the $1.1 billion awarded, $966.0 million in contracts were awarded under delegation of authority representing a 1.9% decrease from 2009, but an overall increase of 25.2% from 2008, attributable mostly to the Infrastructure Stimulus Fund in the past two years, (Figure 1.1). With Infrastructure Stimulus funding extended until October 31, 2011 the Supply Branch expects the 2011 figures to continue to be in line with 2009 and 2010 purchasing trends.
Figure 1.1 –Total Purchases (≥$10,000 under delegation of authority)
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2010 |
% yearly change |
2009 |
% yearly change |
2008 |
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$966.0 M |
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$984.4 M |
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$771.8 M |
_files/image001.gif){kind=small}
_files/image002.gif){kind=small}
Figure 1.2 below shows a breakdown of the total amount of purchases in addition to those approved under delegation of authority. The purchases are broken down by purchasing type with $1.1 billion in purchases awarded through the Supply Branch. Other purchasing mechanisms such as, payments without reference, departmental purchase orders and procurement card purchases are made by individual departments and do not require Supply Branch involvement.
Figure 1.2 – Total Purchasing Breakdown
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Purchase Type |
2010 |
2009 |
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Purchases awarded under delegation of authority |
$966.0 M |
$984.4 M |
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Ottawa Police Services |
$6.5 M |
$9.5 M |
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Ottawa Public Library |
$2.3 M |
$0.8 M |
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Council approved purchases |
$156.6 M[1] |
$12.1 M |
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Sub Total |
$1.1 B |
$1.0 B |
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Payments without reference (≥$25 K) |
$97.7 M |
$99.6 M |
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Departmental Purchase Orders (≤$10 K) |
$66.5 M |
$64.3 M |
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Procurement Card Purchases |
$15.0 M |
$13.0 M |
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Purchasing Grand Total |
$1.3 B |
$1.2 B |
Figure 1.3 (a) & (b), detailed below, show the dollar value and number of contracts awarded under delegation of authority for different purchasing amount thresholds.
As illustrated in Figure 1.3(a), 90.8% of all contracts were valued at greater-than or equal-to $100,000 in 2010 representing a 1.9% decrease from 2009. Although the majority of purchasing value was derived from purchases valued at greater-than $100,000, a significant number of contracts are issued in the $10,000 to $25,000 dollar range as seen in Figure 1.3(b). In 2010, the largest volume of purchases was in this category representing 32.4% of the total volume, but only 2.0% of the total value. On a year-to-year basis these figures remain fairly constant with the largest percentage change coming from the number of contracts awarded greater-than $100,000, which amounted to an 11.0% increase over 2009. This increase is likely due to the increasing number of multi-year, high dollar value contracts awarded by the Supply Branch in order to increase sustainability and achieve best value over the lives of contracts.
Figure 1.3(a) – Purchasing Breakdown by dollar amount (value of contracts)
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2010 |
2009 |
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Contract Amount |
Total Dollar Value |
% of Total |
Total Dollar Value |
% of Total |
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>$100,000 |
$877.1 M |
90.8% |
$894.3 M |
90.9% |
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Between $50,000 and $100,000 |
$41.5 M |
4.3% |
$41.2 M |
4.2% |
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Between $25,000 and $50,000 |
$28.1 M |
2.9% |
$28.9 M |
2.9% |
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Between $10,000 and $25,000 |
$19.3 M |
2.0% |
$20.0 M |
2.0% |
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Total |
$966.0 M |
100.0% |
$984.4 M |
100.0% |
Figure 1.3(b) – Purchasing Breakdown by dollar amount (number of contracts)
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2010 |
2009 |
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Contract Amount |
Total # of contracts |
% of Total |
Total # of contracts |
% of Total |
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>$100,000 |
1,058 |
29.4% |
953 |
26.8% |
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Between $50,000 and $100,000 |
590 |
16.4% |
569 |
16.0% |
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Between $25,000 and $50,000 |
784 |
21.8% |
808 |
22.7% |
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Between $10,000 and $25,000 |
1,170 |
32.4% |
1,227 |
34.5% |
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Total |
3,602 |
100.0% |
3,557 |
100.0% |
Section 2: Professional and Consulting Services
Professional Services contracts pertain to the required skills of professionals for a defined service requirement or for a specific project related deliverable including but not limited to the areas of engineering, architecture, design, planning, information technology, financial auditing and fairness commissioners.
