4. 2011 – PURCHASING YEAR IN REVIEW

2011 – L’ANNÉE DE L’APPROVISIONNEMENT EN RÉVISION

COMMITTEE RECOMMENDATION

That Council receive this report for information.

RECOMMANDATION DU COMITÉ

Que le Conseil municipal prenne connaissance du présent rapport.

DOCUMENTATION

1. City Treasurer’s report dated 24 April 2012 (ACS2012-CMR-FIN-0016).

2. Extract of Finance and Economic Development Committee Minutes dated 1 May 2012.

Report to/Rapport au :

Finance and Economic Development Committee

Comité des finances et du développement économique

and Council / et au Conseil

24 April 2012

le 24 avril 2012

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 ext./poste 25175, Jeff.Byrne@ottawa.

CITY WIDE / À L’ÉCHELLE DE LA VILLE

RefN°:ACS2012-CMR-FIN-0016

SUBJECT:

2011 – PURCHASING YEAR IN REVIEW

OBJET :

2011 – L’ANNÉE DE L’APPROVISIONNEMENT EN RÉVISION

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 2011, the Supply Branch awarded $1.152 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 $1.152 billion awarded in 2011, $1.14 billion was awarded under delegation of authority, which represents 99.4% awarded competitively after adjusting for 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). 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 the past three years.

The City continued to be a strong consumer of local products in 2011, spending approximately 94.5% of the annual purchasing dollars 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 supplier community.

2011 marked the first year of operation of the Strategic Sourcing Group (SSG) within the Supply Branch. The SSG is responsible for aligning purchasing strategies with corporate business strategies to improve decision making and decrease long term costs. The SSG provided advisory services on a number of key initiatives for the City in 2011 including the Lansdowne Air Rights Request for Offer, Ottawa Stadium lease negotiation, Externally Managed Uniform Solution business model and e-Procurement solutions.

Two separate motions were put forward by Council addressing ‘Contractor Health & Safety’ and ‘Supplier Performance’ and were actioned by the Supply Branch in 2011. With regards to Contractor Health & Safety, commencing in the 2012 construction season, the City will assess the health and safety record of contractors and suppliers bidding on City construction and maintenance projects. With regards to supplier performance, the Supply Branch formalized an internal procedure for reporting contractor performance. This procedural document has been circulated to all City managers and has been discussed with the supplier community at various outreach sessions held by the City.

As part of the solicitation process, bidders are encouraged to offer the City a discount for prompt payment of invoices. In 2011, the City obtained $221,761 in prompt payment discounts.

A payment without reference is a legitimate payment method permitted within corporate procedures 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 2011, 8 suppliers, representing 0.5% of the total value of all contracts paid without reference, were identified as not in compliance with the Purchasing By-law. The Supply Branch continues to work with each non-compliant department to educate those involved on the proper procedure for acquiring goods and services.

In addition to an in-depth statistical analysis of City purchasing, this report also includes; information on sustainable purchasing, the Supply Branch’s contribution to the Ottawa Light Rail Transit Project, the fuel hedging strategy, financial agreements and the annual report on sponsorship and advertising.

RÉSUMÉ

En 2011, la Direction de l'approvisionnement a accordé des contrats d'une valeur totale de 1,152 milliard de dollars, somme qui comprend tous les achats effectués conformément à la délégation de pouvoirs (10 000 $ ou plus) et les achats approuvés par le Conseil, par le conseil d'administration de la Bibliothèque publique d'Ottawa et par la Commission de services policiers. Des 1,152 milliard de dollars donnés en contrat en 2011, 1,14 milliard de dollars sont allés à des contrats octroyés en vertu de la délégation de pouvoirs. Si l'on tient compte des contrats que la Ville devait accorder à un fournisseur particulier (dans le cas, par exemple, de contrats touchant aux services publics, aux brevets et aux droits d'auteur ou de ceux où, pour des raisons techniques, il n'y avait qu'un fournisseur unique), c'est 99,4 % de ces contrats qui ont été conclus à la suite d'un processus d'appel d'offres concurrentiel. Ces chiffres reflètent l'engagement ferme de la Ville d'octroyer, dans la mesure du possible, les contrats à la suite d'un appel d'offres concurrentiel et sont comparables à ceux des activités d'approvisionnement au cours des trois dernières années.

