Supply Manual

VERSION 10-1

January 11, 2010

Prepared by:

Acquisition Policy and Process DirectoratePublic Works and Government Services Canada

Supply Manual

Chapter 1

Public Procurement

TABLE OF CONTENTS Chapter 1 - Public Procurement................................................................................... 1 1.1 Overview ..........................................................................................................................................1 1.5 Supply Manual .................................................................................................................................1

1.5.1 Organization of the Manual.................................................................................................1 1.5.5 Supply Manual Format........................................................................................................2

1.10 PWGSC Procurement Process........................................................................................................2 1.10.1 Integrity ...............................................................................................................................3 1.10.5 Guiding Principles ...............................................................................................................3 1.10.10 Procurement Best Practices ...............................................................................................3

1.15 The Legal Framework of Contracting...............................................................................................5 1.20 Statutes and Regulations.................................................................................................................5

1.20.1 Department of Public Works and Government Services Act ..............................................6 1.20.5 Financial Administration Act and the Government Contracts Regulations.........................7 1.20.10 Defence Production Act ......................................................................................................8 1.20.15 Federal Accountability Act ..................................................................................................8 1.20.20 Other Acts ...........................................................................................................................8

1.25 Agreements......................................................................................................................................9 1.25.1 International and National Trade Agreements ....................................................................9 1.25.5 NAFTA ................................................................................................................................9 1.25.10 WTO-AGP.........................................................................................................................11 1.25.15 AIT.....................................................................................................................................12 1.25.16 Bilateral Free Trade Agreements......................................................................................13 1.25.20 Comprehensive Land Claims Agreements .......................................................................13 1.25.25 Other Agreements.............................................................................................................14

1.30 Policies, Directives and Guidelines................................................................................................14 1.30.1 Treasury Board .................................................................................................................14 1.30.5 Treasury Board Contracting Policy ...................................................................................14 1.30.10 Treasury Board Common Services Policy ........................................................................15 1.30.15 Treasury Board Contracts Directive..................................................................................15 1.30.20 Treasury Board Procurement Review Policy ....................................................................15 1.30.25 Code of Conduct for Procurement ....................................................................................15

1.35 Challenge Process .........................................................................................................................16 1.35.1 Canadian International Trade Tribunal .............................................................................16 1.35.5 Procurement Ombudsman................................................................................................17

1.40 Departmental Delegation of Authority ............................................................................................18 1.40.1 Use of Judgement and Knowledge...................................................................................18 1.40.5 Contract Approval and Signing Authorities .......................................................................18

1.45 Division of Responsibilities between PWGSC and Client Departments ........................................18 1.50 Fairness Monitors...........................................................................................................................19 1.55 Commodity Management ...............................................................................................................19

1.55.1 Overview ...........................................................................................................................19 1.55.5 Goals and Benefits of Commodity Management ..............................................................20 1.55.10 Pre-competed Procurement Instruments ..........................................................................20

1.60 Environmental Considerations .......................................................................................................20 1.60.1 Green Procurement Policy................................................................................................21 1.60.5 Office of Greening Government Operations .....................................................................21

1.65 Policy on Government Security......................................................................................................21 1.70 Privacy in Contracting ....................................................................................................................22 Annex 1.1: Matrix of Responsibilities between PWGSC and Client Departments for the Procurement of

Goods and Services (Generic) ..................................................................................................1 Annex 1.2: Specific Division of Responsibilities Agreements......................................................................1

Section A: Division of Responsibilities Between PWGSC and DND for the Acquisition of Goods and Services...............................................................................................1

Section B: Division of Responsibilities between PWGSC and DND for the Quality Assurance of Materiel and Services ........................................................................................7

Chapter 1 – Public Procurement

Chapter 1 - Public Procurement 1.1 Overview (2010-01-11) (a) The mandate of Public Works and Government Services Canada (PWGSC) is to provide services

to all Canadian federal departments, and is summarized in section 5 of the Department of Public Works and Government Services Act. This section stipulates that:

“The Department shall operate as a common service agency for the Government of Canada, and its activities as a common service agency shall be directed mainly toward providing the departments, boards and agencies of the Government of Canada with services in support of their programs.”

(b) The role of PWGSC as a common service provider of both mandatory and optional acquisition

services is further elaborated in the Treasury Board (TB) Common Services Policy. (c) Public procurement by Canada is legislated and guided by a number of international and national

trade agreements, and acts, as well as policies, directives, and guidelines provided by TB, the Treasury Board Secretariat (TBS) and PWGSC. Certain departments such as Indian and Northern Affairs Canada and Industry Canada are responsible for programs that have a direct impact on procurement. In addition to the above, and the content in this Supply Manual, contracting officers must also be cognisant of policy notifications, relevant communiqués and internal operating procedures.

1.5 Supply Manual (2010-01-11) (a) The Supply Manual describes the acquisitions related activities of PWGSC. It references laws,

regulations, government and departmental policies, directives, and procedures that have an impact on contracting and procurement activities of the Acquisitions Branch.

(b) Contracting officers should be aware that this manual and the contracting policies referenced may

be read by and referred to by a number of parties interested in procurement activities such as clients, suppliers, the general public, and the media.

(c) Canadian government procurement is carried out in a decentralized manner. Individual

departments award contracts within their own authorities for services, and within certain authorities for goods and construction delegated by the Minister of PWGSC. They make a considerable number of lower dollar value purchases through the use of these authorities, as well as purchases through their authorized use of standing offers put in place by PWGSC.

(d) The Supply Manual is to be read in conjunction with other government policies and directives, in

particular, those released by TB and TBS. Acquisition policies are regularly updated by PWGSC Policy Notifications as well as by TB Contracting Policy Notices. The Standard Acquisition Clauses and Conditions (SACC) Manual must be read as a complementary document to the Supply Manual. Policy notifications take precedence over the contents of these two manuals.

1.5.1 Organization of the Manual (2010-01-11) The Manual generally follows the sequence of a typical procurement process. The structure is as follows: (a) Chapter 1, Public Procurement, provides an overview of the context and the legal framework

Supply Manual Page 1 of 23 Version 10-1 (2010-01-11)

Chapter 1 – Public Procurement

relating to public procurement for the acquisition of goods or services, including construction. (b) Chapter 2, Defining the Requirement and Requisition Receipt, is about defining the requirement

for the bid solicitation. While this is often the responsibility of the client department, PWGSC involvement is still important.

(c) Chapter 3, Procurement Strategy, describes what the procurement strategy is. This determines

how the request will be satisfied. (d) Chapter 4, Solicitation Process, outlines the actual bid solicitation preparation and process. Most

of the various methods of solicitation and items that need to be included in the bid solicitation are found in this chapter.

(e) Chapter 5, Evaluation and Selecting the Contractor, explains how to evaluate and select the

contractor based on the solicitations. (f) Chapter 6, Approvals and Authorities, provides the details of the approvals that need to be

obtained before awarding a contract. (g) Chapter 7, Award of Contracts and Issuance of Standing Offers and Supply Arrangements,

relates to the award of contracts, issuance of standing offers and supply arrangements, debriefings, notification to unsuccessful bidders, and other matters surrounding contract award and the issuance of standing offers and supply arrangements.

(h) Chapter 8, Contract Management, offers a quantity of information regarding contract

management during the contract. Non-exhaustive examples of this information are contract performance, progress payments, subcontracting, warranty work, disputes and terminations.

(i) Chapter 9, Special Procurements, details procurements where PWGSC has implemented special

procedures applicable to identified commodities, clients or projects. (j) Chapter 10, Cost and Profit, is generally used when a contract is to be awarded on a non-

competitive basis for non-commercial goods or services, or in the case of a competitive process for such goods or services, only one compliant bid is received, so price negotiations with this bidder may be required.

(k) The Glossary includes words, concepts, titles, etc., used throughout the Manual. 1.5.5 Supply Manual Format (2010-01-11) (a) Each chapter refers to particular subjects by heading, and subsequent sub-heading numbers.

Each chapter also commences with a Table of Contents and concludes with annexes specific to that chapter.

(b) Subjects are numbered as they appear in the chapters, i.e. 1.5.5 appears in Chapter 1 and 8.65.5

would appear in Chapter 8. (c) Section and subsection numbering includes gaps to provide for future additions to the Supply

Manual. 1.10 PWGSC Procurement Process (2010-01-11) There is one over-arching principle for all PWGSC procurement activities: Integrity. Subordinate to this are guiding principles, which provide the framework for PWGSC procurement process. Contracting

Supply Manual Page 2 of 23 Version 10-1 (2010-01-11)

Chapter 1 – Public Procurement

officers must always respect these principles, regardless of whether or not the actions are clearly set out in this manual. 1.10.1 Integrity (2010-01-11) PWGSC procurement processes will be open, fair and honest. 1.10.5 Guiding Principles (2010-01-11) All those involved in the procurement process must apply prudence, probity and transparency at each stage of the process. (a) Client Service

PWGSC will make every reasonable effort to satisfy the operational requirements of its clients, while obtaining the best value in each procurement process.

(b) National Objectives

PWGSC procurement activities will advance established government policies, within the limits imposed by international trade obligations.

(c) Competition

PWGSC procurement will be competitive, with specific exceptions. (d) Equal Treatment

PWGSC will ensure that all potential bidders of a particular requirement are subject to the same conditions.

(e) Accountability

PWGSC is accountable for the integrity of the contracting process. Clients are responsible to ensure that all information relating to their requirements, which is provided to PWGSC, is complete and accurate. (See Annex 1.1.)

1.10.10 Procurement Best Practices (2010-01-11) (a) Ensure Integrity

Contracting officers must ensure the integrity of the procurement process. If there is any doubt that what is being done (or asked by the client to be done) might bring the integrity of the process into question, the contracting officer should consider suspending the procurement process until the issue is resolved. Issues that cannot be resolved satisfactorily at the contracting officer level must be referred to a higher authority within PWGSC.

(b) Get Involved Early

The procurement process can be facilitated by advance work being done with clients. This includes helping with needs identification and requirement definition, procurement strategy development, and drafting of solicitation documents before a requisition is actually received. This can be accomplished through ongoing liaison with the client or a review of procurement patterns.

Supply Manual Page 3 of 23 Version 10-1 (2010-01-11)

Chapter 1 – Public Procurement

These methods can be initiated by a client request for assistance, or by a more formal process of regular consultation.

(c) Consult with Peers

Contracting officers should consult with colleagues, particularly when working with an unfamiliar situation, such as a new commodity. Their experience and advice may help to arrive at a sound decision. Referring to previous files can also be instructive, particularly for estimating things like business volume under a new contract where there is a current contract covering substantially the same activities.

(d) Liaise with the Client

The contracting officer should keep clients informed and involved, and in order to develop responsive, creative and flexible procurement strategies, their departmental needs must be understood, as well as their specific technical requirement. When consulting the client, make the purpose plain, so that if there is a problem with a proposed approach a solution that achieves the purpose can be developed. The contracting officer must work with the client towards their operational objectives.

(e) Use Specialists

The contracting officer should seek advice from the following specialists: Legal Services, policy advisors, Access to Information and Privacy officers, quality control officers, cost analysts and risk management advisors. Specialists are available to provide guidance and recommendations in their areas of expertise.

(f) Communicate Effectively

Contracting officers should be very clear in communications. Written instructions accompanying each bid solicitation, for example, should be clear with no ambiguity, and be easily understood by all parties.

(g) Maintain Confidentiality

The contracting officer must treat all information of a confidential or personal nature, including bid information, in a secure and confidential manner. This ensures the integrity of the contracting process, and protects the interests of suppliers and clients.

(h) Obtain Confirmation

The contracting officer should obtain written confirmation of significant information, agreements and discussions, such as confirmation of an unusually low price, or extension of a bid validity period by the bidder.

(i) Select the Appropriate Contracting Method

(i) Depending on which commodity is being procured, the appropriate contracting method may be a standing offer, a supply arrangement, a government-wide or multi-departmental contract, or a normal contract. See 3.15 for details on the usage of the different methods.

(ii) Some commodities are available via mandatory standing offers, and these must be used

unless there is a valid reason to deviate. (j) Commodity Knowledge

Supply Manual Page 4 of 23 Version 10-1 (2010-01-11)

Chapter 1 – Public Procurement

Contracting officers should develop their understanding of their commodity's industry, the market conditions, and the pertinent factors of each commodity, which then affect the choices made by contracting officers in determining, for example, such things as the basis of payment and the selection methodology. Clients should also use their understanding of the commodity when defining their technical requirements and scope.

Contracting officers should also keep themselves informed about such things as the proposed contractor's performance history, financial situation and practices, before recommending a contract award. It also means keeping up to date with a contractor during the performance of a contract.

(k) Life Cycle Management of Assets

Life Cycle Management of Assets is an integrated approach to materiel management that looks at the process as a complete system rather than separate activities. While this process is primarily the responsibility of materiel managers within client departments, procurement and disposal are a part of this process so contracting officers should discuss with the client the implications of the life cycle management process for each procurement.

(l) Maintain Records

Contracting officers should keep files up to date for reasons of good management, access to information requests as well as for audit purposes. Current files should be kept up to date for anyone who may have to consult the file or assume responsibility for it at a later date. See Annex 8.1 for further details.

(m) Use Standard Documents

Contracting officers should use only the templates available on the Departmental Standard Procurement Documents Web site in the procurement process (see 4.15.1.) Contracting officers should obtain from their supervisor the most current standard documents within their respective areas that have been developed in accordance with these templates. Directorates needing assistance in developing documents based on these templates should contact the Procurement Process Tools Division of the Policy, Risk, Integrity and Strategic Management Sector.

1.15 The Legal Framework of Contracting (2010-01-11) The legal framework is comprised of: (a) statutes and regulations; (b) agreements; (c) policies, directives, procedures and guidelines; and, (d) challenge process. They are described in 1.20 to 1.35. 1.20 Statutes and Regulations (2010-01-11) (a) PWGSC procurement activities are principally carried out pursuant to the following major statutes:

(i) Department of Public Works and Government Services Act; (ii) Financial Administration Act and the Government Contracts Regulations; (iii) Defence Production Act;

Supply Manual Page 5 of 23 Version 10-1 (2010-01-11)

Chapter 1 – Public Procurement

(iv) Federal Accountability Act; (v) Government Contracts Regulations.

(b) No legal interpretation should be attempted on the basis of the following highlights. An electronic

copy of the acts may be viewed on the Department of Justice Web site. 1.20.1 Department of Public Works and Government Services Act (2010-01-11) (a) The Department of Public Works and Government Services Act came into force on July 12, 1996,

to give legislative sanction to the amalgamation of the former department of Public Works and the former Department of Supply and Services together with the Translation Bureau and the Telecommunication Services for government. The legal name of the Department is “Department of Public Works and Government Services”; while “Public Works and Government Services Canada” or “PWGSC” is the common usage name. The legal name of the Department must be used for the preparation and execution of legal documents.

(b) The Act:

(i) constitutes the Department; (ii) provides for the appointment of a minister who has the management and direction of the

Department; (iii) provides for the appointment of a deputy minister as deputy head of the Department; (iv) provides that the Minister is the Receiver General for Canada and the Deputy Minister is

the Deputy Receiver General; (v) sets out the powers, duties and functions of the Minister which extends to and includes all

matters over which Parliament has jurisdiction, not by law assigned to any other department, board or agency of the Government of Canada.

(c) Sections 6 and 7 outline in detail the powers, duties and functions of the Minister. With respect to

acquisitions, the following services are specifically identified in Section6: (i) acquisition and provision of articles, supplies, machinery, equipment and other materiel

for departments; (ii) acquisition and provision of services for departments; (iii) planning and organizing of the provision of materiel and services required by

departments; (iv) acquisition and provision of printing and publishing services for departments; and (v) construction, maintenance and repair of public works, federal real property and federal

immovable. (d) Section 8 allows the Minister to delegate any of the Minister’s powers, duties or functions under

the Act to an appropriate minister, within the meaning of the Financial Administration Act, for any period and under any terms and conditions that the Minister considers suitable. Section 8 also provides the Minister of PWGSC with the power to authorize other Ministers, to whom he or she has delegated powers under the Act, to sub delegate those powers to the “chief executive” of the relevant department. Subsection 8(3) empowers a minister receiving the authority to sub-delegate to the officials who are in charge of the departments in that minister’s portfolio and subsection 8(4) empowers those officials in turn, to sub-delegate to departmental officials under their jurisdiction.

(e) Section 9 gives the Minister the exclusive authority for the acquisition of goods. All ministers

have inherent power to contract; however, the authority given to the Minister in section 9 supplants the authority of each department to contract for goods. That authority may be restored to the extent determined by the Minister of PWGSC through a delegation, in accordance with section 8, from the Minister of PWGSC to the Minister responsible. Departments may enter into

Supply Manual Page 6 of 23 Version 10-1 (2010-01-11)

Chapter 1 – Public Procurement

contracts for services under their own authorities, up to the limits contained in Appendix C - Treasury Board Contracts Directive; however, they may still choose to have these contracts for services done by PWGSC.

(f) Section 16 empowers the “Minister to do anything for or on behalf of:

(a) any department, board or agency of the Government of Canada or Crown Corporation, or (b) with the approval of the Governor in Council, any government, body or person in Canada

or elsewhere that requests the Minister to do that thing, where the Minister is authorized to do that thing under this or any other Act of Parliament for or on behalf of any department, board or agency of the Government of Canada.”

(g) Sections 20 and 21 provide the necessary contracting powers of the Minister, including the power

to fix terms and conditions of contracts, and instructions, terms and conditions with respect to other documents relating to contracts and their formation. Section 22 gives the Minister the power to incorporate contractual clauses by reference.

1.20.5 Financial Administration Act and the Government Contracts Regulations (2010-01-11) (a) The Financial Administration Act provides the legal framework for the collection and expenditure

of public funds, including the contracting practices of PWGSC and its clients. Sections 32, 33, 34, 37, 40 and 41 are of direct interest to contracting officers.

(b) Section 32 provides that no contract providing for a payment can be entered into unless there is

sufficient funding available to discharge any debt that under the contract will be incurred during the fiscal year in which the contract is entered into. Section 33 requires that no charge can be made against an appropriation except on the requisition of the appropriate Minister of the department for which the appropriation was made or of a person authorized in writing by that Minister.

(c) Pursuant to section 34, no payment can be made unless the deputy of the appropriate Minister,

or another person authorized by the Minister certifies, in the case of a payment for the performance of work, the supply of goods or the rendering of services, that the work has been performed, the goods supplied or the service rendered and that the price charged is in accordance with the contract, or if not specified in the contract, is reasonable. Under 1.20(a) (ii), payment may be made before completion of the work (i.e. advance or progress payment) but only if such payment is in accordance with the contract.

(d) Sections 37 and 37.1 provide that any unexpended portion of an appropriation lapses at the end

of the fiscal year, except that a debt incurred for work performed, goods received or services rendered before the end of the fiscal year must be recorded as an expenditure against the appropriation, even though payment is made during the following fiscal year.

(e) Section 40 provides that it is a term of every contract providing for the payment of any money by

Her Majesty under that contract is subject to there being an appropriation for the particular service for the fiscal year in which any commitment under that contract would come in course of payment.

(f) Section 41 provides for regulations with respect to the conditions under which contracts may be

entered into. (g) Sections 61 and 62 restrict the transfer, lease or loan of public property and require each

department to maintain adequate records of its public property. However, pursuant to the Public Property Loan Regulations, (SOR/92-745), section 61 permits ministers to loan public property,

Supply Manual Page 7 of 23 Version 10-1 (2010-01-11)

Chapter 1 – Public Procurement

subject to certain conditions. (h) Sections 66 to 71 describe conditions under which Crown debts may be assigned, and the

procedure to follow. (i) Contracting officers should be familiar with the Government Contracts Regulations (GCR). Part I

of the GCRs deals with conditions of contract entry. Section 4 provides that contracts for legal services are only entered into by the Minister of Justice. Section 5 sets out the requirement for soliciting bids and section 6 specifies conditions under which bids need not be solicited. Section 8 and 9 authorize advance payments and progress payments. Part II deals with bid and contract security.

1.20.10 Defence Production Act (2010-01-11) (a) The Defence Production Act (DPA) gives the Minister of PWGSC the responsibility to administer

the DPA and the exclusive authority to buy or otherwise acquire defence supplies and construct defence projects required by the Department of National Defence, subject to exceptions listed at subsection 10(2) of the DPA. All PWGSC contracts for defence supplies or projects are governed by the provisions of the DPA.

(b) The DPA includes the following three parts: (1) Procurement of Defence Supplies; (2)

Regulations of Access to Controlled Goods; and (3) Offence and Punishment. (c) In Part 1, section 11 permits the Minister, if authorized by the Governor in Council, to do or

undertake, on behalf of an associated government, any act or thing that the Minister is empowered to do or undertake under the Act. Sections 12 to 15 deal with the Minister’s mandate to organize and control the Canadian defence industry. Section 16 provides wide powers to the Minister with respect to the procurement, production or disposal of defence supplies or defence projects. Sections 21 to 25 deal with the administration of defence contracts.

(d) Part 2 deals with the regulation of access to controlled goods, including requirements for

registration, offences and prohibitions. Part 3 defines offences, continuing offence and factors to consider when sentencing.

1.20.15 Federal Accountability Act (2010-01-11) (a) The Federal Accountability Act (Fed AA) was granted Royal Assent on December 12, 2006. The

Act provides for conflict of interest rules, measures respecting administrative transparency, oversight and accountability. The Act enacts two new acts (the Conflict of Interest Act and the Director of Public Prosecutions Act) and makes a series of amendments to existing legislation such as the Parliament of Canada Act, the Lobbyists Registration Act, the Financial Administration Act, the Criminal Code and the Department of Public Works and Government Services Act.

(b) The Fed AA also amends the Department of Public Works and Government Services Act to

provide for the appointment and mandate of a Procurement Ombudsman. See 1.35.5 for more details.

1.20.20 Other Acts (2010-01-11) In addition to the above statutes, examples of other acts which also apply to contracting for goods and services are as follows:

Supply Manual Page 8 of 23 Version 10-1 (2010-01-11)

Chapter 1 – Public Procurement

(a) Conflict of Interest Act; (b) Access to Information Act; (c) Privacy Act; (d) Official Languages Act; (e) Lobbying Act; (f) Criminal Code; (g) Competition Act; (h) Department of Justice Act; (i) Bankruptcy Act. 1.25 Agreements 1.25.1 International and National Trade Agreements (2010-01-11) (a) Canada is a signatory to two international trade treaties aimed at reducing trade barriers between

the signatories: the North American Free Trade Agreement (NAFTA) and the World Trade Organization Agreement on Government Procurement (WTO-AGP). Canada has also signed the Canada-Chile Free Trade Agreement (CCFTA) and the Canada-Peru Free Trade Agreement (CPFTA). As well, Canada has signed the Agreement on Internal Trade (AIT) with the provinces and territories.

(b) Some trade agreements have the added force of law as they have been enshrined in legislation

(the North American Free Trade Agreement Implementation Act, the World Trade Organization Agreement Implementation Act, the Agreement on Internal Trade Implementation Act).

(c) The procurement provisions of all trade agreements are similarly structured in that if a proposed

contract meets certain criteria it is covered by the agreement; if it does not meet all the stated criteria then it is not covered. A proposed contract can be, and often is, covered by more than one agreement.

(d) Coverage Under Multiple Agreements

For all trade agreements, PWGSC is required to comply with specific procedures when completing certain procurements. Therefore a decision must be made as to whether or not the requisition is subject to a particular agreement, or a combination of agreements. To determine coverage under the various trade agreements, the estimated procurement value (including the estimated amount of the Goods and Services Tax or the Harmonized Sales Tax), the client, the type of good or service or construction, and any exceptions or exclusions must be reviewed. Contracting officers should note that when the procurement is covered by more than one agreement, all agreements must be complied with at the same time. In order to accomplish this, the procedures to be followed are the procedures that are considered the most rigorous. For example, for limited tendering reasons, procurement covered by NAFTA, WTO-AGP and AIT, only the limited tendering reasons that are common to all three agreements are available as options.

(e) For assistance with the application of the trade agreements, contracting officers may contact

Trade Agreements Strategy of the Policy, Risk, Integrity and Strategic Management Sector, either by telephone at 819-956-6411, or by e-mail at: christine.cowan@tpsgc-pwgsc.gc.ca.

1.25.5 NAFTA (2010-01-11) (a) The North American Free Trade Agreement Implementation Act sets out Canada's commitment

to reduce trade barriers between Canada, the United States of America and the Federal Republic

Supply Manual Page 9 of 23 Version 10-1 (2010-01-11)

Chapter 1 – Public Procurement

of Mexico. Chapter 10 of the Agreement focuses on achieving greater competition for, and transparency in, government procurement, eliminating the protection of domestic products or suppliers or discrimination among foreign products or suppliers. The “National Treatment” clause and the “Non-discrimination” clause are similar as those found in the WTO-AGP.

(b) The use of measures to improve socioeconomic development (offsets) for procurements covered

by NAFTA is prohibited. See Article 1006. Note that set asides for small and minority business are exempt as described in (e)(iv) below.

(c) To determine whether NAFTA is applicable, the agreement (Chapter 10) must be consulted. In

the following sections on determining NAFTA coverage, all references to an “Annex” are to the annexes of Chapter 10 of NAFTA.

(d) For purposes of determining coverage, a requisition is considered to be one for:

(i) goods; (ii) services; or (iii) construction services;

based on the one that represents more than 50 percent of the estimated value of the requisition.

(e) To determine if a procurement is subject to NAFTA, refer to the following:

(i) Determine the value of the requisition. See Article 1001 and Article 1002, and Annex 1001.2c of NAFTA. The thresholds in NAFTA are presented in U.S. dollars. The values in Canadian dollars are based upon conversion factors, as agreed upon in the Agreement, and may be revised every two years. They are published in a Treasury Board Contracting Policy Notice 2007-05. The conversions below are in effect until December 31, 2011. A procurement may be subject to NAFTA if the requisition value, in Canadian dollars, is as follows: (A) for goods being procured by departments and agencies (including some

Commissions and Boards): $27,300. See subparagraph 1001(1)(c)(i); (B) for services being procured by departments and agencies: $76,600. See

subparagraph 1001(1)(c)(i); (C) for goods or services being procured by federal government enterprises (usually

Crown corporations): $383,300. See subparagraph 1001(1)(c)(ii); (D) for construction services being procured by departments and agencies:

$9,900,000. See subparagraph 1001(1)(c)(i); (E) for construction services being procured by federal government enterprises:

$12,200,000. See subparagraph 1001(1)(c)(ii).

(ii) Determine the coverage by client. See Annex 1001.1a-1 and Annex 1001.1a-2. (iii) Determine the coverage by type of requirement:

(A) goods – See Annex 1001.1b-1; or (B) services – See Annex 1001.1b-2; or (C) construction services – See Annex 1001.1b-3.

Supply Manual Page 10 of 23 Version 10-1 (2010-01-11)

Chapter 1 – Public Procurement

(iv) Determine if an exception should be invoked for the requirement or if the requirement is excluded from the agreement. See Article 1018 and Annex 1001.2b. An example of this is set-asides. Article 1.(d) of Annex 1001.2b provides for set-asides for small and minority businesses. Therefore, procurements that are set-aside (i.e. reserved) for either CLCA beneficiaries, or for aboriginal businesses under the Procurement Strategy for Aboriginal Business (PSAB), are exempt from NAFTA. For more information on when procurements can be reserved for CLCA beneficiaries, see 9.35. For more information on PSAB, see 9.40.

1.25.10 WTO-AGP (2010-01-11) (a) The World Trade Organization Agreement on Government Procurement (WTO-AGP) is an

agreement, which aims to secure greater international competition for government procurement. It provides procurement procedures, which Canada abided to.

(b) The Agreement also contains provisions of national treatment and non-discrimination that

Canada must respect (Article III). National treatment means, that “…each Party shall provide immediately and unconditionally to the products, services and suppliers of other Parties offering products or services of the Parties, treatment no less favourable than:

“(i) that accorded to domestic products, services and suppliers; and (ii) that accorded to products, services and suppliers of any other Party.”

(c) Non-discrimination means that “…each Party shall ensure:

“(i) that its entities shall not treat a locally-established supplier less favourably than another locally-established supplier on the basis of degree of foreign affiliation or ownership; and

(ii) that its entities shall not discriminate against locally-established suppliers

on the basis of the country of production of the good or service being supplied, provided that the country of production is a Party to the Agreement in accordance with the provisions of Article IV.”

(d) The use of measures to improve socioeconomic development (offsets) for procurements covered

by WTO-AGP is generally prohibited. See Article XVI. (e) To fully determine whether the WTO-AGP is applicable, the Agreement must be consulted. In the

following Sections on determining WTO-AGP coverage, all references to an “Annex” are to the annexes to the WTO-AGP.

(f) Each Party to the WTO-AGP has an Appendix, which includes five Annexes defining the

coverage of that Party’s obligations. (g) A procurement is covered by the WTO-AGP if:

(i) its value is equal to or greater than the relevant threshold; (ii) if the type of requirement (e.g. plumbing supplies) is covered; (iii) if the entity for which the procurement is being done is covered, and (iv) if there is no specific exception applicable (e.g. shipbuilding) or invoked (e.g. national

security). All four criteria must be met in order for the procurement to be covered by the WTO-AGP. See below for how to determine if these criteria are met.

Supply Manual Page 11 of 23 Version 10-1 (2010-01-11)

Chapter 1 – Public Procurement

(h) To determine if a procurement is subject to the WTO-AGP, refer to the following:

(i) Determine the value of the requisition. See Article I; Article II, and Appendix I, Annex 1 of WTO-AGP. The thresholds in the WTO-AGP are presented in the Special Drawing Rights, the unit of account of the International Monetary Fund. The threshold is converted to Canadian dollars and published in a Treasury Board Contracting Policy Notice, which is reviewed every two years.

A procurement may be subject to WTO-AGP if the requisition value in Canadian dollars (including taxes) is as follows for the period January 1, 2010, to December 31, 2011: (A) For goods and services being procured by a federal government entity, including

departments, and some Commissions and Boards: $221,300. See Appendix I, Annex 1; and

(B) For construction for federal government entities: $8,500,000. See Appendix I,

Annex 1. (ii) Determine whether the client department is covered by determining if they are listed in

Canada's Annex 1. (iii) Determine the coverage by the client. See Appendix I, Annex 1. (iv) Determine the coverage by type of requirement:

(A) goods – See Appendix I, Annex 1, or (B) services – See Appendix I, Annex 1 and Annex 4. The WTO-AGP identifies

services coverage, according to the United Nations Central Product Classification system of classification. The conversion to PWGSC's classification system is provided in Annex 4.1. Only services listed are covered.

(C) construction services – See Appendix 1, Annex 1 and Annex 5.

(v) Determine if an exception should be invoked for the requirement or if the requirement is excluded

from the agreement. See Article XXIII and Appendix I. An example of this is set-asides. Article 1.(d) of Canada’s General Notes in Annex 5, provides for set-asides for small and minority businesses. Therefore, procurements that are set-aside (i.e. reserved) for either CLCA beneficiaries, or for aboriginal businesses under the Procurement Strategy for Aboriginal Business (PSAB), are exempt from WTO-AGP. For more information on when procurements can be reserved for CLCA beneficiaries, see 9.35. For more information on PSAB, see 9.40.

1.25.15 AIT (2010-01-11) (a) The Agreement on Internal Trade (AIT) is a comprehensive agreement on Canadian internal

trade in recognition of the need to reduce barriers to trade within Canada. (b) Chapter 5 of the AIT, Procurement, is intended to "establish a framework that will ensure equal

access to procurement for all Canadian suppliers in order to contribute to a reduction in purchasing costs and the development of a strong economy, in a context of transparency and efficiency”.

(c) In the following sections on determining AIT coverage, all references to an “Annex” are to the

annexes to Chapter Five, Procurement, of the AIT.

Supply Manual Page 12 of 23 Version 10-1 (2010-01-11)

Chapter 1 – Public Procurement

(d) If all of the following AIT criteria are met, the procurement is subject to AIT:

(i) Determine the value of the requisition. A procurement may be subject to AIT if the requisition value is:

(A) $25,000 or greater, in cases where the largest portion of the procurement is for

goods; (B) $100,000 or greater, in cases where the largest portion of the procurement is for

services, except those services excluded by Annex 502.1B; or (C) $100,000 or greater, in the case of construction.

(ii) Determine the coverage by client. Entities listed in Annex 502.1A, are subject to the AIT

procurement procedures. Entities listed in Annex 502.2A are excluded from Chapter Five of the AIT.

(iii) Determine the coverage by the type of requirement:

(A) all requirements for the purchase, lease or rental of goods are covered; (B) all services are covered except for those listed in Annex 502.1B; and (C) all construction procurement is covered.

(iv) Determine if an exception should be invoked for the requirement or if the requirement is

excluded from the agreement. See Article 507; Article 1802; Article 1803; and Article 1804.

(e) A procurement, which is subject to a CLCA or to the PSAB, may also be subject to the AIT.

Based on Article 1802 of the AIT, PSAB procedures, and contracting obligations contained in the CLCAs that appear inconsistent with the AIT may be applied to the procurement regardless of the apparent conflict. Essentially, the AIT considers any measures relating to aboriginal peoples to be consistent with the agreement.

1.25.16 Bilateral Free Trade Agreements (2010-01-11) (a) It is a government priority to expand Canada's trade by negotiating a number of bilateral trade

agreements in the coming years. The Canada-Chile Free Trade Agreement (CCFTA) Part Three bis - Government Procurement portion came into effect on September 5, 2008. The Canada-Peru Free Trade Agreement (CPFTA) came into effect on July 1, 2009. Chapter 14 of the CPFTA covers procurement.

(b) Neither the CCFTA nor the CPFTA have any reporting requirements. (c) In the text of the Supply Manual, we have generally referred only to NAFTA and the WTO-AGP.

This is because the procedural requirements of the other international trade agreements will be fulfilled if we comply with the procedural requirements of NAFTA and the WTO-AGP.

1.25.20 Comprehensive Land Claims Agreements (2010-01-11) (a) The federal government, represented by the Department of Indian and Northern Affairs, has

negotiated a number of Comprehensive Land Claims Agreements (CLCAs) with Aboriginal peoples. CLCAs are modern treaties that are based on the concept of continued Aboriginal rights and title to lands traditionally used and occupied by an Aboriginal group, which have not been dealt with by treaty or other legal means. There are currently 22 CLCAs in effect, with more expected in the future.

Supply Manual Page 13 of 23 Version 10-1 (2010-01-11)

Chapter 1 – Public Procurement

(b) The CLCAs are law. The CLCA obligations are legally binding because they are contained in

agreements signed by the Crown and backed by legislation. They have also been granted quasi-constitutional status by virtue of Section 35 of the Constitution Act (1982).

(c) The CLCAs contain specific legal obligations on the part of the government requiring it to take

measures that are spelled out in each agreement. Most CLCAs include measures dealing with procurement, and although the procurement measures are not always identical in the various agreements, they are all aimed at increasing the opportunities of the aboriginal group signing the agreement to compete successfully for contracts in their settlement areas.

(d) The procurement obligations of a specific CLCA apply to the portion of the procurement that

involves deliveries of goods and/or services to the settlement area of that CLCA. (e) Any contracting officer who receives a requisition with deliveries to a location that is subject to a

CLCA must read 9.35 for information on the CLCA obligations that have to be addressed during the procurement process.

1.25.25 Other Agreements (2010-01-11) Contracting officers should also be aware that a number of National Park Agreements and Department of National Defence Co-operation Agreements have been signed between individual departments and certain aboriginal groups. Reference to these agreements can be found in sections 7 to 10 of Treasury Board Secretariat Contracting Policy Notice 1997-8. 1.30 Policies, Directives and Guidelines 1.30.1 Treasury Board (2010-01-11) (a) The Treasury Board (TB) is a Cabinet committee of the Queen’s Privy Council of Canada. TB is

responsible for accountability and ethics, financial, personnel and administrative management, comptrollership, approving regulations and most orders-in-council.

(b) As the administrative arm of TB, the Treasury Board of Canada Secretariat (TBS) has a dual

mandate to support TB as a committee of ministers and to fulfill the statutory responsibilities of a central government agency. TBS provides advice and support to TB ministers in their role of ensuring value-for-money and provides oversight of the financial management functions in departments and agencies. TBS makes recommendations and provides advice to the TB on policies, directives, regulations, and program expenditure proposals with respect to the management of the government’s resources.

1.30.5 Treasury Board Contracting Policy (2010-01-11) (a) The Treasury Board Contracting Policy, established under s. 7(1) of the Financial Administration

Act (FAA), sets out the policy objective for government contracting as being that to acquire goods and services and to carry out construction in a manner that enhances access, competition and fairness and results in best value or, if appropriate, the optimal balance of overall benefits to Canada and the Canadian people. It provides that:

(b) Government contracting must be conducted in a manner that will:

(i) Stand the test of public scrutiny in matters of prudence and honesty, facilitate access,

Supply Manual Page 14 of 23 Version 10-1 (2010-01-11)

Chapter 1 – Public Procurement

encourage competition and reflect fairness in the spending of public funds. (ii) Ensure the pre-eminence of operational requirements. (iii) Support long-term industrial and regional development and other appropriate national

objectives, including aboriginal economic development. (iv) Comply with the government’s obligations under NAFTA, WTO-AGP and AIT.

1.30.10 Treasury Board Common Services Policy (2010-01-11) The objective of the Common Services Policy is to ensure that departments and agencies can acquire responsive, cost-effective support for their program delivery. It further provides that client service organizations will offer services to client departments in a manner that is most supportive of timely, effective and economical delivery of programs to the public. PWGSC is identified both as a provider of mandatory common services under Appendix E of the policy, and of optional common services under Appendix F of the policy. 1.30.15 Treasury Board Contracts Directive (2010-01-11) The TB Contracts Directive, issued pursuant to section 10 and paragraph 41(1)(a) of the FAA, sets basic contracting limits for contracting authorities, and provides specific contracting limits for specific ministers. The TB Contracts Directive sets out the limits above which departments must obtain TB approval. The application of the Directive to PWGSC is set out in Chapter 6. 1.30.20 Treasury Board Procurement Review Policy (2010-01-11) The objective of the Procurement Review Policy is to enhance the use of procurement in support of industrial and regional development and other national objectives in a manner that is fully consistent with the government's approved procurement objectives, and with Canada's international commitments within the General Agreement on Tariffs and Trade, NAFTA or other trade rights and obligations. See 3.70 for further details. 1.30.25 Code of Conduct for Procurement (2010-01-11) (a) The Code of Conduct for Procurement consolidates the government’s existing legal, regulatory

and policy requirements into a concise and transparent statement of the expectations that the government has of its employees and its suppliers. It ensures that public servants and suppliers are working from the same statement of expectations and commitments that clearly outline what is acceptable conduct when contracting with the government. The Code applies to all transactions covered by the Treasury Board Contracting Policy, and it requires that all those involved in government procurement abide by the legislation and policies outlined in the Code. It is a single point of reference to key responsibilities and obligations of public servants and suppliers.

(b) All PWGSC standard instructions to bidders include the following clause:

"To comply with the Code of Conduct for Procurement, bidders must respond to bid solicitations in an honest, fair and comprehensive manner, accurately reflect their capacity to satisfy the requirements stipulated in the bid solicitation and resulting contract, submit bids and enter into contracts only if they will fulfill all obligations of the

Supply Manual Page 15 of 23 Version 10-1 (2010-01-11)

Chapter 1 – Public Procurement

contract. To ensure fairness, openness and transparency in the bidding process, the following activities are prohibited: (a) payment of a contingency fee by any party to a contract to a person to whom the

Lobbyists Act, R.S. 1985, c. 44 (4th Supplement) applies; (b) corruption and collusion in the bidding process for contracts for the provision of goods

and services. By submitting a bid, the Bidder certifies that it meets the above requirements. Bidders further understand that the commission of certain offences may render them ineligible to be awarded a contract. By submitting a bid, the Bidder declares that it has never been convicted of an offence under Section 121 (Frauds on the government and Contractor subscribing to election fund), Section 124 (Selling or Purchasing Office), Section 380 (Fraud committed against Her Majesty) or Section 418 (Selling defective stores to Her Majesty) of the Criminal Code of Canada, or under paragraph 80(1)(d) (False entry, certificate or return) subsection 80(2) (Fraud against Her Majesty) or Section 154.01 (Fraud against Her Majesty) of the Financial Administration Act."

1.35 Challenge Process 1.35.1 Canadian International Trade Tribunal (2010-01-11) (a) The international trade agreements require that each party have an independent bid challenge

authority. The Canadian International Trade Tribunal (CITT) is the bid challenge authority for Canada for the North American Free Trade Agreement (NAFTA), World Trade Organization Agreement on Government Procurement (WTO-AGP) Canada-Chile Free Trade Agreement (CCFTA), Canada-Peru Free Trade Agreement (CPFTA) and Agreement on Internal Trade (AIT). A potential supplier may file a complaint concerning a procurement action to the CITT, on the grounds that any aspect of the procurement process relating to a requirement covered by these agreements is unfair or discriminatory.

(b) CITT is authorized to receive complaints pertaining to any aspect of the procurement process up

to and including contract award, and also to conduct inquiries and make determinations. In dealing with a complaint, CITT must determine whether the government institution responsible for the procurement under review has complied with the requirements of the trade agreements and such other procedural requirements, as prescribed in the Canadian International Trade Tribunal Procurement Inquiry Regulations.

(c) Contracting officers may contact the PWGSC CITT expert advisor, either by telephone at 819-

956-6411 or by facsimile at 819-956-1265 for assistance with respect to an actual or potential CITT action. Contracting officers should encourage suppliers to resolve issues directly with PWGSC before making a complaint to the CITT. Any matter brought to the attention of the contracting officer should be handled with a minimum of delay, while exercising due care and judgement. Experience demonstrates that there are often minor errors, omissions, or other inadvertent actions, which can quickly be clarified or corrected to the satisfaction of all concerned, thus removing the basis of many problems and concerns at the outset.

(d) All PWGSC actions in response to a complaint filed with the CITT are coordinated through the

PWGSC Acquisition Policy and Process Directorate (APPD). All requests, decisions, reports, letters, etc, to the CITT will be coordinated by APPD in consultation with Legal Services and the procurement organization. The procurement organization is responsible for preparing a chronology of events that will form the “backbone” of the Government Institution Report (GIR). Legal Services will produce the remaining sections, with input from the procurement organization,

Supply Manual Page 16 of 23 Version 10-1 (2010-01-11)

Chapter 1 – Public Procurement

other departmental specialists, and the client department, as required. The procurement organization’s management remains responsible to review and approve the GIR, before the sign-off.

(e) Contracting officers must ensure that complete documentation and records dealing with the

complaint, including a dated record of all communications with suppliers, are maintained in order to substantiate that the procurement process was carried out in accordance with the obligations of the trade agreements. Throughout the complaint process, PWGSC will keep the client informed of actions taken in response to the complaint, as well as any notices, decisions, information, etc. received from the CITT.

(f) The Assistant Deputy Minister, Acquisitions Branch, is the signing authority for requests for the

rescission of Postponement of Award Orders. (g) Details about the CITT, including its complaint and inquiry process, are in the publication

Procurement Review Process – A Descriptive Guide. The CITT Determinations and Notices of Motion and Orders can also be viewed on the CITT Web site.

1.35.5 Procurement Ombudsman (2010-01-11) (a) Sections 306 and 307 of the Federal Accountability Act (Fed AA) amend the Department of Public

Works and Government Services Act to provide for the appointment and mandate of a procurement ombudsman. The Procurement Ombudsman has four primary functions, which are to: (i) review the practices of departments for acquiring materiel and services to assess their

fairness, openness and transparency and make any appropriate recommendations to the relevant department for the improvement of those practices;

(ii) review any complaint respecting the award of a contract for the acquisition of goods

below the value of $25,000 and services below the value of $100,000; (iii) review any complaint respecting the administration of a contract for the acquisition of

materiel or services by a department, regardless of dollar value; (iv) ensure that an alternative dispute resolution process is provided, if both parties agree to

participate; (v) a possible fifth function is that the Federal Accountability Act also specifies that the

Procurement Ombudsman can also perform any other duty or function respecting the practices of departments for acquiring materiel and services that may be assigned to the Procurement Ombudsman by order of the Governor in Council or the Minister of Public Works and Government Services Canada.

(b) The Office of the Procurement Ombudsman (OPO) performs its duties and functions as set out in

the Procurement Ombudsman Regulations. (c) The role of coordinating supplier complaints to OPO as well as OPO reviews of those

procurement practices performed by Acquisitions Branch on behalf of clients has been assigned to the Acquisition Policy and Process Directorate, Policy, Risk, Integrity and Strategic Management Sector.

For assistance with respect to OPO related activities or potential complaints, contracting officers may contact the OPO Coordination Office, by telephone at 819-956-0912.