Consulting Services contracts pertain to assistance to management, including but not limited to the areas of strategic analysis, organizational design, change management, policy development, feasibility studies and other services intended to assist decision making within the organization.
Figure 2.1 provides a breakdown of the Professional and Consulting Services contracts awarded by the Supply Branch in 2010. As per Figure 2.1, the Supply Branch awarded $135.8 million in Professional Services contracts in 2010, and a further $2.3 million in Consulting Services.
Figure 2.1 –Professional and Consulting Services Contracts (>$10,000)
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Service Type |
2010 |
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2009 |
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Total Value |
% yearly change |
Total Value |
|
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Professional Services |
$135,795,193 |
+ 11.5% |
$121,814,552 |
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Consulting Services |
$2,309,849 |
-75.2% |
$9,327,220 |
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Total |
$138,105,042 |
+ 5.3% |
$131,141,772 |
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Service Type |
2010 |
|
2009 |
|
Total # of Contracts |
% yearly change |
Total # of Contracts |
|
|
Professional Services |
1,128 |
+ 2.0% |
1,106 |
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Consulting Services |
45 |
- 55.4% |
101 |
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Total |
1,173 |
- 2.8% |
1,207 |
The overall number and value of Consulting Services has decreased significantly from 2009 to 2010. The number of Consulting Services contracts awarded decreased by 55.4% and the total value decreased by 75.2%
The overall number of Professional Services contracts increased slightly by 2.0%, however the total value of Professional Services contracts increased by 11.5% largely due to the award of a $27.0 M contract for preliminary engineering and project management services for the Ottawa Light Rail Transit Project. Removing this purchase from the analysis results in 10.7% decrease in the total value of professional services contracts awarded from 2009 to 2010. This decrease is the result of engineering and design work on Infrastructure Stimulus Fund projects now being completed.
The procurement of Professional Engineering Services is summarized in Figure 2.2. Once again, the increase in 2010 is largely due to the Ottawa Light Rail Transit Project engineering services purchase as mentioned above.
Figure 2.2 –Professional Engineering Services Summary (>$10,000)
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2010 |
2009 |
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Total Value |
Total # of Contracts |
Total Value |
Total # of Contracts |
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$90,286,880 |
445 |
$76,306,519 |
480 |
The procurement of Professional Engineering Services is a required mandate approved by Council as part of the business outsourcing model strategy used by the City. Professional engineering services represents 65.4% of all Professional and Consulting Services procured by the City in 2010.
Section 3: Procurement Strategies – Competitive vs. Non-Competitive Purchases
The City continues to be a strong advocate of competitive procurement processes in 2010. Of the $966.0 million in contracts awarded, 93.1% were awarded as a result of a competitive solicitation process. This figure remains constant with previous years, reflecting the City’s strong competitive purchasing record.
Furthermore, when this figure is adjusted to take into account contracts where there was no option but to award to a specific supplier (for example, contracts pertaining to utilities, patents and copyrights, and where for technical reasons no alternative supplier exists), the percentage of competitive purchases increases to 99.8%.
Figure 3.1 provides a side-by-side comparison of the percentage of competitive vs. non-competitive contracts awarded by the Supply Branch, both before and after adjustment.
Figure 3.1 – Competitive vs Non-Competitive Procurements ($)
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All non-competitive contracts awarded by the Supply Branch were awarded in accordance with the sole source circumstances identified in sections 22(1) and 22(7) of the Purchasing By-law.