La Ville s'est encore montrée une grande consommatrice de produits locaux en 2011, ayant réalisé environ 94,5 % de ses achats de biens et services à Ottawa et dans la région environnante. Ce chiffre est relativement constant depuis quelques années et témoigne de l'engagement de la Ville à soutenir les fournisseurs de la communauté locale.

2011 est la première année de fonctionnement du Groupe des sources stratégiques d'approvisionnement (GSSA) au sein de la Direction de l'approvisionnement. Le GSSA a la responsabilité d'aligner les stratégies d'achat sur les stratégies opérationnelles de la Ville afin d'améliorer les prises de décision et de réduire les coûts à long terme. Le GSSA a fourni à la Ville en 2011 des services de consultation dans un certain nombre de dossiers clés, notamment la demande d'offres pour les droits de propriété du dessus à Lansdowne, la négociation du bail du Stade d'Ottawa, le modèle opérationnel d'une solution de gestion externe des uniformes et les solutions d'approvisionnement électronique.

Deux motions distinctes auxquelles la Direction de l'approvisionnement a donné suite en 2011, l'une sur les pratiques de santé et de sécurité des entrepreneurs et l'autre sur le rendement des fournisseurs, ont été présentées au Conseil. Pour ce qui est des pratiques de santé et de sécurité des entrepreneurs, la Direction de l'approvisionnement commencera, dès la saison de construction de 2012, à évaluer le dossier de santé et de sécurité des entrepreneurs et fournisseurs qui soumissionnent les projets de construction et d'entretien de la Ville. Quant au rendement des fournisseurs, la Direction de l'approvisionnement a formalisé une procédure interne pour consigner le rendement des entrepreneurs. Ce document a été distribué à tous les gestionnaires de la Ville et a été discuté avec les fournisseurs à l'occasion de différentes séances d'information organisées par la Ville.

Dans le cadre des appels d'offres, les soumissionnaires sont invités à offrir à la Ville un escompte pour paiement rapide des factures. En 2011, la Ville a reçu des escomptes pour paiement rapide de 221 761 $.

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. Comme 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 2011, huit fournisseurs, comptant pour 0,5 % de la valeur totale des contrats payés sans référence, ont été payés d'une façon non conforme au Règlement sur les achats. La Direction de l'approvisionnement continue de travailler avec les Services fautifs afin d'informer le personnel concerné de la procédure appropriée d'approvisionnement de biens et de services.

En plus d'une analyse statistique approfondie des achats de la Ville, le présent rapport contient des renseignements sur l'approvisionnement responsable, la contribution de la Direction de l'approvisionnement au projet de train léger d'Ottawa, la stratégie de couverture contre les fluctuations des prix du carburant et les accords financiers, ainsi que le rapport annuel sur les commandites et la publicité.

Background

This report summarizes the purchasing activity for the year and provides updates on the objectives and future goals for the City. 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 City for the year 2011. This report is a useful tool used by both management and client groups within the City to identify purchasing trends and significant purchases made throughout the year.

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 2011:

1) January 1 to March 31, 2011;

2) April 1 to June 30, 2011;

3) July 1 to September 30, 2011; and

4) October 1 to December 31, 2011.

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 individual vendor for 2011 awarded under delegation of authority.

DISCUSSION

Section 1: 2011 Purchasing Summary

In 2011, the Supply Branch awarded $1.152 billion in contracts, including all purchases under delegation of authority (≥$10,000) and purchases approved by Council, the Library board and the Police board. This represents a 1.9% increase from 2010 and an overall increase of 14.4% from 2009. This increase in spending over this two year period is mainly attributable to the Infrastructure Stimulus Funding (ISF), which finished October 31, 2011, (Figure 1.1). Although the ISF has ended, the Supply Branch expects 2012 to be an above average year as a result of the Ottawa on the Move initiative.