Supply Manual Page 17 of 23 Version 10-1 (2010-01-11)

Chapter 1 – Public Procurement

1.40 Departmental Delegation of Authority 1.40.1 Use of Judgement and Knowledge (2010-01-11) (a) The individual requirements of a particular procurement may suggest that a course of action other

than one set out in this Manual should be followed. Wherever there is no instruction on a particular subject, contracting officers must use their judgement and knowledge following the guiding principles at subsection 1.10.5.

(b) PWGSC may be required to defend publicly a contracting officer's actions, and the contracting

officer will be required to substantiate those actions. In the event that there arises a need to deviate from an established policy or procedure, the process to be followed can only be presented in general terms: (i) Any deviation must be identified in advance and must be carefully assessed and justified;

(including the reason for the deviation and the consequences of not deviating) for approval by the director general.

(ii) The director general must determine whether more senior officials must become involved in the decision to deviate.

1.40.5 Contract Approval and Signing Authorities (2010-01-11) Contracting officers are delegated authorities from the Minister of Public Works and Government Services Canada (PWGSC) to provide procurement and acquisitions-related services to departments and agencies. See Chapter 6 for further details. 1.45 Division of Responsibilities between PWGSC and Client Departments (2010-01-11) (a) The matrix at Annex 1.1 provides a generic division of anticipated types of responsibilities

between PWGSC and client departments. It forms the basis for an effective and efficient partnering relationship for those who are responsible for activities within the procurement process.

(b) The division of responsibilities, as shown in the matrix, represents a standard way of doing

business. However, as every procurement and associated contract differs, alternate divisions of roles and responsibilities can be established in advance by way of a written agreement between PWGSC and the client. Such client-specific or procurement-specific arrangements or matrices will take precedence over this generic matrix. Legislation, regulations and policy will also take precedence over this matrix. Annex 1.2 contains two client-specific agreements with the Department of National Defence.

(c) Two additional Memorandum of Understanding (MOU), are those for Canadian Commercial

Corporation and CORCAN. Details for these special procurement processes are described in Chapter 9.

(d) The Client Engagement Sector (CES) maintains copies of separate MOU signed for individual

business requirements, which may be obtained by contacting this sector. (e) All Major Crown Projects (MCPs) have MOU signed between the project and the contracting

authorities to delineate project management responsibilities between the two departments. Copies of these MOU may also be obtained from the CES or appropriate MCP office.

Supply Manual Page 18 of 23 Version 10-1 (2010-01-11)

Chapter 1 – Public Procurement

1.50 Fairness Monitors (2010-01-11) (a) PWGSC's fairness monitoring process provides independent assurance that specific PWGSC

procurements are conducted in a fair, open and transparent manner. (b) A fairness monitor is an independent third party whose role is to observe all or part of a

procurement process, to provide related feedback on fairness issues to PWGSC’s Department Oversight Branch, and to provide an unbiased and impartial opinion on the fairness of the observed procurement process.

(c) The involvement of a fairness monitor in a procurement process in no way diminishes or absolves

any PWGSC official of their accountabilities or responsibilities. (See 3.135 for further details.) 1.55 Commodity Management (2010-01-11) Commodity management is defined by a framework of governance and processes used to review, plan, acquire and control the total life cycle activities of a distinct group of goods and/or services. Use of the commodity management framework results in the award of Pre-competed Procurement Instrument(s), which should meet operational requirements of government departments while providing the optimal cost of ownership and disposal and achieving the best value for Canada. This is in keeping with Canada’s commitment to deliver services smarter, faster and at a reduced cost. 1.55.1 Overview (2010-01-11) Commodity management provides the following: (a) A government-wide approach to managing commonly used goods and services that meet the

operational requirements of government client departments and support their program and service objectives.

(b) An effective "best practices" combination of:

(i) market and demand/spend analysis, (ii) total life cycle and risk analysis, (iii) governance and consultation, (iv) strategic sourcing and procurement to achieve the best value and reduce total cost to

government through:

(A) volume optimization, (B) purchase specification standardization and improvement, (C) supply base optimization, (D) purchasing process improvements and technology integration, (E) demand, maintenance and spares management, (F) best value evaluation,

(v) change management and training to improve client purchasing process management, (vi) contract management including performance measurement and tracking.

Supply Manual Page 19 of 23 Version 10-1 (2010-01-11)

Chapter 1 – Public Procurement

(c) Attention to these elements is done in the context of current procurement values and ethics of transparency, equity and openness as well as government socio-economic, sustainable development and environmental "green" improvement objective.

1.55.5 Goals and Benefits of Commodity Management (2010-01-11) (a) Some of the goals of commodity management are:

(i) to establish performance measures, to assess what, how and at what cost the government procures goods and services, thereby facilitating a successful continuous improvement program;

(ii) to identify risk factors to government operations and mitigation strategies to manage

those risks (e.g. strengths, weaknesses, opportunities and threats); (iii) to collaborate with colleague departments through inter-departmental commodity teams,

resulting in the commitment to use government-wide procurement instruments, and (iv) to achieve best value for Canada, including lowest overall cost and ability to support

socio-economic objectives, sustainable development and aboriginal objectives. (b) Some of the benefits of commodity management are:

(i) improved transparency, accountability and responsibility for procurement across the federal government;

(ii) a simplified process that ensures efficient delivery of products and service; (iii) ability to better understand, define and meet operational requirements for a full range of

government programs through close collaboration with client departments; (iv) stronger relationships with the supplier community and the use of procurement

processes, leading to the selection of top-performing contractors, and high-quality best value goods/services, and

(v) more effective and pro-active contract management strategies and implementation plans.

1.55.10 Pre-competed Procurement Instruments (2010-01-11) (a) Pre-competed Procurement Instruments (PCPIs), also known as Consolidated Procurements

Instruments, can result in, but are not limited to, standing offers, supply arrangements, task authorization contracts, or government-wide contracts resulting from the commodity management processes and are put in place between Canada and one or more suppliers for the provision of a specific commodity over a specified period of time.

(b) Departments and agencies should always consider use of these procurement instruments as the

first method of supply to buy goods and services. There are both mandatory and non-mandatory PCPIs. In 2005, Treasury Board distributed a letter to departments and agencies for mandatory use of standing offers and supply arrangements for 10 commodity categories. Further details on the different methods of supply can be found in Chapter 3 and Chapter 4.

1.60 Environmental Considerations

Supply Manual Page 20 of 23 Version 10-1 (2010-01-11)

Chapter 1 – Public Procurement

1.60.1 Green Procurement Policy (2010-01-11) (a) The Policy on Green Procurement was introduced through the TB Contracting Policy Notice

2006-1, and came into effect on April 1, 2006. The objective of the policy is to advance the protection of the environment and to support sustainable development by integrating environmental performance considerations into the procurement decision-making process.

(b) The Policy is set within the context of “value for money” and a life cycle management approach.

The Policy requires that departments integrate environmental performance considerations, as a key factor in procurement decisions that occur throughout the life cycle of assets and acquired services. Departments are also required to establish green procurement targets and monitor and report on their green procurement performance through the annual Report on Plans and Priorities and the Departmental Performance Report; or, if applicable, in the Sustainable Development Section of the Departmental Performance Report. This Policy applies to all departments and agencies.

(c) The Policy is described in further detail in 2.20 and 3.65. (d) The implementation of the Policy in Acquisitions Branch is managed by the Green Procurement

Team, within the Procurement Renewal Office (PRO). Contracting officers can contact PRO by e-mail at: GreenProcurement.AchatsEcologiques@tpsgc-pwgsc.gc.ca.

(e) Contracting officers are required to:

(i) take the on-line course Green Procurement (C215E) available through Campusdirect, Canada School of Public Service;

(ii) incorporate environmental considerations into the commodity management process for all

procurement instruments, if applicable; (iii) advise all clients of the Green Procurement Policy and support them, using the

information, tools and guidance available, to meet both the client needs and policy requirements; and

(iv) record in procurement, in contract approval and in reporting documents, that

environmentally preferable goods or services have been considered. 1.60.5 Office of Greening Government Operations (2010-01-11) The Office of Greening Government Operations (OGGO) was created in April 2005 within Public Works and Government Services Canada (PWGSC). OGGO's mandate is to accelerate the greening of the government's operations by working with other federal departments, particularly Treasury Board Secretariat and Environment Canada. OGGO works in conjunction with the Green Procurement Team in Acquisitions Branch (AB), to establish procedures to enhance green procurement within AB and throughout the government. 1.65 Policy on Government Security (2010-01-11) (a) The objective of the Policy on Government Security, as it pertains to contracting, is to ensure that

sensitive information and assets of the government are properly protected when entrusted to industry. The role of PWGSC in this process is to ensure that individuals and organizations that will have access to or will possess sensitive information and assets have first received the

Supply Manual Page 21 of 23 Version 10-1 (2010-01-11)

Chapter 1 – Public Procurement

necessary security screening or clearance through the Canadian Industrial Security Directorate (CISD), PWGSC.

(b) The project authority and the departmental security officer are responsible for ensuring that their

department adheres to the Policy and that provisions are made for any suppliers used to provide goods or services to ensure that they also meet the same requirements. CISD is responsible for the following services: (i) the provision of the appropriate security clauses to be inserted into solicitation and

contractual documents, as required, when a Security Requirements Check List (SRCL) has been used to identify the needs;

(ii) provide appropriate security clearance to any companies that are awarded sensitive

contracts in order to meet the security requirements of the contract and ensure that they maintain their security clearance during the period of the contract;

(iii) ensure that inspections are undertaken and regularly renewed at the company facilities if

required; and (iv) carry out the security screening of the contractor’s personnel as required by the

provisions of the contract. Note that contracts may still have a security requirement, even though the contractual documents themselves are not designated as PROTECTED/CLASSIFIED.

(c) Upon request, CISD also handles the security requirements of contracts awarded by other

government departments under their own contracting authority; (d) The Policy is issued by Treasury Board under the authority derived from government decision

and section 7 of the Financial Administration Act. (e) Each federal department is responsible for protecting sensitive information and assets under its

control not only in its own operations but also throughout the bidding, negotiating, awarding, carrying out, and terminating of any contracts it manages. In contracting, the SRCL is used by PWGSC and client departments to define their security requirements in a contract. See 2.50, 3.55 and 7.55 for more information on security.

1.70 Privacy in Contracting (2010-01-11) (a) Effective April 1, 2008, TB released a Policy on Privacy Protection. Canadians value their privacy

and the protection of their personal information. They expect government institutions to respect the spirit and requirements of the Privacy Act. This policy is to be read in conjunction with the Policy Framework for Information and Technology and the Policy on Access to Information. Additional mandatory privacy-related requirements are set out in the Privacy Impact Assessment Policy.

(b) This policy applies to government institutions as defined in section 3 of the Privacy Act (the Act),

including parent Crown corporations and any wholly owned subsidiary of these corporations. It does not apply to the Bank of Canada. Also, this policy does not apply to information excluded under the Act.

(c) Canada is committed to protecting the privacy of individuals with respect to the personal

information that is under the control of government institutions. The government recognizes that this protection is an essential element in maintaining public trust in government. The Supreme Court of Canada has characterized the Act as "quasi-constitutional" because of the role privacy

Supply Manual Page 22 of 23 Version 10-1 (2010-01-11)

Chapter 1 – Public Procurement

plays in the preservation of a free and democratic society. (d) Privacy protection in this sense means limiting government interventions into the private lives of

Canadians to lawful and necessary purposes. It also means that government must ensure a high standard of care for personal information under the control of government institutions. The government also has to respond to requests for access to personal information. Sound information management plays a key role in facilitating the exercise of access rights under the Act and ensuring privacy protection.

(e) Through government contracts, contracting authorities, clients and other departmental

organizations are privy to individual and company private information. It is imperative that precautions are taken in contracting to safeguard this information. Some examples include such things as individual resumes that contain very personal information and secondly company private information that in the wrong hands may provide competing companies technical advantages, trade secrets or financial information.

(f) PWGSC must ensure safeguards are put in place to protect personal and company private

information by ensuring information is stored securely and that information is handled through limited distribution and provided only as necessary. Under no circumstances should a company's private information or an individual’s personal information be shared with competitors or placed in the public domain without the written authorization of the originator of the information.

(g) The guidance document, “Taking Privacy Into Account Before Making Contacting Decisions”

should be reviewed by contracting officers whenever personal information about Canadians is to be handled or accessed by private sector suppliers or agencies under contract.

Supply Manual Page 23 of 23 Version 10-1 (2010-01-11)

Annex 1.1 - Matrix of Responsibilities between PWGSC and Client Departments for the Procurement of Goods and Services (Generic)

Annex 1.1: Matrix of Responsibilities between PWGSC and Client Departments for the Procurement of Goods and Services (Generic)

(2010-01-11) Introduction 1. The following matrix provides a generic division of anticipated types of responsibilities between

Public Works and Government Services Canada (PWGSC) and client departments. It forms the basis for an effective and efficient partnering relationship for those who are responsible for activities within the contracting process.

2. The division of responsibilities as shown in the matrix represents a standard way of doing

business. However, as every procurement and associated contract differs, alternate divisions of roles and responsibilities can be established in advance by way of a written agreement between PWGSC and the client department. Such client department or procurement-specific arrangements or matrices will take precedence over this generic matrix. Legislation, regulations and policy will also take precedence over this matrix.

3. Regular communication between PWGSC and the client department is considered essential to

success in all activities, even for those activities where no contributing role is indicated within the matrix.

Note: The matrix does not represent a delegation of procurement authority by the Minister of PWGSC,

and it does not remove from contracting officers their overall contracting responsibilities.

Supply Manual Page 1 of 4 Version 10-1 (2010-01-11)

Annex 1.1 - Matrix of Responsibilities between PWGSC and Client Departments for the Procurement of Goods and Services (Generic)

L: Lead C: Contributing S: Shared

Generic Matrix of Responsibilities between PWGSC and Client Departments for the Procurement of Goods and Services

No. Activities Responsibility

Client PWGSC

1 Requirements Definition 1.1 Define client’s operational requirements:

1.1.1 Define the essential characteristics (i.e., Statement of Requirements). L C

1.1.2 Consider all feasible solutions to meet the client’s operational needs. L C

1.1.3 Develop the preliminary project cost estimates and schedules. L

1.1.4 Conduct the cost benefit analysis of alternatives, including the life cycle costing analysis.

L C

1.1.5 Determine the total resource requirements and implications; for example, training, priority of allocation amongst operational needs and security requirements.

L

1.1.6 Obtain approval-in-principle to continue with the project. L

1.1.7 Develop the Total Project Plan, including substantive cost estimates and schedules, special project management needs, project phasing, maintenance support requirements, etc.

L

1.2 Define client’s technical requirements:

1.2.1 Develop the Statement of Work (SOW) and/or performance specifications or standards, as appropriate, for the goods/services required in order to meet the operational needs.

L

1.2.2 Define the technical requirements for quality assurance, acceptance, warranty, training, documentation, packaging, transportation, initial provisioning, etc.

L

1.3 Raise the requisition (form PWGSC-TPSGC 9200):

1.3.1 Prepare the funded requisition for goods/services to be forwarded to PWGSC. Include the Security Requirements Checklist (SRCL), if applicable.

L C

2 PWGSC Procurement Plan 2.1 Assess potential sources of supply (Canadian vs. offshore, etc.). C L

2.2 Identify applicable major contracting policy issues/ considerations, which must be resolved to accomplish the procurement.

C L

2.3 Examine potential problems in relation to patents, licencing, royalties and technology transfer.

C L

2.4 Develop Procurement Plan including:

2.4.1 Delivery schedule and acceptance requirement L C

2.4.2 Contracting approach (including sourcing strategy) C L

2.4.3 Target cost and cash flow plan C L

Supply Manual Page 2 of 4 Version 10-1 (2010-01-11)

Annex 1.1 - Matrix of Responsibilities between PWGSC and Client Departments for the Procurement of Goods and Services (Generic)

Generic Matrix of Responsibilities between PWGSC and Client Departments for the Procurement of Goods and Services

No. Activities Responsibility

Client PWGSC

2.4.4 Statement of appropriate quality and inspection system standards and qualification approvals

L C

2.4.5 Communications strategy C L

2.4.6 Contractual risk management C L

2.4.7 Evaluation methodology and selection method C L

2.4.8 Industrial Benefits (IBs), where appropriate C L

2.4.9 Interdepartmental and international agreements related to procurement plan

L C

2.5 Obtain the Procurement Plan approval. L

3 Contracting Process 3.1 Prepare the translation of procurement documents (the client is

responsible for the translation of the SOW and/or performance specifications or standards and technical evaluation criteria)

C L

3.2 Prepare and distribute/post procurement notice on GETS (Government Electronic Tendering Service) and the bid solicitation package.

L

3.3 Prepare and distribute technical data packages, as required. L C

3.4 Receipt of the bids on bid closing. L

3.5 Evaluate the technical elements of bids. L C

3.6 Evaluate time, cost and other contractual elements of the bids. L

3.7 Prepare the consolidated evaluation and the selection of the bidder. C L

3.8 Negotiate the contract, where applicable. C L

3.9 Obtain the contract approval. C L

3.10 Prepare and issue the contract. L

3.11 Debrief the unsuccessful bidders. C L

4 Contract Administration 4.1 General:

4.1.1 Monitor work of the contractor; and receive the contract deliverables. L C

4.1.2 Monitor the cash flow. L C

4.1.3 Report any problems to the contracting authority. L

4.1.4 Resolve any contractual problems. C L

4.1.5 Monitor compliance with the terms and conditions of the contract. S S

4.1.6 Determine that goods and services received are in accordance with the requirement.

L C

4.1.7 Determine that goods and services received are in accordance with the contract.

C L

4.1.8 Process the claims for payment. L C

Supply Manual Page 3 of 4 Version 10-1 (2010-01-11)

Annex 1.1 - Matrix of Responsibilities between PWGSC and Client Departments for the Procurement of Goods and Services (Generic)

Generic Matrix of Responsibilities between PWGSC and Client Departments for the Procurement of Goods and Services

No. Activities Responsibility

Client PWGSC

4.2 Contract Amendments:

4.2.1 Identify the need for additional work or revisions; confirm the funding. L

4.2.2 Confirm that the contract amendment is the appropriate vehicle. L

4.2.3 Negotiate the contract amendment. C L

4.2.4 Obtain an approval for amendment/change order. L

4.2.5 Prepare and issue the contract amendment. L

5 Contract Close-out 5.1 Settle the outstanding claims for payment. C L

5.2 Issue the contract closing amendment. L

5.3 Finalize the disposition of Crown assets. L

Supply Manual Page 4 of 4 Version 10-1 (2010-01-11)

Annex 1.2 - Specific Division of Responsibilities Agreements

Annex 1.2: Specific Division of Responsibilities Agreements (2010-01-11) Section A: Division of Responsibilities Between PWGSC and DND for the Acquisition of

Goods and Services 1. This matrix is an assigned division of responsibility, agreed by the Ministers of the Department of

National Defence (DND) and Public Works and Government Services Canada (PWGSC). 1. It forms the foundation for an efficient and effective partnering relationship for those who are responsible for activities within the procurement process.

2. This matrix is to be used for all DND goods and services procured by PWGSC. An “X” represents

the assignment of each activity to a "Lead" and "Participatory" department. An “M” represents the norm for MCPs and like projects.

3. The assignment of each activity to a “Lead” and “Participatory department” as indicated in this

table is to be considered the normal way of doing business. However, as every procurement and associated contract differs with respect to complexity, risk, value and availability of skilled resources, deviations can be agreed jointly in advance as long as justifications are formally filed in an agreement between the two Departments, which consider reasons why the norm cannot be applicable in specific areas.

4. In all activities, it is incumbent upon each "Lead" to always consider as prudent, continuous

communication with the procurement representatives of the other department, even if this "Lead" is identified as the sole "X". Finally, it is important to note that this matrix of assigned responsibilities is not necessarily sequential.

5. Effective communications between DND and PWGSC must be worked out on a project-by-project

basis. The matrix below sets out anticipated DND internal responsibilities. For any individual project, DND requests that communications be through the procurement functional contact, the applicable DND Procurement Manager/Officer, unless otherwise discussed and agreed to with that procurement functional contact.

1 The matrix does not represent delegation of procurement authority by the Minister of PWGSC, and does not affect the

responsibility of the contracting officer as defined in Treasury Board Contracting Policy.

Legislation, regulations and policy will take precedence over this matrix in the case of any ambiguity.

Supply Manual Page 1 of 12 Version 10-1 (2010-01-11)

Annex 1.2 - Specific Division of Responsibilities Agreements

DND/PWGSC Responsibility Matrix

CODE DETAIL RESPONSIBILITY

PO (Procurement Officer) PM (Project Manager) TA (Technical Authority- includes LCMM) PD (Project Director) M (denotes for MCP or MCP-like projects where role is defined in the PMP) PM/TA - usually the PM for Capital/NP project procurement and the TA for in-service procurement PW

GSC

DN

D

PWG

SC N

orm

ally

Par

ticip

ates

DN

D N

orm

ally

Par

ticip

ates

1 DEFINE DND OPERATIONAL REQUIREMENTS

1.1 Define essential characteristics - Statement of Capability Deficiency or Statement of Requirement

PD

1.2 Seek procurement input/ advice from DND procurement authority

PO

1.3 Delineate all feasible solutions, within government policy, to meet operational needs (ROM costs)

PD M

1.4 Identify Total ROM project cost and schedule estimates for SSID

PO

1.5 Obtain operational approval to continue with project (SSID) PD

1.6 Preparation of cost benefit analysis including life cycle costing analysis of alternatives and uncertainties

PD

1.7 Determine requirement for cooperation & involvement of other Departments/Countries (excluding 3.5.9)

PD

1.8 Determine national and international obligations applicable to operational need

PD

1.9 Determine requirement for phased cycles for project implementation

PM X

1.10 Determine maintenance and support requirements PM/TA X

1.11 Determine total resource requirement for the project PM X

1.12 Identify Total Project cost (substantive) and schedule estimates

1.12.1 Obtain and collate cost and schedule information PD/PO X

1.12.2 Develop Total Project cost and schedule estimates PO

1.13 Initiate a PMP (formerly PIP) for project (Responsibility Assignment Matrix)

PM X

1.14 Develop DND's Procurement Master Plan PO

1.15 Obtain approval (SRB and PRC/SPAC) PM X

Supply Manual Page 2 of 12 Version 10-1 (2010-01-11)

Annex 1.2 - Specific Division of Responsibilities Agreements

CODE DETAIL RESPONSIBILITY

1.16 Prepare project submission and obtain approval (PMB, SS PPA and SS EPA, and Project Briefs)

PD/PM& PO

1.17 Prepare Memorandum to Cabinet (for MCP's only) M M

1.18 Execute DND's Procurement Master Plan PO

2 DEFINE TECHNICAL REQUIREMENTS AND RAISE PROCUREMENT INSTRUMENT

2.1 Establish team (formal or informal as appropriate) for an individual procurement instrument, including required stakeholder

PO X

2.2 Identify appropriate DND authorities in the PI (e.g. requisition, technical, QA)

PO

2.3 Statement of Work (SOW)

2.3.1 Define SOW and/or Performance Specifications in support of the operational need

PM/TA

2.3.2 Identify Earned Value requirements (for MCP's or MCP-like projects)

M

2.3.3 Review and Refine SOW PO X

2.4 Define Government Furnished Resources (e.g. tools, test equipment)

PM/TA

2.5 Define Quality Assurance and Acceptance requirements PM/TA

2.6 Define other technical requirements (e.g. warranty, training, documentation, Initial Provisioning, etc.)

PM/TA

2.7 Define Technical Evaluation Criteria PM/TA

2.8 Prepare Procurement Instrument and Associated Documents

2.8.1 Validate cost estimate and secure funding for this PI PO

2.8.2 Develop Technical Bid Evaluation Plan PM/TA X

2.8.3 Establish Technical Bid Evaluation Team PM/TA X

2.8.4 Develop proposed procurement schedule (activities and timeline) for this PI

PM/TA

2.8.5 Identify and mitigate DND risks associated with this PI PO

2.8.6 Develop Content of Procurement Instrument PO

2.8.7 Review Draft Procurement Instrument PO X

2.9 Approve Procurement Instrument (Requisition) PO

3 DEVELOP PWGSC PROCUREMENT PLAN (*based on DND Procurement Instrument)

3.1 Assess the industrial capability * X

3.2 Identify applicable major contracting policy which must be considered to accomplish procurement *

X

Supply Manual Page 3 of 12 Version 10-1 (2010-01-11)

Annex 1.2 - Specific Division of Responsibilities Agreements

CODE DETAIL RESPONSIBILITY

3.3 Review applicable CITT cases and Federal Court Rulings of Procurement

X PO

3.4 Examine potential problems in relation to patents, licensing, royalties, and technology transfer

X PM/TA

3.5 Develop Procurement Plan including:

3.5.1 Delivery schedule and acceptance requirement PO X

3.5.2 Contracting approach * X

3.5.3 Target cost and cash flow plan PO

3.5.4 Stating of appropriate quality control and inspection system standards and qualification approvals

PM/TA

3.5.5 Communications Strategy (e.g. press release, etc.) X PM/TA

3.5.6 Risk Management * X

3.5.7 Evaluation Methodology * X

3.5.8 Industrial and Regional Benefits X PM/TA

3.5.9 Interdepartmental and international agreements related to Procurement Plan (excluding DND/PWGSC)

PM/TA X

3.6 Obtain approval of procurement plan X

4 CONTRACTING PROCESS

4.1 Review requisition or procurement instrument X PO

4.2 Review SOW and Technical Evaluation Criteria for its contractibility

X PO

4.3 Prepare Solicitation Bid Package

4.3.1 Identify Applicable Terms and Conditions (including Basis of Payment)

X PO

4.3.2 Develop Contractual Evaluation Criteria (time, finance incl. transition, contractual & consolidated evaluation plan)

X PO

4.3.3 State appropriate authorities (e.g. requisition, technical, contract, quality, etc., as applicable)

X

4.4 Dispatch "Solicitation - Bid" (RFP/ITT) documentation to Industry and DND

X

4.5 Distribute technical data packages to suppliers as required and as applicable

PM/TA X

4.6 If competitive (RFP, ITT or equivalent process), Evaluate Bids and Recommend Supplier

4.6.1 Carry out Technical evaluation (SOW and associated t's & c's) in accordance with the Evaluation Plan

PM/TA X

4.6.2 Carry out Contractual evaluation (including contract t’s & c’s) in accordance with the Evaluation Plan

X M

4.6.3 Consolidate evaluation and recommend supplier X PO

Supply Manual Page 4 of 12 Version 10-1 (2010-01-11)

Annex 1.2 - Specific Division of Responsibilities Agreements

CODE DETAIL RESPONSIBILITY

4.7 If sole-source, Negotiate contract X PO&PM/TA

4.8 Review draft contract documentation PO

4.9 Obtain TB or Departmental contract approval, as required X M

5 CONTRACT ADMINISTRATION

5.1 Initiate Contract Administration

5.1.1 Implement Tools and Processes for Administration X PO

5.1.2 Kick-Off Meetings with Parties, Stakeholders X PO&PM/TA

5.2 Provide Government Furnished Resources(GFR) in Support of Contract Work

PO X

5.3 Ascertain Contract Performance

5.3.1 Technical and Quality of the Deliverables PM/TA

5.3.2 Contractor's Engineering, Production and Quality Systems PM/TA

5.3.3 Contractor's Financial and Management Systems X

5.3.4 Contract Cash Phasing/ Cash Flow

5.3.4.1 Cash Flow Actual versus Contracted Cash Flow X M

5.3.4.2 Cash Flow Actual versus DND Planned Cash Flow for Financial Forecast

PO

5.3.4.3 Earned Value (monitor progress of work versus planned work and associated cost) for MCP's

X M

5.3.5 Delivery

5.3.5.1 Monitor materiel and services delivery date PO

5.3.5.2 Acceptance Trials and Tests PM/TA

5.3.5.3 Schedule compliance X M

5.3.6 Progress Review Meetings

5.3.6.1 Requirements/Technical Work Group Meetings PM/TA X

5.3.6.2 Contract Progress Review Meetings with Contractor X PO&PM/TA

5.4 Apply Contract Provisions and Processes

5.4.1 Interpretation and Notifications X

5.4.2 Change Control

5.4.2.1 Technical (Engineering Change Notices/Proposals) PM/TA

5.4.2.2 Contract Amendments X PO

Supply Manual Page 5 of 12 Version 10-1 (2010-01-11)

Annex 1.2 - Specific Division of Responsibilities Agreements

CODE DETAIL RESPONSIBILITY

5.4.3 Warranty Provisions

5.4.3.1 Invoke Warranty PM/TA

5.4.3.2 Enforce Warranty X

5.4.4 Contractual Issues

5.4.4.1 Identify contractual issues X PO

5.4.4.2 Enforce contractual issues X

5.4.5 Accept Contract Deliverables PM/TA

5.4.6 Certify and Process Payments X PO

5.5 Close Out Contract

5.5.1 Crown Asset Disposition PO X

5.5.2 Final Contract Audit X

5.5.3 Final Payment and Amendment X PO

List of Acronyms: CITT Canadian International Trade Tribunal DND Department of National Defence GFR Government Furnished Resources ITT Invitation to Tender LCMM Life Cycle Material Manager MCP Major Crown Project NP National Procurement PI Procurement Instrument PIP Project Implementation Plan PMB Program Management Board PMP Project Management Plan PRC Procurement Review Committee PWGSC Public Works and Government Services Canada RFP Request for Proposal ROM Rough Order of Magnitude SOW Statement of Work SPAC Senior Project Advisory Committee SRB Senior Review Board SS(ID) Synopsis Sheet (Identification) SS(EPA) Synopsis Sheet (Effective Project Approval) SS(PPA) Synopsis Sheet (Preliminary Project Assessment) TB Treasury Board

Supply Manual Page 6 of 12 Version 10-1 (2010-01-11)

Annex 1.2 - Specific Division of Responsibilities Agreements

Section B: Division of Responsibilities between PWGSC and DND for the Quality Assurance of

Materiel and Services 1. Public Works and Government Services Canada (PWGSC) and the Department of National

Defence (DND) agreed in principle to a division of responsibilities between the two departments for the quality assurance of materiel and services acquired on behalf of DND. This agreement will be amended, if and when required, only with the consent of both departments.

2. This agreement identifies the division of responsibilities as agreed by each department for the

quality assurance of materiel and services, as it applies to military specifications, acquired on behalf of DND.

It does not deal with materiel and services to non-military specifications (see Section A) or with the division of responsibilities for materiel and services managed by an interdepartmental project management office, which are the subject of a separate agreement. Materiel and services to military specifications: Includes all materiel and services, including repair and overhaul, as well as research and development for which a military or other DND specification or requirement is included in procurement documentation. Also included in this category are materiel and services which are not covered by DND or military specifications but which are of sufficiently significant concern to DND as to require the allocation of responsibilities annotated under this heading.

3. PWGSC shall also participate with DND in identifying the application and use of quality assurance techniques at the earliest possible stage in the product life cycle and the development and implementation of cost-effective quality assurance support programs.

4. DND shall be solely responsible for the designation of materiel and services as "Military" or "Non-

Military" in technical and procurement documentation. 5. The responsibilities identified for a Sub-activity does not mean exclusive involvement by one

department. Close participation and coordination by both departments is essential throughout the various phases of the procurement program.

Where participation by the other department is indicated, the responsible department is expected to initiate the consultation. However, it does not preclude either department from requesting participation in, or consultation on, any given sub-activity relative to an established program.

Materiel and Services for Military Specifications Sub-activity Description A: Definition of Requirements - DND assigned overall responsibility

Quality assurance services which support achievement of the quality of design, its practicality for manufacture and the means by which conformance will be demonstrated. The tasks involve participation in:

A.1 The evaluation with DND of technical data for completeness, clarity, freedom from

irrational or excessive tolerances, contradictions, over stipulation of quality requirements, ability to meet interface requirement, etc.

A.2 Review of design to determine completeness of definition, the methods for demonstrating

conformance and analysis of system effectiveness of such major elements as:

Supply Manual Page 7 of 12 Version 10-1 (2010-01-11)

Annex 1.2 - Specific Division of Responsibilities Agreements

a. Safety b. Maintainability c. Reliability d. Performance e. Human Engineering f. Interchangeability g. Configuration Control.

A.3 Establishment and definition of test methods with respect to practicality, suitability and

cost as related to: a. Qualification Approval b. Design Approval Model (Prototype) c. Production Unit Conformance d. Acceptance Trials. Responsibility for Sub-activity - DND Normally Participates in Sub-activity - PWGSC

A.4 Applicability of technical data to current programs of maintenance, repair and overhaul and reprovisioning. Responsibility for Sub-activity - DND

A.5 Selection of parts, components or process, with avoidance of those which are difficult to control, subject to excessive variation or high failure rate, etc.

Responsibility for Sub-activity - DND Normally Participates in Sub-activity - PWGSC

A.6 Classification of quality characteristics with respect to their importance to design

objectives.

A.7 Designation of quality control and inspection system standards.

A.8 Definition of preferred warranty requirements. A.9 Establishment of requirements for technical reports from suppliers.

Responsibility for Sub-activity - DND

B: Quality Assurance Support Programs - DND assigned overall responsibility

Develop, support and maintain programs conducive to efficient procurement and quality assurance which includes such tasks as:

B.1 Development as appropriate of contractor quality system standards/specifications for

contract use.

B.2 Maintenance of qualified/approved product programs.

B.3 Evaluation of the acceptability of suppliers' quality control/inspection systems, commercial test, laboratory and calibration facilities.

Responsibility for Sub-activity - DND

Supply Manual Page 8 of 12 Version 10-1 (2010-01-11)

Annex 1.2 - Specific Division of Responsibilities Agreements

Normally Participates in Sub-activity - PWGSC B.4 Selection of suppliers with acceptable quality control/inspection systems, commercial

test, laboratory and calibration facilities.

Responsibility for Sub-activity - PWGSC Normally Participates in Sub-activity - DND

C: Requisitioning - DND assigned overall responsibility

Quality assurance tasks associated with requisitioning (contract demands, local purchase orders).

C.1 Review of the requisition with DND for applicability of the technical data.

Responsibility for Sub-activity - DND Normally Participates in Sub-activity - PWGSC

C.2 Development of Quality Assurance Plan.

C.3 Assurance that workmanship standards are established.

C.4 Determine which contractor quality control/inspection requirements are applicable.

C.5 a. Designation of the Quality Assurance Authority, and

b. Designation of government quality assurance at source or inspection at

destination.

Responsibility for Sub-activity - DND

C.6 Develop and include special clauses of significance to the assurance of quality.

Responsibility for Sub-activity - DND Normally Participates in Sub-activity - PWGSC

D: Preparation of Bid Solicitation - PWGSC assigned overall responsibility

Quality assurance tasks associated with the preparation of bid solicitations.

D.1 Review of quality requirements on the requisition for completeness and clarity.

Responsibility for Sub-activity - DND

D.2 Establishment of criteria for the evaluation of bids/proposals for compliance with quality requirements.

D.3 Review of past performance of potential bidders in respect of their quality history, to

determine potential suppliers.

D.4 Explanation of quality requirements at the prebidders' conference.

Responsibility for Sub-activity - PWGSC Normally Participates in Sub-activity - DND

Supply Manual Page 9 of 12 Version 10-1 (2010-01-11)

Annex 1.2 - Specific Division of Responsibilities Agreements

E: Bid Evaluation and Supplier Selection - PWGSC assigned overall responsibility

Quality assurance tasks associated with evaluation and supplier selection in relation to:

E.1 Evaluation of bidders' quality capabilities based upon their quality history and pre-award survey of their quality control/inspection systems.

E.2 Evaluation with DND of the quality/quality assurance implications of selecting alternative

products.

E.3 Trade-off analysis of performance cost and schedule.

Responsibility for Sub-activity - DND Normally Participates in Sub-activity - PWGSC

F: Contract Preparation and Final Award - PWGSC assigned overall responsibility

Quality assurance tasks associated with contract preparation and final award in relation to:

F.1 Resolution of negotiations with contractor on quality-cost matter not finalized at the bid evaluation stages and review of contract quality requirements to ensure mutual understanding

F.2 Verification with DND that the contract includes the required quality system requirements.

Responsibility for Sub-activity - PWGSC Normally Participates in Sub-activity - DND

G. Contract Administration - PWGSC assigned overall responsibility

Performance of the following activities in support of PWGSC contract administration throughout the duration of the contract, as applicable: G.1 Quality Assurance Verification of the continuing effectiveness of the contractor's methods

for controlling his product quality. These elements are:

a. Management control system review b. Planning c. Quality Assurance documentation d. Corrective action e. Design, development, control and engineering features f. Documentation control and change g. Control of inspection, measuring and test equipment h. Control of contractor purchased materiel i. Manufacturing and process control j. Purchased and/or supplied materiel standards and specifications k. In-process and final inspection and test l. Sampling procedures m. Control of non-conforming materiel n. Inspection status o. Handling, storage and packing.

G.2 a. Verification of the conformance of preproduction or first-off unit.

b. Periodic sampling as appropriate during production to ascertain conformance to

Supply Manual Page 10 of 12 Version 10-1 (2010-01-11)

Annex 1.2 - Specific Division of Responsibilities Agreements

specifications. c. Timely reporting to PWGSC in the event of deviations from specifications. d. Verify acceptability of product and authorize release to consignee.

G.3 Quality assurance action in technical change procedures such as initiation, and

recommendation. G.4 Review of contract quality requirement with contractor to ensure mutual understanding.

Responsibility for Sub-activity - DND Normally Participates in Sub-activity - PWGSC

H. Contract Close out and Clean-up - PWGSC assigned overall responsibility

Quality assurance tasks performed during contract close-out and clean-up: H.1 Verification from DND of the condition and disposition of Crown-owned production

tooling, inspection and test equipment H.2 Verification from DND of the completeness, suitability and proper disposition of technical

data and documentation.

Responsibility for Sub-activity - DND Normally Participates in Sub-activity - PWGSC

I. Post-delivery Appraisals - DND assigned overall responsibility

Quality assurance tasks arising during the life of the product in relation to:

I.1 Quality History

a. Accumulation and assessment of quality assurance histories for the purpose of recommending need for modification of product technical data, quality assurance standards, or quality assurance plans for the product, based on quality data acquired from the following: (i) Product Qualification (ii) Supplier Evaluation (iii) Bid Evaluation (iv) Product Quality Assurance (v) Post-delivery Appraisal.

I.2 Unsatisfactory Condition Report/Complaints

a. Review of failure reports where the complaint has been associated with quality

defects. b. Analysis and identification of cause. c. Seeking of corrective action with contractor or through PWGSC. In all instances,

DND should notify PWGSC immediately in writing. Responsibility for Sub-activity - DND Normally Participates in Sub-activity - PWGSC

Supply Manual Page 11 of 12 Version 10-1 (2010-01-11)

Annex 1.2 - Specific Division of Responsibilities Agreements

J: Disposal - DND assigned overall responsibility

Quality assurance tasks related to the disposal of equipment and data. K: Warehousing and Distribution - DND assigned overall responsibility

Quality assurance tasks associated with the development of a quality program, which will assure product quality on receipt, during storage and on issue, including such elements as:

K.1 Preparation of Inspection Plans, including inspection on receipt, during storage, on issue

and after repair. K.2 Control of technical data; K.3 Control of adequacy of inspection equipment; K.4 Incoming inspection; K.5 Identification of defective material; K.6 Procedures for material handling; K.7 Packaging and shipping; K.8 Inspection records; K.9 Quality audit; K.10 Corrective action.

Responsibility for Sub-activity – DND

Supply Manual Page 12 of 12 Version 10-1 (2010-01-11)

TABLE OF CONTENTS Chapter 2 - Defining the Requirement and Requisition Receipt ............................... 1 2.1 Requirements Definition...................................................................................................................1 2.5 Project Approvals .............................................................................................................................1 2.10 Special Procurements ......................................................................................................................1 2.15 Agreement with Other Governments Departments or Agencies .....................................................2 2.20 Green Procurement and Defining the Requirement ........................................................................2 2.25 Comprehensive Land Claim Agreements ........................................................................................3 2.30 Requisition Receipt ..........................................................................................................................3

2.30.1 Funding.............................................................................................................................. 3 2.30.5 Requisition Allocation within PWGSC ............................................................................... 3

2.35 Extract Files .....................................................................................................................................5 2.35.1 Part Files............................................................................................................................ 5

2.40 Price and Availability Enquiries........................................................................................................5 2.45 Requests for Information and Letters of Interest .............................................................................6 2.50 Industrial Security Requirements .....................................................................................................6

2.50.1 Security and Requisitions .................................................................................................. 6 2.50.5 Security Requirements Checklist....................................................................................... 7

2.55 Employer-employee Relationships ..................................................................................................7 2.60 Requisition Checklist........................................................................................................................7 2.65 Procurement Process Initiated by Client..........................................................................................8 2.70 Ratification by Treasury Board.........................................................................................................8 2.75 Confirming Orders and Contracts Involving Pre-contractual Work..................................................9 Annex 2.1: Requisition Checklist ...............................................................................................................1 Annex 2.2: Green Procurement: Environmental Factors and Evaluation Indicators.................................1

Chapter 2 – Defining the Requirement and Requisition Receipt

Chapter 2 - Defining the Requirement and Requisition Receipt 2.1 Requirements Definition (2010-01-11) (a) Defining the requirements of a procurement is the cornerstone of a successful procurement

process. The contracting officer must understand completely what he/she is about to procure. There are many aspects to consider.

(b) When defining the requirement, client departments must keep in mind not only the goods and

services needed, but also the legal framework regulating the goods and services being procured (see 1.15.) Client departments can save significant time and money if there is a clear and well-prepared description of what is required. Early involvement of Public Works and Government Services Canada (PWGSC) contracting officers in the process can help achieve this.

(c) The greatest contribution to achieving the best good or service and price can in fact be made at

the earliest stages of requirements definition. Identifying the needs and carefully developing the requirements can minimize the need for changes later.

(d) Requirements are best defined in a manner that allows competition and ensures best value.

Contracting officers may be able to suggest wording, which defines requirements in terms of operational requirements rather than using brand names or proprietary technical specifications.

(e) PWGSC can help client departments identify special requirements related to green procurement,

security, progress reports, special packaging, transportation, bonding, etc. that suppliers may need to address in their bids.

(f) The contracting officer and the client department must work together to ensure that all concerns

are addressed from the beginning of the process to receipt of the final deliverable. (g) Writing clear and concise contractual documents, using the right words and plain language, is the

best method to adopt, to obtain satisfaction and avoid disputes. 2.5 Project Approvals (2010-01-11) Government departments and agencies are guided in the management of projects by Treasury Board (TB) Policies and Guidelines addressing Project Approvals and Project Management. For projects that require TB approval, consideration should be given to requesting advance authority to enter into contract, along with the applicable project approval submissions. Working closely with the client at the program development stage, advance approvals may be possible, saving time and effort. 2.10 Special Procurements (2010-01-11) A number of special procurements require a different approach when handling the requirement. On receipt of a requisition relating to any of the following programs, the contracting officer should review Chapter 9 before proceeding further. (a) Real Property Contracting; (b) purchases from CORCAN; (c) United States Foreign Military Sales; (d) Co-operative Logistics (COLOG) and Blanket Order Cases with the United States Department of

Defence;

Supply Manual Page 1 of 9 Version 10-1 (2010-01-11)

Chapter 2 – Defining the Requirement and Requisition Receipt

(e) use of the Defence Production Revolving Fund and Loan Account; (f) Canadian Commercial Corporation; (g) Major Crown Projects; (h) Procurement Strategy for Aboriginal Business; and (i) Comprehensive Land Claims Agreements. 2.15 Agreement with Other Governments Departments or Agencies (2010-01-11) It is the mandate of Public Works and Government Services Canada (PWGSC) to provide services to departments, boards and agencies of the Government of Canada or to Crown corporation. Section 16 of the PWGSC Act further allows PWGSC to make its services available with the approval of the Governor in Council to any government, body or person in Canada, or elsewhere, if so requested by them. This means that the Act permits PWGSC to obtain an order in council to allow it to provide services, such as the procurement of goods and services, to entities that are not part of the Government of Canada. Contracting officers must consult Legal Services when they receive such a request. An agreement must be established between the entity, PWGSC and Legal Services to help with the preparation of the required order in council. 2.20 Green Procurement and Defining the Requirement (2010-01-11) (a) The Government of Canada is committed to implementing the Policy on Green Procurement.

This is to ensure that the government cost effectively procures, operates and disposes of its assets in a manner that protects the environment and supports sustainable development objectives. This policy is all encompassing and it applies across all four stages of the procurement process, from planning and acquisition through use and disposal.

(b) The contracting officer, in assisting a client with the needs definition process, should analyze with

the client what opportunities may exist to support their obligations as well as their departmental targets related to green procurement. A key consideration is whether it is actually necessary to make the new purchase. Ultimately, avoiding a purchase will be the most environmentally preferable and economical option.