Section 4: Local Purchasing
The City of Ottawa continued to be a strong consumer of local products in 2010, spending approximately 94.6% of the annual purchasing dollar in Ottawa and the surrounding area, for goods and services which are available in the local community.
Figure 4.1 includes a pair of charts identifying the geographical vendor breakdown for the 2010 purchasing contracts awarded under delegation of authority. The figures have been adjusted to remove those goods and services consumed annually by the City which are not available locally (e.g. transit buses are not manufactured in Ottawa, nor is winter rock salt mined locally).
Figure 4.1 – 2009 and 2010 Adjusted Geographical Vendor Breakdown
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2010 |
2009 |
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Region |
Dollar Value |
% of Total |
2009 $ Value |
% of Total |
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Ottawa and area |
$754,027,059.78 |
94.6% |
$732,055,748.00 |
95.4% |
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Ontario |
$18,187,232.99 |
2.3% |
$24,918,710.00 |
3.2% |
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Quebec |
$13,028,587.26 |
1.6% |
$5,796,562.00 |
0.8% |
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All Others |
$12,077,843.29 |
1.5% |
$4,805,783.00 |
0.6% |
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Total |
$797,320,723.32 |
$767,576,803.00 |
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As seen above, purchasing activity in Ottawa and the surrounding area remains constant on a yearly basis in comparison to all other purchasing activity (excluding purchases not available locally). The value of purchasing in Ottawa and the surrounding area increased 3.0% from 2009 to 2010 as well further exemplifying the City’s support to the local economy.
Section 5: Portfolio & Departmental Purchasing
Almost all of the purchases made by the Supply Branch are for the four Portfolios within the City. The Portfolio’s are identified as follows:
· OAG: Office of the Auditor General
· CMO: City Manager’s Office
· CO: City Operations
· ISCS: Infrastructure Services & Community Sustainability.
*Please note the analysis does not include contracts awarded by Police, Library or Council.
Of the four City Portfolio’s, the ISCS Portfolio was once again the largest purchaser in terms of dollar value by a significant margin. The total value of purchases awarded by the Supply Branch on behalf of ISCS represents 76.1% of all purchases made in 2010 as represented in Figure 5.1.
Figure 5.1 – 2010 Purchasing Breakdown by Portfolio (total value of contracts awarded)
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Figure 5.2 displays the data as a relation to the total number of contracts awarded by the Supply Branch for each Portfolio. The number of contracts awarded for CO and ISCS make up 96.7% of all contracts awarded. Although, a large value of purchases is attributable to ISCS, a significant number of contracts are awarded to departments in the CO Portfolio.
Figure 5.2 – 2010 Purchasing Breakdown by Portfolio (total number of contracts awarded)
_files/image006.gif)
Of the $735.0 M awarded on behalf of the ISCS Portfolio, 67.8% ($481.8 M) was awarded on behalf of the Infrastructure Services Department. This total value represents a decrease of 7.5% from 2009, but still accounts for more than double the value of any other department in the City.
Also, within the ISCS Portfolio, Transit Services was the second largest departmental purchaser. Contracts awarded on behalf of Transit Services for 2010 were valued at $158.2 M which represents a 4.8% decrease from 2009. It should be noted an additional bus purchase was made in 2010 valued at $156.6 M, but this acquisition is not included as it was awarded by Council and not under delegated authority.
After the Infrastructure Services and Transit Services Departments, which accounted for 65.6% and 21.5% respectively, of the $735.0 M awarded on behalf of the ISCS Portfolio, the Environmental Services Department was the third largest client within this Portfolio. Environmental Services accounted for a further 7.1% ($51.9 M) of the $735.0 M awarded.