Figure 1.1 –Total Purchases (issued through Supply Branch)

2011	*% yearly change*	2010	*% yearly change*	2009
$1.152 B	1.9%	$1.131B	12.4%	$1.007 B

Figure 1.2 below shows a breakdown of the total amount of purchases by purchasing area/type. 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

Purchase Area/Type	2011	2010	2009
Purchases awarded under delegation of authority	$1.14 B	$966.0 M	$984.4 M
Ottawa Police Services	$8.3 M	$6.5 M	$9.5 M
Ottawa Public Library	$0.9 M	$2.3 M	$0.8 M
Council approved purchases	$2.0 M [1]	$156.6 M [2]	$12.1 M [3]
Total (Issued through Supply Branch)	*$1.152 B*	*$1.131 B*	*$1.007 B*
Payments without reference (≥$25 K)	$101.7 M	$97.7 M	$99.6 M
Departmental Purchase Orders (≤$10 K)	$54.4 M	$66.5 M	$64.3 M
Procurement Card Purchases	$16.6 M	$15.0 M	$13.0 M

Figure 1.3 (a) & (b), detailed below, show the dollar value and number of contracts awarded through the Supply Branch for different purchasing amount thresholds.

As illustrated in Figure 1.3(a), 91.1% of all contracts were valued at greater than or equal to $100,000 in 2011. 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 2011, the largest volume of purchases was in this threshold representing 33.2% of the total volume, but only 1.9% of the total value. On a year-to-year basis these figures remain fairly constant.

Figure 1.3(a) – Purchasing Breakdown by dollar threshold (total value)

	2011		2010		2009
Contract Amount	Total Dollar Value	% of Total	Total Dollar Value	% of Total	Total Dollar Value	% of Total
>$100,000	$1.050 B	91.1%	$1.038 M	91.8%	$913.9 M	90.7%
Between $50,000 and $100,000	$47.0 M	4.1%	$42.6 M	3.8%	$42.3 M	4.2%
Between $25,000 and $50,000	$33.0 M	2.9%	$29.7 M	2.6%	$29.9 M	3.0%
Between $10,000 and $25,000	$21.6 M	1.9%	$20.5 M	1.8%	$20.8 M	2.1%
Total	$1.152 B	100.0%	$1.131 B	100.0%	$1.007 B	100.0%

Figure 1.3(b) – Purchasing Breakdown by dollar threshold (number of contracts)

	2011		2010		2009
Contract Amount	Total # of contracts	% of Total	Total # of contracts	% of Total	Total # of contracts	% of Total
>$100,000	1,099	27.3%	1,072	28.6%	974	26.6%
Between $50,000 and $100,000	664	16.5%	609	16.2%	584	15.9%
Between $25,000 and $50,000	925	23.0%	828	22.1%	838	22.8%
Between $10,000 and $25,000	1,333	33.2%	1,242	33.1%	1,274	34.7%
Total	4,021	100.0%	3,751	100.0%	3,670	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 under delegation of authority in 2011. As per Figure 2.1, there was $156.9 million in Professional Services contracts in 2011, and a further $1.2 million in Consulting Services.

Figure 2.1 –Professional and Consulting Services Contracts (>$10,000)

Service Type	2011		2010		2009
Service Type	Total Value	*% yearly change*	Total Value	*% yearly change*	Total Value
Professional Services	$156,919,241	+ 15.6%	$135,795,193	+ 11.5%	$121,814,552
Consulting Services	$1,182,083	- 48.8%	$2,309,849	- 75.2%	$9,327,220
Total	$158,101,324	+ 14.5%	$138,105,042	*+ 5.3%*	$131,141,772