(c) Some key considerations in defining the requirement are to:

(i) evaluate the need, utilization and scale of the purchase, and reduce the need if possible; (ii) determine that the quantity requested is appropriate and definitely will be used (the

feasibility of short term leasing, renting or sharing of the good should be investigated); (iii) inquire as to whether or not the requirement could be satisfied internally, through a

different division or section of the organization or through government surplus supplies; (iv) combine the requirement, if appropriate, with one or several other departments to take

advantage of economies of scale, to reduce packaging and to save other resources.

(d) See Annex 2.2 for factors and indicators that will aid the client in managing the resource, from planning to disposal.

(e) More information can be found in the Environmental Awareness Tool Kit under the Green Procurement Considerations in the Planning Phase, and in section 2, Planning and Identifying Requirements of the Guideline for Integration of Environmental Performance Considerations in Federal Government Procurement.

Supply Manual Page 2 of 9 Version 10-1 (2010-01-11)

Chapter 2 – Defining the Requirement and Requisition Receipt

(e) Section 2 will provide help in terms of planning and identifying environmental requirements to reduce or eliminate impacts on the environment.

(f) The Green Procurement Tools includes valuable information such as the completed Green

Procurement Plans and the related templates, a list of green standing offers, supply arrangements and contracts and a repertoire of existing contracting language related to green procurement.

(g) For commodities under the Commodity Management Framework, contracting officers must

develop a Green Procurement Plan, and procurements must be conducted in accordance with this plan.

2.25 Comprehensive Land Claim Agreements (2010-01-11) Any contracting officer that receives a requisition with deliveries to a location that is subject to a Comprehensive Land Claim Agreement (CLCA) must refer to 9.35 for information on the CLCA obligations that have to be addressed during the procurement process. 2.30 Requisition Receipt 2.30.1 Funding (2010-01-11) (a) Clients are responsible for submitting accurate requisitions and are accountable for the estimate

on the requisition. The requisition approval must be in accordance with the client department’s internal delegation of authority. Requisitions must be funded in Canadian currency, including Goods and Services Tax/Harmonized Sales Tax (GST/HST), and provide the information required on the PWGSC-TPSGC 9200 (NOTE: Only government employees have access to this form) form. This includes procurements to be made by PWGSC organizations located outside Canada.

(b) The authorized requisitioning authority must sign the mandatory signature blocks on the

requisition. One of those signature blocks signifies that the funding is provided in accordance with Section 32 of the Financial Administration Act. A procurement cannot be completed until proper funding has been provided through the requisition approval process.

2.30.5 Requisition Allocation within PWGSC (2010-01-11) (a) Client departments may direct their requisitions and price and availability (P&A) enquiries directly

to the Public Works and Government Services Canada (PWGSC) office of their choice (Canada only).

(b) When the client stipulates the PWGSC office of choice on the requisition, it will normally be

allocated to that office. The major exceptions are:

(i) Restricted commodities:

Restricted commodities include: advertising, public opinion research, production of audio visual, bulk buys for fuel and vehicles and United States Foreign Military Sales (U.S. FMS). Requisitions will be allocated as follows: (A) when a requisition is for a restricted commodity, the requisition will be allocated

to the headquarters (HQ) division/section responsible for that NATO Stock

Supply Manual Page 3 of 9 Version 10-1 (2010-01-11)

Chapter 2 – Defining the Requirement and Requisition Receipt

Number/Goods and Services Identification Number (NSN/GSIN) Code; (B) when there is more than one line item of a restricted commodity, the requisition

will be allocated to the HQ division/section responsible for the restricted commodity line item with the highest value;

(C) when the monetary value of the line items cannot be determined, the requisition

will be allocated to the HQ division/section responsible for the GSIN Code of the first line item, which represents a restricted commodity; and

(D) when a requirement will be sole-sourced to the U.S. FMS Program, see Chapter

9.

(ii) Commodity Managers

Where a requisition relates to a specific commodity (i.e. monitors or printers) or to a specific geographical client (i.e. Northwest Territories), PWGSC will customarily inform the client that the requisition is being forwarded to the specific commodity management office that is able to satisfy their request.

(iii) Major Projects

If the requisition is part of a major project, it will be allocated to the office responsible for that project.

(c) When a client does not specify a preference, the following rules apply:

(i) when there is only one consignee point, the requisition will be allocated to the PWGSC office closest to the consignee within the same regional sector. If the closest PWGSC office is HQ, it will be allocated in accordance with PWGSC HQ procedures;

(ii) when a requisition originates in a region with more than one consignee in the same

regional sector, the requisition will be allocated to an office designated by the regional director general;

(iii) when there are multiple consignee points within the same regional sector, and the

consignee points are not close to one PWGSC office, then the requisition will be allocated to an office designated by the Regional Director, Acquisitions. When the multiple consignee points are all close to the same PWGSC office, then the requisition will be allocated to that office;

(iv) when consignees in two or more regional sectors appear on a single requisition, it will be

allocated to the PWGSC office closest to the originator of the requisition; (v) when there are multiple consignees where the closest PWGSC offices are in two or more

regional sectors, then the requisition will be allocated to the PWGSC office closest to the originator of the requisition, based on the requisition order office code. If the closest PWGSC office is HQ, then it will be allocated in accordance with PWGSC HQ procedures;

(vi) requisitions sent to HQ will be allocated to the section responsible for the greatest value

of line items based on the line item NSN/GSIN codes; (vii) if the value of the line items are equal, or otherwise cannot be determined, then the

requisition will be allocated to the office or division/section responsible for the GSIN code for the first line item on the requisition (clients should be encouraged to enter NSN/GSIN

Supply Manual Page 4 of 9 Version 10-1 (2010-01-11)

Chapter 2 – Defining the Requirement and Requisition Receipt

codes by line item on their requisitions); and (viii) all requisitions and requisition amendments must be sent to an allocation unit, where they

are entered into the Automated Buyer Environment (ABE) and routed to the appropriate office.

2.35 Extract Files (2010-01-11) (a) At times it is necessary to separate a client’s requirement as it will be procured by two different

procurement groups. In this instance, the main contracting officer will create an extract file. (b) The main file holder (the original contracting officer) must:

(i) procure items not extracted; (ii) control requisition funds; (iii) act as the coordinator for client enquiries; (iv) ensure all procurement actions under extracted files are completed; (v) record commitments on extracted items; (vi) request additional funds, from the client, if required; (vii) process all invoices for payment by the client, and (ix) close the file once the procurement is complete.

(c) The extract file holder (the contracting officer that received the extract file) must:

(i) procure the assigned items; (ii) request funds from the main file holder after the total funding requirement has been

identified; (iii) ensure funds have been allotted before contract award; (iv) obtain the contract number from the main file holder before contract award, if the

procurement is done outside of ABE, and (v) forward to the main file holder copies of all contracts and amendments issued against an

extract file, if the procurement is done outside of ABE. 2.35.1 Part Files (2010-01-11) When there is a need to prepare and issue more then one solicitation on a requisition main file or on an extract file, then part files may be created for each solicitation required. When part files are created under an extract file, the extract file will be treated, for the purposes of records, as though it were a main file. 2.40 Price and Availability Enquiries (2010-01-11) (a) A requisition for a price and availability (P&A) enquiry is generally received from the client and

handled in the same manner as any requisition. A P&A enquiry is prepared and sent to suppliers to obtain information concerning approximate prices and availability of specific goods or services. A P&A is used when such information is needed by PWGSC or by a client for program planning or budgetary purposes. A P&A enquiry could be made directly to selected bidders or it may be publicly posted on the Government Electronic Tendering Service (GETS).

Supply Manual Page 5 of 9 Version 10-1 (2010-01-11)

Chapter 2 – Defining the Requirement and Requisition Receipt

(b) P&A enquiries sent to suppliers, or posted on the Government Electronic Tendering Service, must clearly indicate that the request is not a bid solicitation and that there are no commitments with respect to future purchases or contracts.

2.45 Requests for Information and Letters of Interest (2010-01-11) Clients may request or the contracting officer may propose that a Request for Information (RFI) or a Letter of Interest (LOI) be issued to obtain feedback from industry, before finalizing the requirements definition or procurement strategy. Additional information on the RFI/LOI process may be found in 4.5.5. 2.50 Industrial Security Requirements 2.50.1 Security and Requisitions (2010-01-11) (a) All requisitions and requisition amendments for contracts, standing offers or supply arrangements

that contain a security requirement must include a Security Requirements Check List (SRCL) (form TBS/SCT 350-103.)

(b) The security block of all requisitions received by PWGSC on form PWGSC-TPSGC 9200 (NOTE:

Only federal employees can access this site.) must be completed by the client to indicate whether or not security provisions are included in the requirement.

(c) Note that the financial systems of some departments are not yet equipped to print this block. In

such a case, contracting officers can accept the previous version of the requisition form PWGSC-TPSGC 9200 from clients as long as certification against the wording of the new security block is provided, either by replicating the new security wording (see below) in the "Special Instructions" block of the requisition, or either by providing it as a separate document.

"Requisition No. ___________________ Security: Does this requisition include security provisions? (___) No (___) Yes If yes, is a Security Requirement Check List (SRCL) required? (___) No (___) Yes If an SRCL is required, attach the properly completed and signed SRCL to this requisition. If an SRCL is not required, but the requisition does include security provisions, explain why in the requisition. The Undersigned certifies that this requisition, including any attached SRCL, accurately details the security provisions of this requirement. _____________________ Signature (mandatory) _____________________ Date The contracting officer must ensure that the completed security certification is included on each procurement file when the requisition lacks a properly completed security block.

Supply Manual Page 6 of 9 Version 10-1 (2010-01-11)

Chapter 2 – Defining the Requirement and Requisition Receipt

2.50.5 Security Requirements Checklist (2010-01-11) (a) The client department may complete the SRCL, either electronically via the online SRCL service

(referred to as E-SRCL), or in hard copy using the form TBS/SCT 350-103. (b) The SRCL service provided by the Canadian Industrial Security Directorate (CISD) allows client

departments to complete the SRCL form via the Internet in a secure environment using a Smart form, which eliminates errors. With the online service, CISD can provide the security clauses to be included in the solicitation documents before receiving the signed hard copy of the SRCL, thereby expediting the process. Once CISD receives the E-SRCL, its turnaround time to provide the security clauses is two working days for an E-SRCL, as opposed to 15 working days for the hard copy. The electronic process results in the reduction or elimination of errors, in this way, it enables the production of clauses in a more timely manner.

(c) For further information, see 1.65, 3.55 and 4.30.10 or contact CISD, being the organization

responsible for security screenings and clearances for PWGSC procurements. (d) CISD will provide the appropriate security clauses to be used in the solicitation to the contracting

officer. In all cases, where clarification is required, CISD will contact the contracting officer and the departmental security officer as required. Security clauses provided for a similar solicitation should never be used without the prior authorization of CISD.

2.55 Employer-employee Relationships (2010-01-11) (a) When contracting for the services of individuals, including temporary help, contracting officers

should carefully review the circumstances in order to avoid establishing an employer-employee relationship which would be contrary to or in conflict with the Public Service Employment Act and common law principles dealing with master-servant relationships.

(b) The Treasury Board Contracting Policy, as per sections 4.1.9(e) and 16.3, requires contracting

officers to ensure that an employer-employee relationship will not result when contracting for the services of individuals.

(c) Criteria for assessing an employer-employee relationship have been established by the Canada

Revenue Agency (CRA) and pertinent court rulings. For guidance, seek legal advice or consult the CRA publication RC 4110, Employee or Self-Employed?. If there is any uncertainty, the contract should be signed at a level higher than the individual who would normally approve the initial entry into the contract.

(d) Legal advice should be sought where it is not feasible for contracting officers to determine

whether a contract is a contract for services or a contract of employment (i.e. employment status is not easily identifiable). It is ultimately the responsibility of the contracting officer to ensure that contracts do not create employer-employee relationships.

2.60 Requisition Checklist (2010-01-11) (a) All requisitions must be reviewed for acceptability and completeness so that procurement action

can proceed. The review should address as a minimum, the points identified in Annex 2.1. (b) Issues must be resolved through consultation between the client and the contracting officer.

Example issues are as follows:

Supply Manual Page 7 of 9 Version 10-1 (2010-01-11)

Chapter 2 – Defining the Requirement and Requisition Receipt

(i) if a requirement is not clearly defined, then the client must be encouraged and helped to define the objectives and the performance criteria to be met. The client must be encouraged to use generic or performance specifications;

(ii) any unreasonable delivery requirements or unrealistic delivery dates should be

discussed; (iii) if the sole source justification provided by the client is inadequate, then seek further

justification. If the request cannot be substantiated to the satisfaction of the contracting officer, then the contracting officer must advise the client that the procurement will be competed, and

(iv) for justified sole source requirements, the contracting officer should work with the client to

develop responses to Annex 3.1. For more information on this process, see 3.15. 2.65 Procurement Process Initiated by Client (2010-01-11) Public Works and Government Services (PWGSC) is sometimes asked to process requirements when the

procurement process was initiated by client departments (e.g. sourcing, bidding, evaluation, selection). The client department remains responsible for all of their actions, which may or may not be in compliance with TB or PWGSC policies or applicable legislation. PWGSC will attempt to mitigate risks associated with such a requirement; however, the client department will remain responsible even if PWGSC agrees to continue or restart the procurement process. To reduce the risk of complaints and challenges associated with these procurements, the following procedures must be followed:

(a) Upon receipt of a requisition for a contract or contract amendment, where the client has already

taken certain steps in the procurement process, the contracting officer must alert the manager to the situation.

(b) The contracting officer will review the procurement process already initiated by the client, to

identify any deviations from standard practice or policy. The contracting officer must develop a clear understanding of all procurement-related activities that have been completed, including whether a contract has been awarded or the supplier has been given the go-ahead to commence work. Where a contract has been awarded, or the supplier authorized to proceed with the work, 2.75 will apply.

(c) In the event that some of the actions of the procurement process initiated by client departments

do not adhere to the established supply policy guidelines, PWGSC may have to restart the procurement process. Whenever a contracting officer must act in a way not clearly set out in this Manual, integrity and it’s supporting principles provide necessary guidance (see 1.10.5.)

2.70 Ratification by Treasury Board (2010-01-11) As stated in the Treasury Board (TB) Contracting Policy, subsection 4.1.11:

“If a contracting authority enters into a contract without Treasury Board approval when such approval should have been obtained, ratification by the Treasury Board must be sought as soon as possible.”

In a case where contract approval is being sought for work already commenced, the contracting officer must include with the request for TB’s approval the client's certification to the effect that the client department concerned had agreed to the commencement of work before the receipt of TB approval.

Supply Manual Page 8 of 9 Version 10-1 (2010-01-11)

Chapter 2 – Defining the Requirement and Requisition Receipt

2.75 Confirming Orders and Contracts Involving Pre-contractual Work (2010-01-11) (a) PWGSC does not normally place contracts to confirm the actions of departments or agencies.

The practice of providing such service to client departments should be discouraged to the maximum extent practical. However, it may be necessary for PWGSC to become involved because of its exclusive goods procurement authority. PWGSC may have some value to add in processing confirming orders when the work is complete, or contracts when the work has started.

(b) Requests for confirming orders and contracts for pre-contractual work must be evaluated and

processed on the basis of the circumstances surrounding each instance. Where the request is the result of attempts to circumvent normal procurement procedures, return of the request to the client department should be a prime consideration.

(c) When the work has been completed, Legal Services will prepare a confirming order that will

contain only the information necessary to document the transaction, which includes the parties, the work performed, the dates, the amount, a release and, if required, a transfer of intellectual property rights. The appropriate director or higher authority, as determined by the contract value and non-competitive contract approval authority limits, must approve the confirming orders processed by PWGSC. These limits are reduced by 50 percent below the assistant deputy minister (ADM) level, as per Annex 6.4.2.

(d) Where the work has commenced, the contracting officer will prepare a contract. This contract

should only include work that was not subject to a proper contract authorization. Even though the work started before a required contract authorization, the contract must not be backdated. The date in the Period of the Contract or Period of Performance clause must be the award date of the written contract. The contract cannot be back dated or retroactive under no circumstances. To ensure that the work done before the contract date will be covered by the contract, the pre-contractual work clause C0210C of the Standard Acquisition Clauses and Conditions Manual, indicating the date the work has started, must be included in the contract to pay the contractor for any work performed before the award of the written contract. The appropriate director or higher authority, as determined by the contract value and non-competitive contract approval authority limits, must approve the contracts processed by PWGSC. These limits are reduced by 50 percent below the ADM level, as per Annex 6.4.2.

(e) The client department will remain liable for any complaints resulting from their actions.

Supply Manual Page 9 of 9 Version 10-1 (2010-01-11)

Annex 2.1 - Requisition Checklist

Annex 2.1: Requisition Checklist (2010-01-11) 1. Has the requisition been properly directed or allocated to the appropriate office? 2. Has the current version of the requisition form been used? (If the previous version is used, then

the proper security certification must be included.) 3. Is the requisition authorized properly, and does it contain the mandatory signatures in all

signature blocks on the requisition? The client must certify that:

(a) pursuant to subsection 32(1) of the Financial Administration Act, funds are available; (b) the requisition is approved, the necessary approvals have been obtained, and the client

requests Public Works and Government Services Canada (PWGSC) to acquire and provide the goods and/or services, including construction, described; and

(c) the requisition, including any attached SRCL, accurately details the security provisions of

the requirement.

NOTE: Requisitions received via e-Purchasing or via the Universal ABE Interface (UABEI) electronic interfaces are deemed to have been properly authorized with all signatures pursuant to the Financial Administration Act.

4. Does the estimated funding seem adequate? 5. Are the destination/consignee codes specified? 6. Have environmental performance considerations been addressed? 7. Is this requirement subject to the provisions of a Comprehensive Land Claims Agreement (see

9.35.)? 8. Are invoicing instructions provided? 9. Are the financial codes identified? 10. Has the client indicated whether the requisition includes security provisions and whether a

Security Requirements Check List (SRCL) is required? If no SRCL is required but security provisions are included, this must be explained.

11. Is there support for a sole source or no-substitute request? Has the client provided responses to

Annex 3.1? 12. Are delivery lead times and schedules realistic, or will special action be required to meet delivery

objectives? 13. What could be the consequences resulting from a late delivery, and is there a need for liquidated

damages provisions or other performance incentives? 14. Is the good or service adequately defined in the requisition, attached technical documentation or

statement of work? 15. Have appropriate standards, specifications or purchase descriptions been included? If not, can

an existing one be used; or

Supply Manual Page 1 of 3 Version 10-1 (2010-01-11)

Annex 2.1 - Requisition Checklist

(a) is there a need for the development of a new standard, specification or purchase

description? (b) is the NATO Stock Number or the Goods and Services Identification Number

(NSN/GSIN) number of the products shown? 16. Is a design change/deviation procedure specified? 17. Is the extent of required product quality management and assurance specified? 18. Is the inspection or quality assurance authority specified? 19. Does the requisition or attachments contain any clauses or conditions that conflict with any

PWGSC or government contracting policies and procedures (i.e. Standard Acquisition Clauses and Conditions Manual and Supply Manual)?

20. Does the nature of the work include work to Canadian specifications? 21. Does the requisition contain any form of predefined types of pricing basis? 22. Are evaluation criteria specified and are the mandatory requirements clear? 23. Is special production tooling or special test equipment required? 24. Is government-furnished equipment or government-supplied materiel specified? 25. Are there unrestricted rights to the use of technical data or are royalty payments involved? 26. Is a trade-in specified? 27. If radio-transmitting equipment must be acquired, has the client obtained radio frequency

equipment clearance from Industry Canada? Are there other special considerations of a similar nature?

28. If there are multiple items on the requisition, should any of these items be grouped together, or

put in a part or extract file? 29. Could repetitive items be bought on an annual basis through standing offers, supply

arrangements, phased delivery, task authorization, contracts with a call-up feature, or be included as contract options for additional quantities?

30. Are items required available on a standing offer or a supply arrangement (or a mandatory

standing offer)? 31. Has the client department included instructions concerning the treatment of any intellectual

property that may result from the procurement? 32. Has the client department claimed and substantiated exemption from taxes or duties, by referring

to a certificate of exemption, or remission or drawback order in council? 33. Are controlled goods identified? 34. Has the client department identified the requirement as a “defence contract” as defined in the

Defence Production Act?

Supply Manual Page 2 of 3 Version 10-1 (2010-01-11)

Annex 2.1 - Requisition Checklist

35. Is the GSIN number shown and accurate? 36. Is the block “Current Funding” completed? Does it include the Goods and Services Tax or the

Harmonized Sales Tax? 37. Does the requirement involve contractor’s access to personal records? 38. Has the procurement been set aside under the Procurement Strategy for Aboriginal Business? 39. Are option/extension period(s) specified/needed? 40. Is the sole source directed to a former public servant? 41. Is this procurement a renewal of an existing contractual arrangement for the same services, or

have the services been procured before? If yes:

(i) Who is the incumbent contractor? (ii) What is the previous contract number? (iii) When does it expire? (iv) Was it procured by PWGSC or the client? (v) Did the previous contract have special pricing or terms and conditions?

Supply Manual Page 3 of 3 Version 10-1 (2010-01-11)

Annex 2.2 – Green Procurement: Environmental Factors and Evaluation Indicators

Annex 2.2: Green Procurement: Environmental Factors and Evaluation Indicators (2010-01-11) Client departments, with the assistance of Public Works and Government Services Canada (PWGSC), are responsible for all four stages of the procurement process, from planning and acquisition through use and disposal. The following lists are an example of aspects to be considered: 1. Environmental Factors and Related Cost Elements Examples of environmental factors that should be taken into consideration in assessing value for money are provided below. These are expressed in terms of cost elements that client departments may take into consideration in the evaluation of bids. These include but are not limited to: (a) operation costs, such as energy or water consumed by the good over its life; (b) indirect costs (e.g. less energy efficient information technology equipment will produce more heat

causing the building's air conditioning system to work harder, and increase electricity costs); (c) administrative costs, such as complying to the Workplace Hazardous Materials Information

System (WHMIS); (d) investing up front to save costs later, such as specifying higher levels of insulation where the

extra expenditure can be recovered from lower energy costs; (e) use of refurbished parts or products, where possible; (f) Recyclability: This is thought to be the key since purchasers can create markets for their own

waste, such as paper, toner cartridges, etc., through the transformation and sale of products containing recycled materials;

(g) cost of disposal arrangements; (h) establishing minimum environmental performance standards for commodities where there is a

sufficient supplier base to support competition; (i) where the supplier base is limited, include incentives for meeting extra environmental

performance criteria; and (j) use of contractual terms, to define environmental obligations, such as packaging take-back, use

of certified recyclers for e-waste. 2. Environmental Evaluation Indicators Examples of indicators that should be examined to develop evaluation criteria are as follows: (a) Environmental Certification

(i) Has the good/service been certified through an independent program, such as the Environmental Choice Program or Energy Star?

(ii) Have studies of the environmental attributes of the good been completed? (b) Energy and Resource Efficiency

(i) Do you purchase used, remanufactured, rebuilt or refurbished goods and/or materials? (ii) Does this good make efficient use of resources and energy throughout its life cycle?

Supply Manual Page 1 of 3 Version 10-1 (2010-01-11)

Annex 2.2 – Green Procurement: Environmental Factors and Evaluation Indicators

(iii) Does this good reduce waste? (iv) Suppliers should be instructed to indicate if the good has any energy, water or fuel saving

features, such as Power Down Mode. (v) Are there measures to extend the useful life of the good; for example, re-use, refill,

recharge, recondition? (c) Recycled Content

(i) Does the good include post-consumer recycled content? (ii) What type and what percentage are recycled materials?

(d) Hazardous Replacement

(i) Does the supplier offer a non-hazardous replacement or alternative for this good? (ii) Does the good require Material Safety Data Sheets (MSDS)?

(e) Performance Testing

(i) Is it possible to test the good/service, prior to purchase? (ii) Does the good meet the performance specifications? (iii) Is there any documented past performance? (For example, annual reports, environmental

performance reports). (f) Packaging

(i) Is packaging reduced to the bare minimum required to ensure that the good is delivered in perfect working condition?

(ii) Can the good be acquired in bulk or concentrated form? (iii) Will the supplier remove the packaging from the site following installation? (iv) Is the packaging reusable, contain reusable parts or is it recyclable? (v) Does the packaging material contain post-consumer recycled materials?

(g) On Site Waste Management

(i) During the project, will all waste be source separated on site and recycled? (ii) Request information and reward environmentally sound stewardship and use of certified

haulers/sites. (iii) Is the good or service designed to minimize waste (for example, catering service using

dishes that are made of china rather than Styrofoam)? (h) Return for Disassembly and Recycling

(i) Does the good include a return for recycling policy? (ii) Can the good be recycled in your area? (iii) Will consumables (such as toner cartridges) be accepted for recycling? (iv) Is the good easily disassembled?

(i) Warranties

(i) What is the expected useful life span of the good? (ii) How long is the warranty, and should you purchase an extended warranty?

(j) Maintenance

(i) Is the good designed for easy maintenance and repair? (ii) Are maintenance and replacement parts readily available and reasonably priced?

Supply Manual Page 2 of 3 Version 10-1 (2010-01-11)

Annex 2.2 – Green Procurement: Environmental Factors and Evaluation Indicators

(iii) Is the good easy and cost effective to upgrade? (k) Environmental Attributes of the Supplier

(i) Does the supplier have a certification or registration (for example, ISO 14001 registration)?

(ii) Has the supplier received any regulatory environmental violations within the past five years?

Supply Manual Page 3 of 3 Version 10-1 (2010-01-11)

TABLE OF CONTENTS Chapter 3 Procurement Strategy ............................................................................. 1 3.1 Introduction ...................................................................................................................................... 1

3.1.1 Procurement Plan ...........................................................................................................1 3.5 Existing Procurement Instruments ................................................................................................... 2

3.5.1 Mandatory Standing Offers and Supply Arrangements..................................................2 3.5.5 Exceptions to Using Mandatory Procurement Instruments ............................................4 3.5.10 Exception Process for Mandatory Standing Offers and Supply Arrangements..............4

3.10 Competitive Contracting Process..................................................................................................... 5 3.15 Non-competitive Contracting Process.............................................................................................. 5

3.15.1 Justification of Non-competitive Process........................................................................6 3.15.5 Advance Contract Award Notice.....................................................................................6

3.15.5.1 ACAN Time Limit ...............................................................................................8 3.15.5.5 ACAN Content ...................................................................................................8 3.15.5.10 Statement of Capabilities (Challenge Process)...............................................8 3.15.5.15 ACAN Exceptions ............................................................................................9

3.20 Procurement Schedule................................................................................................................... 10 3.25 Trade Agreements Tendering Approaches.................................................................................... 11 3.30 Methods of Supply ......................................................................................................................... 12 3.35 Contracts........................................................................................................................................ 12

3.35.1 Task Authorization Contracts .......................................................................................13 3.35.1.1 Task Authorization Contract - Description.......................................................13 3.35.1.5 Task Authorization Contract – Process ...........................................................13

3.40 Standing Offers .............................................................................................................................. 14 3.45 Supply Arrangements..................................................................................................................... 16 3.50 Procurements Subject to Trade Agreements................................................................................. 17

3.50.1 General Procurement ...................................................................................................17 3.50.5 Applicability of Trade Agreements to Standing Offers and Supply Arrangements.......18

3.55 Industrial Security Requirements (Personnel or Organization)...................................................... 18 3.55.1 Security and Timelines .................................................................................................18

3.60 Low Dollar Value Procurements .................................................................................................... 19 3.60.1 Requirements ...............................................................................................................19 3.60.5 Geographic Factors and Low Dollar Value...................................................................20

3.65 Green Procurement Strategy ......................................................................................................... 20 3.70 Industrial and Regional Benefits (IRB) Program............................................................................ 20 3.75 Small and Medium Enterprise........................................................................................................ 22

3.75.1 Office of Small and Medium Enterprises Role and Initiatives.......................................22 3.75.5 PWGSC On-Line Tools/Services and OSME Role ......................................................23

3.80 Comprehensive Land Claims Agreements .................................................................................... 23 3.85 Procurement Strategy for Aboriginal Business .............................................................................. 23 3.90 Former Public Servants.................................................................................................................. 23 3.95 Intellectual Property ....................................................................................................................... 25 3.100 Vendor Performance Corrective Measures.................................................................................... 27

3.105 National Security Exceptions ......................................................................................................... 27 3.105.1 Trade Agreements and Invoking a National Security Exception ..................................27 3.105.5 Texts of the National Security Exceptions....................................................................27 3.105.10 Procedures for Invoking a National Security Exception ...............................................28

3.110 Legal Services................................................................................................................................ 28 3.115 Bidders' Conferences and Site Visits ............................................................................................. 31 3.120 Roles and Memorandum of Understanding ................................................................................... 31 3.125 Canadian Commercial Corporation................................................................................................ 31 3.130 Canadian Content .......................................................................................................................... 31 3.135 Fairness Monitors........................................................................................................................... 31 3.140 Life Cycle Costing .......................................................................................................................... 32

3.140.1 General Requirements..................................................................................................32 3.145 Cost and Profit ............................................................................................................................... 33 3.150 Standards and Quality Assurance ................................................................................................. 33

3.150.1 Standards, Specifications and Purchase Descriptions.................................................33 3.150.5 Government Quality Assurance at Source ...................................................................35 3.150.10 Listing Programs...........................................................................................................36 3.150.15 Department of National Defence Qualified Products Lists ...........................................38 3.150.20 Canadian General Standard Board ..............................................................................38

3.150.20.1 Canadian General Standard Board Responsibilities...................................38 3.150.20.5 New Standards, Specifications or Listings ..................................................39

3.150.25 Electrical Equipment .....................................................................................................40 3.155 Acquisition Cards ........................................................................................................................... 40

3.155.1 Acquisition Cards In Contracting ..................................................................................40 3.155.5 Acquisition Card Management .....................................................................................40

3.160 Royalty Payments and License Agreements ................................................................................. 41 3.165 Controlled Goods ........................................................................................................................... 43 3.170 Shipbuilding, Repair, Refit and Modernization............................................................................... 43 3.175 United States Defense Related Procurement................................................................................ 44 3.180 Joint Certification Program............................................................................................................. 44 3.185 Foreign Military Sales..................................................................................................................... 44 3.190 U.S. Defense Priorities and Allocations System ............................................................................ 44 3.195 Risk Management .......................................................................................................................... 45

3.195.1 Treasury Board Secretariat Risk Management Policy..................................................45 3.195.5 Risk Management Process...........................................................................................45

3.195.5.1 General ..........................................................................................................45 3.195.5.5 Risk Assessment ...........................................................................................46 3.195.5.10 Risk Control .................................................................................................46 3.195.5.15 Risk Financing .............................................................................................47

3.200 Contractor Liability ......................................................................................................................... 47 3.200.1 General .........................................................................................................................47 3.200.5 Indemnification..............................................................................................................48

3.205 Review Process for Creation, Renewal and Extension of Standing Offers and Supply Arrangements................................................................................................................................. 48 3.205.1 Review Process ............................................................................................................49

3.205.5 Reviewer Evaluation .....................................................................................................49 3.205.10 Publishing Information on the Standing Offer Index.....................................................49 3.205.15 Duplication of Coverage in Standing Offers and Supply Arrangements ......................50

Annex 3.1: Treasury Board Questions for Sole Source ........................................................................1 Annex 3.2: Limited Tendering Reasons contained in the Trade Agreements ......................................1 Annex 3.3: Model Advance Contract Award Notice ..............................................................................1 Annex 3.4: Task Authorization Contracts..............................................................................................1

Appendix A (to Annex 3.4) ..................................................................................................7 Annex 3.5: Procurement Review Committee Requirements and Approval Process ............................1

Exhibit A: Detail Document - Procurement Review Committee.......................................3 Annex 3.6: Canadian Content Policy ....................................................................................................1 Annex 3.7: National Security Exception Request Letter – Template ....................................................1

Chapter 3 – Procurement Strategy

Chapter 3 Procurement Strategy 3.1 Introduction (2010-01-11) (a) A procurement strategy defines in general terms how a good, service, or construction will be

procured, and will include, at the highest level, the determination to proceed competitively or non-competitively and applicable details in support of industrial and regional benefits or other national objectives. The strategy could be quite basic, such as the decision to use a standing offer, or could be more detailed, which would be used for major projects.

(b) The development of a procurement strategy begins with the first meeting between Public Works

and Government Services Canada and the client, and often even before this point. It is the most important step in the procurement process as it influences the scope of the requirement and determines the extent of competition.

(c) In developing the procurement strategy, the guiding principles described in 1.10.5 must be taken

into consideration. Specifically, the procurement strategy must satisfy the client's operational requirements and comply with legal requirements, while achieving best value, and advancing national objectives.

3.1.1 Procurement Plan (2010-01-11) (a) As soon as the key elements of the procurement strategy have been determined, the contracting

officer should prepare a procurement plan (or CPAA as applicable) for approval. The contracting officer should carefully address all the pertinent factors that an approval authority considers when making an approval.

(b) A non-exhaustive list of some of the factors that the client and the contracting officer can take into

account when developing the procurement plan are listed as follows:

(i) the method of supply; (ii) total estimated cost including all options, as well as maintenance and storage costs, as

applicable; (iii) contract period; (iv) delivery requirements; (v) the procurement schedule; (vi) evaluation procedures and method of selection; (vii) environmental factors; (viii) commercial products versus customized solutions; (ix) risk factors; (x) possible use of a fairness monitor; (xi) the participation of small and medium enterprises; (xii) aboriginal considerations; (xiii) other national objectives; (xiv) compatibility with existing solutions, (xv) the opportunity to consolidate requirements; (xvi) disposal of the product, if applicable, and (xvii) renewal (procurement of a replacement good or service and all transfer costs).

(c) The approval authority must be given the opportunity to approve or reject the proposed

procurement plan as early as possible in the process, to avoid the situation where a contracting officer has done significant work following a strategy which may not be approved.

Supply Manual Page 1 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(d) The procurement plan must identify any deviations to contracting policies. (e) If events during the procurement process result in a significant change in the procurement

strategy, a revised procurement plan must be approved before implementation or completion of the procurement process.

(f) For more information on elements and process for a procurement plan, see 6.5.1. 3.5 Existing Procurement Instruments (2010-01-11) (a) Before determining a new method of supply for the requirement, the contracting officer should

first ensure that the good or service is not already available from an existing procurement instrument. Clients should be encouraged to use mandatory standing offers or non-mandatory standing offers/supply arrangements to satisfy their requirements, whenever possible. A list of standing offers and other instruments is available from the Standing Offer Index (SOI) (NOTE: Only government employees have access to the site).

(b) Procurement instruments may be referred to as “Pre-Competed Procurement Instruments”

(PCPIs) or “Consolidated Procurement Instruments” (CPIs) and are also known as mandatory standing offers or non-mandatory standing offers/supply arrangements as well as contracts.

(c) The Standing Offer Coordination Office provides information associated with the administrative

aspects of standing offers, including:

(i) facilitate the exchange of information on standing offers between Public Works and Governments Services Canada (PWGSC) and clients;

(ii) prepare, update and coordinate the distribution of indices of all National Master Standing

Offers, Departmental Individual Standing Offers, and Regional Master Standing Offers; (iii) coordinate the distribution of NMSOs, DISOs and RMSOs originating from PWGSC

headquarters. (d) Federal government employees who require additional information or assistance with locating

standing offer information can contact the PWGSC Acquisitions Systems Service Desk, Business Operations and Service Management, at 819-956-3325 or 1-866-664-6609.

(e) Suppliers requiring additional information on standing offers and supply arrangements can

contact Business Access Canada at 1-800-811-1148, or by email at: ncr.contractscanada@tpsgc-pwgsc.gc.ca.

3.5.1 Mandatory Standing Offers and Supply Arrangements (2010-01-11) (a) PWGSC has put in place a number of standing offers and supply arrangements that must be

used before any new procurement is considered in accordance with the Treasury Board Policy Notice: Business Transformation Initiative – The Way Forward.

(b) The use of standing offers and supply arrangements for the commodity groups listed below is

mandatory and these mandatory commodities are listed in the Standing Offer Index (SOI) Website under the Mandatory Standing Offer Categories. (NOTE: Only government employees have access to the site.)

(i) N23 : Ground Effect Vehicles, Motor Vehicles, Trailers, and Cycles/Véhicules à l'effet de

sol, véhicules-moteur, remorques et cycles

Supply Manual Page 2 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(ii) N58 : Telecommunications Equipment and Accessories/Equipements des

télécommunications, de détection et à rayonnement cohérent (iii) N70 : General Purpose Automatic Data Processing Equipment, including Firmware,

Software, Supplies and Support Equipment/Équipement pour le traitement automatique de données à usage général, logiciel, comprenant la microprogrammation, fournitures et équipement de soutien

(iv) N71 : Furniture/Mobiliers (v) N74 : Office Machines, text processing systems and visible recording

equipment/Machines de bureau, systèmes de traitement des textes et équipement à classement visible

(vi) N75 : Office Supplies and Devices/Fournitures de bureau (vii) N84 : Clothing, Accessories and Insignia/Vêtements, équipement individuel et insignes (viii) N91 : Fuels, Lubricants, Oils and Waxes/Carburants, lubrifiants, huiles et cires (ix) D : Information Processing and Related Telecom Services/Traitement de l'information et

services de télécommunications connexes (x) R : Professional, Administrative and Management Support Services/Services

professionnels, administratifs, et de soutien à la gestion (c) These mandatory standing offer and supply arrangements apply to all departments, as defined in

Section 2 of the Financial Administration Act, including the Canadian Forces, and to Crown procurement contracts subject to the Government Contracts Regulations and the Treasury Board Contracting Policy.

(d) Client departments and agencies continue to be able to acquire goods and services as they have

in the past. However, they must first verify whether a mandatory standing offer or supply arrangement exists that meets their requirements. If it does, clients must use it.

(e) On receipt of a requisition for any goods or services within these identified commodity groups,

contracting officers must determine if an existing standing offer or supply arrangement can meet the requirement. If so, that standing offer or supply arrangement must be utilized. There are only a few exceptions (listed below) whereby contracting officers may use another method of supply.

(f) The goods or services should not duplicate those already provided under an existing standing

offer or supply arrangement at the national or regional level. If the required goods or services are similar, or identical, in nature to goods or services available under existing standing offers or supply arrangements, a full rationale must be provided to justify using another procurement instrument or method of supply. For the process on creating a new standing offer or supply arrangement, see 3.205.

(g) It should be pointed out to clients that when they use a mandatory standing offer or supply

arrangement (with the exception of Departmental Individual Standing Offers), they can receive the goods or services faster and with less administrative cost than by sending a requisition to PWGSC. The value of the acquisition will be limited to their Treasury Board Secretariat delegated purchasing authorities.

(h) If the client indicates to PWGSC that they have a valid reason to not use a mandatory standing

offer or supply arrangement, then the exception process, below, must be initiated.

Supply Manual Page 3 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

3.5.5 Exceptions to Using Mandatory Procurement Instruments (2010-01-11) (a) Mandatory procurement instruments, such as standing offers and supply arrangements, must be

used by client departments acting on their own behalf, or by PWGSC handling a requisition, unless one of the following applies:

(b) A lower price is available and confirmed (by the PWGSC contracting officer) for an equivalent

good or service, by means other than the mandatory standing offer or supply arrangement, and the standing offer or supply arrangement in question has not been established as the exclusive supplier for the Government of Canada.

(c) The good or service available through the mandatory standing offer or supply arrangement does

not meet justifiable operational requirements, including specifications or delivery dates. (d) The value of the requirement exceeds the call-up limitation of the standing offer or the scope of

the supply arrangement. (e) An existing contract is in place, which guarantees the work to another supplier. (f) The requisitioning department or agency has its own standing offer or supply arrangement in

place, which better meets needs/price.

Note: Departments can not put their own standing offers or supply arrangements in place, so as to avoid having to use PWGSC standing offers or supply arrangements, as this would defeat the long-term benefits and savings of the PWGSC government-wide approach.

(g) The requirement is subject to contracting obligations under Comprehensive Land Claims

Agreement(s) (CLCA), and no mandatory standing offer/supply arrangement addressing the contracting obligations of the applicable CLCA(s) exists;

(h) The requirement will be set-aside under the Procurement Strategy for Aboriginal Business

(PSAB), and no mandatory procurement instrument exists for PSAB set-asides; 3.5.10 Exception Process for Mandatory Standing Offers and Supply Arrangements (2010-01-11) (a) The contracting officer responsible for the mandatory standing offer or supply arrangement will

consult with the Performance, Spend and Commodity Management Directorate (PSCMD) within the Client Engagement Sector (CES) of Acquisitions Branch, as to whether an exception to the use of a mandatory standing offer or supply arrangement will be used. PSCMD will consult, as required, with the appropriate commodity manager.

(b) If a client department is handling its own procurement, and requires an exception to a mandatory

standing offer or supply arrangement, it must contact the contracting officer responsible for the appropriate standing offer or supply arrangement (the one that the client department does not want to use), and seek an exception.

(c) If the client department disputes the decision, it may request that the contracting officer bring its

additional concerns to the attention of PSCMD. (d) The contracting officer should record all procurements where an applicable mandatory standing

offer or supply arrangement was not used, and the associated reason(s).

Supply Manual Page 4 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

3.10 Competitive Contracting Process (2010-01-11) (a) The Government Contracts Regulations (GCRs) require the competitive soliciting of bids before

any contract is entered into, though the GCRs do provide for exceptions to the competitive soliciting of bids.

(b) Whenever possible, contractors must be selected using a competitive process. The flexibility to

depart from this approach depends on the procurement framework being followed. The type of competitive solicitation that may be used will also depend on the procurement framework.

(c) It is the contracting officer’s responsibility to select the most effective process for notifying

suppliers of an opportunity by taking into consideration the requirements of the trade agreements and the policies set out in the Supply Manual.

(d) For procedures relative to public advertisement and for publication of a Notice of Proposed

Procurement and posting solicitation documents, see 4.75.10 to 4.75.25. For procurements not publicly advertised, see 4.75.45. For more information on trade agreements, see 3.50.

3.15 Non-competitive Contracting Process (2010-01-11) (a) When a non-competitive (sole source) procurement strategy is chosen, the legal authority to use

an exception to competitive bidding must be fully justified by the client department with a reference to all exceptions to competitive bidding which may apply under the Government Contracts Regulations (GCRs) of the Financial Administration Act, and the limited tendering provisions of Canada’s national and international trade agreements. Contracting officers are also reminded to take into account the procurement provisions under the Comprehensive Land Claims Agreements (CLCAs).

(b) The GCRs require the competitive soliciting of bids before any contract is entered into. However,

contracts may be entered into without soliciting bids when:

(i) the need is one of pressing emergency in which delay would be injurious to the public interest (GCRs 6.(a));

An emergency may be an actual or imminent life-threatening situation, a disaster which endangers the quality of life or has resulted in the loss of life, or one that may result in significant loss or damage to Crown property.

(ii) the estimated expenditure does not exceed,

(A) $25,000; (B) $100,000 where the contract is for the acquisition of architectural, engineering

and other services required in respect of the planning, design, preparation or supervision of the construction, repair, renovation or restoration of a work;

(C) $100,000 where the contract is to be entered into by the member of the Queen's

Privy Council for Canada responsible for the Canadian International Development Agency and is for the acquisition of architectural, engineering or other services required in respect of the planning, design, preparation or supervision of an international development assistance program or project; (GCRs 6.(b))

Supply Manual Page 5 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(iii) the nature of the work is such that it would not be in the public interest to solicit bids; or (GCRs 6.(c));

(iv) only one person is capable of performing the contract (GCRs 6.(d)).

The exception should only be invoked where patents, copyright requirements, or technical compatibility factors and technological expertise suggest that only one contractor exists. When invoking exception 6.(d), the questions found in Annex 3.1 must be answered by the contracting officer with the assistance of the client department. The answers to these questions must be appended to all approval documents and also placed on the procurement file for all procurements above $25K (see 6.5.5.1, Annex 6.2 and TB Contracting Policy Notice 2007-04).

(c) The TB Contracting Policy Notice further defines the use of exceptions to competitive contracting.

This policy notice describes specifically the need to provide more rigor when invoking exception 6.(d) of the Government Contract Regulations (GCR) where only one person is capable of performing the contract. For all procurements above $25,000, the questions must be answered, accompany the approval document and be placed on the procurement file. See Annex 3.1 for a copy of these questions along with additional information on how to respond to each of them.

(d) Exception 6.(b)(i) of the GCRs states that where the estimated expenditure does not exceed

$25,000, contracts can be awarded without soliciting bids. However, contracting officers are expected to solicit bids whenever it is cost effective to do so.

(e) With respect to the trade agreements, contracting officers may award a contract without soliciting

bids, only if one or more of the limited tendering reasons stated in each applicable trade agreement can be applied. The relevant articles are as follows:

(i) NAFTA article 1016; (ii) WTO-AGP article XV; (iii) AIT article 506, paragraphs 11 and 12.

Note: A copy of these limited tendering reasons are provided in Annex 3.2.