The CO portfolio was the Supply Branch’s second largest portfolio client representing 20.6% of the value of all contracts awarded under delegation of authority. Of the $199.5 M awarded on behalf of City Operations, 65.1% ($129.8 M) was awarded on behalf of the Public Works Department; 21.7% ($43.3 M) was awarded on behalf of the Information Technology Services Department; and 6.7% ($13.3 M) was awarded on behalf of the Emergency and Protective Services Department.
Within the CO Portfolio, the value of contracts awarded on behalf of the Public Works Department increased by 13.4% from 2009, while the value of contracts awarded on behalf of the Information Technology Services Department increased by 46.3%.
The significant increase in value associated with the contracts awarded on behalf of the Information Technology Services Department is emblematic of the increasing role that Information Technology is playing within the City. In support of Service Excellence, the Supply Branch has realigned its purchasing services and created a new division within its purchasing function specializing solely in this area. This new group will better serve the City’s technology procurement needs and provide specialized advice to all Information Technology procurements.
The value of the contracts awarded on behalf of the CMO and the OAG accounted for 3.2% and 0.1%, respectively, of all contracts awarded by the Supply Branch. In total, this amounted to $30.9 M awarded on behalf of the CMO (of which 63.8% was awarded on behalf of the Finance Department), and $0.6 M awarded on behalf of the OAG.
Figures 5.3 and 5.4 displays the total value of all contracts awarded and the total number of contracts awarded, respectively, on behalf of each Department.
Figure 5.3 – 2010 Contracts Awarded by Department (dollar value ≥$10,000)
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Figure 5.4 – 2010 Contracts Awarded by Department (number of contracts ≥$10,000)
_files/image008.gif)
Section 6: Strategic Sourcing
In addition to continuing to be a strong advocate for competitive procurement processes, the Supply Branch is continuing its evolution towards becoming a more strategic organization, as opposed to merely a transactional one.
This transformation has included the establishment of a Strategic Sourcing Group within the Supply Branch which focuses on corporate business strategy identification, alignment of sourcing strategies and business strategies, use of a “total cost” model, increasing both internal client and external supplier collaboration, and enhancing the City’s overall procurement skills and visibility.
In support of this evolution, and where appropriate, the Supply Branch increased its reliance on innovative procurement strategies in 2010.
The purchase of light fleet vehicles for the City (not including Transit Services) in 2010 was done on the basis of total cost versus solely on the basis of lowest responsive bidder. The Supply Branch used further evaluation criteria including fuel economy (as per the Canadian Black Book) and residual value after five years in addition to the purchase cost of vehicles. This procurement method now takes into consideration the full cost of a vehicle over the life of the vehicle. Previously, with the purchase of vehicles based on lowest responsive bids, it would result in a low acquisition price, but not necessarily the lowest total cost over the life of the vehicle. This new procurement methodology creates greater overall value by considering evaluation factors over the life of the vehicle, in contrast to only acquisition cost.
In 2010, the procurement of articulated motor graders was awarded on the basis of a total cost as well versus lowest responsive bid. This new evaluation method considered a comparison between the monthly lifecycle costs of ownership over a 12-year period versus the cost of a seasonal monthly lease of the motor graders. A further criterion was added to the evaluation comparing the cost of maintenance performed by the City versus the cost of maintenance performed by the Supplier. A full analysis was performed by the Supply Branch and Fleet Services with the option of purchasing the articulated motor graders with City maintenance being the lowest total cost.
The procurement of Coarse Crushed Rock Salt is an annual requirement by the City and each year approximately 180,000 tonnes is used for the winter season. The Surface Operations Branch initiated a procurement review involving active dialogue with all North American suppliers and comparable contracts and concluded that Ottawa is one of the largest consumers of road salt in Canada. By leveraging the City’s purchasing volume, the Supply Branch negotiated a contract extension with the current vendor to extend the existing agreement and provide savings over the long-term. This contract will ensure a continual supply of the material is provided along with cost certainty regarding price increases which will remain stable and align with budgetary figures going forward. A thorough comparison was done with other municipalities and the pricing the City is receiving is the lowest in Ontario.