Service Type	2011		2010		2009
Service Type	Total # of Contracts	*% yearly change*	Total # of Contracts	*% yearly change*	Total # of Contracts
Professional Services	1,234	+ 9.4%	1,128	+ 2.0%	1,106
Consulting Services	20	- 55.6%	45	- 55.4%	101
Total	1,254	+ 6.9%	1,173	*- 2.8%*	1,207

The overall number and value of Consulting Services has decreased significantly from 2010 to 2011. The number of Consulting Services contracts awarded decreased by 55.6% and the total value decreased by 48.8%

The overall number of Professional Services contracts increased by 9.4% and the total value of Professional Services contracts increased by 15.6%. This increase in 2011 is attributable to several large initiatives undertaken by the City in 2011 including Service Ottawa ($8.7M in contracts), the Lansdowne Park redevelopment ($5.9M in contracts) and the Ottawa Light Rail project ($33.4M in contracts). When removing these initiatives from the analysis and comparing the results to 2009 (prior to the Ottawa Light Rail project), the total value of Professional and Consulting services contracts decreased by 16.0%.

The procurement of Professional engineering services is summarized in Figure 2.2.

Figure 2.2 –Professional Engineering Services Summary (>$10,000)

2011		2010		2009
Total Value	Total # of Contracts	Total Value	Total # of Contracts	Total Value	Total # of Contracts
$81,112,159	497	$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 51.3% of all Professional and Consulting Services procured by the City in 2011. Although the Infrastructure Stimulus Funding has ended, the Supply Branch expects 2012 to be an above average year for Professional engineering services as a result of the Ottawa on the Move initiative.

Section 3: Procurement Strategies – Competitive vs. Non-Competitive Purchases

The City continues to be a strong advocate of competitive procurement processes in 2011. Following the guiding procurement principle, purchases are made using a competitive process that is open, transparent and fair to all suppliers. Of the $1.152 billion in contracts awarded under delegation of authority, 87.8% were awarded as a result of a competitive solicitation process. Furthermore, if the sole source purchase of seventy-five (75) double-decker buses ($59.5M) approved by Council and awarded under delegation of authority is removed from the analysis, the percentage of competitive purchases increases to 92.6%. This figure remains constant with previous years, reflecting the City’s strong competitive purchasing record.

Additionally, 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 99.4%.

Figure 3.1 provides a side-by-side comparison of the percentage of competitive vs. non-competitive contracts awarded by the City, both before and after adjustment.

Figure 3.1 – Competitive vs. Non-Competitive Procurements ($)

All non-competitive contracts awarded by the City were awarded in accordance with the sole source rationales identified in sections 22(1) of the Purchasing By-law.

Section 4: Local Purchasing

The City of Ottawa continued to be a strong consumer of local products in 2011, spending approximately 94.5% 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 identifies the geographical vendor breakdown for the 2011 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 – 2009-2011 Adjusted Geographical Vendor Breakdown

	2011		2010		2009
Region	Dollar Value	% of Total	Dollar Value	% of Total	Dollar Value	% of Total
Ottawa and area	$898,901,307	94.5%	$754,027,060	94.6%	$732,055,748	95.4%
Ontario	$22,897,121	2.4%	$18,187,233	2.3%	$24,918,710	3.2%
Quebec	$10,522,412	1.1%	$13,028,587	1.6%	$5,796,562	0.8%
All Others	$18,607,380	2.0%	$12,077,843	1.5%	$4,805,783	0.6%
Total	$950,928,220		$797,320,723		$767,576,803

Section 5: Portfolio & Departmental Purchasing

The majority of the purchases made by the City were for the four Portfolios within the City in 2011. 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

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 72.5% of all purchases made in 2011. However, in relation to the total number of contracts awarded by Portfolio, ISCS and CO represent an almost even split at 49.9% and 44.9% respectively. These two Portfolios represent 94.8% of all purchasing activity under delegation of authority.