3.15.1 Justification of Non-competitive Process (2010-01-11) (a) While the client department must provide the rationale for any exception to competitive

procurement, it is the responsibility of the contracting officers to make sure that the rationale can be adequately supported. Contracting officers are also reminded to take into account the procurement provisions under the Comprehensive Land Claims Agreements.

(b) If there is inadequate substantiation, the contracting officer should advise the client of alternative

products or sources, if known, and attempt to reach agreement with the client on the most appropriate procurement strategy. When agreement cannot be reached by the contracting officer, the next level of management should be consulted

(c) Use of any of the GCRs exceptions must be fully justified by the contracting officer with

appropriate documentation placed on the contract file. The trade agreements also contain provisions to document on file the reasons for the use of limited tendering and the appropriate article must be provided as justification, where applicable. See 3.25(b).

3.15.5 Advance Contract Award Notice (2010-01-11)

Supply Manual Page 6 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(a) An Advance Contract Award Notice (ACAN) is a public notice indicating to the supplier

community that a department or agency intends to award a good, service or construction contract to a pre-identified supplier believed to be the only one capable of performing the work, thereby allowing other suppliers to signal their interest in bidding by submitting a statement of capabilities. If no other supplier submits a statement of capabilities that meets the requirements set out in the ACAN, the contracting officer may then proceed with awarding the contract to the pre-identified supplier. It is important to note that an ACAN is not a competitive process; however, competitive approval authorities may be used if there is no successful challenge.

(b) ACANs may be published pursuant to article 10.7.13 of the Treasury Board (TB) Contracting

Policy. When an ACAN is not published, Contract Award Notices will continue to provide transparency and it is therefore important that they be issued shortly after contract award.

(c) In addition, contracting officers should review the TB Guide for Managers - Best Practices for

Using Advance Contract Award Notices, Contracting Policy Notice 2000-4 and Contracting Policy Notice 2000-4 – Non-Competitive Contracting.

(d) As stated in the TB Guide for Managers, the objectives of the ACAN process are to:

(i) provide a procurement process that is efficient and cost effective; (ii) provide potential suppliers with the opportunity to demonstrate, by way of a statement of

capabilities, that they are capable of satisfying the requirements set out in the ACAN, and (iii) respect the principles of government contracting by enhancing access and transparency.

(e) The ACAN notice must be published on the Government Electronic Tendering Service (GETS)

currently provided through MERX. (f) An ACAN may be published only for requirements where Canada is able to accept a statement of

capabilities from another supplier. Contracting officers must ensure that Canada is in a position to accept a statement of capabilities before publishing an ACAN. In circumstances where there is no possibility of another supplier submitting a statement of capabilities or where Canada cannot, for program or policy reasons, accept a statement of capabilities from another supplier, an ACAN must not be published. For more information on statements of capabilities, see 3.15.5.10.

(g) Accordingly, the use of an ACAN for sole source contracts is not mandatory and there is no

requirement to seek approval not to publish an ACAN for a requirement. (h) Where the ACAN process is not used, the non-competitive approval authorities apply to the

procurement strategy. (i) ACANs are not to be used to circumvent electronic bidding or other bidding procedures when it is

clear that more than one supplier exists that can perform the work. (j) ACANs are not to be structured in ways that discourage submissions of statements of

capabilities. For example, the notice should not say: "This is not a competitive solicitation", "This is a sole source requirement", or other language that is not consistent with the spirit of the TB Contracting Policy on competitive contracting.

(k) An ACAN process, even if conducted in accordance with the Policy, does not constitute a

"competitive" process for the purposes of the trade agreements and any Canadian International Trade Tribunal (CITT) challenge. For the purposes of contract approval authorities, ACANs are classified under the “electronic bidding” category.

Supply Manual Page 7 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

3.15.5.1 ACAN Time Limit (2010-01-11) (a) Although ACANs are posted for a minimum of 15 calendar days on GETS, the contracting officer

should determine the posting period based on the individual circumstances for each procurement, including the complexity associated with the procurement.

(b) Furthermore, while for reasons of timeliness and efficiency, contracting officers may enter into

negotiations with the pre-identified supplier before the closing of the ACAN posting period, care should be exercised to ensure that any such negotiations do not put the pre-identified supplier at an advantage should a successful challenge take place before contract award. Due to this inherent risk, the pre-identified supplier must be cautioned not to commence any work or incur any costs before contract award.

3.15.5.5 ACAN Content (2010-01-11) (a) Contracting officers are responsible for preparing an ACAN for publication on GETS. (b) The text of the notice must clearly state that the proposed procurement meets one of the

Government Contracts Regulations exceptions to soliciting bids (see 3.15(c)). The text must also reference the limited tendering reasons being invoked for all applicable trade agreements. Such exceptions must be fully and clearly justified in writing on the procurement file.

(c) A sample of texts to be used in an ACAN notice can be found in Annex 3.3. (d) Further information on notice content and additional models can be found in TB Guide for

Managers - Best Practices for Using Advance Contract Award Notices. (e) When additional information not specifically set out in the ACAN is provided on the requirements,

it must be provided equally to all interested parties. If the information provided is considered a significant clarification to the information provided in the ACAN, an amended ACAN should be issued. Extending the closing date would be appropriate in such cases.

3.15.5.10 Statement of Capabilities (Challenge Process) (2010-01-11) (a) The ACAN process provides suppliers with an opportunity to submit a statement of capabilities

regarding work identified in an ACAN. (b) Statements of capabilities submitted by suppliers:

(i) should be provided in writing within the specified timeframe indicated on the ACAN; and (ii) must include documentation demonstrating that the supplier meets the requirements as

set out in the ACAN. (c) Despite the timeframe indicated in the ACAN, there may be circumstances when a contracting

officer could consider a statement of capabilities received after the specified date but before the award of the contract. Contracting officers should discuss this with their management and Legal Services.

(d) Following receipt of a statement of capabilities, the process is as follows:

(i) All statements of capabilities received by the timeframe indicated in the ACAN are reviewed by the contracting officer.

Supply Manual Page 8 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(ii) When a supplier’s statement of capabilities provides sufficient information to indicate that

it meets the requirements set out in the ACAN, the supplier is notified of the decision to compete the requirement before proceeding to a full bidding process.

(iii) If a statement of capabilities is rejected, a separate review of the rejection is conducted.

This review would be made at one level higher than the original approval authority, but not lower than that of Manager and not higher than the Assistant Deputy Minister.

(iv) With respect to statements of capabilities that are rejected, suppliers should be advised

in writing of the decision to reject a statement of capabilities before a contract is awarded. (v) The reasons for the decision to reject a statement of capabilities are included in the file. (vi) Suppliers that have submitted a statement of capabilities are given the reasons why their

statement of capabilities was rejected. (vii) The request from a supplier to withdraw/cancel its statement of capabilities is

documented on file, and should be provided in writing by the supplier. (e) If the procurement is being set aside under the Procurement Strategy for Aboriginal Business,

statements of capabilities must only be considered from Aboriginal suppliers. (f) If the requirement subject to an ACAN is cancelled, suppliers that submitted statements of

capabilities should be notified in a timely manner. (g) Contracting officers may request additional information from suppliers or third parties, as

appropriate, to ensure that the interested supplier has the capability to meet the requirements set out in the ACAN.

3.15.5.15 ACAN Exceptions (2010-01-11) (a) ACANs must not be posted in situations where the competitive process using electronic or

traditional bidding cannot be used. Examples of such situations include:

(i) when, for reasons of security or public interest, the information contained in an ACAN cannot be provided to the public;

(ii) confirming orders; (iii) Corps of commissionaires, if right of first refusal applies; (iv) government direction, such as Munitions Supply Program; (v) works of art; (vi) where, for reasons of extreme urgency brought about by events unforeseeable by the

entity, the goods or services could not be obtained in time by means of open or selective tendering procedures;

(vii) tobacco products purchased for inmates by Correctional Service Canada; (viii) regulatory body determined sole source service contracts (e.g. National Transportation

Agency, Canadian Radio-Television and Telecommunications Commission);

Supply Manual Page 9 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(ix) consolidated announcements that advertise a program consisting of several non-competitive standing offers/contracts (pharmaceutical and medical supplies are the only products currently eligible for this exclusion);

(x) when an entity needs to procure consulting services regarding matters of a confidential

nature, the disclosure of which could reasonably be expected to compromise government confidences, cause economic disruption or similarly be contrary to the public interest.

(b) ACANs must also not be posted in situations where a statement of capability cannot be accepted.

For example, in circumstances where detailed market knowledge confirms that only one supplier can perform the work,then the contract should be awarded on a non-competitive basis with transparency achieved through a Contract Award Notice.

(c) In such cases, the rationale underlying the decision not to publish an ACAN should be well

documented on the procurement file. 3.15.5.20 Documentating the Procurement File (2010-01-11) Contracting officers are required to exercise due diligence in documenting on the procurement file the actions taken in each phase of the ACAN process. As a minimum, this involves documentation of the following justifications, reasons and associated steps: (a) justification for the sole source (see 3.15.1); (b) what actions, if appropriate, were taken to determine if other suppliers may have been capable of

performing the work; (c) the requirement or rationale for issuing the ACAN (bearing in mind that Canada must be able to

accept a statement of capabilities from another supplier if an ACAN is issued); (d) the process followed in either accepting or rejecting a statement of capabilities from another

supplier, including the independent review, if required (see 3.15.5.10.(d)); (e) details of any resulting competitive process, if conducted; (f) evidence that all suppliers that submitted a statement of capabilities were notified and were given

the reasons why their statement of capabilities was rejected, if requested. 3.20 Procurement Schedule (2010-01-11) (a) Early in the process, contracting officers should develop a procurement schedule for the entire

procurement cycle in consultation with the client. The following, as applicable, must be taken into consideration:

(i) review and analysis of the client's requirements; (ii) time for Request for Information process; (iii) the Procurement Review Committee process; (iv) assessment/approval for the use of a fairness monitor; (v) approval of the Procurement Plan or the Contract Planning and Advanced Approval; (vi) solicitation documents preparation; (vii) translation requirements; (viii) the time required for the preparation of and the receipt of bids, offers or arrangements,

including site visits and bidders conference, if applicable; (ix) bidding period, and extensions;

Supply Manual Page 10 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(x) technical evaluation period; (xi) financial evaluation; (xii) benchmarking or other pre-award testing; (xiii) recommendations from legal and financial reviews; (xiv) the evaluation process; (xv) the requirement for negotiation; (xvi) the obtaining of security clearances; (xvii) the level of approval required; (xviii) approval document preparation; (xix) any other item that might contribute to the time to complete the procurement.

(b) In the normal course of events, final draft submissions must be received by the Treasury Board

(TB) Secretariat seven weeks before being scheduled on a TB agenda. (c) Overall, the contracting officer should expect at least 16 weeks process time for a qualified bid,

offer or arrangement to obtain TB approval. The overall procurement process may take as much as six months to effect a major procurement for the client, assuming there are no challenges during the process. When it is reasonable to expect that a TB approval will be required, the validity period must be sufficient to ensure that bids, offers or arrangements are still valid when the TB approval is received.

3.25 Trade Agreements Tendering Approaches (2010-01-11) (a) The government achieves competitive contracting through two sourcing methodologies, which

include: electronic bidding through an open bidding process, and traditional bidding using suppliers lists.

(b) The three tendering approaches under the trade agreements are:

(i) Open Tendering: Where a Notice of Proposed Procurement (NPP) is advertised and, any supplier may submit a bid;

Open Tendering is the preferred approach.

(ii) Selective Tendering:

(A) involving the use of a one-time list of qualified suppliers:

This is a two stage procurement where potential suppliers express an interest in participating and meet predetermined qualifications for participation publicized in the NPP at the first stage. Tender documentation is issued to those suppliers meeting the qualifications at the second stage. For the North American Free Trade Agreement (NAFTA) and the World Trade Organization Agreement on Government Procurement (WTO-AGP), an NPP must be published at both stages of the procurement (it is also acceptable to amend the original NPP once the tender closing date has been determined). Any supplier who wishes to bid at the second stage may do so, as long as there is sufficient time to carry out the qualification process;

(B) involving the use of a permanent list of qualified suppliers*:

This is where a source list is developed and maintained and qualified suppliers for the product or service in question are issued the bid documentation. Any other potential supplier who requests bid documentation must be considered. For NAFTA, WTO-AGP and the Agreement on Internal Trade (AIT), an annual notice

Supply Manual Page 11 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

of the existence of the source list must be published (use the NPP form). For AIT, when using a source list, all qualified suppliers in a given category on a source list must be invited to bid for all procurement in that category.

(iii) Limited Tendering: A process that allows for deviations from the above procurement

practices. In situations, where a specific limited tendering justification can be applied, limiting the number of suppliers, to one or more suppliers, is allowed. While limited tendering is often used for sole source procurements, it can also be used in competitive procurements.

*A permanent list of qualified suppliers is also known as a source list.

(c) For a procurement subject to the Comprehensive Land Claims Agreements (CLCAs), the

contracting officer must check the particular CLCA to ensure that correct notification has been provided.

(d) For the procedure for publication on GETS, see 4.75.20. In addition to the above, specific

government enterprises (Crown corporations) subject to NAFTA, Annex 1001.1a-2), may use a notice of planned procurement to advertise potential procurements. This notice is normally published at the start of a fiscal year and lists potential procurements for the enterprise in the upcoming fiscal year.

A response from potential suppliers to a notice of planned procurement is not required. The notice of planned procurement may also be used as a notice regarding a qualification system. When used in this manner, a response from suppliers would be required. Tender documentation is issued to those suppliers meeting the qualifications.

3.30 Methods of Supply (2010-01-11) (a) There are essentially three methods of supply for procuring goods and services, which may be

used competitively and non-competitively by PWGSC, which are:

(i) contracts; (ii) standing offers, and (iii) supply arrangements.

(b) The contracting officer, in consultation with the client, chooses the method of supply that best

satisfies the client's requirements. (c) Contracts for goods and services are typically used for unique requirements for a client

department, but they may also be used to meet the requirements of more than one department when the requirements are clearly defined.

(d) Standing offers are issued by PWGSC when it is possible to clearly define the requirement but

expected quantities are not known. Standing offers may authorize clients to make call-ups for goods or services directly to offerors.

(e) Supply arrangements are issued by PWGSC when the requirement can not be clearly defined

and may allow clients to enter into contracts and solicit bids directly from pre-qualified suppliers. These three methods are described in further detail in the following sections.

3.35 Contracts (2010-01-11)

Supply Manual Page 12 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(a) Contracts are generally used to meet unique, non-repetitive requirements of departments, where

a standing offer or supply arrangement is not warranted. For more information on when to use a standing offer or supply arrangement, see 3.40 and 3.45.

(b) For more information on the required content of a contract, see Chapter 4. 3.35.1 Task Authorization Contracts 3.35.1.1 Task Authorization Contract - Description (2010-01-11) (a) Public Works and Government Services Canada (PWGSC) uses a variety of approaches to meet

procurement requirements. This spectrum ranges from specific contracts which precisely define the deliverables to be provided to a specific client by a specific date, to various procurement frameworks for use by several or many departments and agencies, for sometimes less specific or well defined needs. Included in the latter are standing offers, supply arrangements, and contracts with components activated by task authorizations.

(b) A Task Authorization (TA) is a structured administrative process enabling the client to authorize

work by a contractor on an "as and when requested" basis in accordance with the conditions of an existing contract. Contracts that provide for the use of TAs ("TA contracts") are mainly used in service contracting situations where a definite need for a category of service exists, but the precise nature and timing of the need cannot be set out in advance. The use of TAs must be specifically provided for in the contract. When the client requires the services, a TA is issued to instruct the contractor to carry out the specified work.

(c) The following types of requirements are examples of when a task authorization contract might be

considered appropriate:

(i) Professional Services; (ii)) Informatics Professional Services; (iii) Technical Investigation and Engineering Studies (TIES); (iv) certain types of Repair and Overhaul (R&O) services.

(d) The Department of National Defence (DND) is perhaps the largest user of TA contracts and has a

well-defined internal process to administer this type of requirement. 3.35.1.5 Task Authorization Contract – Process (2010-01-11) (a) Clients may request that task authorizations be included in a new contract. Equally, PWGSC

contracting officers may determine that the needs of the client(s) would be best met by the use of task authorizations issued on an "as and when requested" basis.

(b) Client project or program authorities may issue TAs to have work performed within the scope of

the contract, up to financial limits established by PWGSC in consultation with the client. These limits are established taking into consideration a number of factors. In general, the more closely the contract scope has been defined, and the more specifically individual tasks may be defined, the higher the limit that can be placed on individual TAs by clients. Conversely, where the overall contract and individual tasks have a broader scope and tasks will require significant negotiation to define and put in place, it is prudent that individual task authorization limits be lower. Furthermore, the greater the number of client representatives issuing TAs, the closer the need for oversight by PWGSC and the client (particularly of total expenditures against the contract).

Supply Manual Page 13 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(c) Where required work falls outside the scope of a TA contract, some other approach must be used to meet the client's requirement (such as a new contract).

(d) TA contracts must not be put in place, unless there are clear mechanisms for information

transmittal and reporting that will ensure timely oversight by the client and PWGSC of the status of the contract.

(e) TA contracts are service contracts. They must not be used to have the contractor acquire goods

on behalf of the client, in order to circumvent the normal procurement process. However, in order to provide the required service, it may be necessary for the contractor to purchase and/or supply incidental goods, which will later become the property of the government. Where this incidental purchase of goods is necessary, the conditions for this must be addressed in the contract, with appropriate limitations defined.

(f) The minimum approval authority for TA contracts, and for amendments which will amend the

provisions of a TA contract, is a director level. Directors are accountable for ensuring that the planned contract will be properly managed, including appropriate procedures for administering the TA process and appropriate control and reporting of expenditures under TAs.

(g) Directors General must maintain an oversight of all TA contracting activity within their sector or

region. (h) Directors General may approve or prohibit classes of procurement in which TAs may be used.

TAs must not be included in contracts for shipbuilding or ship refit requirements. (i) In addition, the following work authorizations issued under Repair and Overhaul (R&O) contracts

are not considered as TA contracts:

(i) Selection Notice and Priority Summary (SNAPS); (ii) Repairable Materiel Request (RMR); (iii) Quartermaster Transfer Orders (QTO); (iv) Vehicle Movement Orders (VMO).

(j) However, the following types of work authorizations issued under R&O contracts are considered

as task authorizations, and any R&O contract allowing for task authorizations is subject to the provisions of the task authorization contract requirements defined herein.

(i) Additional Work Requirements (AWR); (ii) Mobile Repair Party (MRP); (iii) Special Investigations and Technical Studies (SITS); (iv) R&O work currently authorized on an "as and when requested" basis through the use of

forms such as the Project Work Order (PWO). Note that DND now uses the DND626 task authorization form in lieu of the PWO.

(k) A description of the TA process is contained in Annex 3.4. 3.40 Standing Offers (2010-01-11) (a) A standing offer is a continuous offer from a supplier to Canada that allows Canada to purchase

goods and services, as requested, through the use of a call-up process which incorporates the conditions and pricing of the standing offer.

(b) A standing offer itself is not a contract. A separate contract is formed each time a call-up for the

provision of goods and/or services is made against a standing offer. When a call-up is made, it constitutes an unconditional acceptance by Canada of the supplier’s offer for the provision, to the

Supply Manual Page 14 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

extent specified, of the goods and/or services described in the standing offer. Canada’s liability is limited to the actual value of the call-ups made by the identified user(s) within the period the standing offer is valid.

(c) This method of supply is used to satisfy the requirements of departments and agencies for a

specified period, when precise details on expected quantities for the period are not known in advance.

(d) For a description of the five types of standing offers that may be authorized, see 7.10.1. (e) A standing offer may be valid for one or more years, and is often for a predetermined initial period

with a preapproval to extend the offer for one or more additional years. The selection of the appropriate time period is a process that varies significantly by individual commodity.

(f) The quantity of goods and/or level of services specified in the Request for Standing Offers

(RFSO) and the resulting standing offer(s) are only an approximation of the requirements given in good faith by Canada to the offerors.

(g) All government policies, regulations and procedures related to contracting, including those

required under the trade agreements, apply to the standing offer method of supply. (h) The total estimated expenditure of the requirement (the anticipated total value of all accumulated

call-ups) proposed to be satisfied by the standing offer method of supply, Goods and Services Tax/Harmonized Sales Tax (GST/HST) included, must be used to determine the applicability of any procedures required by any trade agreement to which the Government of Canada is signatory.

(i) Contacting officers should consider using a standing offer where appropriate considering the

advantages and disadvantages of the approach:

(A) Advantages of a standing offer method of supply may include:

(1) client service (with a standing offer in place, clients can place orders quickly); (2) no commitment (risk of overestimating the need is eliminated)

(B) Disadvantages of a standing offer approach may include:

(1) no commitment (supply is not guaranteed at that price since offeror may withdraw);

(2) best value (with no commitment, prices may be less competitive). (j) Standing offers may be either competitive (see Standard Acquisition Clauses and Conditions

Manual standard instructions 2006) or non-competitive (see standard instructions 2007) in nature. (k) For more information on the competitive solicitation process for RFSOs, see Chapter 4. (l) A standing offer may be directed on a non-competitive basis to one offeror for its full range of

catalogue goods or services. The non-competitive approval authorities would then apply. (m) The standing offer is usually considered for goods and services when:

(A) One or more clients repetitively order(s) the same range of goods, services, or both, and the actual demand (for example, quantity, delivery date, delivery point) is not known in advance;

(B) Some of the following conditions are present:

Supply Manual Page 15 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(1) the goods, services, or both are well defined; (2) prearranged prices or a prearranged pricing basis can be established at the

outset, usually through competition, and there is no need nor any intention to negotiate them at the time of the call-up;

(3) the goods and services, or both are readily available and are to be ordered

(requested through a call-up), if and when the requirements arise, and (4) at the time of the call-up, there is no need, nor any intention to further negotiate

contractual terms and conditions. (n) The standing offer method of supply cannot be used when:

(i) prices, pricing basis or conditions are not stated, or are subject to change at any time at the discretion of the supplier;

(ii) the identified users of the standing offers intend to negotiate further the prearranged

prices, pricing basis, or conditions of the standing offer, or (iii) it is intended to solicit bids each time goods or services are required. In these cases,

another method of supply such as a supply arrangement should be considered. (o) Departments and agencies are authorized by PWGSC to make call-ups against each standing

offer, as defined in the standing offer. See 4.10.20.1(a). (p) If only one standing offer will be authorized for use, the offer that meets all the requirements of

the RFSO and provides best value (highest ranked) will be retained and the competitive contract authorities can be used for call-ups.

(q) When procedural requirements of any trade agreement apply to a standing offer method of

supply, the complete procurement process, including all standing offers authorized for use and the resulting call-ups, fall within the purview of the Canadian International Trade Tribunal.

3.45 Supply Arrangements (2010-01-11) (a) A supply arrangement (SA) is a non-binding arrangement between Canada and a pre-qualified

supplier that allows departments and agencies to award contracts and solicit bids from a pool of pre-qualified suppliers for specific requirements within the scope of the SA.

(b) An SA is not a contract for the provision of the goods and services described in it and neither

party is legally bound, as a result of signing a supply arrangement alone. The intent of a supply arrangement is to establish a framework to permit expeditious processing of individual bid solicitations, which result in legally binding contracts for the goods and services described in those bid solicitations.

(c) An SA may be used when:

(i) a commodity is procured on a regular basis (goods or services); (ii) a standing offer is not suitable, due to variables in resulting call-ups (e.g. varying

methods/basis of payment, or the statement of work or commodity cannot be adequately defined in advance);

Supply Manual Page 16 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(iii) a simplified solicitation, undertaken by users/clients, can be used to obtain competitive bids from the pre-qualified suppliers;

(iv) selection will be based on best value, as described in the SA and the subsequent

solicitation; and (v) it is more efficient for PWGSC to operate as the provider of the framework on behalf of

other users/clients and not as the contracting officer. (d) Supply arrangements are generally issued following a Request for Supply Arrangement process.

For more information on the solicitation process, see Chapter 4. When developing the procurement strategy, contacting officers should consider the following:

(i) if national and international trade agreements apply to the solicitation (see 3.50); (ii) whether or not ceiling prices will be included in the SAs; (iii) how security requirements will be managed (i.e. what are the base security requirements

and how are different security requirements managed.). The contracting officer must ensure that a contract resulting from an SA contains the proper security requirements;

(iv) how the use of the SA will be monitored and reported.

(e) Each SA should contain clear instructions on how to use the SA and identify which departments

and agencies can use them. (f) A requirement that would normally be covered by the trade agreement is still covered when

solicited or contracted through the use of a supply arrangement method of supply.

(i) The use of this method of supply is considered selective tendering under the North American Free Trade Agreement and the World Trade Organization Agreement on Government Procurement. Therefore, a Notice of Proposed Procurement (NPP) must be posted for each separate procurement under an SA that is over the relevant trade agreement threshold and to provide the time periods required by the agreements. For more information, see 4.10.25.5 and 4.10.25.10.

(ii) The use of this method of supply is considered to be the use of a source list under the

Agreement on Internal Trade (AIT). The AIT does allow the use of source lists without publication of a separate NPP for each requirement, provided that all suppliers on the source list be invited to bid and that suppliers be able to get on the list at any time.

3.50 Procurements Subject to Trade Agreements 3.50.1 General Procurement (2010-01-11) (a) For procurements subject to the North American Free Trade Agreement (NAFTA), the World

Trade Organization Agreement on Government Procurement (WTO-AGP) or the Agreement on Internal Trade (AIT), or a combination of these, public advertisement/notification provisions specified within these trade agreements must be followed. This includes any mini-tenders for procurements made against a supply arrangement. The procedures to be followed are generally consistent for all of the agreements. When there are inconsistencies, the contracting officer must select the provisions that demonstrate the highest example of openness, for example, the longer of two solicitation periods.

Supply Manual Page 17 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(b) The provisions for public advertisement/notification are described in each of the following trade agreements:

(i) North American Free Trade Agreement, article 1010; (ii) World Trade Organization - Agreement on Government Procurement, article IX; (iii) Agreement on Internal Trade, article 506, paragraph 2. (referred to as a "call for tenders")

(c) For more information on determining when the trade agreements (NAFTA, WTO-AGP, AIT)

apply, see Chapter 1. (d) With certain exceptions, competitive procurements subject to NAFTA, WTO-AGP or AIT must be

advertised on the Government Electronic Tendering Service (GETS). In appropriate circumstances, potential suppliers may be contacted directly after the notice has been posted, in accordance with the procedures outlined in 4.75.35.

3.50.5 Applicability of Trade Agreements to Standing Offers and Supply Arrangements (2010-01-11) (a) Contracting officers must determine whether any or all of the trade agreements apply to each

procurement. (b) The applicability of the trade agreements (NAFTA, WTO-AGP or AIT) to standing offers and

supply arrangements depends on three factors:

(i) if the department for which the standing offer/supply arrangement is intended is subject to the agreements;

(ii) if the good or service is subject to the agreements; and, (iii) if the total estimated value of all the call-ups (contracts) against a standing offer or all

contracts under a supply arrangement (which determines the total estimated value of the offer or arrangement) is above the NAFTA, WTO-AGP or AIT thresholds.

(c) The total estimated value is determined before tendering, at which time it is identified whether or

not any of the trade agreements apply. If they do apply, SOs and SAs are solicited in accordance with the agreements.

(d) Subsequent individual call-ups/contracts cannot be made under the standing offer/supply

arrangement without considering trade agreement applicability, and may be subject to a challenge directed to CITT by suppliers.

(e) For more information on trade agreements and the use of supply arrangements, see 4.10.25.5 to

4.10.25.20. 3.55 Industrial Security Requirements (Personnel or Organization) (2010-01-11) Contracting officers should take into account any industrial security requirement when developing the procurement strategy and also when determining the procurement schedule. Procurement strategy and approval documents should identify the existence of any security requirements. 3.55.1 Security and Timelines (2010-01-11)

Supply Manual Page 18 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(a) Procurement schedules must take into account that the organization and personnel security screening process may take a considerable length of time. The contracting officer must provide as much lead time as possible to Canadian Industrial Security Directorate (CISD) to process organization or personnel security screenings, as well as to give time to bidders to implement security recommendations before contract award.

Note: If foreign-based suppliers are identified, contact CISD for applicable clauses and

verification of security. If security clearances are required for foreign-based suppliers, the timeframes required to provide them could have a significant impact on the procurement schedule.

(b) Personnel Security Screening

The approximate timeframes for completing a personnel security screening are as follows:

(i) Simple Reliability Status: 2 working days; (ii) Complex Reliability Status: 52 days (100 days if out of country check is required); (iii) “Confidential”/”Secret” Clearance: 62 days (an additional 100 days if out of country check

is required); (iv) Top Secret Clearance: 100 days (an additional 100 days if out of country check is

required), and (v) NATO Clearance: 100 - 200 days (non-Canadian citizen).

Note: Reliability checks may be more complex and take additional time to process. This occurs

when a request for fingerprints is made in order for Canada to uniquely identify the individual applying for a reliability clearance.

(c) Organization Security Screening

The approximate timeframes for an organization security screening are as follows: (i) Designated Organizational Screening (DOS): two months (faster if the supplier responds

in a timely manner), and (ii) Facility Security Clearance (FSC): up to one year depending on the complexity of the

supplier's organization. All key senior officials need to be cleared as well as those performing the work of the contract.

3.60 Low Dollar Value Procurements 3.60.1 Requirements (2010-01-11) (a) Requirements below $25,000, including all applicable taxes, are considered to be low dollar value

(LDV) procurements. When identifying an LDV requirement, based on the estimated value of the final contract, contracting officers must:

(i) not split or artificially divide requirements to meet the LDV threshold (see 6.1); (ii) procure LDV requirements below $25,000, including all applicable taxes, using the most

efficient and cost effective approach to select a contractor, either by soliciting bids or by directing the requirement to a sole supplier when it is not cost effective to solicit bids;

(iii) determine the most appropriate procurement strategy for each LDV requirement in order

to obtain best value and ensure the timeliness and cost effectiveness of each contract, while respecting Public Works and Government Services Canada (PWGSC's) guiding

Supply Manual Page 19 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

principles, which include client service, competition, accountability and equal treatment (see 1.10.5)

(b) Contracting officers should use the electronic tools available to identify and select a supplier on a

competitive or directed basis. Examples of such tools include:

(i) Supplier Registration Information (SRI) service; (ii) Automated Vendor Rotation System (AVRS); (iii) SELECT; (iv) Government Electronic Tendering Service (GETS); (v) telephone and online trade directories.

(c) Contracting officers must document the procurement file with the rationale to support the

procurement strategy, and must also document the basis on which the estimated value of the contract, that is, below $25,000, was established.

3.60.5 Geographic Factors and Low Dollar Value (2010-01-11) Regional offices will source requirements below $25,000, including all applicable taxes, within their geographic area, provided the area has adequate sources of supply, which may include foreign-based suppliers of foreign goods or services, and offers the required level of service to clients and fair market value for the taxpayer’s dollar. 3.65 Green Procurement Strategy (2010-01-11) (a) Successful implementation of the Policy on Green Procurement requires the identification and

implementation of environmental performance opportunities at both the strategic and operational levels, taking into consideration specific departmental buying patterns, sustainable development targets and other Government of Canada priorities.

(b) In developing the procurement strategy, departments must consider opportunities to advance the

protection of the environment and support sustainable development. Contracting officers must document the environmental considerations and decisions taken in relation to the integration of environmental requirements.

(c) For commodities under the commodity management framework, contracting officers must

develop a green procurement plan and procurements must be done in accordance with this plan. The completed plan serves as an example of green procurement best practices.

(d) Contracting officers can refer to Annex 2.2 to identify those factors, which need to be addressed

in the procurement strategy. (e) For more information on environmental issues and mitigating actions to support the Policy on

Green Procurement, go to the Environmental Awareness Tool Kit under Developing Green Procurement Specifications, and the section 3.2, Selection According to Technical Capacity, of the Guideline for Integration of Environmental Performance Considerations in Federal Government Procurement. The various environmental performance considerations listed in the Green Procurement Checklist must also be considered.

3.70 Industrial and Regional Benefits (IRB) Program (2010-01-11)

Supply Manual Page 20 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(a) The government has determined that its procurement actions should be consistent with and supportive of such national objectives as industrial and regional development, and other national objectives such as aboriginal economic development, the environment and other approved socio-economic objectives.

(b) The objective of the Treasury Board Procurement Review Policy is to enhance the use of

procurement in support of national socio-economic objectives in a manner that is fully consistent with the government’s other objectives, e.g., the pre-eminence of operational requirements, competition, fairness and accessibility, all within Canada's international trade obligations.

(c) The procurement strategy for goods and services over $2,000,000 must be considered for

potential socio-economic benefits to ensure that maximum benefit to Canada is achieved. The primary mechanism for selection for the review for socio-economic benefits is inclusion in the department’s annual short range acquisition plan.

(d) The review process is carried out by the interdepartmental Procurement Review Committee

(PRC), which is responsible for providing linkages between the government's national objectives and individual procurements. Contracting officers should refer to Annex 3.5 for details on the process to be followed.

(e) The PRC consists of a number of federal departments: PWGSC (the chair), the client department,

Industry Canada, the regional agencies/departments, Indian and Northern Affairs Canada, Environment Canada, Human Resources and Skills Development Canada, National Research Council, Finance Canada and the Treasury Board Secretariat.

(f) Industry Canada and the regional economic agencies/departments review procurements for

potential industrial and regional benefits. For more information on the Industrial and Regional Benefits Program, see 9.45. The other departments, such as Indian and Northern Affairs Canada, review the procurements for opportunities to achieve other national objectives, such as Aboriginal economic development.

(g) The PRC makes recommendations to the operating and contracting departments regarding

appropriate procurement strategies and other initiatives that would support government objectives in individual acquisitions.

(h) Mandatory procurement review does not apply in the following situations:

(i) foreign aid by or on behalf of the Canadian International Development Agency; (ii) procurements by the Canadian Commercial Corporation on behalf of entities not subject

to this policy, for example, foreign governments; (iii) the acquisition, modification and routine maintenance of real property, and (iv) security requirements by or on behalf of the Canadian Security Establishment of the

Department of National Defence; the Canadian Security Intelligence Service; and the Royal Canadian Mounted Police for the purpose of pursuing criminal investigations.

Note: Notwithstanding this exemption, the above organizations must apply the principles of the Policy where appropriate, consistent with the security requirements of their procurement. (i) In cases of emergency, as defined in the Treasury Board (TB) Contracting Policy, departments

may enter into contract without submitting the strategy for procurement review pursuant to TB Procurement Review Policy. Such action should be noted in any subsequent submission or report to TB or TB Secretariat (if such a submission or report is required), and should also be reported to the PRC Secretariat within 60 days.

Supply Manual Page 21 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(j) The PRC divides procurements into the following categories:

(i) those covered by international trade agreements, and (ii) all others, including requirements subject to the Agreement on Internal Trade (AIT), with

the following exceptions: (A) Foreign Military Sales; (B) security services; (C) temporary help services; (D) procurements under the Munitions Supply Program; (E) requirements subject to the Shipbuilding Policy.

Note: Procurement covered by international trade agreements is not reviewed for socio-

economic benefits, except for set-aide for minority business. (k) The Advisory Council on Repair and Overhaul (ACRO) will carry out the socio-economic benefits

review for military repair and overhaul requirements, under the strategic direction of the PRC. (l) For Major Crown Projects (MCPs), or those requirements exceeding $100 million, a Senior

Project Advisory Committee (SPAC) will normally be set up and the SPAC will, in accordance with the TB Policy on Management of MCPs and will carry out procurement review function. If a SPAC is not set up, then the PRC will review the procurement. For more information on MCPs, see 9.5.

(m) For proposed procurements between $2 million and $100 million, the contracting officer must

complete a “Detail Document” to be forwarded to the PRC Secretariat, once it has undergone the respective sector approval processes. It must be kept on the contract file.

(o) Copies of the Detail Document and the Record of Decision must be retained on the procurement

file. 3.75 Small and Medium Enterprise 3.75.1 Office of Small and Medium Enterprises Role and Initiatives (2010-01-11) (a) The Office of Small and Medium Enterprises (OSME), as part of the government of Canada,

supports the government agenda to provide value for Canadians by:

(i) encouraging and assisting small and medium enterprises (SMEs) to participate in the federal government procurement process;

(ii) improving the links between supply and demand and influencing change within

government acquisitions, and (iii) conducting economic analysis of Government of Canada procurement and the private

sector. For more information, visit the Office of Small and Medium Enterprises Web site.

(b) The Office performs six activities in support of smaller suppliers, as follows:

(i) provides information and advisory services to SMEs that want to do business with the

government;

Supply Manual Page 22 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(ii) helps reduce competition barriers and simplify the government contracting process; (iii) identifies and pursues opportunities that encourage the introduction of innovative new

goods and services; (iv) collaborates to improve procurement policies and best practices; (v) works closely with the SME community to ensure their concerns and views are brought

forward and heard; and (vi) engages with SMEs to interest them in federal government opportunities.

3.75.5 PWGSC On-Line Tools/Services and OSME Role (2010-01-11) The Office of Small and Medium Enterprises (OSME) offers the following demonstrations of on-line tools to individuals and groups: (a) Supplier Registration Information (SRI) service: Directory of suppliers who want to do business

with the federal government. This database is accessible to all federal government buyers and administrative authorities. It is important that suppliers register with SRI as this database is the start of the contracting process.

(b) Procurement Allocations Directory is a list of key purchasing contacts in PWGSC offices. (c) Government Electronic Tendering System (MERX™): This is the Government of Canada’s tool

for advertising federal procurement opportunities, subject to trade agreements. The SRI places the supplier in the contracting process while MERX is a major source of information on contract opportunities for suppliers.

3.80 Comprehensive Land Claims Agreements (2010-01-11) Any contracting officer who receives a requisition with deliveries to a location that is subject to a Comprehensive Land Claims Agreement (CLCA) must consult 9.35 for information on the CLCA obligations that have to be addressed during the procurement process. 3.85 Procurement Strategy for Aboriginal Business (2010-01-11) All federal government departments are encouraged to set-aside some procurements for competition by Aboriginal suppliers provided operational requirements are fully met. For more information on the Procurement Strategy for Aboriginal Business, see 9.35. 3.90 Former Public Servants (2010-01-11) (a) Contracts with former public servants in receipt of a pension or of a lump sum payment must bear

the closest public scrutiny, and reflect fairness in the spending of public funds. (See section 16.8 of the Treasury Board Contracting Policy.)

(b) A former public servant is any former member of a department as defined in the Financial

Administration Act, a former member of the Canadian Armed Forces or a former member of the Royal Canadian Mounted Police. A former public servant may be:

Supply Manual Page 23 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(i) an individual; (ii) an individual who has incorporated; (iii) a partnership made of Former Public Servants, or (iv) a sole proprietorship or entity where the affected individual has a controlling or major

interest in the entity. (c) Retirement Waiting Period

When contracting for the services of a former public servant or a former public officer holder, the provisions of the Conflict of Interest Act, the Post-Employment Measures contained in the Values and Ethics Code for the Public Service, and the Conflict of Interest and Post-Employment Code for Public Office Holders apply. These codes provide information on the applicability of the retirement waiting period.

(d) Approval Authority

Treasury Board approval may be required for a contract with a former public servant, depending on the value or the situation. For more information, see Annex 6.4.1, section 1.1.1. The retirement waiting period does not apply to former members of the Canadian Forces or the Royal Canadian Mounted Police (RCMP).

(e) Fee Abatement

(i) For non-competitive contracts with former public servants in receipt of a pension pursuant to the Public Service Superannuation Act, the fee abatement formula below applies in the determination of the maximum fee payable during the one-year fee abatement period.

(ii) For non-competitive contracts with former public servants in receipt of a pension and a

lump sum payment, the application of the fee abatement formula is postponed to have it begin at the conclusion of the lump sum payment period.

(iii) Fee Abatement Formula

D = ((M+F)/260) - (P/260) D = maximum payable per diem rate; M = maximum salary of the former public servant, updated to the current level, or the estimated salary cost of having the work done by a qualified public servant; F = cost of usual fringe benefits, 30 percent; P = total annual pension in pay: Example: Maximum salary = $60,000; benefits are 30 percent of salary;

Pension after 35 years of service = $42,000 ($60,000 x 0.7); Per Diem = (60,000 + 18,000)/260 - 42,000/260 = $138.46 Note: A “pension” in the context of the fee abatement formula is a pension or annual

allowance paid under the Public Service Superannuation Act (PSSA) and any increases paid pursuant to the Supplementary Retirement Benefits Act, as it affects the PSSA. It does not include pensions payable pursuant to the Canadian Forces Superannuation Act, the Defence Services Pension Continuation Act, the Royal Canadian Mounted Police Pension Continuation Act

Supply Manual Page 24 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

and the Royal Canadian Mounted Police Superannuation Act, the Members of Parliament Retiring Allowances Act and that portion of pension payable to the Canada Pension Plan Act.

(iv) In accordance with Workforce Reduction Programs, for non-competitive contracts with

former public servants in receipt of a pension AND a lump sum payment, the application of the fee abatement formula is postponed to have it begin at the conclusion of the lump sum payment period. See article (f) below.

(v) No exceptions to the application of the formula or to the maximum rate allowed must be

permitted without prior TB approval. (f) Workforce Reduction Programs

(i) In addition to the requirements of the Contract Fee Abatement Policy for former public

servants in receipt of a pension, the amount payable for professional fees to former public servants, whether they are in receipt of a pension or not, members of the Canadian Forces, and members of the RCMP, who have received a lump sum payment for employment termination under a workforce reduction program or adjustment initiative, has been limited during the lump sum payment period.

(ii) The Contract Fee Limit Policy does not apply if the contract is not specifically for the

services of a former public servant. (iii) For purposes of this policy, the “lump sum payment period” is defined as the period

measured in weeks of salary, for which payment has been made to facilitate the transition to retirement or to other employment as a result of the implementation of various programs to reduce the size of the Public Service. The lump sum payment period does not include the period of severance pay, which is measured in a like manner.

(iv) For competitive or non-competitive service contracts awarded to a former public servant

during the lump sum payment period, the total amount of fees that may be paid is $5,000, including Goods and Services Tax or Harmonized Sales Tax, as applicable. The Contract Fee Limit Policy applies to all former public servants, including former members of the Canadian Forces and the Royal Canadian Mounted Police, in receipt of a lump sum payment.

(v) Reasonable overhead costs, such as travel expenses, are excluded from the $5,000 limit.

However, due to the sensitivity of these contracts, these costs should be strictly controlled. Departments and agencies must obtain Treasury Board approval for all contract situations where former public servants could receive fees totalling more than $5,000 during the lump sum payment period.

(vi) When a former public servant works as a salaried employee of, or a subcontractor to, an

established supplier contracting with Canada, the Contract Fee Limit Policy does not apply.

3.95 Intellectual Property (2010-01-11) (a) Before issuing a solicitation or awarding a contract, the contracting officer must identify what

intellectual property (IP) is already existing before contract award and, conversely, what IP will be generated as a result of the contract. In addition to reducing future costs, disputes can be avoided by being clear upfront.

Supply Manual Page 25 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(b) Intellectual property is anything resulting from a contract that can be copyrighted, trademarked, patented, licensed, etc. Potentially, any contract can have IP. The likelihood for IP is much greater where the goal of the contract is something new, or might incorporate new processes. IP considerations are most relevant to research and development contracts, software development, or where the production of new written material occurs. A definition of “Intellectual Property” and Intellectual Property Rights” can be found in Standard Acquisition Clauses and Conditions Manual general conditions 2040.

(c) Contracting officers can find complete details on the IP policy as per following Treasury Board

policies:

(i) Policy on Title to Intellectual Property Arising Under Crown Procurement Contracts; (ii) Implementation Guide for the Policy: Title to Intellectual Property Arising Under Crown

Procurement Contracts; (iii) TBS Contracting Policy Notice 2000-2: Revised Policy on Ownership of Intellectual

Property Arising Under Crown Procurement Contracts. (d) The default position of the government policy is to allow contractors to retain the rights to IP

generated under government contracts. This is designed to promote the commercialization of new ideas, under the premise that the private sector has a greater capacity in this regard. Exceptions are described in the Policy references above.

(e) The contracting officer must therefore determine at the planning stage, how IP will be handled,

what IP is anticipated and how the IP will be identified and secured for the use of the client and Canada. Once again, this process can have very long timeframes and can have extremely complex processes. The greatest pitfall with IP is in not identifying what is the foreground information and the background information upfront and if left to the end of the contract, Canada is at a severe disadvantage.

(f) The client department must decide to what extent IP rights are to be retained by Canada.

However, the contracting officer should discuss with the client department their needs in order to ensure that the client department is aware of the extent to which PWGCS can obtain for them the rights they need to use the IP created under their contract, whether Canada or the contractor owns the IP. For instance, subject to industry practice, Canada may not be able to obtain IP ownership, even when desired. In such cases, Public Works and Government Services Canada (PWGSC) contract clauses are designed with the goal of ensuring that even where the contractor owns the IP, this does not affect the client department's ability to use the IP, except that such use would not extend to commercialization of the IP by Canada.