Purchasing strategically also means evaluating factors other than price alone. More than 33.0% of all competitive contracts were awarded on the basis of Best Value where technical factors are combined with pricing to determine the weighting for bid award. Conversely, 67.0% of competitive contracts were awarded on the basis of Lowest Responsive Bid in 2010. This reflects that 1 in 3 contracts are being evaluated on more than just price alone.
When removing Construction contracts which are tendered on a lowest responsive bid basis, as per accepted industry standards from the analysis, the adjusted results show Best Value represents approximately half of all contracts awarded by the Supply Branch. Contracts awarded on the basis of Best value represent 59% and 47% of all contracts awarded greater than $100K in 2009 and 2010 respectively.
Section 7: Purchasing on Ottawa.ca
Online Request for Quotation Procedure: Update
In Q2 2010, Supply Branch launched a web-based solution for posting bid opportunities less than $50,000 on the Purchasing section of Ottawa.ca as part of the its strategic evolution, and in an effort to increase transparency and competitiveness throughout its procurement process.
This Ottawa.ca solution will serve as a centre of information for suppliers looking to quote on opportunities valued at less than $50,000 while MERX and the Ottawa Construction Association (OCA) websites are used to advertise bidding opportunities greater than $50,000.
The new procedure creates equal bidding opportunity for all suppliers and encourages new suppliers to work with the City as quotations are now publicly advertised and accessible to all suppliers. This new solution will increase competition as well as the City’s presence in the supplier community. The Supply Branch’s old quotation procedure limited the potential entrance of new suppliers as it involved obtaining a minimum of three quotes from a list of suppliers who had previously performed similar work for the City.
To date, this procedure has yielded strong results with approximately twenty quotations advertised on a monthly basis as well as a significant increase in website hits. After implementation of the quotation listing, website traffic has doubled and it is now consistently ranked as the 2nd most visited page in the Business section of the Ottawa.ca with approximately 2,000 hits per month. Quotation listings are updated daily to ensure accuracy and timely information for the local supplier community.
One such example of how this new procedure has created further opportunities is the award of an emergency building repair service contract. The previous supplier, along with two others, were contacted in regards to this submission as per the purchasing by-law’s quotation procedure. The bid opportunity was then advertised on Ottawa.ca with a further two firms submitting bids. The contract was awarded to one of the suppliers who was made aware of the opportunity on-line resulting in savings of approximately $2,000 to the City. Overall, the creation of the new online quotation platform has been a great success and the Supply Branch has received strong positive feedback from the Supplier community.
Purchasing on Ottawa.ca – Further Embracing Online Initiatives
In addition to the success of the updated request for quotation procedure, the Purchasing page of Ottawa.ca is serving suppliers and the public as a center of information for the latest news and updates taking place in the Supply Branch. The following information is now available for viewing on the Purchasing website:
- Bidding opportunities ≤$50,000
- Contract award information for the past two years
- Key Supply Branch contacts
- Latest news and changes to Purchasing By-laws, policies and procedures
- List of existing Standing Offers with expiry dates
- General Terms & Conditions
Section 8: Sustainable Purchasing
Sustainable purchasing strategies continue to be at the forefront in both private and the municipal sector with increasing reliance placed on long-term sustainable procurement strategies. The City strives to look for innovative methods to incorporate sustainable purchasing and in 2010 began the process of moving our General Terms and Conditions online as well as joining a municipal purchasing co-operative across Canada.
Effective April 1st, 2011, the Supply Branch no longer included copies of the City’s General Terms and Conditions within its bid solicitation documents. The General Terms and Conditions are now posted on our Purchasing website and are incorporated by reference into all solicitations. The City expects that this initiative will result in the avoidance of approximately 50,000 printed pages per year. In addition, it will decrease the overall cost of the City’s solicitation documents when obtained via MERX and the Ottawa Construction Association by the supplier community.