In 2011, of the $826.8 M awarded on behalf of the ISCS Portfolio, 95.2% ($786.8 M) was awarded on behalf of Infrastructure Services, Transit Services and Environmental Services. Infrastructure Services represents 50.9% of this Portfolio ($420.6M) and accounts for more than double the purchasing value of any other Department in the City. Transit Services was the second largest client in this Portfolio representing 25.5% ($211.0M) and Environmental Services was the third largest accounting for 18.8% ($155.2M) of the $826.8M awarded.

City Operations was the City’s second largest portfolio representing 24.9% of the value of all contracts awarded under delegation of authority. Of the $284.5M awarded on behalf of the CO Portfolio, 71.2% ($202.7M) was awarded on behalf of Public Works and 14.9% ($42.4M) was awarded on behalf of Information Technology Services.

The value of contracts awarded on behalf of the CMO and the OAG accounted for 2.5% and 0.1%, respectively, of all contracts awarded under delegation of authority. In total, this amounted to $29.1M in purchasing activity.

Figures 5.1 and 5.2 displays the total value of all contracts awarded and the total number of contracts awarded, respectively, on behalf of each Department.

As seen in the figures below, Public Works represents the third largest purchasing department in the City, but in terms of number of contracts, it represents approximately the same amount as Infrastructure Services. This is due to a large number of maintenance and upgrades at various City facilities and parks as well as purchases for road and traffic operations, City fleet and equipment and snow removal.

Figure 5.1 – 2011 Contracts Awarded by Department (dollar value ≥$10,000)

Figure 5.2 – 2011 Contracts Awarded by Department (number of contracts ≥$10,000)

Section 6: Strategic Sourcing

In addition to continuing to be a strong advocate for competitive procurement processes, the City is continuing its evolution towards becoming a more strategic organization, as opposed to merely a transactional one.

This transformation included completing the staffing of the Strategic Sourcing Group within the Supply Branch in 2011. The Strategic Sourcing Group focuses on corporate business strategy identification, alignment of sourcing strategies and business strategies, enhanced service delivery, increasing both internal client and external supplier collaboration, and enhancing the City’s overall procurement skills and visibility.

In support of this objective, the Strategic Sourcing Group participated in several innovative procurements in 2011 including:

Corporate Uniforms Project

The City undertook a review of the current uniform supply procedures with the objective of identifying a new business model that would address client challenges. The objective is to award a contract for a new business model to supply all City uniform requirements. The services will include design, purchasing, warehousing, quality assurance, on-line ordering, just in time delivery and enhanced reporting. The contract will be for a five year period with options to renew.

A committee of City representatives, led by the Strategic Sourcing Group, was formed to support the initiative and provide input into the technical requirements of uniformed employees. The Strategic Sourcing Group acted in a liaison role obtaining IT requirements, addressing legal issues and informing the service aspects of the bid solicitation. The Strategic Sourcing Group will participate in the vendor site visits and bid evaluation for this Supply Branch led initiative.

MERX e-Bidding pilot project

As part of the Supply Branch objective to provide enhanced service delivery to clients, the Strategic Sourcing Group, Information Technology Services Department and MERX initiated a pilot project to introduce an electronic tendering process and automated reporting for call-ups against the Standing Offer for IT Resources. The pilot will run for a one year period, effective April 2012 to March 2013 followed by an evaluation and recommendation by the Strategic Sourcing Group.

The objectives of the pilot project are to facilitate ITS resource requirements by using an electronic tendering process administered by MERX and increase overall efficiency in the process. The pilot will test the Merx functionality in terms of vendor management, invitational tendering, managing addenda and document tracking and acceptance of tender submissions.

The pilot is expected to deliver the following key benefits:

· Managing pre-qualified vendors for ITS call-ups within a centralized database

· Electronic delivery of invitation to bid and distribution of Statement of Work documents

· Electronic delivery of amendment notifications

· Electronic receipt of bids from vendors

· Detailed audit reports and customized reporting

Lansdowne Air Rights Request for Offer & Ottawa Stadium Lease

The Strategic Sourcing Group also participated in projects that have been typically beyond the scope of traditional procurement activities within the Supply Branch. In particular, the Strategic Sourcing Group was engaged to provide advice on Real Estate projects and assist City staff with contractual issues and the decision making procedure ensuring all processes were carried out in a fair, open and transparent manner representing best value to the City.