(g) A summary of PWGSC's contractual options is shown in the table below.

Table 1: Contractual Options for Ownership of Intellectual Property

Research and Development

(R&D)

Goods with Associated

R&D Goods with no R&D Expected

Services with no R&D Expected

Default Contractor to

Retain IP Ownership

Contractor to Retain IP

Ownership

Canada to Retain

Copyright

Canada to retain copyright

Intellectual Property Options

Options Canada to Retain IP Ownership

Canada to Retain IP

Ownership

Contractor to Retain IP, including Copyright

Contractor to Retain IP, including Copyright

Supply Manual Page 26 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

No IP Terms in the Contract

No IP Terms in the Contract

3.100 Vendor Performance Corrective Measures (2010-01-11) For more information on the Vendor Performance Policy, contracting officers should consult 8.180. For more information on the vendor performance during the evaluation process, see 5.55. 3.105 National Security Exceptions 3.105.1 Trade Agreements and Invoking a National Security Exception (2010-01-11) The national security exception (NSE) provided for in the North America Free Trade Agreement (NAFTA), the World Trade Organization Agreement on Government Procurement (WTO-AGP), the Canada-Chile Free Trade Agreement (CCFTA) and the Agreement on Internal Trade (AIT) allow Canada to exclude a procurement from some or all of the obligations of the relevant trade agreement(s), where Canada considers it necessary to do so in order to protect its national security interests specified in the text of the NSE. The purpose of the NSE must ensure that parties to the agreements are not required in any way to compromise these interests through application of the obligations of the trade agreements. 3.105.5 Texts of the National Security Exceptions (2010-01-11) (a) The relevant text for each trade agreement can be found as follows:

(i) for NAFTA, Article 1018: Exceptions; (ii) for WTO-AGP, Article XXIII: Exceptions to the Agreement; (iii) for the CCFTA, Article Kbis-16: Exceptions; (iv) for the AIT, Article 1804: National Security.

(b) The Canadian International Trade Tribunal (CITT), in its decision PR-98-005, has found that “the

most senior level of substantive policy formulation and advice to the department on all Acquisition Branch activities...” has the authority to invoke the use of the National Security Exception, to exclude a procurement from the NAFTA, WTO-AGP, CCFTA and the AIT. For Public Works and Government Services Canada (PWGSC), that authority is the Assistant Deputy Minister of the Acquisitions Branch (ADM/AB).

(c) Furthermore, on the basis of the authority given to the Minister under section 6 of the Department

of Public Works and Government Services Act, in conjunction with paragraph 24(2)(d) of the Interpretation Act, PWGSC has decided that this specific authority will not be delegated to a lower official level because of the nature of the exception. PWGSC has further decided that a NSE will not be invoked by anyone other than the ADM/AB, where PWGSC/AB is the contracting officer. See the procedures for invoking an NSE below.

(d) Invoking an NSE under the trade agreements does not affect the obligation to comply with the

Government Contracts Regulations in respect of such matters as sole source justifications, other sourcing strategy issues and contracting officer limits. Procurements for which an NSE is invoked remain subject to other relevant regulations and governmental and departmental policies, which may include posting a Notice of Proposed Procurement or an Advanced Contract Award Notice on the Government Electronic Tendering Service where appropriate, though the security requirements may, in some cases, preclude such actions.

Supply Manual Page 27 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

3.105.10 Procedures for Invoking a National Security Exception (2010-01-11) (a) All requests to invoke an NSE to exclude a procurement from the WTO-AGP, NAFTA, CCFTA or

the AIT, or any combination of the agreements, will normally be submitted by the client department to the ADM/AB for approval, regardless of dollar value, where PWGSC/AB is the contracting officer.

(b) A request must be in the form of a letter from the responsible ADM, or equivalent to the ADM

level, at the client department. The letter must explain the nature of the proposed procurement and, depending upon which trade agreement(s) applies, how it relates to:

(i) Canada's "national security interests" or, pursuant to Canada's international obligations,

"the maintenance of international peace and security". (AIT: Article 1804); and/or (ii) Canada's "essential security interests relating to the procurement of arms, ammunition or

war materials, or to procurement indispensable for national security or for national defence purposes". (NAFTA: Article 1018 (1) / WTO-AGP: Article XXIII (1) / CCFTA: Article Kbis-16 (1) ).

(c) In reviewing requests to invoke the NSE, the ADM/AB will be considering only the issue of

whether or not to invoke the NSE and will not be considering, at that time, other matters such as procurement methods, procurement plans or authority to enter into the contract. Client departments should work with the contracting officer in determining which method of procurement to be used, in parallel with any request for approval of an NSE. In situations where the NSE is invoked, it remains government policy to compete the requirement, subject to the exceptions to competitive contracting provided in the Government Contracts Regulations (GCRs).

(d) Requests for an NSE are reviewed by the Acquisition Program Integrity Secretariat (APIS) who

makes recommendations to the ADM/AB. Once the ADM/AB has made a decision whether or not to invoke an NSE, the ADM/AB will advise the client department in writing of the decision. For the approval process for NSE, see section 1.1.4 of Annex 6.4.1.

Note: Contracting officers seeking advice to aid client departments in properly framing and

requesting an NSE should contact APIS at 819-934-1382. It is strongly recommended that a draft of the NSE request letter be forwarded to APIS for review before having it signed by the responsible ADM at the client department. For a template of the NSE request letter, see Annex 3.7.

(e) The utilization of the NSE must be documented. In documents used to seek authority to enter

into contract, and on the file, the contracting officer must explain clearly that the NSE is being invoked, specifying each of the trade agreements from which the procurement is being excluded, and include a copy of the NSE approval on the file.

3.110 Legal Services (2010-01-11) (a) All Legal Services lawyers are officers of the Department of Justice. The role of the PWGSC

Legal Services is to provide legal services to PWGSC. Legal services relating to procurement must be sought only from the PWGSC Legal Services or from a regional office of Justice Canada, when the latter has agreed along with PWGSC Legal Services to provide counsel to a particular region. Legal Services involvement in the review of proposed contractual documents is intended to: (i) ensure that contracts are legally binding and enforceable and precisely reflect the

intended relationship between Canada and the contractor;

Supply Manual Page 28 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(ii) ensure that the respective obligations of the parties are expressed clearly and that the

interest of Canada are protected; (iii) identify the consequences of any changes to standard general conditions in terms of the

additional risk and liability being assumed by Canada. (b) Whenever legal involvement is required, contracting officers must provide the legal counsel

involved with access to all required documents and files. Legal counsels should be given the opportunity to review procurement documents at an early stage in the procurement process to facilitate the making of informed business decisions and incorporation of any required changes. For the procurement of goods and services, this means before the issuance of bid solicitations and requests for standing offers or for supply arrangements. For anything related to the administration of the contract, standing offer or supply arrangement, Legal Services must be consulted before any binding action is taken by contracting officers.

(c) Contracting officers must seek legal advice:

(i) when Senior Director, Regional Director, Director General, Assistant Deputy Minister, Deputy Minister, Minister or Treasury Board approval is required to enter into or amend a contract, or to issue or revise a standing offer or supply arrangement (see Chapter 6);

(ii) for contracts containing special conditions or deviations from PWGSC or Canadian

Commercial Corporation general and supplemental conditions; (iii) in all situations where the work has been completed pursuant to a verbal request from a

representative of a client and a confirming order has to be prepared; (iv) in all situations where a security must be obtained to ensure repayment of a debt or

satisfaction of an obligation to Canada, particularly for all contracts under which payment is secured by means of a letter of credit;

(v) for all letters of comfort, letters of intent and go-ahead letters; (vi) for all contracts where questions may arise regarding conflict of interest issues or the

post-employment code for former public servants; (vii) for all letters of credit; (viii) for any proposed assignment of a contract to a third party; (ix) for any case of receivership, insolvency or bankruptcy of a contractor; (x) for all terminations for default, convenience and mutual consent; (xi) for all defence contracts where the provisions of section 20 of the Defence Production Act

respecting title to any government issue or building may be applicable; (xii) for all memorandum of understanding and drafting of orders in council.

(d) Legal Services can also be contacted about any matter in respect of which a contracting officer believes legal advice would be appropriate or helpful. Some of these situations are identified below: (i) any proposed contract for services involving the possible development of an employee-

employer relationship;

Supply Manual Page 29 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(ii) any proposed contract where a clause providing for liquidated damages must be included

to cover late delivery or unsatisfactory performance of the work; (iii) disputes arising after the contract has been awarded; (iv) for discussions or communications with outside lawyers.

(e) Solicitor-Client Privilege

(i) Communications between a client and its lawyer are protected by the solicitor-client privilege and exempt from disclosure under the Access to Information Act. The solicitor-client privilege allows clients to disclose all relevant information to their legal counsel knowing that such information will remain confidential. There are however three conditions for the privilege to apply: (A) the communication must be with a practicing lawyer occupying a legal counsel

position within government (it would also include a non-government lawyer hired by the Department of Justice to provide legal services in certain circumstances);

(B) the communication must be for the purpose of giving or receiving legal advice, as

opposed to policy advice or non legal matters advice; (C) the request for legal advice and any advice given must have been intended to be

confidential. A notice "protected by solicitor-client privilege" may not be sufficient to prove that the parties intended that the communication be privileged. The proof will really be found from the actions of the client who must disclose the communication only to those persons who have a direct need to know depending on the circumstances of each case. Contracting officers must be particularly careful with e-mails containing legal advice and not forward them to persons who don't have a direct need to know.

(ii) All three conditions must be met for the privilege to apply. If any one of those conditions

is not met, all communications between the lawyer and the client relating to the subject matter will lose their privilege status.

(iii) The solicitor-client privilege is the privilege of the client, who alone can waive it either

intentionally or unintentionally. Intentional waiver occurs when a client, after consultation with its legal counsel, decides to disclose the privileged communications knowing the consequences of this action. Unintentional waiver occurs when, despite the fact that the parties still intend to keep the communication confidential, it is disclosed to a third party who does not have the need to know. Once the communication is revealed to a third party who does not have a need to know, the privilege is waived. This means that the legal advice is not protected anymore and is subject to disclosure under the Access to Information Act, if no other exception applies. This also means that all other communications between the legal counsel and the client relating to the same subject may loose their privilege and protection.

(iv) Communications subject to solicitor-client privilege can be subject to mandatory statutory

disclosure. For example, the Auditor General Act authorizes the Auditor General to review legal advice on matters relevant to her/his auditing function. The Auditor General however cannot disclose the legal advice. The disclosure to the Auditor General does not constitute a waiver of the privilege and the information remains confidential and is still protected by the privilege.

Supply Manual Page 30 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(v) Legal advice should not be disclosed without the knowledge and recommendation of legal counsel. All questions regarding solicitor-client privilege should be brought to the attention of Legal Services.

3.115 Bidders' Conferences and Site Visits (2010-01-11) (a) A bidders' conference is used to provide information to suppliers, and to ensure that all suppliers

receive the same information. A conference must be held only when such a meeting is required for suppliers to fully understand the proposed procurement. Supplier attendance is optional. (See Chapter 4)

(b) Attendance at site visits may be optional or mandatory. Mandatory site visits apply to all

suppliers, even those who contend they are already familiar with the site in question. (See Chapter 4).

(c) The need for a mandatory site visit should be carefully examined and documented on the file as

part of the procurement planning. Consideration should be given to the cost and relative hardship imposed on suppliers not in the immediate vicinity of the site when deciding if a site visit will be mandatory.

3.120 Roles and Memorandum of Understanding (2010-01-11) Contracting officers should consider client department memorandums of understanding (MOUs) when determining roles and responsibilities in the planning and management of procurements. Contracting officers shoud consult Annex 1.1 and Annex 1.2 relative to the division of responsibilities between PWGSC and the client department, as well as 9.5.15 relative to Major Crown Projects. 3.125 Canadian Commercial Corporation (2010-01-11) For information on procurements on behalf of the Canadian Commercial Corporation (CCC), the roles and responsibilities of CCC and PWGSC as well as the pertinent MOU, see 9.55. 3.130 Canadian Content (2010-01-11) (a) The Canadian Content Policy encourages industrial development in Canada by limiting, in

specific circumstances, competition for government procurement opportunities to suppliers of Canadian goods and services.

(b) For more information on the complete Canadian Content Policy and the procedures for its

application, see Annex 3.6. 3.135 Fairness Monitors (2010-01-11) (a) For all procurements requiring the Minister’s approval or above, contracting officers must formally

assess the merits, at the procurement strategy phase, of using a fairness monitor. (b) Contracting officers may optionally consider, at the procurement strategy phase, using a fairness

monitor where an enhanced assurance of fairness is desired (e.g. at the request of the client, complex procurement).

Supply Manual Page 31 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(c) Contracting officers must complete the Fairness Monitoring Coverage Assessment and Recommendation Form (PWGSC-TPSGC 587) (NOTE: Only government employees have access to the site) for both mandatory and optional fairness monitor use and submit to the Assistant Deputy Minister, Acquisitions Branch (ADM/AB), for signature.

(d) The signed form is then forwarded to the ADM, Departmental Oversight Branch (DOB). In the

event that the ADM/AB does not recommend the use of a fairness monitor in optional situation indicated in (b) above, the signed form is not forwarded to the ADM/DOB but must be kept on the procurement file.

(e) The ADM/DOB reviews the request for fairness monitor coverage of the procurement process on

behalf of the Business Operations Committee (BOC) and forwards the recommendation to BOC who renders a decision on whether use of a fairness monitor is appropriate and desirable.

(f) For more information, see the Fairness Monitoring Policy (NOTE: Only government employees

have access to the site.). (See also 1.50 and 5.25.) 3.140 Life Cycle Costing (2010-01-11) Life cycle costing pertains to all four stages of the procurement process, from planning and acquisition to use and disposal. Currently, the Policy on Green Procurement applies to all federal government procurement activities. The Policy requires that environmental performance considerations be embedded into the procurement decision-making process in the same manner as price, performance, quality and availability. For more information and tools on the life cycle costing, see 2.20. 3.140.1 General Requirements (2010-01-11) (a) The Policy on Green Procurement is aligned with the Treasury Board (TB) policies on assets and

acquired services and reinforces the requirement to take into account both environmental performance and costs that occur throughout the life cycle of assets and acquired services, including planning, acquisition, use and disposal. Some cost elements related to environmental factors that could be taken into account in assessing value for money in the evaluation of bids, offers or arrangements include: (i) operation costs, such as energy or water consumed by the product over its life; (ii) indirect costs (less energy efficient information technology equipment will produce more

heat causing the building's air conditioning system to work harder, and increase electricity costs);

(iii) administrative costs, such as complying to Workplace Hazardous Materials Information

System (WHMIS); (iv) investing up front to save costs later, such as specifying higher levels of insulation where

the extra expenditure can be recovered from lower energy costs; (v) cost of disposal arrangements;

(b) The application of total life cycle costing has traditionally meant the sum of the Product,

Resource, Operating, and Contingent (PROC) costs relating to procurement. The PROC technique is essential for evaluating bids, offers or arrangements. Through the Policy on Green Procurement, Canada has strengthened environmental performance considerations into the procurement process. In this context, value for money includes the consideration of many factors such as cost, performance, availability, quality and environmental performance.

Supply Manual Page 32 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(c) The PROC technique should be used for Major Crown Projects and in procurement in which

operating costs are a major part of the total cost of the product, for example, major construction projects or motor vehicle purchases. (See Chapter 9.)

3.145 Cost and Profit (2010-01-11) (a) For a contract to be awarded on a non-competitive basis, or when, following a competitive

process, price negotiations with the successful bidder are required, the anticipated cost and profit becomes part of the strategy and forms part of the determination of the type of contract contemplated to be put in place.

(b) The contracting officer must estimate the cost for the procurement planning phase. Conceptual

cost estimating is derived from a mix of industry standards and historical data for similar procurement. The total project budget and estimate should be considered using an optimistic and pessimistic price to determine a cost range. It is important to consider fixed costs, external influences, such as exchange rates and supply and demand. Also, consideration should be given to the build of a contingency fund and a management reserve fund. It would be beneficial to include a description of the scope of work, and the basis for the estimate. Assumptions made must be documented and an outline provided relative to the range of possible cost.

(c) In general contract negotiations profit is a representation of the risk a bidder is taking in delivering

the contract. If Canada is assuming the majority of the risk then the profit applied should be low. If the bidder is assuming the risk then the profit allowable should be higher. Although not all contracts demand the application of the profit policy and all its components, the profit policy does represent the factors to be considered when negotiating the applicable profit. Consideration should be given to the factors detailed in the Policy even though detailed analysis and calculations may not be performed.

(d) For more information on cost and profit, see Chapter 10. 3.150 Standards and Quality Assurance 3.150.1 Standards, Specifications and Purchase Descriptions (2010-01-11) (a) Recognized Canadian standards or specifications must be used in the procurement of goods and

services, except when not warranted by the volume or specific nature of the procurement. (b) When Canadian national standards are not available, Canadian specifications produced by a

recognized standards-writing organization must be used wherever possible. Where no such specification is available, directly relevant United States (U.S.)/foreign or international standards or specifications should be used when suitable.

(c) In determining the suitability of U.S./foreign or international standards or specifications, the

contracting officer should consult with the client, and may call on the assistance of the Canadian General Standards Board (CGSB). The determination to use such standards should also reflect the extent to which:

(i) Canadian views have been reflected in the standard or specification; (ii) products available in Canada are likely to conform to the standard or specification; (iii) the standard or specification is likely to discriminate against products.

Supply Manual Page 33 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(d) Contracting officers must assess the adequacy and applicability of any standards, specifications, including client-developed specifications, or purchase descriptions included by a client in the requisition.

(e) When a requisition does not include an existing standard, specification or purchase description,

which the contracting officer considers appropriate, the contracting officer should recommend to the client that the requisition be amended to include it.

(f) Contracting officers are also responsible for identifying the need for a new standard, specification

or purchase description, if a suitable one is not available for a particular product or service. (g) Clients are responsible for stating their requirement for Government Quality Assurance (GQA),

which includes quality assurance and quality control on their requisition or attached technical documentation.

(h) The client statement should clearly and completely describe the technical requirements and the

requirement for GQA, and must designate the inspection authority and the point of inspection. (i) The extent of GQA required will vary, depending on contract technical requirements and bidder

performance history. (j) The GQA requirement may be specified in terms of:

(i) the quality standard against which verification will be conducted such as ISO 9001-2000, ISO 9001-2000 plus AQAP-2110, or equivalent;

(ii) the requirement for the supplier to establish and maintain systems to assure quality; (iii) the requirement for the supplier to demonstrate conformance; (iv) what quality verification activity will be done by the government; (v) consignee inspection; (vi) the requirement for the supplier to provide proof of compliance in accordance with an

acceptable quality assurance standard or specification; (vii) the requirement for the supplier to submit samples for approval, such as pre-award

samples, first-off units, pre-production, qualification or sealed samples; (viii) the requirement for the supplier to submit an inspection plan; (ix) the requirement for the inspection authority to verify that the product supplied:

(A) is equal in all respects to the product qualified during the Qualified Products

List/Qualification Program List (QPL) or Certification Program List (CPL) process; (B) is manufactured under the same conditions as the product qualified during the

QPL/CPL process; (C) the details of acceptance inspection, tests and trials.

(k) As an alternative to items above, the supplier may be required to be listed in an acceptable

qualifying program, such as ISO 9001-2000, ISO 9001-2000 plus AQAP-2110, or equivalent that provides for adequate audit and controls.

Supply Manual Page 34 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(l) When the alternative above is specified, supplier surveillance must be undertaken, to assess the supplier’s compliance with the specified standard. The contracting officer must inform clients of the availability of CGSB or other listing programs that, if used for procurement, would reduce the need for GQA. For example, CGSB Certification and Qualification Programs and the Qualified Products Lists are operated on a cost recovery basis with no direct expense or use of resources to the client.

(m) If a requisition does not specify a GQA requirement, or includes an insufficient level, given the

nature of the procurement, the contracting officer must work with the client to develop an appropriate GQA framework, and advise the client of the financial and operational implications of appropriate GQA, for the client, the supplier and PWGSC.

(n) If a requisition does not specify a supplier quality system, the client should be requested to

consider specifying such a stipulation if:

(i) non-conformance would produce significant effects relating to product safety, reliability or operational consequence; for example, arctic clothing, fire extinguishers and security equipment or services;

(ii) the requirement is for a newly designed product being produced to government-

generated specifications; (iii) the requirement is for a product or service where current bidders have a history of not

conforming to specifications and/or previous similar requirements have resulted in chronic client complaints;

(iv) the requirement is for a product of high technical complexity; a product that has stringent

interchangeability requirement; or a "critical" product whose non-conformance would result in the failure of a system of which that product is a component;

(v) the requirement is for a product or service, which is being purchased for the first time and

no history of performance is available; or (vi) at least one potential supplier has a weak quality system. Note 1: This is required to provide adequate protection for both the client and PWGSC. Note 2: The contracting officer may also consider a supplier quality system if a requirement has

significant dollar value. However, issues relating to the nature of the requirement are usually more important than the dollar value.

3.150.5 Government Quality Assurance at Source (2010-01-11) (a) Government Quality Assurance (GQA) at source should be used when any of the following

conditions apply:

(i) the requisitioning authority has designated an inspection authority other than the consignee;

(ii) the costs of performing inspection at source are justified by the benefits received; (iii) conformance cannot be adequately determined on receipt because:

(A) the product contains critical characteristics not visible in the end item; (B) the product has special safety or security characteristics;

Supply Manual Page 35 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(C) special packing and packaging would be destroyed; (D) delivery is to multiple destinations; or (E) conditions or capabilities are not adequate at destination.

(iv) the bidder has a record of marginal performance or unsatisfactory quality history and

conditions preclude procurement from other sources. (b) The GQA at source may be performed by a client-designated inspection authority or by an

inspection authority commissioned by PWGSC on behalf of the client. As part of the inspection, supplier performance data respecting quality must be documented and copies of all inspection reports provided to the sector/region.

(c) PWGSC has the authority to provide additional quality tasking for civilian marine services; for

example, inspection and arranging for technical support. This authority is provided through TB Document No. 749386, May 5, 1977, Section VI, Recommendation 2.

3.150.10 Listing Programs (2010-01-11) (a) Listing programs are designed to expedite procurement by establishing, in advance and

independent of any specific purchase, a listing of those products or services that comply with recognized performance standards or specifications. Listing/Qualification Programs are normally established in situations where: (i) test requirements would adversely affect delivery; (ii) costs of acceptance inspection would be excessive; (iii) prior assurance of product conformance and/or supplier capability is necessary; (iv) complex test equipment and procedures are required; or (v) for products purchased on a regular basis and in large quantities.

Note: Before contracting, contracting officers should verify with the standards (listing)

organization, which product or service offered has been approved. (See 3.150.10(d).) (b) The inclusion of a product or service on a list implies only that the product or service complies

with recognized performance standards or specifications. Listing does not relieve the supplier of contractual obligations to deliver items or services meeting all specified requirements, nor does it guarantee acceptance under a contract.

(c) The CGSB and the Department of National Defence (DND) both develop and maintain lists. The

responsible qualifying authority may discontinue the qualification and delete the product from an existing listing under the following conditions: (i) Formula change. A change in the supplier’s formulation of the product that impairs

product quality.

(ii) Process change. A change in the supplier’s production process that impairs product quality.

(iii) Field failure. Authenticated field failure in use, which is attributable to non-conformance

of the product to the relevant standard or specification. Authentication of field failure generally requires extensive investigation and supporting laboratory tests. Perceived field failures should be reported by users to the qualifying authority.

(iv) Verification failure. Failure to meet requirements in a verification test of the product

and/or system, or failure to submit samples for testing, where requested, or to submit data for qualification maintenance when requested.

Supply Manual Page 36 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(v) Withdrawal for cause. Supplier has ceased operation, changed location, or has

consistently failed to respond to requests for quotation. (vi) Changes to standard or specification. Listings may be cancelled by the responsible

qualifying authority when the governing standards or specifications are cancelled, superseded or amended in such a manner as to affect existing qualification.

(vii) Appeals. Discontinuance may be appealed by the supplier in accordance with appeal

procedures established by the qualifying authority.

Note: When there are indications of non-conformance, and if PWGSC and a client determine that a qualified bidder does not conform to the applicable standard, the contracting officer must notify the qualifying authority.

(d) When a listing program is used for a procurement, contracting officers must state in the Notice of

Proposed Procurement (NPP), bid solicitation and contract documents that the supplier and its product must be listed in the following appropriate listing: (i) Qualification Program List (QPL):

(A) underlay; (B) security guards; (C) remanufactured toner cartridges; (D) protective clothing; (E) polyethelene vapour barrier; (F) paints; (G) office furniture; (H) medical gloves; (I) Laboratory Acceptance Program; (J) Dockside Monitoring Company; (K) capets; (L) Canadian Non-Destructive Testing Personnel Certification Program; (M) Canadian Air Transport Security Authority screening contractors; (N) breather type sheathing membrane.

(ii) Certification Program List (CPL):

(A) polyethylene vapour barrier; (B) surgical and patient examination rubber gloves; (C) breather type sheathing membrane; (D) firefighter's protective clothing, protecting against heat and flame; (E) fireline workwear for forest firefighters; (F) Laboratory Acceptance Program.

(iii) Registered Quality Systems List ISO 9001 (ISO 9000 Quality Management Systems):

This is a list of companies that are compliant with ISO 9001: 2000 models for quality systems. Note: ISO 9001: 2000 has replaced ISO 9001, 9002 or 9003.

ISO 9001: 2000 is currently being transitioned to the latest standard version; ISO 9001:9008.

(iv) Registered Environmental Management Systems List:

Supply Manual Page 37 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

This is a list of companies that are compliant with the ISO 14001:2004 standard for environmental management systems.

(v) Certified Occupational Health and Safety Standards (OHSAS) List

This is a list of companies that are compliant with the OHSAS 18001:1999 specification for health and safety management systems.

(vi) Certified Food Safety Management Systems (Alberta and Ontario Hazard Analysis and

Critical Control Point [HACCP] Advantage) List: (A) The Alberta HACCP Advantage (AHA!) Certification Program is the formalized

process whereby a food safety management system is assessed against the AHA! standard of the Alberta Ministry of Agriculture and Rural Development.

(B) The Ontario HACCP Advantage Certification Program is the formalized process

whereby a food safety management system is assessed against the Advantage HACCP standard of the Ontario Ministry of Agriculture, Food and Rural Affairs.

(vii) Certified Drinking Water Quality Systems (Ministry of Ontario) List:

The purpose of the Registration Program is to recognize operating authorities of municipal residential drinking water systems that demonstrate, through accreditation by an independent third party, that their quality management systems meet the requirements of the Ontario Drinking Water Quality Standard, and to recognize operating authorities that are managing their drinking water systems in a planned and systematic manner.

3.150.15 Department of National Defence Qualified Products Lists (2010-01-11) (a) batteries; (b) decals, for military identification; (c) electronic components, active: electron tubes, electronic modules, discrete; (d) semiconductors, filters, microcircuits, piezoelectric crystals and oscillators; (e) electronic components, passive: capacitors, connectors, relays and resistors; (f) fire fighting agents and chemicals; (g) flux, liquid soldering, rosin base; (h) gaskets; (i) hose fittings; (j) hydraulics; (k) insulation and packing materials; (l) marine and industrial coatings and related products; (m) mechanical hardware; (n) panels, information, integrally illuminated; (o) petroleum products; (p) plastic sheet, laminated, metal-clad; (q) printed-wiring boards; (r) rubber hoses, tires and tubes; (s) solder, for electronic use; (t) wire and cable. 3.150.20 Canadian General Standard Board 3.150.20.1 Canadian General Standard Board Responsibilities (2010-01-11)

Supply Manual Page 38 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(a) The contracting officer must be aware of the Canadian General Standard Board (CGSB) and its responsibilities. The CGSB is a federal government organization that offers client-centred, comprehensive standards development and conformity assessment services in support of the economic, regulatory, procurement, health, safety and environmental interests of our stakeholders - government, industry and consumers. In the procurement planning stages, the contractor may be required to meet the standards or specifications of the CGSB for certain requirements and provide a reference in the solicitation and contract documents.

(b) CGSB is accredited by the Standards Council of Canada as a standards-development,

product/service/personnel certification and quality and environmental management systems registration organization. It is PWGSC's independent, third party qualifying authority. Note: There are other accredited standards organizations in Canada, and contracting officer should contact CGSB for further information.

(c) CGSB manages the development and maintenance of consensus standards and specifications,

and develops and maintains qualification, certification and quality and environmental management systems registration, listing programs to support procurement, good business practice and trade.

(d) CGSB also provides expertise and information on standardization, both nationally and

internationally; the assessment of the suitability of standards and specifications; quality and environmental management systems registration; and qualification/certification of personnel and listing programs for products and services.

(e) The CGSB Catalogue contains: a listing of over 900 standards and specifications in

approximately 80 subject areas, in French and English, for products and services; listing programs for a selected number of these products and services; and other services offered by CGSB.

(f) The Personnel Certification Division of CGSB has been selected by the Treasury Board

Secretariat as the certifying body for the Procurement, Material Management and Real Property Certification Program.

(g) Government organizations, suppliers and the general public can obtain CGSB publications,

information on the listing programs or documentation required to apply for a listing by contacting:

Canadian General Standards Board Place du Portage III, 6B1 11 Laurier Street Gatineau, Quebec K1A 1G6 Telephone: 819-956-0425 E-mail: ncr.cqsb-ongc@tpsgc-pwgsc.gc.ca OR By visiting the Canadian General Standards Board Web site.

3.150.20.5 New Standards, Specifications or Listings (2010-01-11) (a) When the need for a new standard, specification or listing program is identified, and no suitable

document or listing is under development, the contracting officer should contact CGSB, or, since clients are responsible for defining technical requirements, suggest that the client do so.

Supply Manual Page 39 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(b) In cases of an urgent need for a new standard or specification, CGSB may be requested to develop a CGSB standard, as opposed to a Canadian national standard.

(c) If the need for a standard is limited to a single client or sector/region, a client/sector/region

qualification program may be instituted. Procedures, which do not limit competition and equity of opportunity for all suppliers, should be established by the client/sector/region concerned, and distribution of listings should be restricted if criteria other than technical performance are applied. Where client/sector/region lists are distributed, the qualification criteria should be stated.

3.150.25 Electrical Equipment (a) The client is responsible for determining whether or not a requirement is subject to the Canadian

Electrical Code, Part l, and for identifying circumstances where certification or approval in accordance with the Code is required.

(b) Suppliers are responsible for complying with applicable building codes and standards, including

the Canadian Electrical Code, Part 1. (c) If the required electrical equipment must be either certified or approved, bid solicitation

documents must contain the appropriate clause specifying the applicable organization accredited by the Standards Council of Canada. The clauses are listed in the Standard Acquisition Clauses and Conditions Manual, subsection 5-B.

(d) The equipment may be specially inspected by an organization acceptable to Chief Electrical

Inspector in the province, territory or city where the electrical equipment is to be installed and operated.

3.155 Acquisition Cards 3.155.1 Acquisition Cards In Contracting (2010-01-11) (a) Contracting officers must be aware of the use and application of “acquisition cards”. The Policy

on Acquisition Cards came into effect on January 1, 1998. The intent of acquisition cards is to provide a convenient and less burdensome method of procuring and paying for goods and services, while ensuring effective financial control. It is government policy to use acquisition cards for departmental procurement and payment of goods and services (within the levels of procurement authority delegated to departments) where it is efficient, economical and operationally feasible to do so. This policy applies to all organizations considered to be departments within the meaning of section 2 of the Financial Administration Act.

(b) Contracting officers are invited to consult the Treasury Board (TB) Policy on Acquisition Cards

and the Acquisition Cards Program - Management Guide. The purpose of the guide is to provide information that will help federal departments administer and control the acquisition card program. The guide will assist responsibility centre managers, individuals doing purchases on their behalf, procurement managers and financial managers by providing them with control standards to achieve a higher and more consistent standard of control. This guide is complementary to the Acquisition Card Policy issued by Treasury Board and should be used along with the Policy.

3.155.5 Acquisition Card Management (2010-01-11) (a) The acquisition card has been in the forefront of most procurement and payment process

improvements in client departments. The increasing use of acquisition cards has had an impact on the traditional paper based control framework. The Office of the Auditor General conducted a

Supply Manual Page 40 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

government-wide review of acquisition card usage, and the report stressed the need for better controls and better monitoring by departments.

(b) “Corporate Acquisition Cards" are designed to help eliminate paper in the procurement process.

These cards allow an employee to charge purchases for which full payment is made by the department to the applicable card provider. There is no fee for the cards and conditional discounts can be obtained in exchange for faster and/or electronic settlement.

(c) Like a personal credit card:

(i) the cardholder receives a monthly statement listing purchases; (ii) each cardholder is assigned a credit limit; and (iii) suppliers receive 97 to 98.5 percent of the purchase price within two days of purchase.

(d) Unlike a personal credit card:

(i) the department is obligated to pay either individual invoices for each card or one "consolidated" bill summarizing monthly purchases made by all cardholders;

(ii) there is a defined maximum liability of $50 to the department in the event of fraudulent

use; (iii) there is special application of financial authorities; and (iv) a department can obtain access to all card transactions.

(c) The card is issued in the name of the employee designated to do the purchasing; however, the

liability rests with the sponsoring department. Most important, the dollar amount of purchases and monthly limits associated with acquisition cards are controlled by the card-using organization.

(d) The use of acquisition cards within federal government departments and agencies offers very

significant opportunities for savings in the procurement through payment process. Client departments can reduce and simplify the procurement process of goods and services using acquisition cards. Local purchase orders and petty cash are eliminated and a single payment is made for multiple purchases. The ease and flexibility of using the cards provide an incentive to purchase only as the need arises rather than buying in bulk. By using an acquisition card to make the purchase and then settling these purchases electronically, departments can realize significant savings. Taken across government, this approach allows for major cost avoidance in the procurement process.

3.160 Royalty Payments and License Agreements (2010-01-11) (a) If royalty payments, technical assistance agreements or manufacturing licenses are required or

anticipated as being required, the contracting officer must plan for these events within the procurement strategy submitted for approval. Establishing these types of agreements can have very long timeframe and can be a very complex process.

(b) In order to carry out certain contracts, primarily for defence, contractors may have to obtain

technical assistance and/or manufacturing licenses from third parties. (c) The usual commercial practice is for the contractor to enter into a technical assistance and/or

license agreement. However, there are cases where it may be more advantageous for Canadato enter, in its own name, into the license agreement with respect to inventions, patents, copyrights, trade secrets, trademarks, technical data, know-how and industrial designs.

Supply Manual Page 41 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(d) In order to avoid paying for rights that the government already has, contracting officers should check that no license agreement in Canada’s name exists, which could remove the need for royalty payments.

(e) Contracting officers should minimize the use of patented products, by calling up performance

specifications rather than product specifications. When there is no alternative, market-based processes for the supply of patented products through licensed production arrangements, royalties, etc., must be exhausted before using section 19 of the Patent Act or section 22 of the Defence Production Act.

(f) Royalty payments of 5 percent or less of the selling price of the patented item require the Director

approval. A royalty that exceeds 5 percent requires the Deputy Minister approval, before entry into a contract.

(g) If there is an increase in the amount of the royalty to be paid, or if further items become subject to

royalty payments during the life of a contract, the same guidelines for approval apply. (h) To obtain the approval of the Deputy Minister for royalties exceeding 5 percent, the following

information must be provided on Part 2 of the Contract Request: (i) details of the royalties; (ii) a forecast of anticipated future purchases beyond the requirement in the present

submission; (iii) the comments of Legal Services.

(i) In consultation with Legal Services, the contracting officer must consider the advantages and

disadvantages before deciding that a license should be obtained in the name of Canada or the contractor. These advantages and disadvantages are to be considered in relation to the nature of the supplies to be manufactured, the expenditure by Canada, potential purchases by Canada and the relationship between the potential contractor and the licensor; for example, the contractor may be a subsidiary of the licensor.

(j) Advantages - if the license agreement is in the name of Canada, Canada can:

(i) negotiate terms and ensure that no restrictions are placed on the use, sale, lease or exchange of supplies. Such restrictions, if imposed, might interfere with Canada's obligations under international defence arrangements;

(ii) gave unrestricted choice of contractors; and (iii) control the manner in which required technical assistance must be furnished and used.

(k) Disadvantages - if the license agreement is in the name of Canada, Canada may:

(i) become involved in contractual negotiations apart from the contract it is presently interested in;

(ii) have to assume onerous burdens dealing with secrecy, non-disclosure and informing the

licensor of improvements and developments; (iii) be bound by all terms of the agreement and be required to pay royalties at a set rate and

assume other burdens for a long period. (l) Royalties required to be paid by contractors and their subcontractors to third parties, in the

performance of a defence contract, will be paid if they are valid costs in the bid, and the amounts being charged are acceptable to Canada.

Supply Manual Page 42 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(m) Where the license agreement must be in the name of the contractor, approval to enter into such

an agreement may be obtained as part of the authority for the purchase of the goods and/or services.

(n) Where the license must be in the name of Canada, the contracting officer, when negotiating the

license agreement and the amount of the royalty payment, should take into consideration the following:

(i) manufacturing rights, including use of licensor's patents and designs; (ii) technical assistance, including:

(A) supply of plans, drawings, specifications, etc.; (B) engineering person-days provided by the licensor both at its own plant and the

plant of the manufacturer selected by Canada; (C) traveling and living expenses of the licensor’s representatives;

(iii) obtaining for Canada the right to modify or have modified the plans, drawings, etc., and, if

required, the right to build or have built or to repair or have repaired the articles in question by a party other than the licensor.

(o) Approval of the Assistant Deputy Minister is required before entry into any contractual agreement

that exercises the rights of Canada under section 22 of the Defence Production Act or section 19 of the Patent Act. Exercising the rights granted to Canada under these acts must only be carried out in exceptional circumstances as warranted by consideration of the public interest, and after market-based processes have been exhausted.

Note: Examples of these circumstances would include refusal by a patent holder to produce or

license others to produce a product vital to the defence of Canada, or where monopoly power conferred by the patent is being abused to impose unconsciously high prices upon Canada. It would be very unusual to find these rights exercised for other than defence supplies.

3.165 Controlled Goods (2010-01-11) (a) As of April 30, 2001, no new controlled goods can be provided unless persons are registered,

exempt or excluded by the Canadian Industrial Security Directorate. Bill S-25 amended the Defence Production Act and established a new regime for regulating access to certain controlled military and military related goods, technical data and technology, referred to as controlled goods.

(b) Even if there are no controlled goods in a bid solicitation, there may be situations where

proposals submitted by bidders could contain controlled goods. Controlled goods cannot be released to persons that are not registered, exempt or excluded under the Controlled Goods Program.

3.170 Shipbuilding, Repair, Refit and Modernization (2010-01-11) The PWGSC procedures for sourcing suppliers to work on Canadian government vessels derive from the government's Shipbuilding, Repair, Refit and Modernization Policy. The objective of the Policy is to encourage competition amongst Canadian shipyards. For all competitive shipbuilding requirements, as

Supply Manual Page 43 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

defined in the above-mentioned Policy, subject to the Agreement on Internal Trade, contracting officers must ensure that the details of the restrictions or practices are highlighted in the Notice of Proposed Procurement and the bid solicitation. 3.175 United States Defense Related Procurement (2010-01-11) (a) Procurements by Canada for military goods and services are often related and technically

integrated for the same or similar goods and services as United States (U. S.) military procurements. As a result, Canada and U.S. have agreed to share or permit access to technical data and material that may not be readily accessible for the advancement of a procurement.

(b) The contracting officer must be aware that in the procurement planning and strategy development

that agreements and processes exist between Canada and U.S. to facilitate access to technical data and material. For more information, see Chapter 9.

(c) There are three areas of concern to the contracting officer in procurement planning as it applies

to military procurements as part of the Canada/U.S. joint procurement efforts:

(i) Joint Certification Program; (ii) Foreign Military Sales; and (iii) U.S. Defense Priorities and Allocations System.

3.180 Joint Certification Program (2010-01-11) A Memorandum of Understanding (MOU) between the Minister of National Defence and the U.S. Secretary of Defense established a Joint Certification Program, which allows certified contractors of each country access, on an equally favourable basis, to unclassified technical data of both countries. It also ensures that effective and appropriate controls and enforcement mechanisms are in place in each country to protect such technical data. The Technical Data Control Regulations are the authority for implementing this program. 3.185 Foreign Military Sales (2010-01-11) (a) The Foreign Military Sales (FMS) program is a mutually beneficial government-to-government

method for selling U.S. defence equipment, services, and training. FMS must be considered as a method of procurement when the goods or services required related to military equipment of U.S. origin and when, on the basis of the information available at the time, those goods and services are available or can be made available from the U.S. Department of Defense (DoD).

(b) When Public Works and Government Services Canada Headquarters (PWGSC [H]) determines

that a requirement will be sole sourced through the U.S. FMS Program, the requisition must be reallocated to PWGSC Washington. Decisions by PWGSC (H) to sole source requirements through the U.S. FMS Program must be adequately documented.

(c) For more information, see 9.15. 3.190 U.S. Defense Priorities and Allocations System (2010-01-11) (a) The U.S. Defence Priorities and Allocations System (DPAS) is intended to assure the timely

availability of industrial resources to meet current national defence and emergency preparedness program requirements and provide an operating system to support rapid industrial response in a

Supply Manual Page 44 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

national emergency. Priority ratings are intended to support approved defence programs with some exceptions.

(b) Contracting officers should seek assistance from the Central Allocations and Defence Priorities

Officer, Business Management Directorate to determine whether the system may be utilized for U.S. procurements when dealing with a contract with a defence requirement. Before contract award, and with consideration of the foregoing, contracting officers must insert the appropriate Standard Acquisition Clauses and Conditions Manual clause in all Canadian defence contracts placed with U.S.-based suppliers and in all Canadian defence contracts placed with Canadian-based suppliers.

(c) For a variety of reasons, U.S.-based suppliers may be unable to deliver material to Canadian-

based contractors, within the timeframes specified, despite the prompt application for and the timely issuance of a priority rating.

3.195 Risk Management 3.195.1 Treasury Board Secretariat Risk Management Policy (2010-01-11) (a) The Treasury Board (TB) Risk Management Policy provides the framework for managing risks

within the Government of Canada. (b) The objective of the Policy is to safeguard the government's property and interests, and the

interests of its employees as they do government work. TB is responsible for monitoring the effectiveness of the Policy in assisting department’s risk management programs.

(c) The Policy mandates that it is the responsibility of each department to effectively manage its own

risks. Departments are responsible for adequate and timely compensation, restoration, and recovery of losses in the event of harmful or damaging incidents arising within their department. Departments must comply with the following TB policies: Policy on Legal Assistance and Indemnification; and Policy on Claims and Ex Gratia Payments. For more information on claims for extra payment, see 8.55.

(d) Public Works and Government Services Canada (PWGSC) manages risks linked to the

procurement process by applying sound procurement plans and contract structure that reduce Canada’s loss exposure. PWGSC works with client departments during the contracting process to facilitate clients’ understanding of the risk management process relating to their responsibilities.

3.195.5 Risk Management Process 3.195.5.1 General (2010-01-11) The risk management process, simply put, is a management process that applies to risk and it involves the following steps: (a) risk identification and analysis; (b) examination of the risk management techniques; (c) selection of the appropriate technique(s); (d) implementation of the selected technique(s); and (e) monitoring of the results.

Supply Manual Page 45 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

3.195.5.5 Risk Assessment (2010-01-11) (a) Risk assessment is the process whereby risks and their potential outcomes are identified and

measured according to their probability of occurrence and degree of severity. The outcome of the risk assessment is a report on the quantified value of the risks and it is used to guide decision-making in the contracting process. The risk assessment is an important tool because it forms the basis of risk-based decision-making.

(b) Risk assessments are conducted by client organizations, as the requisitioning authorities, and

they can vary in depth and complexity. Risk assessments can be performed by contracted firms under a standing offer or directly by a client organization. The decision as to who conducts the risk assessment will take into account technical capacity, resources and funding.

(c) Each risk assessment will examine and measure the sources of potential loss (exposures) over

which a contractor has control. The risk assessment can also identify and segregate the exposures over which the client department has control. Examples of general exposures include property, assets, legal liability, personnel and reputation.

(d) The risk assessment will draw on the various risks that the client organization identifies.

Information on risks can come from a variety of sources, such as records and data; questionnaires; surveys and exploratory testing; and process maps.

3.195.5.10 Risk Control (2010-01-11) Risk control comprises risk treatment that requires taking action to avoid, prevent, reduce or transfer losses. Risk control can occur before, or after, a loss event. The various methods of loss control usually require on organization to develop, implement and maintain various processes and procedures to ensure the effectiveness and success of the risk control program. (a) Loss avoidance is the technique by which an organization will refrain from various activities

because of the severe nature of the risk. . For example, a contractor can exit a certain line of business because losses incurred by that business threaten the viability of the firm. For example, a food services firm may sell off its tobacco business line due to the potential for costly class action lawsuits.