The City has also taken a lead role in establishing a municipal co-operative which ranges all across Canada with the common goal of sharing best practices and lessons learned by each municipality. To date, fourteen municipalities have confirmed their participation and quarterly meetings are held to discuss current purchasing trends and methodologies.
Section 9: Fairness Commissioners
Purchasing staff continued to make use of the independent fairness commissioners for procurement issues which are either very complex, or have the potential of becoming contentious. In 2010, the City spent $363,377 on fairness commissioner services.
The Supply Branch will continue to use Fairness Commissioner Services on an “as needed” basis, selected from the competitive standing offers now in place, in planned procurement processes that are complex or potentially contentious, as determined by the Chief Procurement Officer.
Section 10: Assessing Supplier Performance
Subsections 37(1) and 37(2) of the City’s Purchasing By-law provide a discretion to the City Treasurer, in consultation with the City Clerk and Solicitor, to prohibit an unsatisfactory supplier from bidding on future City contracts where the performance of the supplier has been unsatisfactory in terms of failure to meet contract specifications, terms and conditions or for Health and Safety violations.
This discretion was used once in 2010 to prohibit a specific consultant from working on future projects with the City as a result of his performance and conduct. The City Treasurer, in consultation with Legal Services, barred this consultant from bidding on any future projects and continues to monitor other instances that may warrant similar penalties.
Health & Safety Initiatives – Assessing a Contractor’s Health & Safety Record
At the January 27th, 2010 meeting of Corporate Services and Economic Development Committee, City staff was asked to research and assess the possibility of including as evaluation criteria in all City Of Ottawa bid solicitations for construction and maintenance services an assessment of the bidder’s health & safety record and the bidders support and use of apprenticeships.
Numerous stakeholders and industry representatives have been contacted to determine their position on the implementation of a five-year health & safety assessment and the support of apprenticeships for City awarded contracts.
These representatives include:
- Ottawa Construction Association
- National Capital Heavy Construction Association
- General Contractors Association of Ottawa
- Greater Ottawa Truckers Association
- Workplace, Safety & Insurance Board of Ontario
Overall, all comments were positive in regards to implementation of a health & safety assessment by the industry, although the proper approach differed by each party. Areas of concern were the five-year length of the assessment, difficulty for new firms to have a five-year record, comparison of large vs. small companies and how exactly the City would monitor the assessment program.
Potential challenges and issues were raised with new companies who may not yet have met the required five-year health & safety record. This experience criterion was deemed unreasonable by the industry and will eliminate many new and growing firms as well as having no relation to whether the firm has an effective safety management program in place. Designing and properly defining an effective measurement program is essential to providing equal opportunity to all bidders.
The recently
released report from the Expert Advisory Panel on Occupational Health and
Safety to the Ontario Minister of Labour includes a recommendation that Ontario
establish a similar accreditation program for ‘top-flight employers that
encourages them to influence the health and safety performance of contractors in
their supply chains’. The City of Ottawa would like to see the Ontario Ministry
of Labour implement such a program so it could be used by reference in the bid
submission/review process. Although this is positive news, the province was
unable to provide a timeline for implementation of the program.
The City of Ottawa’s Occupational Health & Safety Branch, in conjunction with the Supply Branch, has commenced work with other City stakeholders on the development of a ‘Contractor Safety Management Program’ which will respond in part to this motion. It is proposed that this program be implemented in phases and upon completion will encompass the following elements:
- Bid submission of health and safety requirements prior to contract award,
- Implementation of a pass/fail criterion
- Pre-commencement meetings with bidders, and
- Performance monitoring and incident recording.