Section 7: Purchasing on Ottawa.ca

Online Request for Quotation Procedure: Update

In 2010, the City 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.

The new procedure was welcomed by the supplier community. As a result, new suppliers have come forward resulting in increased competition and further competitive pricing. The prior 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.

The Purchasing website continues to expand moving forward into 2012 and continues to receive an increase in website traffic with over 2,000 hits per month. The Purchasing main page currently ranks as the most visited page in the City Hall section on Ottawa.ca and the Supply Branch ensures quotation listings are updated daily guaranteeing accurate and timely information to the local supplier community. Furthermore, related Purchasing pages including our City’s General Terms & Conditions and Standing Offer listing consistently rank in the top 5 pages visited in the City Hall section on Ottawa.ca

Purchasing on Ottawa.ca – Further Embracing Online Initiatives

In addition to the success of the 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
Accessibility for Ontarians with Disabilities Act 2005 (AODA) training material for suppliers

Section 8: Sustainable Purchasing

Sustainable purchasing strategies continue to be at the forefront in both the private and 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 has identified long-term sustainability planning and practices as a corporate priority. The City’s Strategic Framework provides 12 over-arching longer-term (30-100 years) goals. These goals describe long-term aspirations and collectively make up a vision for a sustainable, resilient and liveable city.

The City of Ottawa is not the only municipality to embrace sustainable purchasing. A group of fourteen Canadian municipalities including two regional municipalities recently released their first annual report on trends and best practices in municipal sustainable purchasing. The Municipal Collaboration for Sustainable Purchasing (MCSP) was initiated in July 2010 to provide leadership and leverage collective experience, knowledge and resources to advance sustainable purchasing initiatives across Canada. The City’s Supply Branch is actively involved with this organization as a member of the Steering Committee and quarterly meetings are held online to discuss current purchasing trends and methodologies.

The term sustainable purchasing means placing a purchasing priority on the environmental and socio-economic impacts of a product or service in addition to price, quality and service. Sustainable purchasing also encompasses working with suppliers to improve environmental and socio-economic performance across supply chains from point of manufacture to final delivery of product or service.

The Supply Branch in partnership with the Neighbourhood Sustainability Branch is developing a Sustainable Purchasing Policy for Council consideration in fall 2012.

Section 9: Contract Administration

In April 2011, Council directed the City Treasurer to formalize the procedure for reporting contractor performance to the Supply Branch. In response to this direction, the Supply Branch developed and circulated to all City managers a practical guide to contract administration entitled ‘Contract Administration and Reporting on Supplier Performance’. Proper contract administration ensures that suppliers deliver the goods and services ordered in accordance with their contractual obligations. Timely recording and reporting of contractual non-performance will allow the City to seek corrective action from suppliers, manage operational risk, and minimize procurement and contracting risk.

The distribution of this practical guide to contract administration was supported by a November 2011 outreach program, directed internally to all City staff who manage contracts and externally to the various supplier associations, including the Consulting Engineers of Ontario – Ottawa Area Chapter, National Capital Heavy Construction Association, Ottawa Construction Association, and General Contractors Association of Ottawa.

Going forward, the City plans to enhance the tracking and reporting of supplier performance by working with City staff and the supplier community to develop additional tools and reports to capture this information in a centralized e-procurement database, resulting in more proactive management of contract deliverables and completion/delivery dates.

Section 10: Contribution to the OTTAWA LIGHT RAIL TRANSIT Project

The Supply Branch, in conjunction with the City’s Rail Implementation Office (RIO), coordinated the release of the Request for Qualification (RFQ), which closed in September 2011. The City then engaged Infrastructure Ontario (IO), the Province’s procurement agency, as the commercial procurement lead for the remainder of the Project, as they have extensive experience with projects of similar scope and size within Ontario. An independent fairness commissioner was also engaged to oversee the RFQ evaluation process, as well as the entire OLRT Project.