(b) Loss prevention is the technique used to prevent losses from occurring, or to reduce their

likelihood of occurrence. Loss prevention measures are often found in engineered or automated processes, such as intrusion detection and access control. In their simpler form, loss prevention measures can include elements such as wide-angle mirrors on vehicles to prevent collisions while reversing.

(c) Loss reduction is the technique used to reduce the impact of a loss once it has occurred. Loss

reduction measures can include engineered systems, such as automatic fire suppression systems (e.g. sprinklers). They can be found in business applications process, such as business continuity plans or crisis management programs.

(d) Contractual transfer for risk control is a risk control measure that uses contract conditions to

transfer the risk of loss and/or the obligation to control loss to a contractor. The most notable form is the contractual requirement for indemnification, which requires the contractor to make good losses it causes. In addition to indemnification, a contract may contain other conditions, such as liability for loss, which can be specifically targeted to certain types of loss and the amount of financial obligation. In addition, the contractor may be required to manage and monitor losses it incurs in the delivery of the contract and report to the clients.

Supply Manual Page 46 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

3.195.5.15 Risk Financing (2010-01-11) (a) Risk financing is the technique through which organizations provide funding for potential losses.

Although the most commonly known form of risk financing is insurance, there are other methods that are frequently used. Canada uses the “self-underwriting” option in the management risks to which it is exposed and over which it has control.

(b) Canada uses the self-underwriting option as a default approach for its own risk financing because

it has the legislative authority and capacity as a sovereign entity to raise funds directly to pay for losses.

(c) Contractors are responsible for financing the risks under their control. Contractors will most often

use commercial insurance to finance their risks, although other risk financing options are available. Contractors use the commercial insurance market to obtain insurance and within the marketplace, insurance policies are underwritten and financed by insurers, with insurance brokers fulfilling the roles of marketing and distribution.

(d) Contractors can manage risk financing on a variety of models:

(i) Insurance transfer, where the contractor purchases commercial insurance with standard deductibles, transferring most of the financial risk to the insurer in exchange for premium.

(ii) Self Insured retention, where the contractor assumes financial responsibility to a certain

level and transfers risk above that level to insurers. This differs from a deductible because the contractor will manage the retained risk through risk control and self-funding measures.

(iii) Alternative risk financing, which involves other forms of risk financing sources, such as

capital and bond markets and “captive” insurance. (e) Canada can exercise the following risk financing options in contracting to ensure an appropriate

level of financial protection from contractors: (i) contractor controlled insurance, wherein Canada self-underwrites its own risks and

relies upon the judgement of the contractor to determine its own insurance requirements; (ii) government specified insurance, where Canada self-underwrites its own risks and

specifies the types and minimum coverage limits of insurance that the contractor must maintain;

(iii) government controlled insurance, where Canada purchases and controls the

insurance as a way of obtaining economies of scale in project involving multiple parties. 3.200 Contractor Liability 3.200.1 General (2010-01-11) (a) The Treasury Board (TB) Secretariat Policy on Decision Making in Limiting Contractor Liability in

Crown Procurement Contracts governs the process for limiting contractor liability. Contracting officers are required to understand the application of the Policy in order to ensure compliance and to protect the interests of the Government of Canada. The Policy applies to all Canadian procurements subject to the Government Contracts Regulations and the TB Contracting Policy for risks under the control of the contractor.

Supply Manual Page 47 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

(b) The Policy forms the framework for risk-based decision-making, enabling the appropriate application and apportionment of liability risk in contracts. The Policy details the steps and necessary approvals that must be followed, when limiting contractor liability, in order to ensure effective program management and service delivery for the benefit of Canadians. A key element of risk-based decision-making is the requirement for risk assessments to be performed by client departments.

(c) The Policy identifies four procurement models that prescribe the extent to which a contractor’s

liability may be limited and the level of approval required:

(i) Model 1 represents the most common type of procurement contracts and accounts for about 90 percent of all Canada procurement contracts. Under this model, only the contractor’s liability to Canada (first party liability) may be limited. Commodity groupings have been established for commonly purchased commodities over which a general risk assessment has been conducted. Under this model, limiting third party liability and indemnification of the contractor requires TB approval.

(ii) Model 2 includes complex procurements that have a high degree of uncertainty or risk

because of the untested nature of the technology or the unproven, unique or developmental nature of the deliverable. Under this model, PWGSC has the authority to limit first party liability. Limiting third party liability or indemnification of the contractor requires TB approval.

(iii) Model 3 includes contracts where there is limited scope for negotiating liability

provisions, such as government-to-government agreements, or where no other viable alternative to serve a program requirement exists. Under this model, PWGSC can limit third party liability. Indemnification of the contractor requires TB approval.

(iv) Model 4 pertains to highly specialized services contracts in support of ensuring the

health, safety and the economic well being of Canadians. Under this model, PWGSC can limit first party liability. Limiting third party liability or indemnification of the contractor requires TB approval.

3.200.5 Indemnification (2010-01-11) Indemnification is the requirement for one party to a contract to make the other whole when the latter has suffered a loss. The current default position of Canada on indemnification in procurement contracts is to remain silent. This enables both the parties to rely on their respective rights at law in the event of a loss. Exceptions to this position are where: (a) It may not be in Canada’s financial interest to rely on Common Law or the Civil Code. (b) The terms of a commodity grouping include the specific indemnification of Canada by the

contractor. (c) Canada agrees to indemnify the contractor due to exceptional circumstances or where the

procurement falls under the terms of a Foreign Military Sale. Under this condition, the client department must assume financial responsibility for the substantive transfer of risk to Canada, as determined by a risk assessment. Substantive transfer occurs where the assessed risk value exceeds the limitation of the limitation of the contractor’s liability.

3.205 Review Process for Creation, Renewal and Extension of Standing Offers

and Supply Arrangements

Supply Manual Page 48 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

In order to reduce duplication and increase the effectiveness, efficiency and level of quality of Standing Offers and Supply Arrangements, the following review process must be followed. 3.205.1 Review Process (2010-01-11) (a) The creation, renewal and extension of all standing offers (SO) and supply arrangements (SA)

requires advance approval by either the designated Commodity Team (CT) Leader identified for those goods or services, or if such a team does not exist, by a Regional Reviewer (RR), who is designated for each region. A list of CT Leaders and Regional Reviewers is available and regularly updated on the Standing Offer Index Web site. (Note: Only government employees have access to the site.) If there is no CT Leader or RR, a designate in the Performance, Spend and Commodity Management Directorate (PSCMD), Acquisitions Branch will perform the review.

(b) The goal of the review process is to:

(i) reduce SO/SA duplication; (ii) actively promote the consolidation of similar client departments requirements into

common SO/SA; (iii) increase the effectiveness and level of quality of SO/SA, and (iv) support the commodity management function by providing the “Request for

Endorsement” form to PSCMD. (c) The “Request for Reviewer Endorsement” form will be available in the very near future on the

Standing Offer Index - User Manual Web site. (Note: Only government employees have access to the site.) The information provided will be used to analyze trends and measure the performance of the commodity management function.

(d) Contracting officers are encouraged to contact the CT Leader or Regional Reviewer early in the

SO/SA planning process to obtain their general agreement on the planned approach, particularly in cases where the proposed new procurement instrument will include goods or services already covered in an existing instrument.

3.205.5 Reviewer Evaluation (2010-01-11) (a) The reviewer will either:

(i) endorse without comments/recommendations; (ii) endorse with comments/recommendations/conditions, or (iii) decline endorsement with supporting rationale.

(b) The comments, recommendations, or endorsement of the reviewer provided on the Request for

Reviewer Endorsement form must be included in the Contract Planning and Advance Approval (CPAA) or Procurement Plan. Approval authorities must ensure that the approval documents include reviewer comments, recommendations, or the endorsement, as applicable.

(c) The approval document (e.g. CPAA, Procurement Plan) is approved in accordance with the

normal process. 3.205.10 Publishing Information on the Standing Offer Index (2010-01-11)

Supply Manual Page 49 of 50 Version 10-1 (2010-01-11)

Chapter 3 – Procurement Strategy

Contracting officers must ensure: (a) that all SOs and SAs are posted according to the Standing Offer Index (SOI) Instructions. (b) that the information presented to the client departments is accurate and includes the original

SO/SA document, the sequence of amendments and tombstone documentation, such as contracting officer name and phone number.

3.205.15 Duplication of Coverage in Standing Offers and Supply Arrangements (2010-01-11) (a) Reviewers will not normally endorse the creation of a duplicate SO/SA in that the product

category is already available in an existing instrument. For example, a request for a Regional Individual Standing Offer or a Regional Master Standing Offer (RISO or RMSO) will not normally be endorsed should a National Master Standing Offer (NMSO) already exist for the same product category.

(b) In the event that the contracting officer believes that the creation of a duplication SO/SA is in

Canada’s best interest, the contracting officer must:

(i) clearly indicate on the “Request for Reviewer Endorsement” form that a similar SO/SA exists;

(ii) provide the duplicate SO/SA number; (iii) clearly identify the need for the duplication, and (iv) include the resulting reviewer comments in the CPAA or Procurement Plan submission.

Supply Manual Page 50 of 50 Version 10-1 (2010-01-11)

Annex 3.1 - Treasury Board Questions For Sole Source

Annex 3.1: Treasury Board Questions for Sole Source (2010-01-11) Provide responses, as applicable, to the questions contained in the template below in order to explain and justify why exception 6.(d) of the Government Contracts Regulations (GCRs) has been invoked to allow a sole source goods or services contract. All of the questions must be considered and answered by the contracting officer with the assistance of the client department, including confirmation, where appropriate, that the question is not applicable to the contract or standing offer under review. Some guidance is also provided for assistance in responding to the questions. Note: In the case of a services contracts or standing offers, contracting officers should satisfy

themselves that the contract in question is the right instrument, as opposed to such instruments as, but not limited to: a grant; a contribution; or, an employment contract i.e. a term, casual or ministerial appointment.

QUESTION CLIENT'S ANSWER

1. Is the proposed sole source contract linked to a previous procurement and strategy for obtaining additional quantities and/or in-service support? If yes, what was the approved strategy? Notwithstanding the approved strategy, is it feasible and/or affordable to compete the requirement? If not, provide the related rationale in terms of cost, schedule, etc.

If answer is “YES”, identify what was the previous procurement strategy that was conducted with PWGSC. Identify the PWGSC file number for the previous contract (i.e. original procurement was posted “competitively” and it was identified that additional equipment would be purchased in the future with the successful vendor) If the answer was “YES” to question #1, can this requirement be issued as a competitive requirement? If the answer is “NO”, then answer the additional question below. Explain why this requirement cannot be issued as a “competitive” requirement.

2. Does the Vendor or its approved distributors have exclusive ownership of, and rights to use, the intellectual property (IP) for the goods or services in question? If yes, provide details. What rights, if any, does the Crown have to use the IP?

If answer is “YES”, you would indicate the vendor details and state whether they are: the Original Equipment Manufacturer (OEM) or the sole authorizer value-added reseller. Clearly indicate why we are going directly to this company, for ex.: (a) We are dealing directly with the OEM, ABC Ltd, as they are the owners, developers of the equipment and owners of the IP. They DO NOT authorize value-added resellers or distributors for their equipment. (b) We are dealing with XYZ Distribution Inc. as they are the sole distributor and only approved value-added reseller authorized to sell and support in Canada the equipment built by the OEM, ABC Ltd.

Supply Manual Page 1 of 3 Version 10-1 (2010-01-11)

Annex 3.1 - Treasury Board Questions For Sole Source

QUESTION CLIENT'S ANSWER

3. Are there legal and/or regulatory considerations precluding open competition for this good or service? If yes, provide details.

Is there any provincial and federal legislation that directs client to only purchase the described requirement.

4. Are there alternative sources of supply for the same or equivalent materiel/support? If no, explain. If yes, what other options were considered and why were they not recommended?

If you are using Government Contracts Regulations, exception 6 d), then you would indicate there are no alternate sources of supply that can meet the mandatory performance specifications identified by you the client. You would reference the attached sole source justification. If the answer is "Yes", and there are alternate sources of supply, then we should be going out to competition. If research has been done, to confirm there is only a manufacture than can meet the mandatory performance specifications, then we should indicate what has been done. Note: To have different manufacturers “pre-tested” or “benchmarked” thru an evaluation process is not acceptable, unless it was done thru a competitive process with PWGSC. Also, simply because the manufacturer is the “best” or the “lowest price” is not acceptable, without a competitive process thru PWGSC.

5. Is the proposal related to commonality/compatibility with existing equipment? If yes, what are the operational costs/implications of managing multiple versions?

Must the equipment required be compatible with existing equipment?….existing software? Or existing equipment at other facilities in Canada, North America, and the World? If the answer is "Yes", at a minimum, we need to: (a) Clearly identify which equipment and or software the client (or other research centers) has that must be compatible with current requirement. (b) Identify what "compatible" means to client. Do the machines communicate with one another from facility-to-facility? Are samples cross-examined and compared from facility to facility? We need to be specific. (c) Identify what the operational costs and the implications of managing multiple versions. (multiple manufacturers, multiple software programs). What would be the price of non-conformance for client? Cost to retrain? Cost to revise protocols, procedures, processes? Is there a cost to delaying this program any further?

6. Explain why the price is fair and reasonable; Client can provide any preliminary information

Supply Manual Page 2 of 3 Version 10-1 (2010-01-11)

Annex 3.1 - Treasury Board Questions For Sole Source

QUESTION CLIENT'S ANSWER

describe how price support was obtained; and summarize negotiations.

received from the vendor. (financial quote). Also, PWGSC, as the contracting officer will be responsible for negotiating a fair and reasonable price and ensuring the prices are fair and reasonable to Canada.

7. Are there any other factors that have led to a recommendation for a non-competitive process? If yes, provide details and rationale. (a) What is the likelihood of an amendment or follow-on contract to the same person? Describe the efforts taken to identify a variety of suppliers and explain any impact the Trade Agreement thresholds or TB Contracts Directive contract entry/amendment limits will have on the proposed procurement strategy. (b) Given the nature of your organization's mandate, describe any efforts taken to put in place long-term procurement arrangements to address similar requirements/activities in future (e.g., establish standing offer).

Is there the possibility of additional equipment, additional warranty services? Then we should be implementing “options-to-purchase” within the contract. Have there been any efforts made by client to identify potential suppliers and determine what is available within the vendor community? PWGSC will advise which trade agreements would be applicable. "PWGSC Supply Specialist consulted with the client in regards to future requirements and the client has confirmed that no follow-on equipment will be required"... OR ... "PWGSC Supply Specialist consulted with Client in regards to future requirements and the client has confirmed that there could be the potential for follow-on equipment, therefore options to purchase additional equipment will be incorporated within the contract." PWGSC will post a ACAN on the GETS (MERX) to ensure there are no suppliers that can actually meet this requirement. This requirement is subject to the following trade agreements: AIT, NAFTA, WTO-GPO. Client to identify any long-term procurement strategies to address future needs: Client to investigate potential consolidation of opportunities with other departments. Client to encourage PWGSC to include an additional range of equipment in any future standing offers whenever possible. PWGSC will also identify the National Commodity Team Lead and discuss the possibility of including this requirement with any future standing offers.

Supply Manual Page 3 of 3 Version 10-1 (2010-01-11)

Annex 3.2 – Limited Tendering Reasons contained in the Trade Agreements

Annex 3.2: Limited Tendering Reasons contained in the Trade Agreements (2010-01-11) Note that the Contract Award Process (CAP) codes for each award type are included for reference. 1. The limited tendering reasons for the North American Free Trade Agreement (NAFTA) are

included below.

"Article 1016: Limited Tendering Procedures

1. An entity of a Party may, in the circumstances and subject to the conditions set out in paragraph 2, use limited tendering procedures and thus derogate from Articles 1008 through 1015, provided that such limited tendering procedures are not used with a view to avoiding maximum possible competition or in a manner that would constitute a means of discrimination between suppliers of the other Parties or protection of domestic suppliers.

2. An entity may use limited tendering procedures in the following circumstances and

subject to the following conditions, as applicable:

a. in the absence of tenders in response to an open or selective call for tenders, or where the tenders submitted either have resulted from collusion or do not conform to the essential requirements of the tender documentation, or where the tenders submitted come from suppliers that do not comply with the conditions for participation provided for in accordance with this Chapter, on condition that the requirements of the initial procurement are not substantially modified in the contract as awarded; (CAP Code 05)

b. where, for works of art, or for reasons connected with the protection of patents,

copyrights or other exclusive rights, or proprietary information or where there is an absence of competition for technical reasons, the goods or services can be supplied only by a particular supplier and no reasonable alternative or substitute exists; (CAP Code 71)

c. in so far as is strictly necessary where, for reasons of extreme urgency brought

about by events unforeseeable by the entity, the goods or services could not be obtained in time by means of open or selective tendering procedures; (CAP Code 81)

d. for additional deliveries by the original supplier that are intended either as

replacement parts or continuing services for existing supplies, services or installations, or as the extension of existing supplies, services or installations, where a change of supplier would compel the entity to procure equipment or services not meeting requirements of interchangeability with already existing equipment or services, including software to the extent that the initial procurement of the software was covered by this Chapter; (CAP Code 74)

e. where an entity procures a prototype or a first good or service that is developed

at its request in the course of and for a particular contract for research, experiment, study or original development. Where such contracts have been fulfilled, subsequent procurement of goods or services shall be subject to Articles 1008 through 1015. Original development of a first good may include limited production in order to incorporate the results of field testing and to demonstrate that the good is suitable for production in quantity to acceptable quality

Supply Manual Page 1 of 5 Version 10-1 (2010-01-11)

Annex 3.2 – Limited Tendering Reasons contained in the Trade Agreements

standards, but does not include quantity production to establish commercial viability or to recover research and development costs; (CAP Code 72)

f. for goods purchased on a commodity market; (CAP code 20) g. for purchases made under exceptionally advantageous conditions that only arise

in the very short term, such as unusual disposals by enterprises that are not normally suppliers or disposal of assets of businesses in liquidation or receivership, but not routine purchases from regular suppliers; (CAP code 21)

h. for a contract to be awarded to the winner of an architectural design contest

(CAP code 22), on condition that the contest is: i. organized in a manner consistent with the principles of this Chapter,

including regarding publication of an invitation to suitably qualified suppliers to participate in the contest,

ii. organized with a view to awarding the design contract to the winner, and iii. to be judged by an independent jury; and

i. where an entity needs to procure consulting services regarding matters of a

confidential nature, the disclosure of which could reasonably be expected to compromise government confidences, cause economic disruption or similarly be contrary to the public interest.

3. An entity shall prepare a report in writing on each contract awarded by it under paragraph

2. Each report shall contain the name of the procuring entity, indicate the value and kind of goods or services procured, the name of the country of origin, and a statement indicating the circumstances and conditions described in paragraph 2 that justified the use of limited tendering. The entity shall retain each report. They shall remain at the disposal of the competent authorities of the Party for use, if required, under Article 1017, Article 1019 or Chapter Twenty (Institutional Arrangements and Dispute Settlement Procedures)"

2. The limited tendering reasons for the World Trade Organization – Agreement on Government

Procurement (WTO-AGP) are included below.

"Article XV: Limited Tendering Procedure 1. The provisions of Articles VII through XIV governing open and selective tendering

procedures need not apply in the following conditions, provided that limited tendering is not used with a view to avoiding maximum possible competition or in a manner which would constitute a means of discrimination among suppliers of other Parties or protection to domestic producers or suppliers:

(a) in the absence of tenders in response to an open or selective tender, or when the

tenders submitted have been collusive, or not in conformity with the essential requirements in the tender, or from suppliers who do not comply with the conditions for participation provided for in accordance with this Agreement, on condition, however, that the requirements of the initial tender are not substantially modified in the contract as awarded; (CAP code 05)

(b) when, for works of art or for reasons connected with protection of exclusive

rights, such as patents or copyrights, or in the absence of competition for

Supply Manual Page 2 of 5 Version 10-1 (2010-01-11)

Annex 3.2 – Limited Tendering Reasons contained in the Trade Agreements

technical reasons, the products or services can be supplied only by a particular supplier and no reasonable alternative or substitute exists; (CAP code 71)

(c) in so far as is strictly necessary when, for reasons of extreme urgency brought about by events unforeseeable by the entity, the products or services could not be obtained in time by means of open or selective tendering procedures; (CAP code 81)

(d) for additional deliveries by the original supplier which are intended either as parts

replacement for existing supplies, or installations, or as the extension of existing supplies, services, or installations where a change of supplier would compel the entity to procure equipment or services not meeting requirements of interchangeability with already existing equipment or services(5); (CAP code 74)

(e) when an entity procures prototypes or a first product or service which are

developed at its request in the course of, and for, a particular contract for research, experiment, study or original development. When such contracts have been fulfilled, subsequent procurements of products or services shall be subject to Articles VII through XIV(6). (CAP code 72)

(f) when additional construction services which were not included in the initial

contract but which were within the objectives of the original tender documentation have, through unforeseeable circumstances, become necessary to complete the construction services described therein, and the entity needs to award contracts for the additional construction services to the contractor carrying out the construction services concerned since the separation of the additional construction services from the initial contract would be difficult for technical or economic reasons and cause significant inconvenience to the entity. However, the total value of contracts awarded for the additional construction services may not exceed 50 per cent of the amount of the main contract;

(g) for new construction services consisting of the repetition of similar construction services which conform to a basic project for which an initial contract was awarded in accordance with Articles VII through XIV and for which the entity has indicated in the notice of intended procurement concerning the initial construction service, that limited tendering procedures might be used in awarding contracts for such new construction services;

(h) for products purchased on a commodity market; (CAP code 21)

(i) for purchases made under exceptionally advantageous conditions which only arise in the very short term. This provision is intended to cover unusual disposals by firms, which are not normally suppliers, or disposal of assets of businesses in liquidation or receivership. It is not intended to cover routine purchases from regular suppliers; (CAP code 21).

(j) in the case of contracts awarded to the winner of a design contest provided that the contest has been organized in a manner which is consistent with the principles of this Agreement, notably as regards the publication, in the sense of Article IX, of an invitation to suitably qualified suppliers, to participate in such a contest which shall be judged by an independent jury with a view to design contracts being awarded to the winners. (CAP code 22).

2. Entities shall prepare a report in writing on each contract awarded under the provisions of paragraph 1. Each report shall contain the name of the procuring entity, value and kind of goods or services procured, country of origin, and a statement of the conditions in this Article, which prevailed. This report shall remain with the entities concerned at the disposal of the government authorities responsible

Supply Manual Page 3 of 5 Version 10-1 (2010-01-11)

Annex 3.2 – Limited Tendering Reasons contained in the Trade Agreements

for the entity in order that it may be used if required under the procedures of Articles XVIII, XIX, XX and XXII.”

Notes: 5. It is the understanding that "existing equipment" includes software to the extent that the

initial procurement of the software was covered by the Agreement. 6. Original development of a first product or service may include limited production or supply

in order to incorporate the results of field testing and to demonstrate that the product or service is suitable for production or supply in quantity to acceptable quality standards. It does not extend to quantity production or supply to establish commercial viability or to recover research and development costs.

3. The limited tendering reasons for the Agreement on Internal Trade (ATI), as stated in

paragraphs 11 and 12 of article 506 are included below.

"11. An entity of a Party may use procurement procedures that are different from those described in paragraphs 1 through 10 in the following circumstances, provided that it does not do so for the purpose of avoiding competition between suppliers or in order to discriminate against suppliers of any other Party: a. where an unforeseeable situation of urgency exists and the goods, services or

construction cannot be obtained in time by means of open procurement procedures; (CAP code 81)

b. where goods or consulting services regarding matters of a confidential or

privileged nature are to be purchased and the disclosure of those matters through an open tendering process could reasonably be expected to compromise government confidentiality, cause economic disruption or otherwise be contrary to the public interest;

c. where a contract is to be awarded under a cooperation agreement that is

financed, in whole or in part, by an international cooperation organization, only to the extent that the agreement between the Party and the organization includes rules for awarding contracts that differ from the obligations set out in this Chapter;

d. where construction materials are to be purchased and it can be demonstrated

that transportation costs and technical considerations impose geographic limits on the available supply base, specifically in the case of sand, stone, gravel, asphalt, compound and pre-mixed concrete for use in the construction or repair of roads;

e. where compliance with the open tendering provisions set out in this

Chapter would interfere with a Party's ability to maintain security or order or to protect human, animal or plant life or health; and

f. in the absence of a receipt of any bids in response to a call for tenders made in

accordance with the procedures set out in this Chapter. (CAP Code 05)" “12. Where only one supplier is able to meet the requirements of a procurement, an entity

may use procurement procedures that are different from those described in paragraphs 1 through 10 in the following circumstances: a. to ensure compatibility with existing products, to recognize exclusive rights, such

as exclusive licences, copyright and patent rights, or to maintain specialized products that must be maintained by the manufacturer or its representative;

Supply Manual Page 4 of 5 Version 10-1 (2010-01-11)

Annex 3.2 – Limited Tendering Reasons contained in the Trade Agreements

b. where there is an absence of competition for technical reasons and the goods or

services can be supplied only by a particular supplier and no alternative or substitute exists; (CAP code 71)

c. or the procurement of goods or services the supply of which is controlled by a

supplier that is a statutory monopoly; (CAP code 86) d. the purchase of goods on a commodity market; (CAP code 20) e. or work to be performed on or about a leased building or portions thereof that

may be performed only by the leasor (CAP code 87) f. for work to be performed on property by a contractor according to provisions of a

warranty or guarantee held in respect of the property or the original work; g. for a contract to be awarded to the winner of a design contest; h. for the procurement of a prototype or a first good or service to be developed in

the course of and for a particular contract for research, experiment, study or original development, but not for any subsequent purchases; (CAP code 72)

i. for the purchase of goods under exceptionally advantageous circumstances such

as bankruptcy or receivership, but not for routine purchases; (CAP code 21) j. for the procurement of original works of art; k. for the procurement of subscriptions to newspapers, magazines or other

periodicals (CAP code 87); and l. for the procurement of real property. (CAP code 87) "

Supply Manual Page 5 of 5 Version 10-1 (2010-01-11)

Annex 3.3 – Model Advance Contract Award Notice

Annex 3.3: Model Advance Contract Award Notice (2010-01-11) An Advanced Contract Award Notice (ACAN) must include, in both official languages, the following information: 1. An explanation of what an ACAN is. The following explanation must be included:

An ACAN is a public notice indicating to the supplier community that a department or agency intends to award a contract for goods, services or construction to a pre-identified supplier, thereby allowing other suppliers to signal their interest in bidding, by submitting a statement of capabilities. If no supplier submits a statement of capabilities that meets the requirements set out in the ACAN, on or before the closing date stated in the ACAN, the contracting officer may then proceed with the award.

2. Definition of requirements or expected results. Provide in sufficient detail, so that other

potential suppliers can determine if they possess the capabilities to satisfy them and to provide the contracting officer with an adequate basis to evaluate the statement of capabilities from potential suppliers.

3. Statement regarding applicability of trade agreements or other obligations. Include, where

applicable, a statement indicating if the proposed procurement is subject to one of the trade agreements, the Procurement Strategy for Aboriginal Business (PSAB), or to one of the Comprehensive Land Claims Agreements (CLCAs). When the procurement is set aside under the PSAB, include the following statement at the beginning of the ACAN:

“This requirement is set aside for an Aboriginal supplier in accordance with the government’s Procurement Strategy for Aboriginal Business (PSAB). Therefore, only suppliers who meet the definition of an Aboriginal business, as defined in the PSAB, may submit a statement of capabilities”.

4. Government Contracts Regulations Exception and Limited Tendering Reason, if

applicable. Indicate all relevant exceptions to the Government Contracts Regulations and, if applicable, the limited tendering reasons (see Annex 3.2) in the trade agreements being invoked. Indicate the reason(s) for the proposed contract award. This should clearly demonstrate why this supplier has been identified as the only supplier capable of performing the work.

5. Ownership of Intellectual Property. Where intellectual property will be created during the

course of the contract, a statement should indicate whether an exception set out in the Treasury Board’s Policy on Title to Intellectual Property Arising under Crown Procurement Contracts is being invoked or if the ownership of intellectual property will rest with the contractor.

6. The period of the proposed contract or the required delivery. Provide the period of the

proposed contract or the required delivery, including potential renewal or option years. 7. A cost estimate of the proposed contract. This should be included, where appropriate,

provided that it will not prejudice negotiations with the proposed contractor, or compromise the contractor’s competitive position if the contract proceeds to a traditional or electronic bidding process (could be provided as a range).

8. Name and, usually, the address of the proposed contractor must be identified in the ACAN. 9. Suppliers’ right to submit a statement of capabilities. An explanation to suppliers of how they

may proceed in responding to the ACAN.

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Annex 3.3 – Model Advance Contract Award Notice

“Suppliers who consider themselves fully qualified and available to provide the services and/or goods described herein, may submit a statement of capabilities in writing to the contact person identified in this notice on or before the closing date of this notice. The statement of capabilities must clearly demonstrate how the supplier meets the advertised requirements.”

10. The closing date for a submission of a statement of capabilities. Include the Day, Month and

Year for the closing date for accepting statements of capabilities, i.e. 15 calendar day period. 11. Inquiries and submission of statements of capabilities. Include the name, position, address,

phone, fax and e-mail address where suppliers may inquire or submit a statement of capabilities.

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

Annex 3.4 – Task Authorization Contracts

Annex 3.4: Task Authorization Contracts (2010-01-11) 1. Background (a) When they are well designed and properly used, task authorization (TA) contracts provide a

structured framework offering operational speed and flexibility to clients. Also, because a formal contract is in place, the overall cost to the government is usually less. With these recognized benefits, TA contracts have been used successfully for many years.

(b) As part of the business transformation of government procurement now under way, the use of TA

contracts and similar instruments is expected to increase. Public Works and Government Services Canada (PWGSC) will seek to move from individual contracts entered into by or for individual departments, to broader-coverage procurement instruments that one or many clients can use directly, quickly and inexpensively.

(c) However, there have also been cases where problems have occurred. These fall into three main

categories:

(i) Improper authorization of work outside the scope of the original contract; (ii) Inadequate scrutiny of task performance and invoicing; and (iii) Insufficient oversight and control of total expenditures.

Note: While problems of this nature may also occur with non TA-type contracts, the focus of

this annex is to detail how to avoid these pitfalls with TA contracts. (d) TAs may be appropriate in a broad range of contract and operational situations. The nature and

scope of work to be performed under the contract may be defined in detail in the contract, and a rate structure included which sets out the basis for pricing any specific task. Equally, the nature and scope of the work to be performed may be included in the contract, but it may take considerable effort to define and negotiate the level of effort for a particular task. As a result, each situation must be dealt with on its own merits.

2. Procedures (a) When it is decided to put in place a TA contract, it is important that the solicitation process and

resulting contract deal specifically with:

(i) scope; (ii) task authorization limits, and (iii) process.

(b) Additionally, the procurement plan must address the contract risk management strategy, and

roles and responsibilities. 3. Scope TA contracts must contain a clear Statement of Work (SOW) describing the work that will or may be performed under the contract, with specific reference to work that may be carried out pursuant to TAs. Therefore, TAs must: (a) include a clear SOW addressing deliverables and schedule requirements; (b) only be for work described within the TA contract or SOW; (c) not exceed individual TA limit(s) specified in the contract, or any limit placed on the cumulative

value of TAs under the contract;

Supply Manual Page 1 of 9 Version 10-1 (2010-01-11)

Annex 3.4 – Task Authorization Contracts

(d) not be used to amend the terms and conditions of the contract. 4. Task Authorization Limits (a) Task authorization limits will include:

(i) limits for issuing TAs by clients, and (ii) limits for issuing TAs by the PWGSC contracting officer.

(b) In establishing limits to individual TAs and any amendments to those TAs, contracting officers in

consultation with the client should consider:

(i) operational requirements, control issues, financial management requirements or other factors affecting the use of TAs;

(ii) expected areas or types of task authorization (e.g. resource or activity streams required

to provide the client with different abilities to issue individual TAs); (iii) the total amount of work contemplated under the contract; (iv) the expected average value of TAs; (v) the amount of work covered under any core commitment, if applicable (i.e. work that will

be carried out without the need to issue task authorizations); (vi) the type of work to be performed on an "as and when requested" basis - relation to the

total contract, and where available total estimated cost and number of individual tasks; (vii) the number of different client representatives authorized to issue TAs; (viii) the frequency of reporting of task authorization usage, by the contractor and the client,

and plans for periodic or random audits of task authorizations. As the frequency of reporting and/or audits is increased, contracting officers will be better able to manage risks associated with inappropriate use of the TA authority. This in turn should permit contracting officers to consider higher limits on TAs.

(c) Limits on TAs that may be issued by a client (and by extension the definition of what services

may be acquired using TAs) should be sufficient to enable the client to authorize the majority of expected work packages. Above such limits, PWGSC must approve the issuance of a TA.

(d) The designated PWGSC approval level of TAs, above the limit that may be issued by a client,

should be addressed on a case-by-case basis, unless specific TA approval levels have been set by the Director or Director General for their directorate or sector. The PWGSC TA approval levels should be specified in the contract approval document. The Contract Planning and Advanced Approval (CPAA) form or the Procurement Plan should address the TA approval level for the contracting officer, the manager and up to the maximum level of Director. The PWGSC Director responsible for the TA contract has unlimited authority to approve a TA, above the limit that may be issued by a client.

(e) In setting the value at which PWGSC must authorize the issue of an individual TA, contracting

officers must ensure that this PWGSC involvement will add value to the task authorization process. This added value can be in several forms, such as financial oversight; negotiation of prices for work packages (tasks) within the contract framework, or comparisons with similar contracts for other clients to ensure value for money. Where the value added is not sufficient to compensate for the cost of this involvement, consideration should be given to an increase in the client TA authority.

Supply Manual Page 2 of 9 Version 10-1 (2010-01-11)

Annex 3.4 – Task Authorization Contracts

5. Process (a) In using task authorizations, the organization authorized to issue tasks to the contractor (normally

the client) is responsible for:

(a) verifying that the work required is within the scope of the TA contract and the task authorization process;

(b) providing the contractor with a Statement of Work for the specific task, including

deliverables, dates, etc. (Setting dates or timeframes for completing tasks must take into consideration the expiry date of the contract; a task must be completed on or before the expiry date of the TA contract. If it cannot be, a contract amendment would have to be issued by the contracting officer before the TA can be issued.);

(c) obtaining price and delivery schedule estimates from the contractor for the specific task,

verifying that the estimate provided for the task is in accordance with the contract basis of payment and ensuring that the proposed level of effort is commensurate with the scope of the TA Statement of Work, and

(d) confirming and authorizing the contractor to begin work on the task within the limits set

out in the contract; or where the estimate exceeds the client TA limits specified in the contract, referral of the task to PWGSC for review and approval prior to confirmation and authorization of work to the contractor.

(b) A TA contract must clearly describe:

(i) the forms or other means to be used in communicating with the contractor regarding the authorizations of tasks;

(ii) the administrative process for issuing TAs under the contract, and (iii) the process for reporting by the contractor on the use of the TAs and the total

expenditures (i.e. burn rate under this administrative process), e.g. regular reports from the contractor and/or progress review meetings.

(c) The form DND626 Task Authorization is the only authorized form to be used in TA contracts for

the Department of National Defence (DND); (d) For non-DND contracts, locally developed and approved task authorization forms may be used. (e) The forms PWGSC-TPSGC 942 (Call-up against a Standing Offer), PWGSC-TPSGC 1379 (Work

Arising or New Work), and GC111-1 (Purchase Order) must not be used as a task authorization form in a TA contract.

(f) Contracting officers should consider including a minimum work guarantee clause in the TA

contract, particularly in situations when the TA contract will not include a firm requirement (i.e. when all work under the contract will be authorized using TAs). Such a clause provides assurance to the contractor that they will receive a certain amount of work, as a minimum, via the contract. It provides a tangible limit on the contractor's expectations with respect to the potential benefits of the contract. Contracting officers should consult Legal Services on whether to include the Standard Acquisition Clauses and Conditions clause B9030C in the specific TA contract being prepared.

(g) In a TA contract, contracting officers must put in place or make use of established processes for

monitoring the contract to ensure that tasks remain within the original scope and value of the

Supply Manual Page 3 of 9 Version 10-1 (2010-01-11)

Annex 3.4 – Task Authorization Contracts

contract. This must include the provision for the client department to send to PWGSC a copy of each TA (including attachments), amendments to TAs, all claims/invoices, supported by reports, provided in a timely manner according to the individual contract: (i) In some cases, monthly information will be needed. (ii) In other contracts – e.g. longer term and with many task authorizations, a lesser

frequency may be adequate. (iii) The frequency of monitoring or audits of tasks can influence the limits placed on

individual task authorizations. The greater the audit frequency, the more managed the risk associated with the task authorization process. Consequently, this may allow contracting officers to consider higher individual task authorization limits.

(h) Contracting officers must ensure that detailed information is provided in order to effectively

perform monitoring and oversight requirements. For example, TAs should include a clear description of the work to be performed, appropriate rates/resource categories, schedule, appropriate authorization, etc. Reports should include details on the work performed, running totals, rates/resource categories, etc. Any audit requirements should be clearly detailed in the contract to ensure the contractor is aware of what information will be required and verified.

6. Risk Management (a) The improper use of task authorization contracts can lead to major problems between the

government and its suppliers, between PWGSC and its clients, and for the government in the eyes of the public. Therefore, focused attention must be given to how to prevent such negative events and how they, however infrequent, will be dealt with.

(b) In developing the procurement plan for TA contracts, contracting officers must consider and

discuss with the client, specific preventative, remedial or corrective measures to be taken where there are indications that the TA process is not working as planned. (For DND, this is outlined in section 8 below.) Measures may range from changing the detail and/or frequency of information reporting, training any or all participants, reduction of the dollar limit placed on individual tasks, reducing or revoking the authority to issue task authorizations to invoking penalty or termination provisions in the contract.

(c) It should be noted that reductions or revocation of authority to issue TAs may require contractor

agreement to an amendment to the contract (responsibility of the contracting officer). Invoking penalty or termination provisions should not be undertaken without consultation with Legal Services.

(d) An area of attention must be how requirements, identified by the client or by the supplier, that

cannot be dealt with using TAs will nonetheless be met quickly and economically. 7. Roles and Responsibilities (a) The following paragraphs provide general guidelines for management of roles and responsibilities

in procurements involving TA contracts. Some elements of this section are specifically covered for DND TA contracts in section 8 below; the specific DND-related provisions take precedence.

(b) When it is proposed to issue a TA contract, it is essential that there be a clear understanding and

agreement between PWGSC and the client as to roles and responsibilities relating to the management of the contract and the use of task authorizations:

(i) how, by whom, to whom and when information will be distributed;

Supply Manual Page 4 of 9 Version 10-1 (2010-01-11)

Annex 3.4 – Task Authorization Contracts

(ii) all task authorizations issued to the contractor will be within the scope of the contract; any apparent instances of scope creep or requirement splitting will be quickly identified and dealt with;

(iii) copies of TAs and all relevant documentation will be provided to the contracting officer

within an appropriate time of their issue; (iv) how and by whom indications of problems with the use of task authorizations will be

addressed, e.g. when work has been carried out under a TA which is outside the scope of the contract, how this will be dealt with when this is identified.

(c) The client is responsible for ensuring that its staff authorized to issue TAs or seek PWGSC

approval of TAs are properly trained to do so, including particularly knowledge of the TA provisions and scope in the contract, and information reporting requirements. Day-to-day contractor performance of task authorizations is monitored by the client to ensure that: (i) The client and the contractor are complying with the requirements of the contract and

specific TAs. (ii) Performance problems are reported to the contracting officer by the client immediately. (iii) Subsequent invoicing is also in accordance with the contract and invoicing. (iv) Total expenditures against a contract – spent and committed via task authorizations – are

within the maximum contract value and that the burn rate is appropriate. (d) Potential problems will be identified to the client authority and contracting officer immediately:

(i) The contracting officer and client will jointly take immediate action to determine whether a problem exists.

(ii) When a problem is confirmed, appropriate action will be taken to resolve it and prevent

recurrences. This may include:

(A) reduction of client TA authorities, up to cancellation or suspension of TA authorities, and possibly renegotiating the contract to include new or different TA processes;

(B) specific or general changes to the timing, distribution and/or content of

information flow; (C) increased requirements for review of task authorizations by PWGSC; (D) training to client authorities and/or the contractor if the need is indicated; (E) changes, up to cancellation or suspension, of TA authorities within the client

department (i.e. who can initiate or approve task authorizations). (e) There must be an agreement between PWGSC and the client regarding the monitoring process

and appropriate information exchange, including the frequency and content of client reports, if applicable. The agreement must be documented on file, and the formality of the agreement will depend on the complexity of the procurement.

(f) At all times during the life of the contract, all parties must be fully accountable for their respective

roles and responsibilities in and relating to the contract, and must remain fully informed of any actions initiated under the contract.

Supply Manual Page 5 of 9 Version 10-1 (2010-01-11)

Annex 3.4 – Task Authorization Contracts

8. Task Authorization Contracts for Department of National Defence (DND) (a) As a major user of task authorization contracts, DND has its own internal procedure for the

management of TAs, known as the DND 626 after the authorization form that is used. PWGSC contracting officers working with DND on TA contracts must ensure that they are familiar with DND's internal processes, which are contained in DND's Procurement Administration Manual (PAM), extracts of which are attached at Appendix A.

(b) The major features of the DND approach, which seeks to ensure tight management oversight

over task authorizations, are that in order to include task authorizations in a contract, the contract must include:

(i) a Statement of Work (SOW) that defines the work to be performed by the contractor

under task authorizations; (ii) a pre-determined administrative process for raising, approving and managing the DND

626 Task Authorizations; (iii) pre-negotiated labour categories and rates which will be used by the contractor to quote

on the level of effort for each DND 626 Task Authorization; (iv) a limit for each TA up to which DND may approve or amend a TA without prior review by

PWGSC. (c) DND makes it clear to its own staff that it is the responsibility of DND, before issuing a task

authorization or seeking PWGSC approval of one, to verify that the proposed work is within scope.

(d) Only the DND 626 Task Authorization form can be used for requesting/confirming TA to the

contractor in DND TA contracts. (e) The DND 626 form contains a signature block for PWGSC approval of tasks, where this is

required under the agreed-to process, i.e. where a particular task authorization is outside the client's approval authority. Where PWGSC approval of a task authorization is required, contracting officers must review it according to the context of the particular contract. If the task authorization is found appropriate, the contracting officer will authorize or arrange for appropriate authorization and return the DND 626 to the DND procurement/requisitioning authority in an expeditious manner for issuance to the contractor.

9. Procurement Reporting After issuing a TA contract or TA contract amendment, contracting officers must report on the procurement as follows: (a) For Automated Buyer Environment (ABE) users: on the main page of the Procurement Summary,

click on “Program ID”, and select “Contract that allows Task Authorizations.” (b) For Automated Data Capture (ADC) users: include the following statement when submitting the

ADC procurement report, “Program ID: Contract that allows Task Authorizations.”

Supply Manual Page 6 of 9 Version 10-1 (2010-01-11)

Annex 3.4 – Task Authorization Contracts

Appendix A (to Annex 3.4) (a) Extract from DND Procurement Administration Manual (PAM) – DND 626 Procedures - a Task

Authorization Contract may be raised when:

(i) There is a need to have some or all of the work performed by the contractor on an "as and when requested" basis; and

(ii) The main Statement of Work (SOW) will broadly define the scope of work that will be

performed under a task authorization; and (iii) The task authorization will be an administrative process only and will use the existing

terms and conditions in the main contract. (PAM 3.1 Annex A). (b) Special requirements to include in the PWGSC-TPSGC 9200 requisition for a Task Authorization

Contract:

(i) The Technical Authority must specify in the SOW the scope of the work to be performed using "as and when requested" tasks. The TA must define the scope sufficiently to allow inclusion in the resulting contract for both the appropriate labour and resource categories and associated firm labour or per diem rates for each resource category.

(ii) The TA should have sufficient knowledge of all work to be performed under the contract,

including Tasks, and be able to identify a reasonable estimated Limitation of Expenditure for the term of the resulting contract.

(iii) The Procurement Authority must include the following two DND clauses in the PWGSC-

TPSGC 9200:

"Requirement for use of DND 626 Task Authorization: This Requisition contains the requirement for DND to authorize the contractor to perform some or all of the work on an "as and when requested" basis using the terms and conditions of the contract. DND will issue a DND 626 Task Authorization to authorize the work to be performed. The requested DND threshold for each DND 626 is $_______* including amendments. Tasks over this limit will be passed to the contracting officer for review and signature in the PWGSC block on the DND 626 prior to release to the contractor."