In response to the motion regarding ‘assessing the 5-year health and safety record’, pending the completion and implementation of a City ‘Contractor Safety Management Program’, and the implementation of a provincial accreditation program by the Ministry of Labour, the Supply Branch, as part of the first phase, recommends requiring bidding firms to submit the appropriate performance report from the applicable WSIB health & safety incentive program prior to the award of contract. In conjunction with Supply’s current practice requiring firms to submit confirmation of workers’ compensation coverage, this will further ensure that their recent occupational injury/illness performance record demonstrates their ability to perform work safely. As the Contractor Safety Management Program is phased in additional elements will be implemented which will continue to provide further depth and rigor going forward.
In response to the motion regarding ‘the 5-year record of support for apprenticeships; and adherence to the Trades Qualifications Apprenticeship Act and the Apprenticeship Act of Ontario’ the Supply Branch recommends that this criterion be not included in bid solicitations as an assessment factor. The industry has responded overwhelmingly against the idea of assessing apprenticeship programs due to the fact that some construction industries were identified as not having an apprenticeship program and the trade union itself controls a large portion of how apprenticeship programs are administered. It would be discriminatory to disqualify bidders without an apprenticeship program in place when the contractor has little or no control over the program itself.
Comprehensive Complaints Process & Litigation Bidding Exclusion
In 2010, the Purchasing by-law underwent a review at Committee and Council and recommendations were passed to include a Comprehensive Complaints Process and Litigation Bidding Exclusion into the By-law.
To ensure that the City’s procurement processes reflect best practices a City Council motion directed staff to put a “comprehensive complaints process” in place that reflects the approach adopted in Toronto and various other municipalities. By clarifying the complaints process in writing, vendors will know, in advance of any procurement initiative, what their rights are, as well as when and how to exercise them (e.g. de-briefing, written complaint, timelines, etc.).
This new comprehensive complaints process was utilized three times in 2010 and in all cases the complaint was resolved by the Chief Procurement Officer.
Council also inquired about the ability of the City of Ottawa to temporarily suspend both business relationships and grants to persons or organizations engaged in litigation with the City. The City Clerk and Solicitor provided to Corporate Services and Economic Development Committee and Council his legal opinion, that there was sufficient legal authority for the City of Ottawa to initiate a litigation exclusion to its Purchasing By-law that would prohibit vendors and suppliers of goods, services or construction who have legal actions pending against the City from doing business with it while such matters are unresolved. In an attempt to overcome the problems associated with an overly broad litigation exclusion, staff recommend that the City Treasurer be given the delegated authority recommended to reject a bidder who is engaged in litigation against the City. To date, this new bidding exclusion has not been utilized by the City of Ottawa.
Section 11: Prompt Payment Discounts
As part of the solicitation process bidders are encouraged to offer the City a cash discount for prompt payment of invoices. This prompt payment discount is taken into consideration in the proposal evaluation and contract award, provided that the minimum number of working days for payment is fifteen (15).
In 2010 the City obtained $464,913 in prompt payment discounts.
Section 12: Payment without Reference
A payment without reference is a legitimate payment method permitted within corporate procedure and is recognized in the Purchasing By-Law. These types of payments provide a cost effective process for low dollar value goods and services and are the standard method used for paying utility and telecommunication costs. As payments without reference do not go through the Supply Branch, an assessment of their compliance with the Purchasing by-law can only be made after the fact.
Also note that the review of payments without reference does not include those issued by members of Ottawa City Council and the Mayor as the City's Purchasing By-law does not apply to the Mayor and Members of Council.
Document 2 of this report lists the purchases greater than $25,000, paid without reference to a contract. In 2010, purchases paid without reference to a contract totalled $97.7 million. The 2009 payment without reference report totalled $99.6 million.
Of $97.7 million in payments made without reference to a contract in 2010, approximately $48.2 million were paid to utility companies or other companies that have a monopoly on the provision of a good or service. These purchases would not be set up through a purchase order.
The majority of the other purchases identified, valued at $49.5 million have been procured through a competitive process and paid without reference to expedite payments for small value items.