The Supply Branch has played an integral role in the OLRT Project by providing strategic advice to RIO and IO. During the procurement process the Supply Branch met regularly with RIO and IO to discuss procurement strategies and develop bid solicitation documents. In addition, the Supply Branch continues to support RIO by issuing contracts awarded under delegation of authority.

Looking forward, the Supply Branch will continue to provide assistance and guidance as the project transitions from the engineering phase into the construction portion of the Ottawa Light Rail Transit Project.

Section 11: Fairness Commissioners

The City continued to make use of independent Fairness Commissioners for procurement files which are either very complex, or have the potential of becoming contentious. In 2011, the City spent $239,606 on fairness commissioner services. The City will continue to use Fairness Commissioner Services on an “as needed” basis.

Section 12: Assessing Supplier Performance

Subsections 37(1) and 37(2) of the City’s Purchasing By-law provide 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 2011 due to a supplier’s poor project management and overall unsatisfactory performance consistently noted by City staff. The supplier was notified of the City’s dissatisfaction with its performance on a number of occasions; however, little improvement resulted.

As a result of this consistently poor performance, the City Treasurer, in consultation with the City Clerk and Solicitor, barred this contractor from bidding on any future projects for a period of two years.

At the conclusion of this two-year period, the supplier can request that the City reconsider the prohibition. At that time, the supplier will be required to provide evidence by way of letters of reference of recent projects undertaken without any major incidents, issues, problems and delays.

Health & Safety Initiatives – Update

Throughout 2011, the Supply Branch reached out to numerous stakeholders and industry representatives to determine their position on the implementation of a health & safety assessment on construction and maintenance contracts. All comments received were positive and after further discussions with the City’s Occupational Health & Safety Branch and other internal stakeholders, the Supply Branch developed and finalized a procedure to assess the health and safety record of contractors and suppliers bidding on City construction and maintenance projects. This Council directed initiative will commence in the construction season of 2012.

As part of the project, the City will request the appropriate WSIB Health & Safety statement from the successful bidder on construction and maintenance service tenders as well as continuing to request bonding, proof of insurance and the WSIB Clearance Certificate.

The contractor’s and supplier’s health and safety record, they will not be evaluated on a pass/fail basis. Rather, the City will use this information to assess risk, and may request additional health and safety information from the contractor and/or become more actively involved in overseeing the contractor’s work site and/or follow up with more regular inspections.

Comprehensive Complaints Process

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 in the By-law.

This new comprehensive complaints process was utilized four times in 2011 and in all cases the complaint was resolved by the Chief Procurement Officer.

Section 13: Prompt Payment Discounts

As part of the solicitation process bidders are encouraged to offer the City a 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 2011 the City obtained $221,761 in prompt payment discounts.

Section 14: Payment without Reference

A payment without reference is a legitimate payment method permitted within corporate procedures 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.

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 each vendor with cumulative purchases greater than $25,000, paid without reference to a contract. In 2011, these purchases paid without reference to a contract totalled $101.7 million. The 2010 payment without reference report totalled $97.7 million.

Of the $101.7 million in payments made without reference to a contract in 2011, approximately $49.2 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 $52.5 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 2011, 8 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 total value of the contracts resulting from procurements not in compliance with the Purchasing By-law account for 0.5% 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 2011, 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 suppliers from 2010 to 2011.

Section 15: 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 75% of the anticipated 2011 Diesel fuel consumption. The details of the transactions are attached in Document 3.

Financial Agreements

Document 3 also 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 16: 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 2011, which total $5.2 M.

RURAL IMPLICATIONS

There are no rural implications associated with this report.

CONSULTATION

There is no public consultation required with this report.

Comments by the Ward Councillor(s)

There are no comments by ward councillors required with this report.

LEGAL IMPLICATIONS

There are no legal implications associated with this information report.

RISK MANAGEMENT IMPLICATIONS

There are no risk management implications.

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.