* Note: The amount listed here should be identified by the TA and represents the average expected limitation of expenditure for the majority of tasks. While the threshold is subject to negotiation between the PWGSC contracting officer and the DND Procurement Authority, if it is necessary to change the threshold requested in the PWGSC-TPSGC 9200, every effort shall be made to keep it at a level where the majority of tasks will still be approved by DND in order to maintain the efficiency of this administrative process and prevent duplication of effort between the two departments.

(c) DND 626 Administrative Process

The DND 626 will be used to authorize tasks under this contract using the following administrative process: (i) The Technical authority prepares a SOW describing the task. (ii) The DND Procurement authority submits the Task SOW to the contractor.

Supply Manual Page 7 of 9 Version 10-1 (2010-01-11)

Annex 3.4 – Task Authorization Contracts

(iii) The contractor reviews the Task SOW and provides a quote on the level of effort (LOE)

to complete the task, to the procurement/requisition authority, using the rates established in the contract.

(iv) The DND Procurement authority reviews the LOE quote with the technical authority and

seeks approval to proceed. (v) If the LOE quote is within the DND Task approval ceiling, the DND Procurement authority

signs the DND626 and forward copies to the contractor and the contracting officer. (vi) If the quote exceeds DND's Task approval ceiling, the PWGSC contracting officer must

also sign the DND 626 prior to DND releasing it to the contractor. (vii) Amendments to the DND 626 require completion of a DND 626 amendment form. The

DND Procurement authority approves tasks where the amended value is within the threshold established in the contract. The PWGSC contracting officer must sign any amendment that exceeds the threshold before the DND procurement authority releases it to the contractor.

(viii) The contractor may not begin work before receiving the approved DND 626. Note 1: This is a list of the minimum requirements to include; more may be added if required by

the individual contract. Note 2: Before issuing a Task Authorization contract, PWGSC may need to ensure that specific

reporting requirements will be addressed. These requirements will be discussed and agreed to by the DND procurement authority and the PWGSC contracting officer prior to releasing the RFQ/RFP. (DND PAM 3.3.11 Annex H)

(d) When to use a DND626

There must be a Task Authorization contract in place containing the following:

(i) A Statement of Work (SOW) that broadly defines the work to be performed by the contractor under a Task Authorization;

(ii) Authority to use a DND 626 Task Authorization process; (iii) A pre-determined administrative process for raising, approving and managing the DND

626 Task Authorizations; (iv) Pre negotiated, labour categories and hourly rates or per diems which will be used by the

contractor to quote on the level of effort for each DND 626 Task; (v) A threshold, for each Task Authorization, up to which the DND PA may approve or

amend the Task without prior review by the contracting officer (DND PAM 3.3.2.1). (e) Approve and Issue the DND626

(i) The PA will ensure the DND 626 is approved by the signing authority listed in the PAM 1.4 Annex D table 1.4D-2. Once approved, the original signed Task Authorization form will be forwarded to the contractor to authorize them to begin work on the task and at the same time a copy of the signed approved Task Authorization form must be forwarded to the contracting officer (DND PAM 3.3.2.2).

Supply Manual Page 8 of 9 Version 10-1 (2010-01-11)

Annex 3.4 – Task Authorization Contracts

(ii) If the quote exceeds the DND approval/amendment threshold identified in the PWGSC contract, the procurement authority forwards the DND 626 to the PWGSC contracting officer for review and comments.

(iii) When the PWGSC contracting officer is satisfied with the task they will sign in the block

for PWGSC and return the DND626 to the Procurement authority" (DND PAM 3.3.2.2).

Supply Manual Page 9 of 9 Version 10-1 (2010-01-11)

Annex 3.5 – Procurement Review Committee Requirements and Approval Process

Annex 3.5: Procurement Review Committee Requirements and Approval Process (2010-01-11) (a) The Procurement Review Committee (PRC) Secretariat is part of the Policy, Risk, Integrity and

Strategic Management Sector, and can be reached either by telephone: 819-956-3513 or by e-mail at: PRC.Secretariat@tpsgc-pwgsc.gc.ca

(b) When a PRC review is required, the Secretariat will, as part of the background document, request

that the contracting officer develop procurement strategies for consideration by the PRC. As a member of the PRC, the contracting officer plays a major role in these deliberations. The PRC's recommendations are recorded in a Record of Review that accompanies the contract submission to Treasury Board (TB).

(c) Recommendations that involve increased cost or risk must be supported by a cost-benefit

analysis using the factors set out in the TB policy. The department whose program will be supported by the benefits being sought carries out this analysis.

(d) The use of relative weightings for evaluating socio-economic benefits should be limited, except in

special circumstances, to procurements exceeding $50,000,000. When relative weightings are utilized for evaluating socio-economic benefits, TB approval of the procurement strategy is required before issuing the bid solicitation, regardless of delegated levels. TB approval will be sought by the department acting as a proponent of the alternate strategies.

(e) Where socio-economic or environmental benefits form part of the bid evaluation, the PRC may

request that the contracting officer provide a briefing on the results of the bid evaluation. (f) The contracting officer may be required to provide the PRC with feedback relative to the results of

the Committee's recommendations. However, monitoring the achievement of the benefits being sought is the responsibility of the department whose program was supported by the socio-economic benefits.

(g) All procurements that contain a requirement for local content or regional economical benefits,

including those procurements for which the PRC has imposed local content or regional economic benefits, must ensure that the Notice of Proposed Procurement/solicitation documents contains details of the restrictions or practices. When the value of the procurement is $2,000,000 or below and local content or regional economic benefits have been sought, these procurements must be reported as "exceptional circumstances." In order to prepare the report, it will be necessary to include the details of the restrictions in the Contract Award Notice as well.

(h) The following process is followed for review and approval of requirements:

(i) The Detail Document (see Exhibit A) is forwarded to PRC Committee members by e-mail. Committee members are given five working days to review each individual requirement. At any time within those five days, members can request that the PRC Secretariat place a requirement on hold, pending further discussions or clarifications.

(ii) Queries on a particular requirement sent to the PRC Secretariat by Committee members

will be forwarded directly to the responsible contracting officer for direct reply. (iii) If no queries or concerns have been received at the end of the fifth day, the PRC

Secretariat will then issue a Record of Decision. (iv) Copies of both the Detail Document and Record of Decision are provided to all PRC

members and the responsible PWGSC contracting officer whose name has been indicated on the Detail Document.

Supply Manual Page 1 of 4 Version 10-1 (2010-01-11)

Annex 3.5 – Procurement Review Committee Requirements and Approval Process

(v) A requirement that has been placed on hold will only be released once direction to do so

has been received by e-mail from the PRC member who has made such a request; (vi) Contracting requirements that are initially under $2,000,000 must be reviewed by the

PRC if the contract value increases to $2,000,000 or above. (vii) Amendments to a requirement must be added to the Detail Document by the contracting

officer and returned to the PRC Secretariat for forwarding to PRC members for further review. PRC members are given three working days to review amendments. At the end of this time period, a Record of Decision will be issued.

(i) When completing the Detail Document, the following should be taken into consideration:

(i) socio-economic or environmental benefits, if any, must be clearly indicated in the Detail Document;

(ii) the Project Value should clearly identify whether it is one contract or part of a project

involving several requirements to be sent for individual PRC review and approval, or whether the PRC is being requested to approve the entire project. If this is the case, then this should be clearly stated in the detail document.

Supply Manual Page 2 of 4 Version 10-1 (2010-01-11)

Annex 3.5 – Procurement Review Committee Requirements and Approval Process

Exhibit A: Detail Document - Procurement Review Committee (2010-01-11) In accordance with the Treasury Board Procurement Review Policy, the following information on a procurement requirement is submitted for your consideration. If there is no request for additional time to consider the socio-economic potential of this requirement by the date below you will be notified by e-mail that no further review is required. If you determine that further review is required, you are requested to provide the reason(s) for your interest and a statement of the benefits being sought. (Date to be determined by the Procurement Review Committee Secretariat) / Date à être déterminée par le Secrétariat du Comité d'examen des acquisitions)

Procurement Review Committee (PRC) - Detail Document Comité d’examen des acquisitions (CE) - Description détaillée

PRC No / No CEA : (To be determined by the PRC Secretariat / À être déterminé par le Secrétariat du CEA) Project Title / Titre du projet : Operating Department / Ministère opérationnel : Project Ref. No / No du projet : Project Value / Valeur du projet : $______M / ______M$ Estimated Contract Value / Valeur estimative du contrat : $_____M / _____M$ Commodity Description / Description des biens ou services : Project Status / État du projet : Procurement Strategy and Other Related Information / Stratégie d’approvisionnement et autres renseignements pertinents : Competitive / Concurrentiel ( ) MERX ( ) Directed / Source unique ( ) ACAN / PAC ( ) Source(s) of supply / Source(s) d'approvisionnement : Justification for Sole Sourcing (if applicable) / Justification du recours à un fournisseur unique (le cas échéant) : Procurement Category Code / Code de catégorie d'achat : Specifications / Spécifications :

Military / Militaires ( ) Commercial / Commercial ( ) Developmental Procurement (if applicable) / Achats aux fins de développement (le cas échéant) : Estimated Contract Award Date / Date prévue d’attribution du contrat : Contact Points / Points de contact :

Supply Manual Page 3 of 4 Version 10-1 (2010-01-11)

Annex 3.5 – Procurement Review Committee Requirements and Approval Process

PWGSC Contracting Authority / Autorité contractante de TPSGC : Telephone / Téléphone : ( ) ______ Fax / Télécopieur : ( ) _______ E-mail / Courriel : ______________ Operating Department Project Authority / Responsable du projet au ministère opérationnel : ________________ Telephone / Téléphone : ( ) _______ Fax / Télécopieur : ( ) _______ E-mail / Courriel : ________________ PRC Secretariat / Secrétariat du CEA 819-956-3513

Supply Manual Page 4 of 4 Version 10-1 (2010-01-11)

Annex 3.6 – Canadian Content Policy

Annex 3.6: Canadian Content Policy (2010-01-11) 1. Introduction The Canadian Content Policy is a Cabinet-mandated policy. The Policy encourages industrial development in Canada by limiting, in specific circumstances, competition for government procurement opportunities to suppliers of Canadian goods and services. 2. Application (a) The Policy applies only to procurements carried out by Supply and Services Canada (SSC),

which is now a part of Public Works and Government Services Canada (PWGSC). Therefore, this policy will normally apply to goods and services contracting carried out by Acquisitions Branch, except for those categories of procurements which were not done by the former SSC. Furthermore, the Policy does not apply when another government departments does its own contracting and would not normally apply to construction procurement that had been previously carried out by the former Public Works Canada.

(b) The Policy applies to competitive procurements with an estimated value of $25,000 or more,

except for the following:

(i) government procurements subject to the international trade agreements; (ii) procurements made in furtherance of aid to developing countries, but does apply to

purchases made by the Canadian International Development Agency (CIDA) on its own account;

(iii) procurements made by PWGSC Acquisitions offices located outside Canada; and (iv) Cabinet-mandated sourcing, including sourcing related to shipbuilding, ship repair, refit

and mid-life modernization. 3. Determining Eligible Bidders (a) Eligible bidders are those supplying Canadian goods and/or services. (b) A good wholly manufactured or originating in Canada is considered a Canadian good. A product

containing imported components may also be considered Canadian for the purpose of this policy when it has undergone sufficient change in Canada, in a manner that satisfies the definition specified under the North American Free Trade Agreement (NAFTA) Rules of Origin. For the purposes of this determination, the reference to "territory" in the NAFTA Rules of Origin is to be replaced with "Canada".

(c) For photocopiers, computers and office equipment within Federal Supply Classification (FSC)

groups 36, 70 and 74, there are special rules – see paragraph (e), “Other Canadian Goods and Services”, below.

(d) A service provided by an individual based in Canada is considered a Canadian service. Where a

requirement consists of only one service, which is being provided by more than one individual, the service will be considered Canadian if a minimum of 80 percent of the total bid price for the service is provided by individuals based in Canada.

(e) Other Canadian Goods and Services

Supply Manual Page 1 of 8 Version 10-1 (2010-01-11)

Annex 3.6 – Canadian Content Policy

(i) For photocopiers, computers and office equipment within FSC groups 36, 70 and 74, only the products of the following firms are considered Canadian goods: (A) MERIT Partner under the MERIT Partnership Program (administered by Industry

Canada [IC] and PWGSC); (B) companies which, on March 31,1992, were allocated to Priority Group 1 under

the Priority Groups Policy in effect at that time; or (C) CIRCLE Canada companies as agreed on by IC and PWGSC.

(ii) Textiles: Textiles are considered to be Canadian goods according to a modified rule of

origin, copies of which are available from the Clothing and Textiles Division, Logistics, Electrical, Fuel and Transportation Directorate.

4. Preparing a Bid Solicitation (a) When a requirement is covered by the Canadian Content Policy, the bidder must certify the

Canadian content by submitting a certification that the good or service offered meet the definition of Canadian goods and/or services.

(b) When the requirement consists of one good or service, the bidder must certify that the good or

service is Canadian. See section 9, “The Rules of Origin Determination”, for examples of how to determine whether a good is Canadian.

(c) When requirements consist of more than one good and/or service, the contracting officer must

decide, at the procurement planning stage, whether the Canadian content certification will be done on an aggregate or individual basis:

(i) aggregate: multi-item requirements will be certified on an aggregate basis. A minimum

of 80 percent of the total bid price must consist of Canadian goods to meet the requirements of the Policy; or

(ii) item by Item: multi-item requirements awarded on an item by item basis will be certified

on an item-by-item basis. In these cases, suppliers will be asked to identify separately, each item that meets the definition of Canadian goods.

(d) For requirements consisting of more than one service, a minimum of 80 percent of the total bid

price must be provided by individuals based in Canada. (e) For requirements consisting of a mix of goods and services, 80 percent of the total bid price must

consist of Canadian goods and Canadian services. See section 9, “The Rules of Origin Determination”, for an example of how to determine whether a mix of goods and services meets the 80 percent rule.

(f) A bid can be accepted in part without resubmission of a certification. (g) The contracting officer must first decide whether a requirement will be solely or conditionally

limited to Canadian goods and or services or whether the procurement will be open to all suppliers.

(h) Solely Limited: the bid solicitation or request for standing offers will be solely limited to suppliers

who could offer Canadian goods and/or services when the contracting officer believes there exists, in the marketplace, three or more such suppliers. Certifications for competitive procurement solely limited to Canadian goods and/or services are provided in the Standard Acquisition Clauses and Conditions (SACC) Manual, under clause numbers:A3051T, A3052T,

Supply Manual Page 2 of 8 Version 10-1 (2010-01-11)

Annex 3.6 – Canadian Content Policy

A3053T, A3055T, A3056T and A3059T for bid solicitations; and M3051T, M3052T, M3053T, M3055T, M3056T and M3059T for requests for standing offers. Except for bids that will be publicly opened, the contracting officer will determine whether:

(i) the bidder will be required to submit the completed certification of Canadian content with

the bid, or (ii) the bidder should submit the completed certification with the bid, but it is not mandatory.

If the certification is not completed or submitted with the bid, the contracting officer will contact the bidder and provide the bidder with a timeframe within which to submit the completed certification.

Note 1: For publicly opened bids, the bidder will be required to submit the completed

certification with the bid. Note 2: The contracting officer will normally not require bidders to submit certifications

with their bid unless the requirement is urgently needed by the client. (i) Conditionally Limited: the bid solicitation or request for standing offers will be conditionally

limited when the contracting officer is uncertain whether three or more suppliers of Canadian goods and/or services exist. Certifications for competitive procurement conditionally limited to Canadian goods and/or services are provided in the SACC Manual, under clause numbers: A3061T, A3062T, A3063T, A3065T, A3066T and A3069T for bid solicitations; and M3061T, M3062T, M3063T, M3065T, M3066T and M3069T for requests for standing offers. The bidder will be required to submit the Canadian content certification with the bid; or

(j) Open: when the contracting officer is of the opinion that three or more suppliers of Canadian

goods and/or services do not exist, the bid solicitation or request for standing offers must be open to all suppliers. Bidders are not required to provide a certification.

(k) Once the sourcing strategy is determined, the contracting officer will prepare a Notice of

Proposed Procurement (NPP). The procurement opportunity will be coded on the Government Electronic Tendering Service (GETS) as:

(i) Solely Limited, Code O-5; (ii) Conditionally Limited, Code O-4; or (iii) Open, Code O-1.

5. Bid Handling (a) The supplier is responsible to demonstrate that its bid meets the definition of Canadian goods

and/or services and must submit a completed certification. When the SACC Manual clauses: A3052T and A3062T for bid solicitations; and M3052T and M3062T for requests for standing offers are used, the supplier must clearly identify the status of each individual product.

(b) Bids to which the Canadian Content Policy applies will be evaluated as follows:

(i) If the procurement process was solely limited to Canadian goods and/or services, and

(A) the bidder was required to submit the certification with the bid, only bids with a valid certification will be evaluated. The bid evaluation process can proceed where there is at least one bid with a valid certification otherwise the bid solicitation must be reissued; or

(B) the bidder was not required to submit the certification with the bid, the contracting

officer will contact the bidder and provide the bidder with a timeframe within

Supply Manual Page 3 of 8 Version 10-1 (2010-01-11)

Annex 3.6 – Canadian Content Policy

which to submit the completed certification. If the bidder does not comply by submitting the completed certification within the prescribed timeframe, the bid will be declared non-responsive. A bid will only be provided to the client department for evaluation once the completed certification is received. The bid evaluation process can continue as long as there is at least one bid with a valid certification otherwise the bid solicitation must be reissued.

(ii) If the procurement process was conditionally limited to Canadian goods and/or

services, the contracting officer will determine, first, if there are three or more bids with a valid Canadian content certification. In that event, the evaluation will be limited to the bids with the certification; otherwise, all bids will be evaluated. If the bids with a valid certification are later declared non-responsive or withdrawn, and, and after such there are less than three responsive bids with a valid certification of Canadian goods and/or services, the evaluation will continue among those responsive bids which contain a valid certification. If all bids with a valid certification are subsequently found to be non-responsive or withdrawn, then all other bids received will be evaluated. (See SACC Manual clause A3070T.)

(c) PWGSC may verify the validity of the certification. If the certification is declared non-responsive,

then the offered goods and/or services are deemed not to meet the definition of Canadian content. Verification of the certification must in no way alter the price quoted or any substantive element of the bid.

6. Contract Award Contracts awarded on the basis of the bid having met the definition of Canadian content under the Canadian Content Policy will include SACC Manual clause A3060C or M3060C, as applicable. 7. Set-asides and Canadian Content (a) The Canadian Content Policy may be applied to procurements set-aside for Aboriginal business. (b) In applying the Policy under a set aside procurement, it must be recognized that there are two

levels of certification. (c) The first level of certification will be to qualify the bidder(s) as eligible for set-aside consideration,

i.e. bidders must provide a certification that they are an Aboriginal business. (d) As the second level, contracting officers must then apply the Policy, in the same manner as any

other procurement, in the context of the supplier community, which is eligible to respond (i.e. the Aboriginal business community). Contracting officers must determine, on the basis of their knowledge of this community, whether there are a sufficient number of eligible firms to carry out the procurement as: solely limited (e.g. three or more Aboriginal businesses exist which are able to provide Canadian goods and/or services); conditionally limited (e.g. there may be three or more Aboriginal suppliers of Canadian goods or services); or open (e.g. there is an insufficient number of Aboriginal businesses able to provide Canadian goods and/or services; the procurement is open to all Aboriginal businesses regardless of the origin of the goods and services supplied).

8. Discretionary Audit and Reviews The authority for discretionary audits results from either the contractual terms, or statute (Defence Production Act, section 19). If a contracting officer has concerns about the certification of Canadian content under the Canadian Content Policy, the contracting officer should discuss the use of a discretionary audit or review with their management and with the Acquisition Policy and Process Directorate.

Supply Manual Page 4 of 8 Version 10-1 (2010-01-11)

Annex 3.6 – Canadian Content Policy

9. The Rules of Origin Determination (a) The Canadian Rules of Origin for Goods (Chapter 4 of the North American Free Trade

Agreement) and Canadian Customs Tariff Harmonized System are used to determine if imported components that go into the production of an item for resale to the government are sufficiently altered or converted in Canada to be considered "Canadian."

(b) The Harmonized Commodity Description and Coding System is a structured classification system

for goods that has been adopted by Canada and most of the world's trading nations, for customs purposes.

(c) For the purposes of this determination, the reference to "territory" in the Rules of Originmust be

replaced with "Canada". (d) Products containing imported components may be considered Canadian when they have

undergone sufficient change in Canada in a manner that satisfies this amended definition. There are three basic steps to determine if any product that is partially or wholly constructed from imported components meets the Rules of Origin definition: (i) Locate the heading number in the Harmonized System that best reflects the final product

for sale. (ii) Find the appropriate heading number in the Harmonized System that identifies imported

components used to construct the final product. (iii) Look up the section in the rules of origin that defines whether the conversion that took

place in Canada allows the goods to be defined as Canadian.

Example 1 – Determining Whether a Good is Canadian (a) A bidder proposes hats, which are manufactured in Canada that use imported calves leather. (b) Analysis of Canadian content:

(i) Look up “hats” in the index of the Canadian Customs Tariff Harmonized System (HS) and

find the type that matches the kinds of hats to be sold: Hats and other headgear, plaited or made by assembling strips of any material, whether or not lined or trimmed. The HS number is 6504.00.00. The first two numbers indicate the good is listed in Chapter 65.

(ii) Look up “leather, bovine” in the index: it falls under HS heading 4104. (ii) Finally, refer to the Rules of Origin which lists the conditions for transforming goods listed

in the HS into Canadian goods (Chapter 65 is for Headgear and Parts Thereof and is listed in Section XII of the rules). The second rule for Chapter 65 applies: A change from 65.03 to 65.07 from any heading outside that group. As the leather is classified outside 65.03 to 65.07, the final product (the hats) for sale are considered to be sufficiently transformed and therefore the hats are deemed to be Canadian for the purposes of this policy.

Example 2 – Determining Whether a Mix of Goods and Services meets the 80 percent Rule of Origin (a) There is a PWGSC solicitation for:

(i) 100 wooden office desks;

Supply Manual Page 5 of 8 Version 10-1 (2010-01-11)

Annex 3.6 – Canadian Content Policy

(ii) 100 electric space heaters with maintenance and repair included; (iii) 100 telephone sets with maintenance and repair included, and (iv) 100 metal swivel chairs.

(b) A bidder has proposed:

(i) unfinished wooden office desks which are imported into Canada and finished in Canada; (ii) electric space heaters which were constructed using domestic labour/materials and

imported parts. The maintenance/repair of the electric space heaters is being done by Canadian-based personnel;

(iii) telephone sets which were constructed using domestic labour/materials and some

imported parts. The maintenance/repair of the telephones is being done by United States-based individuals;

(iv) metal swivel chairs which were constructed using domestic labour/materials and some

imported parts. (c) Below are the prices for the goods and services offered in the bid:

100 wooden office desks @ $150 each $15,000

100 electric space heaters @ $200 each Maintenance/Repair

$20,000 $5,000

100 telephone sets @ $50 each Maintenance/Repair

$5,000 $1,000

100 metal swivel chairs @ $25 each $2,500

Total Bid Price $48,500 (d) Analysis of Canadian content:

(i) Wooden office desks:

(A) Unfinished wooden office desks (HS 9403.30) were imported and finished in Canada. The final good (finished wooden office desks) falls in same the subheading (HS 9403.30) as the unfinished good.

(B) The NAFTA rules of origin covering HS 9403.30 (wooden office desks) require a

change from another chapter, or a change from parts heading 9403.90, provided there is sufficient regional value content. These rules are not satisfied.

(C) Therefore, the wooden office desks are not considered Canadian goods.

(ii) Electric space heaters:

(A) Electric space heaters (HS 8516.21) were constructed using domestic labour/materials and imported parts (HS 8516.90).

(B) The NAFTA rules of origin covering HS 8516.21 (electric space heaters) allow a

change from subheading 8516.90, provided there is a regional value content of not less than 60 percent where the transaction value method is used or 50 percent where the net cost method is used.

Supply Manual Page 6 of 8 Version 10-1 (2010-01-11)

Annex 3.6 – Canadian Content Policy

(C) After calculations are done, the regional value content is found to be 65 percent using the transaction value method.

(D) Therefore, the electric space heaters are considered Canadian goods.

(iii) Telephone sets:

(A) Telephone sets (HS 8517.11) were constructed using domestic labour/materials and some imported plastic tubes (HS 3917).

(B) The NAFTA rules of origin covering HS 8517.11 (telephone sets) require a

change to subheading 8517.11 from any other subheading, except 8517.90.11, 8517.90.12, 8517.90.13, 8517.90.14 or 8517.90.41.

Therefore, the telephone sets are considered Canadian goods.

(iv) Metal swivel chairs:

(A) Metal swivel chairs (HS 9401.30) were constructed using domestic

labour/materials and some imported parts (HS 9401.90). (B) The NAFTA rules of origin covering HS 9401.30 (metal swivel chairs) allow a

change from subheading 9401.90, provided there is a regional value content of not less than 60 percent where the transaction value method is used or 50 percent where the net cost method is used.

(C) After calculations are done, the regional value content is found to be 37 percent

using the transaction value method. (D) Therefore, the metal swivel chairs are not considered Canadian goods.

(v) Maintenance/repair of telephones:

The maintenance/repair of telephones is being done by U.S.-based individuals. Therefore, this service is not considered a Canadian service.

(vi) Maintenance/repair of electric space heaters:

The maintenance/repair of electric space heaters is being done by Canadian-based individuals. Therefore, this service is considered a Canadian service.

(e) Calculation of Percent of Bid Price Considered Canadian

(i) Canadian goods and services

100 electric space heaters $20,000

100 telephone sets Maintenance/Repair

$5,000 $5,000

Total Canadian Goods and Services

$30,000

(ii) Non-canadian goods and services

100 wooden office desks $15,000

Supply Manual Page 7 of 8 Version 10-1 (2010-01-11)

Annex 3.6 – Canadian Content Policy

100 metal swivel chairs Maintenance/Repair

$2,500 $1,000

Total non-Canadian Goods and Services $18,500 Total Bid Price $48,500

(iii) Percent of the Bid Price that is composed of Canadian goods and services =

$30,000/$48,500 = 62% (f) Conclusion

The supplier has not met the Canadian content requirement that “no less than 80 percent of the bid price consists of Canadian goods and services”.

Supply Manual Page 8 of 8 Version 10-1 (2010-01-11)

Annex 3.7 – National Security Exception Request Letter - Template

Annex 3.7: National Security Exception Request Letter – Template (2010-01-11) (Clients should use their appropriate departmental letterhead; and delete the instructions provided in the letter.) Date: Address: _________ (insert name of Assistant Deputy Minister) Acquisitions Branch Public Works and Government Services Canada 11 Laurier Street Gatineau, Quebec K1A 0S5 Dear Ms/Mrs/Mr. __________ (Insert last name of ADM/AB, PWGSC): Subject: Request for a National Security Exception for the procurement of _____ (insert project title) I am writing to request that you invoke the National Security Exception contained in the World Trade Organization Agreement on Government Procurement (WTO-AGP), Article XXIII(1); the North American Free Trade Agreement (NAFTA), Article 1018(1); the Canada-Chile Free Trade Agreement, Article Kbis-16(1); and, the Agreement on Internal Trade (AIT), Article 1804, with respect to the procurement of _______ (insert procurement description, including additional details of project objective/purpose as needed to demonstrate the project's necessity to the protection of Canada's National Security interests by virtue of its connection to Canada's participation in the anti-terrorism campaign and associated operation at home or abroad). For these reasons, this procurement is necessary to the protection of Canada's national security interests. I therefore ask that you invoke the national security exception to exempt the above noted procurement from the application of the trade agreements for all purposes. Please contact ______ (insert project authority’s name, title and telephone number) if you require further information on the nature of the requirements and/or ______ (insert security authority’s name, title and telephone number) for further details on the nature of the threat to national security. Yours sincerely, ________________________ Signature of appropriate Assistant Deputy Minister __________ (insert client department’ name)

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

TABLE OF CONTENTS Chapter 4 – Solicitation Process.................................................................................. 1 4.1 Introduction ......................................................................................................................................1 4.5 Pre-Solicitation Requests.................................................................................................................1

4.5.1 Price and Availability Enquiry ..........................................................................................1 4.5.5 Request for Information or Letter of Interest....................................................................1

4.10 Solicitation Methods .........................................................................................................................2 4.10.1 Request for Quotation......................................................................................................2 4.10.5 Telephone Buy.................................................................................................................2 4.10.10 Invitation to Tender ..........................................................................................................2 4.10.15 Bid Solicitation .................................................................................................................3 4.10.20 Request for Standing Offers ............................................................................................4

4.10.20.1 Standing Offer Procedures...........................................................................5 4.10.20.5 Ranking and Methodology for Multiple Standing Offers...............................5 4.10.20.10 Standing Offer Forms ...................................................................................6

4.10.25 Request for Supply Arrangements ..................................................................................7 4.10.25.1 Supply Arrangement Procedures .................................................................7 4.10.25.5 International Trade Agreements and Use of Supply Arrangements ............8 4.10.25.10 Ongoing Qualification Process.....................................................................8 4.10.25.15 Agreement on Internal Trade and Use of Supply Arrangements .................8 4.10.25.20 Ongoing Qualification Process.....................................................................9

4.10.30 Professional Services Sourcing Tools .............................................................................9 4.15 Preparation of the Solicitation Documents.....................................................................................10

4.15.1 Departmental Standard Procurement Documents.........................................................10 4.15.5 Green Procurement Requirements................................................................................11 4.15.10 Methods of Responding to a Solicitation .......................................................................11

4.20 Official Languages Obligations in Procurement.............................................................................12 4.25 The Requirement ...........................................................................................................................13 4.30 General Instructions for the Preparation of a Solicitation ..............................................................13

4.30.1 Requirement and Statement of Work ............................................................................13 4.30.5 Solicitation Checklist......................................................................................................13 4.30.10 Industrial Security in Contracts ......................................................................................13 4.30.15 Industrial Security in Solicitations ..................................................................................14 4.30.20 Industrial Security in Standing Offers and Supply Arrangements .................................15 4.30.25 Industrial Security and International Contracts..............................................................15 4.30.30 Foreign Ownership, Control or Influence.......................................................................15 4.30.35 Comprehensive Land Claims Agreements ....................................................................16 4.30.40 Procurement Strategy for Aboriginal Business..............................................................16 4.30.45 Standard Instructions, Clauses and Conditions.............................................................16

4.30.45.1 Equivalent Products ...................................................................................16 4.30.45.5 No Substitute Products...............................................................................17 4.30.45.10 Multi-Item Bids/Offers.................................................................................17 4.30.45.15 Bidders’ Conferences and Site Visits .........................................................17 4.30.45.20 Intellectual Property....................................................................................19

4.30.50 Taxes and Duties...........................................................................................................19 4.30.55 Ontario Labour Legislation.............................................................................................19 4.30.60 Communications Notification .........................................................................................19

4.35 Evaluation Criteria..........................................................................................................................19 4.35.1 Mandatory Criteria .........................................................................................................19 4.35.5 Rated Criteria.................................................................................................................20

4.40 Evaluation Process and Method of Selection ................................................................................20 4.45 Certifications ..................................................................................................................................21 4.50 Financial Security...........................................................................................................................23

4.50.1 Surety Bond Forms........................................................................................................23 4.50.5 Bid Financial Security ....................................................................................................23 4.50.10 Contract Financial Security............................................................................................24

4.55 Controlled Goods ...........................................................................................................................25 4.60 Transportation Costs......................................................................................................................26 4.65 Exchange Rate Fluctuations ..........................................................................................................26 4.70 Conditions of the Resulting Contract .............................................................................................27

4.70.1 Security Requirement ....................................................................................................27 4.70.5 General Conditions ........................................................................................................27

4.70.5.1 Warranty .....................................................................................................28 4.70.10 Supplemental General Conditions.................................................................................29 4.70.15 Term of the Contract and Options .................................................................................29 4.70.20 Basis of Payment...........................................................................................................29

4.70.20.1 Firm Price ...................................................................................................30 4.70.20.5 Economic Price Adjustments in Firm Price Contracts................................30 4.70.20.10 Cost Reimbursable with Fixed Time Rate..................................................31 4.70.20.15 Cost Reimbursable with Incentive Fee.......................................................32 4.70.20.20 Cost Reimbursable with Fixed Fee ............................................................32 4.70.20.25 Cost Reimbursable with Fee Based on Actual Costs ................................33 4.70.20.30 Cost Reimbursable with No Fee ................................................................33 4.70.20.35 Cost Reimbursable Contracts – Audit ........................................................34 4.70.20.40 Cost and Profit............................................................................................34 4.70.20.45 Withholding of 15 percent on Service Contracts with Non-residents.........34 4.70.20.50 Types of Price Adjustments........................................................................35

4.70.25 Contract Performance Incentives ..................................................................................36 4.70.30 Method of Payment........................................................................................................37

4.70.30.1 Standard Payment Period and Interest on Overdue Account ....................37 4.70.30.5 Determination of the Method of Payment...................................................38 4.70.30.10 Types of Method of Payment .....................................................................38 4.70.30.15 Progress Payments ....................................................................................40 4.70.30.20 Advance Payments ....................................................................................40 4.70.30.25 Holdbacks...................................................................................................41

4.70.35 Audit...............................................................................................................................43 4.70.35.1 Firm Price Contracts – Price Certification and Discretionary Audit............43 4.70.35.5 Cost Reimbursable Contracts – Certification and Audit.............................43 4.70.35.10 Fixed Time Rate Contracts – Time Verification..........................................43

4.70.40 Discretionary Audit Clauses...........................................................................................44 4.70.45 Time Verification Clauses ..............................................................................................44 4.70.50 Invoicing Instructions .....................................................................................................44 4.70.55 Payment by Acquisition Card.........................................................................................44 4.70.60 Certifications ..................................................................................................................45 4.70.65 Defence Contract and Defence Supplies ......................................................................45 4.70.70 Services – Non-permanent Residents...........................................................................45 4.70.75 Insurance .......................................................................................................................46 4.70.80 Contract Financial Security............................................................................................46 4.70.85 Controlled Goods...........................................................................................................46 4.70.90 Limitation of Liability ......................................................................................................47 4.70.95 Fair Wages.....................................................................................................................48 4.70.100 Transportation Costs Information ..................................................................................48 4.70.105 Ontario Labour Legislation.............................................................................................50

4.75 Issuance of the Solicitation ............................................................................................................50 4.75.1 Client Department Review of Elements of a Solicitation ...............................................50 4.75.5 Determining the Solicitation Period ...............................................................................50 4.75.10 Public Advertisement .....................................................................................................51 4.75.15 Notice of Proposed Procurement...................................................................................51

4.75.15.1.......Official Language Policy Applicable to a Notice of Proposed Procurement.............................................................................................................................52

4.75.15.5 Language Designation of Offices ...............................................................52 4.75.20 Procedure for Publication of Notice of Proposed Procurement on GETS.....................53 4.75.25 Procedures for Posting Solicitation Documents on GETS ............................................53 4.75.30 Distribution of Material Not Electronically Available ......................................................54 4.75.35 Contacting Suppliers Directly During the Solicitation Period.........................................55 4.75.40 Distribution of Solicitation Material to Invited Suppliers.................................................55 4.75.45 Use of Source Lists........................................................................................................55

4.75.45.1 Solicitation by Direct Invitation ...................................................................55 4.75.45.5 Requirements Subject to Trade Agreements .............................................56 4.75.45.10 Requirements Not Subject to Trade Agreements ......................................56

4.80 Solicitation Period ..........................................................................................................................56 4.80.1 Communications during the Solicitation Period .............................................................56 4.80.5 Handling Questions during the Solicitation Period ........................................................57 4.80.10 Changes to the Solicitation ............................................................................................57 4.80.15 Assistance to Suppliers .................................................................................................58

4.85 Closing Procedures........................................................................................................................58 4.85.1 Late Bids/Offers/Arrangements .....................................................................................58 4.85.5 Delayed Bids/Offers/Arrangements ...............................................................................58 4.85.10 Transmission by Facsimile ............................................................................................58

4.90 Receipt of Bids/Offers/Arrangements ............................................................................................58 4.90.1 Secure Handling of Bids/Offers/Arrangements..............................................................59 4.90.5 Public Opening...............................................................................................................60 4.90.10 Receipt of Quotations ....................................................................................................60

4.95 Modification and Withdrawal of Bids ..............................................................................................60 4.100 Cancelling and Reissuing a Solicitation.........................................................................................61 Annex 4.1: General Conditions and Supplemental General Conditions ...............................................1 Annex 4.2: Intellectual Property ............................................................................................................1 Annex 4.3: Taxes and Duties ................................................................................................................1 Annex 4.4: Supplies Exempt from GST/HST ........................................................................................1 Annex 4.5: Goods Subject to Excise Tax..............................................................................................1 Annex 4.6: Ontario Labour Legislation..................................................................................................1 Annex 4.7: Insurance Clauses ..............................................................................................................1 Annex 4.8: Insurance of Government-owned or Leased Vehicles........................................................1 Annex 4.9: Insurance of Government-owned or Leased Equipment ....................................................1

Chapter 4 – Solicitation Process

Supply Manual Page 1 of 61 Version 10-1 (2010-01-11)

Chapter 4 – Solicitation Process 4.1 Introduction (2010-01-11) This chapter provides information on pre-solicitation requests, various methods of solicitation and various sourcing tools. It also contains information on how to prepare and issue a solicitation. Finally, contracting officers will find information on closing procedures, bid receiving, modification and withdrawal of bids/offers/arrangements. Contracting officers are reminded that Canada seeks competitive solicitations whenever possible. 4.5 Pre-Solicitation Requests (2010-01-11) Before a formal solicitation is issued, solicitations for information such as Price and Availability (P&A) enquiries and Requests for Information or Letters of Interest may be issued. 4.5.1 Price and Availability Enquiry (2010-01-11) A Price and Availability (P&A) enquiry is a request sent to suppliers for information concerning approximate prices and availability of specific goods or services. It is used when such information is needed by Public Works and Government Services Canada (PWGSC) or by a client department for program planning or budgetary purposes. A P&A enquiry could be made directly to selected suppliers, or it may be publicly posted on Government Electronic Tendering Service (GETS). P&A enquiries must clearly indicate that the request is not a solicitation and that there are no commitments with respect to future purchases or contracts. 4.5.5 Request for Information or Letter of Interest (2010-01-11) (a) A Request for Information (RFI) or Letter of Interest (LOI) is used when detailed information and

feedback are required from suppliers. Such requests might outline a potential requirement and request suppliers to describe their ability to satisfy the requirement and to provide ideas and suggestions on how the eventual solicitation might be structured. Responses are used to assist the client department and PWGSC in finalizing their plans for the requirement and in developing achievable objectives and deliverables. RFIs/LOIs would normally be posted on GETS in order to obtain replies from a wide audience. If a source list is to be used, the RFI or LOI may be sent only to those on the list. RFIs/LOIs must clearly indicate that they are not solicitations and that there are no commitments with respect to future purchases or contracts.

(b) RFIs/LOIs identify the client department’s potential requirement and its business objectives. (c) The main objectives of an RFI/LOI are to:

(i) allow suppliers time to:

(A) assess and comment on the adequacy and clarity of the requirements as currently expressed;

(B) offer suggestions regarding potential alternative solutions that would meet

requirements, such as solution with a lower environmental impact;

Chapter 4 – Solicitation Process

Supply Manual Page 2 of 61 Version 10-1 (2010-01-11)

(C) comment on the procurement strategy, preliminary basis of payment elements, and timelines for the project, and

(D) comment on the draft solicitation when included with the RFI/LOI.

(ii) provide information to assist the client department to:

(A) determine whether to proceed with requirements/strategy as planned, and if so, further developing internal planning, approval and solicitation documents that may potentially lead to a solicitation;

(B) refine the procurement strategy, project structure, cost estimate, timelines,

requirements definition, and other aspects of the requirement; (C) become a more “informed buyer” with an enhanced understanding of industry

goods and service offerings in the areas of interest; and (D) assess potential alternative solution concepts that would meet its requirement,

such as environmentally preferable solutions. 4.10 Solicitation Methods (2010-01-11) Various methods of solicitation may be used depending upon the circumstances of the particular procurement. 4.10.1 Request for Quotation (2010-01-11) (a) A Request for Quotation (RFQ) may be used to solicit bids for commercial goods and/or services

valued below $25,000 (low dollar value), including all applicable taxes, from one or more suppliers.

(b) The contract requirement must be well defined such that bids may be evaluated and compared

on the basis of price and delivery and where contract award may be determined on the basis of lowest-priced bid that meets the requirements. Because of its abbreviated nature, a RFQ may not contain all of the terms and conditions that are typically used to form a contract.

(c) RFQs are not publicly posted. Contracting officers may have suppliers submit their RFQs directly

to them if a specific date and time is set for the receipt of the quotations. 4.10.5 Telephone Buy (2010-01-11) A telephone buy (T-buy) is a form of RFQ when the bids are solicited, from one or more selected suppliers either, verbally (in-person) or over the telephone, for requirements below $25,000, including all applicable taxes. Written confirmation from the bidder is not required for bids received by telephone, but the contracting officer must record the details of the telephone bid on the procurement file. A verbal contract may be entered into by telephone (and order may be placed) if the contracting officer has the appropriate authority. The order must be confirmed in writing by issuing the applicable contract document and providing a copy to the contractor. (See Chapter 7.) 4.10.10 Invitation to Tender (2010-01-11)

Chapter 4 – Solicitation Process

Supply Manual Page 3 of 61 Version 10-1 (2010-01-11)

(a) An Invitation to Tender (ITT) is used where selection is based on the lowest price. It should be used when all of the following criteria apply:

(i) two or more sources are considered capable of carrying out the requirement;

(ii) the requirement is adequately defined to permit the evaluation of bids against clearly

stated criteria;

(iii) the market conditions are such that bids can be submitted on a common pricing basis;

(iv) it is intended to accept the lowest-priced responsive bid without negotiations; and

(v) the evaluation of bids will exclude any Product, Resource, Operating and Contingency (PROC) costs or socio-economic considerations, other than the employment equity provisions.

(b) An ITT can be used to solicit bids through public advertisement on GETS, through direct invitation

of selected suppliers by means of a source list, where permitted, or by invitation of one source only if conditions for a non-competitive process have been met.

(c) An ITT can be opened publicly. Public opening should be considered for all ITTs estimated to

exceed $25,000. ITTs for requirements less than $25,000 may be opened publicly if circumstances warrant. Public openings should be considered for any bid where the contract award will have a high degree of public visibility.

4.10.15 Bid Solicitation (2010-01-11) (a) A bid solicitation may be used for low dollar value, medium and higher complexity requirements.

It can be used when the bidder selection is based on price or best value. The standard instructions 2003 and 2004 of the Standard Acquisition Clauses and Conditions Manual must be used in bid solicitations for goods and/or services. The templates 2T-LDV1, 2T-MED1 and 2T-HIGH1 must be used when establishing a bid solicitation subject to the procedures outlined in 2T-PROC1.

(b) A Request for Proposal (RFP) is a form of bid solicitation for complex requirements and is used

when the bidder selection is based on best value rather than on price alone. A RFP should be used when, owing to the nature of the requirement, suppliers are invited to propose a solution to a problem, requirement or objective, and the selection of the contractor is based on the effectiveness of the proposed solution.

(c) Bids must be evaluated and the successful supplier must be selected in accordance with specific

criteria and procedures as set out in the bid solicitation. (d) A bid solicitation can be used to solicit bids through public advertisement on GETS, through direct

invitation of selected suppliers by means of a source list where permitted, or by invitation of one source only if conditions for a non-competitive process have been met.

(e) Responses to the bid solicitation may result in negotiations before contract award when the bid

solicitation states the right to negotiate in accordance with the international trade agreements. (f) The preparation of bids is often costly to suppliers. To keep the total cost down while ensuring

freedom of access to suppliers, consideration should be given to soliciting bids in two steps.

Chapter 4 – Solicitation Process

Supply Manual Page 4 of 61 Version 10-1 (2010-01-11)

(i) during the first step of this process, suppliers are requested to provide letters of interest and qualifications, from which a short list is developed. During the second step, suppliers on the short list are requested to submit detailed bids;

(ii) suppliers not included on the short list are still able to request the bid solicitation and

submit bids. (g) Such a process might be appropriate where many suppliers are known. When doing a two-stage

procurement, contracting officers must follow procedures required under North American Free Trade Agreement (NAFTA) and World Trade Organization Agreement on Government Procurement (WTO-AGP) for selective tendering.

(h) The bid solicitation should include, as a minimum, the following information:

(i) a clear definition of the requirement; (ii) bidder instructions; (iii) bid preparation instructions; (iv) clear evaluation procedures; (v) certification requirements; (vi) security and financial requirements; (vii) validity of the bid; (viii) resulting contract clauses; and (ix) instructions informing bidders that they may request information about the results of the

RFP and how their bid was evaluated. (See 7.40 for information to be included in debriefings.)