Periodically reviewing the number of invoices per vendor and the total dollar amount paid to each vendor illustrates noticeable purchasing trends. The Supply Branch reviews payments without reference to ensure the purchases were in compliance with the Purchasing By-law and then consults with client departments to determine appropriate procurement methods.
In 2010, 4 suppliers, who were paid through payments without reference, have been identified in Document 2 as being contracted in a manner not in compliance with the Purchasing By-law. The value of these purchases totals $0.3 M which is a decrease of 23.9% compared to the value of non-compliant purchases identified and reported in 2009.
The total value of the contracts resulting from procurements not in compliance with the Purchasing By-law account for 0.3% of the total value of all contracts paid without reference to a contract.
The Supply Branch has already worked with each of the client departments accountable for the non-compliant purchases to establish, where appropriate, competitive processes to acquire the goods or services required. In 2010, General Manager’s/Director’s of non-compliant departments were notified that their payments noted on the prior year’s annual report were not in compliance with the Purchasing By-law. If the purchase made was to be for a continuing requirement, the Supply Branch helped the client department to establish a process to acquire the required goods/services in a manner that is in compliance with the Purchasing By-law going forward. If the purchase was of a one-time nature, the Supply Branch worked with each department to educate those involved on the proper procedure for acquiring goods and services. This working relationship proved successful as there were no repeat non-compliant transactions from 2009 to 2010. The Supply Branch will continue this process and work with non-compliant purchasers in 2010 with the results to be presented in the 2011 Consolidated Annual Summary Report.
Section 13: Fuel Hedging Strategy & Financial Agreements
To lock in price and fix the budget, the City entered into ‘Float to Fixed Bank Swap Agreements’ with Royal Bank of Canada and CIBC to fix 82% of the anticipated 2010 Diesel fuel consumption. The details of the transactions are as follows:
- 3.5 million litres were fixed for each month of 2010 for a total of 42 million litres
- The average fixed price for the 42 million litres was 87.5 cents per litre
- Any addition for diesel fuel purchases above and beyond the fixed price was purchased at the monthly Floating Rack rate from Suncor.
Financial Agreements
Document 3 provides a detailed report on all subsisting Financial Agreements from operating departments engaged in commodity purchase agreements. The report contains the following information and documents:
- A statement about the status of the agreements during the period of the report, including a comparison of the expected and actual results of using the agreements;
- A statement indicating whether all of the agreements entered during the period of the report are consistent with the City’s statement of policies and goals relating to the use of Financial Agreements to address commodity pricing and costs; and
- A statement of transactions with financial institutions.
Section 14: Sponsorship and Advertising
In accordance with the Sponsorship and Advertising Policy, the Supply Branch is responsible for preparing an annual report to Council on all Sponsorships exceeding $25,000. Document 4 provides the details of these sponsorships for 2010, which total $4.2 M.
RURAL IMPLICATIONS
There are no rural implications.
CONSULTATION
The preparation of this report is required by the Purchasing By-law and as such no public consultation is required.
COMMENTS BY THE WARD COUNCILLOR(S)
N/A
LEGAL/RISK MANAGEMENT IMPLICATIONS:
There are no legal impediments to receiving this information report. The information is required to be disclosed pursuant to the Purchasing By-law.
CITY STRATEGIC PLAN
N/A
TECHNICAL IMPLICATIONS
N/A
FINANCIAL IMPLICATIONS
Prior to a contract approval, Supply Branch staff confirms that the appropriate funds are available in the budget, based on receipt of a funded requisition in SAP. The availability of funds is a condition of approval under the Purchasing By-Law.
SUPPORTING DOCUMENTATION
Document 1 - 2010 Consolidated Delegation of Authority Report Summary (≥$10,000)
Document 4 - List of suppliers awarded sponsorships and advertising contract(s) of a cumulative total value of $25,000 or more in 2010.
DISPOSITION
Report forwarded for information pursuant to the Purchasing By-law.