4.10.20 Request for Standing Offers (2010-01-11) (a) A Request for Standing Offers (RFSO) is used to solicit offers for standing offer methods of

supply. For more information on the application of standing offers, see 3.40. (b) A RFSO can be used to solicit offers through public advertisement on GETS, through direct

invitation of selected suppliers by means of a source list where permitted, or by invitation of one source only if conditions for a non-competitive process have been met.

(c) The RFSO must give instructions on the use, purpose and limitations of the proposed standing

offer. Standard Acquisition Clauses and Conditions (SACC) Manual standard instructions 2006 (competitive) and 2007 (non-competitive) and general conditions 2005 are designed specifically for standing offers and must be incorporated by reference in each RFSO. The template 2T-RFSO1 must be used when establishing an RFSO subject to the procedures outlined in 2T-PROC2.

(d) A RFSO must include the following information, as a minimum:

(i) a clear definition of the requirement and the period for making call-ups; (ii) information on the number of standing offers intended to be authorized for use; (iii) offer preparation instructions; (iv) clear evaluation criteria; (v) clear evaluation procedures and basis of selection; (vi) instructions informing offerors that they may request information about the results of the

RFSO and how their offer was evaluated. (See 7.40 for information to be included in debriefings.)

(vii) clear ranking methodology where applicable; (viii) clear call-up procedure(s) including the method of allocating the work among multiple

standing offers;

Chapter 4 – Solicitation Process

Supply Manual Page 5 of 61 Version 10-1 (2010-01-11)

(ix) a notice to offerors regarding disclosure of their unit prices (see SACC Manual general conditions 2005);

(x) conditions applicable to the RFSO; (xi) conditions applicable to the standing offer; (xii) resulting contract clauses applicable to ensuing call-ups; and (xiii) the estimated utilization, whenever practical.

4.10.20.1 Standing Offer Procedures (2010-01-11) (a) Call-up Limits: Contracting officers will set the call-up limit in the standing offer document for the

client department as defined in the standing offer, as the case may be. For standing offers for goods, services or construction, contracting officers may set the maximum call-up limit using the Treasury Board (TB) Contracts Directive, Appendix C, as a guide. The Directive sets the dollar limit for contract entry for goods, services and construction, above which departments must seek the approval of TB to enter into the contract.

(b) Financial Limitation: The inclusion of a limitation of expenditure in standing offers is optional.

The contracting officer will determine the need for inclusion of a limit on the basis of the type of standing offer (Master or Individual), the degree of control over total expenditures and the needs of the client department. SACC Manual clause M4506C may apply.

(c) Coding in the Automated Buyer Environment (ABE) system: While the limitation of expenditure in

standing offers is optional, the contracting officer must enter the estimated expenditure/value of all standing offers in the "Standing Offer creation screen" in ABE. The use of $0.00 or $1.00, as a document value in the Procurement Summary in ABE, is not acceptable.

(d) The above coding requirement does not apply to Departmental Individual Standing Offers

(DISOs) because the financial information for DISOs is captured when the call-ups are done by contracting officers. To avoid double counting, contracting officers are therefore required to enter $0.00 in the "Standing Offer creation screen" in ABE" as the estimated expenditure/value of the DISO and for each individual call-up, the actual value of the call-up.

(e) Identified Users: The identified users authorized to make call-ups against standing offers could

include any government department, agency or Crown corporation listed in Schedule I, Schedule I.1, Schedule II, Schedule III of the Financial Administration Act. See SACC Manual template 2T-RFSO1, Part 6B, article 6.

(f) Standing Offers Reporting: The standing offer authority may indicate in the standing offer the

reporting requirement for the offeror, or the client, as applicable. The standing offer should indicate the time frame within which each report must be submitted following the reporting period. See SACC Manual clause M7010C. See also 8.75.1 for more details on reporting.

4.10.20.5 Ranking and Methodology for Multiple Standing Offers (2010-01-11) (a) If more than one standing offer will be authorized for use based on a reasonable expectation of

business activity such that a single offeror would lack the capacity to meet the demands, clear ranking methodologies and call-up procedures must be described in the RFSO, so that suppliers are aware of these when preparing their offer. The two models of ranking methodology are described below: (i) right of first refusal basis:

The call-up procedures require that when a requirement is identified, the identified user will contact the highest-ranked offeror to determine if the requirement can be satisfied by

Chapter 4 – Solicitation Process

Supply Manual Page 6 of 61 Version 10-1 (2010-01-11)

that offeror. If the highest-ranked offeror is able to meet the requirement, a call-up is made against its standing offer. If that offeror is unable to meet the requirement, the identified user will contact the next ranked offeror. The identified user will continue and proceed as above until one offeror indicates that it can meet the requirement of the call-up. In other words, call-ups are made based on the “right of first refusal” basis. When the highest-ranked offeror is unable to fulfill the need, the identified user is required to document its file appropriately.

(ii) proportional basis:

The call-up procedures require that call-ups be issued on a proportional basis such that the highest-ranked offeror receives the largest predetermined portion of the work; the second highest-ranked offeror receives the second largest predetermined portion of the work, etc. (for example, 50 percent to the highest-ranked offer, 30 percent to the next highest-ranked offer and 20 percent to the third highest-ranked offer). This predetermined distribution of the resulting work is to be described in the RFSO so that potential offerors are aware of these when preparing their offer. It is also known as “collective best value”. The highest-ranked standing offer represents the best value for Canada, and its offeror receives the largest portion of the work. A clear advantage in terms of distribution of expected business volume should be given to the highest-ranked offeror (for example, 20 percent or more than the next offer) and the same for the others. The determination of what constitutes a clear advantage is the responsibility of the contracting officer and may vary by commodity, service or by business case.

(b) In both cases above, contracting officers should clearly state in the RFSO the expected number

of standing offers that are intended to be authorized for use. If the intention is that multiple standing offers will be authorized for use, the RFSO should state the basis upon which call-ups will be issued, whether right of first refusal, proportional or another method. If call-ups must be issued against standing offers under the proportional basis approach, the breakdown must be stated (for example, 50 percent, 30 percent and 20 percent) in the RFSO.

(c) In addition to the above, when the intention is that multiple standing offers will be authorized for

use, contracting officers could include a condition that only those standing offers, which are within, for example, 10 percent of the best-priced offer, will be considered. The method of such calculations should be explicitly described.

4.10.20.10 Standing Offer Forms (2010-01-11) The following forms are used for call-ups against a standing offer and are available through PWGSC Forms Catalogue Web site: (NOTE: Only government employees can access this site.)

Forms Number Forms Title PWGSC-TPSGC 942 Call-up Against a Standing Offer PWGSC-TPGSC 942-2 Call-up Against a Standing Offer – (Multiple Delivery) PWGSC-TPSGC 944 Call-up Against Multiple Standing Offers (English only) PWGSC-TPSGC 8251 Call-up Against a Standing Offer for Temporary Help PWGSC-TPSGC 7169-1 Call-up Against a Standing Offer for Security Guard

Chapter 4 – Solicitation Process

Supply Manual Page 7 of 61 Version 10-1 (2010-01-11)

Services PWGSC-TPSGC 191 Acquisition Card Application (MasterCard) 1 may also be

used at the time of the call-up against standing offers, as an alternative to other payment methods identified in the standing offer. 2

4.10.25 Request for Supply Arrangements (2010-01-11) (a) A Request for Supply Arrangements (RFSAs) is used to solicit arrangements from suppliers for

the establishment of supply arrangements. For more information on the application of supply arrangements, see 3.45.

(b) Standard Acquisition Clauses and Conditions Manual standard instructions 2008, general

conditions 2020 and the template 2T-RFSA1 must be used when establishing an RFSA. For more information, consult the procedures outlined in 2T-PROC3.

(c) The RFSA should include, as a minimum, the following information:

(i) a clear definition of the requirement; (ii) supplier instructions; (iii) arrangement preparation instructions; (iv) clear evaluation procedures and basis of selection for the establishment of the list of

qualified suppliers; (v) certification requirements; (vi) conditions applicable to the supply arrangement, including the terms of the solicitation; (vii) resulting contract clauses applicable to any contract resulting from each solicitation; and (viii) instructions informing suppliers that they may request information about the results of the

RFSA and how their offer was evaluated. (See 7.40 for information to be included in debriefings.)

(d) The list of qualified suppliers as a result of a RFSA is considered to be a source list under

international trade agreements. 4.10.25.1 Supply Arrangement Procedures (2010-01-11) (a) Before establishing a supply arrangement, the contracting officer will prepare and issue an RFSA,

which will allow for a suitable pool of suppliers who meet the stated evaluation criteria. Industrial security requirements (that is, personnel, physical and information technology security) should be identified at this time, when any or all of these security aspects will be applicable to all client departments of the supply arrangement.

(b) The following forms must be used by client departments for the first page of the bid solicitation for

contracts under supply arrangements and for the resulting contract document:

PWGSC-TPSGC 9400-3, Bid Solicitation PWGSC-TPSGC 9400-4, Contract

1 Because use of a credit card results in immediate payment to the contractor, the normal payment period and

interest on overdue accounts provisions do not apply. (See SACC Manual template 2T-RFSO1, Part 6B, article 2.)

2 Contracting officers should verify if the client(s) need such a service and include appropriate details in the

standing offers. In such cases a call-up form may, or may not, be warranted.

Chapter 4 – Solicitation Process

Supply Manual Page 8 of 61 Version 10-1 (2010-01-11)

(NOTE: Only government employees have access to the site.) (c) Contracting officers will set the contracting limits in the supply arrangement document for the

identified users as defined in the supply arrangement, as the case may be. For supply arrangements for goods, services or construction, contracting officers may set the maximum contract limit using the Treasury Board (TB) Contracts Directive, Appendix C, as a guide. The TB Contracts Directive sets the dollar limit for contract entry for goods, services and construction, above which departments must seek the approval of TB to enter into the contract.

(d) A legal contract does not exist between Canada and the supplier until a contract is awarded

through the completion of form PWGSC-TPSGC 9400-4. (e) Supply Arrangement Reporting: The supply arrangement authority may indicate in the supply

arrangement the reporting requirements for the supplier, or the client, as applicable. The supply arrangement should indicate the time frame within which each report must be submitted following the reporting period. See SACC Manual clause S0010C. See also 8.75.1 for more details on reporting.

4.10.25.5 International Trade Agreements and Use of Supply Arrangements (2010-01-11) For bid solicitations and proposed contracts under a supply arrangement, the following applies: (a) Where the estimated value of a proposed contract under the supply arrangement is below the

applicable North American Free Trade Agreement (NAFTA) threshold and/or the World Trade Organization – Agreement of Government Procurement (WTO-AGP) threshold, these agreements do not apply.

(b) Where the estimated value of a proposed contract under the supply arrangement is above the

applicable NAFTA and/or the WTO-AGP threshold, NAFTA and/or the WTO-AGP applies to the bid solicitation.

(c) Where NAFTA and/or WTO-AGP apply to a bid solicitation under a supply arrangement, a Notice

of Proposed Procurement (NPP) must be published on the Government Electronic Tendering Service (GETS) and suppliers must be given at least 40 calendar days to bid. In addition, a supplier that requests to participate in the bid solicitation under the supply arrangement may apply for qualification. If qualified, the supplier must be included in the supply arrangement within a reasonable period of time. However, after bid closing, the contracting officer does not have to delay the contract award process in order to allow a supplier to go through the qualification process.

4.10.25.10 Ongoing Qualification Process (2010-01-11) Pursuant to NAFTA and/or WTO-AGP, the list of qualified suppliers must be refreshed at least once a year by publishing an NPP on GETS and suppliers must be allowed to apply for qualification at any time. 4.10.25.15 Agreement on Internal Trade and Use of Supply Arrangements (2010-01-11) Where the estimated value of a proposed contract under the supply arrangement is above the AIT threshold, AIT applies to the bid solicitation. Otherwise, AIT does not apply to that proposed contract. Where AIT applies to a bid solicitation under a supply arrangement, the AIT allows the use of source lists without publication of a NPP provided that all suppliers on the source list be invited to bid and that they be

Chapter 4 – Solicitation Process

Supply Manual Page 9 of 61 Version 10-1 (2010-01-11)

able to apply for qualification at any time. It is PWGSC policy that suppliers must be given at least 15 calendar days to bid. 4.10.25.20 Ongoing Qualification Process (2010-01-11) Pursuant to AIT, the list of qualified suppliers must be refreshed at least once a year by publishing an NPP (invitation to qualify) on GETS or predetermined newspapers. The NPP or the newspapers must contain the conditions to be fulfilled by suppliers to qualify. Suppliers must be allowed to apply for qualification at any time. 4.10.30 Professional Services Sourcing Tools (2010-01-11) Professional services sourcing tools that may help client departments with their requirements are provided below: (a) Temporary Help Services (THS) are traditionally used:

(i) when a public servant is absent for a temporary period of time; (ii) when there is a requirement for additional staff during a temporary workload increase and

there is an insufficient number of public servants available to meet the requirement; or (iii) a position is vacant and staffing action is being completed.

THS is a tool to assist federal departments in the National Capital Region in their procurement of temporary help services with a value below the North American Frede Trade Agreement (NAFTA) threshold, including all subsequent amendments and Goods and Services Taxes. Some of the sources are: (A) Public Works and Government Services Canada (PWGSC) issues Regional

Master Standing Offers (RMSOs) to provide for qualified personnel for temporary assignments.

(B) RMSOs for temporary help services are requested and authorized by the

PWGSC's regional offices. Contracting officers must keep client departments informed of contracting processes, procedures and definitions of categories of service with respect to temporary help services.

(C) There is a temporary help contracting officers' network, which has been working

with functional guidance from the Professional Services Procurement Directorate, Services and Technology Acquisition Management Sector.

(D) for additional information, consult the contact person identified on the Temporary

Help Services (On-Line System) Web site. (b) Professional Services Online is an electronic procurement tool that assists federal departments

and agencies in the procurement (below the NAFTA threshold) of professional services. (c) SELECT is a database of approved firms, providing construction, architectural and engineering

services, as well as related maintenance and consulting services. It is used by PWGSC to invite suppliers to bid on real property consulting services below the NAFTA threshold, and for construction services below the AIT threshold.

Chapter 4 – Solicitation Process

Supply Manual Page 10 of 61 Version 10-1 (2010-01-11)

(d) In-Service Support Supply Arrangement (ISS SA) is currently limited to a supply arrangement for the professional services related to Human Resources Management, Organizational Management and Project Management.

4.15 Preparation of the Solicitation Documents (2010-01-11) (a) The solicitation documents must be prepared in a way to reflect the approved procurement

strategy. (b) Contracting officers must perform due diligence in identifying potential conflicts of interests. This

can be done by asking the client department if anyone who is not an employee of Canada is or will be involved in the preparation of the requirement or involved in the preparation of the statement of work or requirement, the evaluation criteria, and the evaluation. Contracting officers may also consider asking if any employees or former public servants have connections in their personal or professional life, which may lead to suppliers asking questions about favoritism. If there is a potential conflict of interest, then certain steps must be taken in accordance with 4.45(c) relative to former public servants. Contracting officers should consult the conflict of interest clause contained in the Standard Acquisition Clauses and Conditions (SACC) Manual standard instructions.

4.15.1 Departmental Standard Procurement Documents (2010-01-11) (a) Public Works and Government Services Canada (PWGSC) has committed to promoting a

“common look and feel” in acquisition documents by standardizing terminology, simplifying contract language by using plain language and ensuring more consistency and uniformity.

(b) PWGSC has implemented departmental standard procurement documents which include

standard instructions, general conditions and templates for bid solicitations, requests for standing offers (RFSOs) and requests for supply arrangements (RFSAs) for use by its contracting officers for the procurement of goods, services or both, excluding construction and architectural and engineering requirements.

(c) Subject to the applicable procedures for use of the templates contained in the SACC Manual,

contracting officers must use the bid solicitation and resulting contract templates for competitive and non-competitive requirements for low dollar value (2T-LDV1), medium complexity (2T-MED1) and higher complexity (2T-HIGH1), and the templates for RFSO (2T-RFSO1) and the RFSA (2T-RFSA1) for the procurement of goods, services or both. To maintain the “common look and feel” for PWGSC’s acquisition documents, contracting officers must not modify or change the order and content of these templates, except where indicated. Where applicable, contracting officers should obtain from their supervisor the most current standard template used within their respective area that has been customized for specific requirements in accordance with the standard templates. Directorates needing assistance in developing documents based on these templates should contact the Procurement Process Tools Division within the Policy, Risk, Integrity and Strategic Management Sector.

(d) Procedures 2T-PROC1, 2T-PROC2 and 2T-PROC3 instruct contracting officers on how to use

the templates referenced above. They are available in Section 2 of the SACC Manual and on the Departmental Standard Procurement Documents Web site.

(e) Procurement of most goods and services must be carried out using the general conditions and

supplemental general conditions found in the SACC Manual. The conditions to be used depend on the nature and complexity of the procurement and are provided in Annex 4.1.

Chapter 4 – Solicitation Process

Supply Manual Page 11 of 61 Version 10-1 (2010-01-11)

(f) Real Property Contracting utilizes their own separate standard templates for construction and architectural and engineering services.

(g) The cover pages of solicitations generated by the Automated Buyer Environment (ABE) must be

used for solicitations issued by PWGSC (whether issued through ABE or manually posted on GETS). Manager’s approval is required to issue solicitations that do not use ABE generated cover pages. Solicitations must specify the solicitation closing date on the cover page.

(h) Contracting officers must ensure that instructions for the submission of solicitations and the

solicitation closing date and time for each solicitation are clearly stated in the procurement documents. Contracting officers must also ensure that the solicitation closing date, which appears on the Notice of Proposed Procurement, is consistent with the solicitation.

4.15.5 Green Procurement Requirements (2010-01-11) (a) Contracting officers must ensure that value for money has been achieved for Canada. Value for

money includes the consideration of many factors such as cost, performance, availability, quality and environmental performance

(b) Contracting officers must consider green procurement in the preparation of solicitation documents

and resulting contracts, including requests for standing offers and requests for supply arrangements, to ensure that environmental considerations, if appropriate, are addressed. Contracting officers must also consult with relevant commodity teams with respect to Green Procurement Plans. Environmental considerations that are related to specific commodities can then be utilized in the procurement. Contracting officers should consider departmental green procurement targets and the green procurement experience of other departments.

(c) Until such time as standard clauses and conditions on environmental performance considerations

have been developed centrally, they should be developed by contracting officers as appropriate to support the inclusion of environmental performance requirements, recognizing that they will have to be approved by Legal Services.

(d) Contracting officers can consult Annex 2.2 for a list of factors to be considered in developing the

solicitation, as well as the Green Procurement Checklist within the Environmental Awareness Tool Kit.

(e) For additional information, consult the Developing Green Procurement Specifications within the

Environmental Awareness Tool Kit and section 3.2 Selection According to Technical Capacity of the Guideline for Integration of Environmental Performance Considerations in Federal Government Procurement.

(f) Contracting officers can contact the Green Procurement Team, within the Procurement Renewal

Office, by e-mail at GreenProcurement.AchatsEcologiques@tpsgc-pwgsc.gc.ca, to obtain assistance with integrating environmental considerations in their solicitation documents.

4.15.10 Methods of Responding to a Solicitation (2010-01-11) (a) The method and location of bid receipt must be specified in the solicitation. (b) The following methods of response may be used:

(i) in writing and submitted to the specified Bid Receiving Unit : all ($) dollar values;

Chapter 4 – Solicitation Process

Supply Manual Page 12 of 61 Version 10-1 (2010-01-11)

(ii) in writing and submitted directly to the contracting officer: below $25,000, including all applicable taxes;

(iii) verbally by telephone

(A) below $25,000, including all applicable taxes; (B) any amount, in cases of documented extreme urgency (director’s approval is

mandatory); (iv) by electronic transmission (CD or facsimile) and submitted to the specified Bid Receiving

Unit. (c) When some form of or any electronic transmission of responses is not acceptable, this must be

clearly indicated in the solicitation and should be in the Notice of Proposed Procurement. 4.20 Official Languages Obligations in Procurement (2010-01-11) (a) PWGSC must comply with the Official Languages Act and the Official Languages Regulations.

The basic rule is that any member of the public in Canada has the right to communicate with and to receive available services in either official languages from federal institutions head or central office or from any office in the National Capital Region, or elsewhere where there is significant demand in that language. Relating to procurement, this generally means that a supplier may receive solicitation documents and bid in either official language.

(b) The official languages parameters provided below are pursuant to the TB Contracting Policy,

Appendix F, Official Languages, for all federal departments and agencies that are subject to the Government Contract Regulations.

(c) When procurements are national in scope or originate from an office having the obligation to

serve the public in both official languages, pursuant to the Act and Regulations, all regular or standardized documents must be provided in both official languages. This requirement also applies to public notices, statements of terms and conditions, basic forms, bid solicitations, standards, purchase descriptions and contracts.

(d) On an exceptional basis, when a bilingual office can justify that demand will be in one language

only or that it is legally and/or technically impossible to provide the non-standard documents such as specifications in both languages, those documents may be issued in one language only. When this occurs, the reason for not issuing the documents in both official languages must be clearly documented on file.

(e) Such a decision requires before the fact substantiation. Acceptable justifications might include:

(i) an industry that has specifically requested documents in one language; and (ii) a two-stage procurement, in which second stage suppliers have all indicated that the

working language is either English or French – NOT both. (f) The fact that documents have never been asked for in the second official language in the past is

NOT an acceptable justification. If there is subsequently a request from a supplier for documents in the second official language, the client department must be notified immediately and requested to provide a translation of the document, as soon as possible. The bidding process must be suspended while the document is being translated and the solicitation closing date must be extended, accordingly. The requester must have sufficient time, after receipt of the translated documents, to prepare a proper bid using those documents. This may require an additional extension to the closing date in order to provide equity of opportunity.

Chapter 4 – Solicitation Process

Supply Manual Page 13 of 61 Version 10-1 (2010-01-11)

(g) When the procurement is not national in scope or when an office of a federal institution does

not have official languages obligations (i.e. unilingual offices), the solicitation documents may be prepared in the official language of the majority of the population concerned only. It is suggested that when a unilingual office anticipates significant demand for service (documents, etc.) relating to a particular procurement in the second official language, it considers transferring the file to a bilingual office before the Notice of Proposed Procurement (NPP) is issued, so that bilingual services will be available.

(h) Another reason that could justify not publishing a bilingual solicitation is when the owner of a

copyright, trademark, patent, or licensed material refuses permission to have the material translated. In that case, the NPP must indicate that the documents will be issued in one language only and the reason included, when this would provide useful information to suppliers. A NPP might state: “Due to copyright restrictions, document X is available only in English or in French.”

(i) Suppliers who carry out work on behalf of a department or agency in a location where the

department or agency would have to provide services or communications to the public in both official languages must also do so in both official languages. This means that the Statement of Work must include the conditions to ensure that, when the public includes members of both official language communities, the supplier observes the requirements of the Act and Regulations on service to the public and, where applicable, of Treasury Board policies.

(j) While the Treasury Board Secretariat requires that contracts be available in the two official

languages, PWGSC Legal services advise that only one version should be signed, that is, that selected by the contractor.

4.25 The Requirement (2010-01-11) (a) The requirement could take the form of technical requirements for the procurement of goods or a

Statement of Work for the procurement of services. Requirements must be defined and specifications and estimates established before bids/offers are solicited and contracts let, so that all potential suppliers are treated equally. Adequate specification details must be available to all interested or qualified suppliers.

(b) For more information on the preparation of the requirement, consult chapter 2. 4.30 General Instructions for the Preparation of a Solicitation 4.30.1 Requirement and Statement of Work (2010-01-11) The requirement must be clearly identified, the deliverables and the delivery schedule defined and the tasks must be included in the Statement of Work. 4.30.5 Solicitation Checklist (2010-01-11) Contracting officers should consult the solicitation checklist when preparing the solicitation to ensure that all applicable elements are included. For more information on the checklist, consult 6.20.1. 4.30.10 Industrial Security in Contracts (2010-01-11)

Chapter 4 – Solicitation Process

Supply Manual Page 14 of 61 Version 10-1 (2010-01-11)

(a) For requirements requiring personnel or organization screening, the Security Requirements Check List (SRCL) must be prepared by the client department and provided either directly or through the contracting officer to the Canadian Industrial Security Directorate (CISD). The role of CISD is to:

(i) review the SRCL and any attachments which contain security provisions, such as the

Statement of Work, for accuracy, completeness, and authorized signatures; (ii) for potential international contracts, ensure that the participating countries have the

appropriate industrial security Memorandum of Understanding (MOU), arrangements, or agreements with Canada (see 4.30.25). If foreign-based suppliers are expected to bid, a list of the applicable country of origin should be provided to CISD, and the appropriate clauses related to foreign-based suppliers will be provided;

(iii) sign the SRCL form as the Contracting Security Authority and provide the applicable

security clauses to the contracting officer; (iv) provide information to the contracting officer on the security status of each potential

bidder, contractor, or offeror, as applicable; (v) provide to Canadian-based bidders, contractors, or offerors, information on the

preparation and transmission of classified or protected information or assets. Classified information and assets must be forwarded to the Document Control Section (DCS).

(b) The fully signed SRCL must contain the following signatures:

(i) the Organization Project Authority must sign the form to indicate that the SRCL properly reflects the security requirements of the requirement;

(ii) the Organization Security Authority must also sign the form to indicate that the SRCL

properly reflects the industrial security requirements of the requirement. CISD will not process the SRCL and provide the applicable clauses if the above two signatures are not provided;

(iii) the contracting officer must sign block 16 "Procurement Officer" to indicate that all

information on file relating to the industrial security requirements has been provided to CISD for their review and also his or her intention to attach the completed SRCL to the contract (and solicitation) as applicable. The contracting officer must not sign the SRCL until CISD provides confirmation that the proposed contractor meets the security requirements;

(iv) CISD signs as indicated in (a) above.

(c) Client departments may provide the hard copy of the SRCL form TBS/SCT 350-103 or use the E-

SRCL. (d) If a requirement is cancelled, the contracting officer must advise CISD immediately so that the file

can be appropriately closed out. (e) Contracting officers may not reuse previously approved clauses, except in processes or

instruments that have been approved by CISD. 4.30.15 Industrial Security in Solicitations (2010-01-11)

Chapter 4 – Solicitation Process

Supply Manual Page 15 of 61 Version 10-1 (2010-01-11)

(a) When there are industrial security requirements, the evaluation section or the security requirements section of the solicitation documents must clearly state whether security requirements must be met before solicitation closing date or before contract award. The contracting officer should be fully aware of the time frames required for the required security clearances to be granted, and whether or not the solicitation document will contain conditions or a time limit in which suppliers must obtain the required security clearance, following the solicitation closing date. The choice of such time frames must not unfairly discriminate between potential suppliers.

(b) The completed SRCL must be attached as an annex to the solicitation, though the signature page

may be omitted. (c) Contracting officers should specify in their solicitation document whether or not suppliers must

include information in their bid to allow the security verification process or clearance process to begin. Contracting officers may contact CISD for assistance in determining the best approach.

4.30.20 Industrial Security in Standing Offers and Supply Arrangements (2010-01-11) (a) When the contracting officer and the client department have determined that it is appropriate to

use a standing offer or supply arrangement method of supply for requirements with an industrial security requirement, the solicitation documents should specify the minimum level of security clearance required as well as the circumstances under which a higher level would be required. Instructions to users of the arrangement must be clear on how to identify which level of security applies in resulting contracts. They should also validate that the supplier meets this requirement through CISD.

(b) Once the solicitation phase is complete, the contracting officer must provide CISD with a copy of

the Request for Standing Offers or Request for Supply Arrangements, as well as a list of proposed suppliers so that CISD can validate that the selected suppliers meet the minimum security requirements stipulated in the arrangement.

(c) Resulting call-ups and contracts, which have security requirements, must identify the applicable

security requirement, and the applicable SRCL must be attached to the call-up or contract. (d) A copy of all such call-ups and contracts must be sent to CISD. It is not necessary to send the

"authorization to use" document to CISD. 4.30.25 Industrial Security and International Contracts (2010-01-11) (a) For contracts with foreign-based suppliers, the contracting officer must advise CISD of the

country of origin for each foreign-based supplier that is interested in participating in the procurement activity. CISD will then verify if there is an industrial security MOU in place with the relevant foreign country. If so, the appropriate equivalent security clauses will be provided to the contracting officer.

(b) Protected/classified information or assets for transmittal outside of Canada must be sent to the

Document Control Section (DCS) of CISD who will then forward it to the recipient. Onward transmission and receipt through approved security channels will be undertaken by DCS.

(c) The contracting officer must submit the Statement of Work to CISD for review of any security

wording to ensure compliance with the terms of the bilateral agreement. 4.30.30 Foreign Ownership, Control or Influence (2010-01-11)

Chapter 4 – Solicitation Process

Supply Manual Page 16 of 61 Version 10-1 (2010-01-11)

(a) A Foreign Ownership, Control or Influence (FOCI) evaluation must be done in all situations where

a third party individual, firm or government is assumed to possess dominance of, or authority over, a Canadian facility to such a degree that a third party individual, firm or government may gain unauthorized access to extremely sensitive information security (INFOSEC). A FOCI evaluation is an administrative determination of the nature and extent of foreign dominance over the contractor’s management and/or operations.

(b) Requirements involving the potential release of extremely sensitive INFOSEC, a special category

of CLASSIFIED Communications Electronic Security (COMSEC) information, are subject to a FOCI review by CISD. Recommendations regarding the use of FOCI will then be submitted to the procurement directorate, and if appropriate, to the Procurement Review Committee Secretariat, Acquisitions Branch.

(c) Suppliers must be informed of the requirement for a FOCI evaluation in the solicitation; however,

completed packages from suppliers should only be requested after the bid evaluation process has determined which supplier(s) will be awarded a contract. The material that a supplier has to provide for such an evaluation is often extensive and time consuming to provide.

(d) Contracting officers must provide two copies of the FOCI submission for the successful

supplier(s) to CISD. Verification of the FOCI and the required Facility Security Clearance of the potential Canadian or United States-based supplier must be obtained from CISD before contract award.

Any irregularity known to contracting officers regarding compliance with the INFOSEC access approval of the contractor involving extremely sensitive INFOSEC must be immediately reported to the Director of CISD.

4.30.35 Comprehensive Land Claims Agreements (2010-01-11) For more information on Comprehensive Land Claims Agreements, consult 9.35. 4.30.40 Procurement Strategy for Aboriginal Business (2010-01-11) For more information on Procurement Strategy for Aboriginal Business, consult 9.40. 4.30.45 Standard Instructions, Clauses and Conditions (2010-01-11) Standard instructions, clauses and conditions set out in the Standard Acquisition Clauses and Conditions (SACC) Manual issued by PWGSC may be added in the solicitation documents to meet specific commodity needs. Contracting officers must ensure that there are no inconsistencies with the applicable general conditions. 4.30.45.1 Equivalent Products (2010-01-11) (a) When there is no alternative to specifying a particular manufactured product, the solicitation

should, whenever possible, include SACC Manual clause B3000T for equivalent products. Before issuing the solicitation, the contracting officer should contact the client department to discuss the potential for equivalent products and any mandatory performance criteria related to the item being specified that must be included in the solicitation to ensure proper evaluation of a substitute product's equivalency. Contracting officers must ensure that all references to a

Chapter 4 – Solicitation Process

Supply Manual Page 17 of 61 Version 10-1 (2010-01-11)

manufacturer's brand name, model and/or part number contained anywhere within the solicitation are followed by the words "or equivalent".

(b) For procurements subject to North American Free Trade Agreement (NAFTA), World Trade

Organization Agreement on Government Procurement (WTO-AGP) or Agreement on Internal Trade (AIT), provision for equivalent products must be made. Contracting officers must give consideration to supplier claims of equivalence and have some way to determine if the proposed products are, indeed, equivalent.

4.30.45.5 No Substitute Products (2010-01-11) When a manufacturer's brand name, model and/or part number are used in the item description and substitutes will not be considered in a solicitation, SACC Manual clause B4024T should be used. This clause must not be used in solicitations subject to NAFTA or WTO-AGP. 4.30.45.10 Multi-Item Bids/Offers (2010-01-11) (a) A requirement can either be on an aggregate basis or an item-by-item basis or a combination of

the two. If it is on aggregate basis, the entire requirement will be awarded to a single supplier. An item by item basis will be used, for example to obtain better prices for certain products or to provide complete coverage when one supplier cannot meet the entire requirement.

(b) The evaluation of multi-item bids/offers should be governed by cost-benefit considerations. (c) The savings generated from the split of a requirement into more than one contract should be

compared with the additional costs usually associated with the award of multiple contracts or issuance of multiple standing offers: (i) costs to PWGSC, for example, the costs of awarding, administering and closing-out

contracts; (ii) costs to the client department, for example, extra billing and inspection, and other related

administrative costs; and (iii) costs to the contractor, for example, transportation costs, price per unit.

(d) Sectors/regions should determine their own administrative premiums for costs such as those

identified in paragraphs (i) and (ii) above. (e) The savings from awarding more than one contract must also be weighed against possible

disadvantages, such as:

(i) the difference in delivery times for components provided by different suppliers; (ii) the compatibility of items supplied by different suppliers; and (iii) the service or maintenance of items after delivery.

(f) While the standard instructions of bids and offers provide for their acceptance "in whole or in

part", it is sometimes appropriate to emphasize the option to award a contract or issue a standing offer, on either an aggregate or an item-by-item basis. When using the item-by-tem basis, SACC Manual clause C9000T should be used.

4.30.45.15 Bidders’ Conferences and Site Visits (2010-01-11)

Chapter 4 – Solicitation Process

Supply Manual Page 18 of 61 Version 10-1 (2010-01-11)

(a) Whenever there is a bidders' conference or site visit planned:

(i) The Notice of Proposed Procurement (NPP) and solicitation documents must clearly state that there will be an optional bidder's conference or optional/mandatory site visit, then indicate the location, date and time.

(ii) Schedule the meeting on a date that will:

(A) allow suppliers time to obtain and review the solicitation; and (B) allow for preparation and distribution of minutes in sufficient time for suppliers to

prepare and submit bids/offers/arrangements before the solicitation closing date. (iii) In the event of a mandatory site visit, the NPP and solicitation documents must clearly

state that:

(A) the site visit is mandatory; and (B) failure to attend will result in the bid being declared non-responsive.

(iv) In the event of either an optional site visit or bidder's conference:

(A) the NPP and solicitation documents must indicate that attendance by suppliers is optional; and

(B) suppliers that do not attend are not precluded from submitting a bid. (b) To provide location, timing and administration of the bidder's conference or site visit in the

solicitation, SACC Manual clauses A9083T, A9038T or A9040T may be used respectively for a bidders’ conference, an optional or a mandatory site visit. Contracting officers should request in the solicitation that suppliers identify, in writing, before the meeting date, the names of the representatives who will attend and a list of the issues they propose to raise.

(c) The bidders' conference normally takes place at the Public Works and Government Services

Canada (PWGSC) office that issues the solicitation, or at another suitable location arranged by that office. While a bidders’ conference is normally held as one meeting, the scope of the solicitation may dictate the need for a series of cross-country regional conferences.

(d) The contracting officer must prepare and distribute an agenda outlining elements, including

questions raised by suppliers, to be discussed before the conference. PWGSC will chair all bidders' conferences, and prepare the minutes, which include any clarifications or specification changes, which may result in a change to the requirement. Client departments are also expected to attend the conference and be available to answer any questions relating to the requirement.

(e) The minutes must be distributed to all suppliers who have requested the solicitation documents,

and to all suppliers who have been invited to respond, in sufficient time to allow suppliers to prepare and submit responses before the solicitation closing date. Any clarifications or changes to the solicitation resulting from the bidders' conference will be included as an amendment to the solicitation. Suppliers who do not attend will not be precluded from submitting a bid/offer/arrangement. The minutes should be made available to all attendees of the bidder’s conference.

(f) Where practical, consideration should be given to using various technical means of allowing

suppliers to participate either directly or indirectly, such as through the use of video conferencing, teleconferencing or web casting. Video or audio recordings of the conference could be made and distributed to others who were not able to attend. However, it is not recommended to permit suppliers to record the conference for his/her own purposes.

Chapter 4 – Solicitation Process

Supply Manual Page 19 of 61 Version 10-1 (2010-01-11)

(g) Site visits must be arranged in conjunction with the client department. The contracting officer should attend any site visit. Although there are no formal minutes, the client department must be instructed to advise PWGSC of any clarifications, or changes in specifications, resulting from the site visit. The original solicitation must then be amended to reflect these changes or clarifications.

(h) A copy of the solicitation amendments must be provided to all suppliers who have already

requested a solicitation document, or all suppliers who have been invited to respond. 4.30.45.20 Intellectual Property (2010-01-11) (a) It is the policy of the Government of Canada that the contractor be the owner of any foreground

information (as defined in the conditions applicable to the contract) created by the contractor in performance of the contract. This is however subject to some exceptions set out in Section 6 of TB Policy, Title to Intellectual Property Arising Under Crown Procurement Contracts.

(b) Client departments should be requested to fully justify any requests to retain ownership of

intellectual property (IP), as provided for in the policy, except for the case of non-software copyright, where the practice of PWGSC practice is to make Canada ownership the norm.

(c) The solicitation should make clear to suppliers the ownership of any IP rights, as determined by

the client department. SACC Manual clauses may be used in conjunction with the general conditions and supplemental general conditions to meet the requirement of the client department. See Annex 4.2.

4.30.50 Taxes and Duties (2010-01-11) For more information on taxes and duties, consult annexes 4.3, 4.4 and 4.5. 4.30.55 Ontario Labour Legislation (2010-01-11) Solicitations for janitorial, food catering and security services must include SACC Manual clause A0075T whenever information concerning each employee of a previous supplier must be provided to other suppliers, in accordance with the Ontario labour legislation. See 4.70.105 and Annex 4.6. 4.30.60 Communications Notification (2010-01-11) A communications notification requesting that, as a courtesy, successful bidders/offerors/suppliers notify the contracting officer in advance of their intention to make public an announcement related to the award of a contract must be included in all solicitations, excluding those for low dollar value requirements under $25,000. Contracting officers should consult the applicable SACC Manual departmental standard procurement templates. When these templates are not used, one of the following SACC Manual clauses must be used: A0085T or M0025T or S0035T. 4.35 Evaluation Criteria (2010-01-11) All evaluation criteria must be clearly specified in the solicitation document and their relative weighing and importance must be described. If applicable, the solicitation must also indicate whether, and under what conditions, alternatives or substitutes will be considered. Additionally, consideration should be given to when a condition will have to be met, that is a condition of contract award versus a condition of bid submission. For example, a certificate of insurance may not be available at the time of submission as it

Chapter 4 – Solicitation Process

Supply Manual Page 20 of 61 Version 10-1 (2010-01-11)

may only be issued on award of a contract. In this case, a requirement for a certificate of insurability may be more appropriate. 4.35.1 Mandatory Criteria (2010-01-11) Contracting officers must ensure that mandatory requirements represent truly essential requirements, since not even a single mandatory requirement can be later waived when faced with an otherwise good bid/offer/arrangement. Contracting officers should discuss this with client departments since the bulk of the mandatory requirements are typically defined by the client department. Mandatory evaluation criteria identify the minimum requirements that are essential to the successful completion of the work. Contracting officers must minimize the number of mandatory criteria in order to increase probability of receiving responsive bids/offers/arrangements. Mandatory criteria must be clearly specified in the solicitation document and may include: (a) licensing requirements; (b) minimum performance characteristics of equipment; (c) requirements for delivery dates or condition; (d) essential minimum qualifications or experience of proposed personnel; (e) budget limitations. 4.35.5 Rated Criteria (2010-01-11) (a) Only bids/offers/arrangements that meet the mandatory criteria are subject to point rating, as

applicable. Rated criteria are used to assess various elements of the technical bid/offer/arrangement so that the relative merits of each bid/offer/arrangement can be used to distinguish one bid/offer/arrangement from another. The maximum points that can be achieved for each rated criterion must be specified in the solicitation document.

(b) When point rating is used, bids/offers/arrangements may have to achieve a minimum number of

points overall to be considered responsive, and often they must achieve a minimum number of points for certain individual criteria. Solicitation documents must clearly identify any minimum thresholds and clearly indicate that such minimums are mandatory. When assigning weights to each criterion, the contracting officer and the client department should ensure that a high aggregate of points for minor criteria does not overcompensate for a low aggregate of points for major criteria.

(c) When evaluating knowledge and experience is important, contracting officers must specify in the

solicitation documents how knowledge and experience will be assessed. In the case of joint ventures for example, whose experience will be assessed, i.e. the experience of a joint venture member only or a pooling of experience of all the members.

4.40 Evaluation Process and Method of Selection (2010-01-11) (a) The evaluation process and the method of selection such a lowest price, best value, etc., must be

clearly described in the solicitation documents. (b) For the basis of selection, contracting officers must use the appropriate SACC Manual clauses;

for example: A0031T, A0034T, A0035T, A0036T, A0069T, M0031T, M0034T, M0035T, M0069T, S1001T, S1002T, etc.

(c) The Canadian International Trade Tribunal (CITT) has determined that although suppliers may be

aware of the department's normal practice to award contracts to the lowest-responsive supplier,

Chapter 4 – Solicitation Process

Supply Manual Page 21 of 61 Version 10-1 (2010-01-11)

this does not relieve it of the obligation to state its method of selection in the solicitation. If the department intends to rely on a publicly available policy, it must be incorporated into the solicitation.

(d) For more information on evaluation procedures, consult Chapter 5. 4.45 Certifications (2010-01-11) A requirement for certifications may be included in the solicitation document. When certifications are required, suppliers are requested to provide the required certifications in order to be awarded a contract/standing offer/supply arrangement. Canada will declare the bids/offers/arrangements non-responsive if the required certifications are not completed and submitted as requested. Compliance with the certifications provided to Canada is subject to verification by Canada during the evaluation period (before award of a contract or issuance of a standing offer or supply arrangement) or after award of a contract or issuance of a standing offer or supply arrangement. (a) In some cases, certifications are required as a precedent to contract award or the issuance of a

standing offer or supply arrangement. In other cases, the certifications are required at solicitation closing. Some common certifications are provided below.

(b) Federal Contractors Program (see Annex 5.1.)

(i) The Federal Contractors Program (FCP) applies to contractors – those provincially regulated employees that receive federal government goods or services contracts of $200,000 or more.

(ii) For requirements valued at $200,000 or more, including all applicable taxes, options

years and set-asides, except for requirements excluded under paragraph 2. (d), (e), and (f) of Annex 5.1, contracting officers must include Standard Acquisition Clauses and Conditions (SACC) Manual clause A3030T or M2000T or S3030T, as applicable, in their solicitation. The FCP requires that some suppliers, including a supplier who is a member of a joint venture, bidding for federal government contracts, valued at $200,000 or more, including all applicable taxes, make a formal commitment to implement employment equity. If the bidder/offeror/supplier or in the case of a joint venture, a member of the joint venture, is subject to the FCP, evidence of its commitment must be provided before contract award. Suppliers who have been declared ineligible contractors by Human Resources and Skills Development Canada (HRSDC) are no longer eligible to receive government contracts over the threshold for solicitation as set out in the Government Contract Regulations (GCRs). Suppliers may be declared ineligible contractors either as a result of a finding of non-compliance by HRSDC, or following their voluntary withdrawal from the FCP for a reason other than the reduction of their workforce to less than 100 employees. Any bids/offers/arrangements from ineligible contractors, including a bid/offer/arrangement from a joint venture that has a member who is an ineligible contractor, will be declared non-responsive. If suppliers continue to hold a valid certificate number, or if they have not obtained a number in the past, then they should submit an original certificate of commitment. If a verification of the Certificate of Commitment discloses a misrepresentation on the part of the contractor, the contract may be terminated for default. (See clause A3015C.)

(iii) For requirements valued over $25,000 and below $200,000, including all applicable

taxes, except for requirements excluded under paragraph 2. (d), (e), and (f) of Annex 5.1, contracting officers must include SACC Manual clause A3031T or M2002T or S3031T as applicable, in their solicitations. Suppliers who are subject to the FCP and have been declared ineligible contractors by HRSDC are no longer eligible to receive government contracts over the threshold for solicitation, as set out in the GCRs. The

Chapter 4 – Solicitation Process

Supply Manual Page 22 of 61 Version 10-1 (2010-01-11)

bidder/offeror/supplier or in the case of a joint venture, the member of the joint venture, must certify its status with the FCP. Suppliers may be declared ineligible contractors either as a result of a finding of non-compliance by HRSDC, or following their voluntary withdrawal from the FCP for a reason other than the reduction of their workforce to less than 100 employees. Any bids/offers/arrangements from ineligible contractors, including a bid/offer/arrangement from a joint venture that has a member who is an ineligible contractor, will be declared non-responsive. If a verification of the Certificate of Commitment discloses a misrepresentation on the part of the contractor, the contract may be terminated for default. (See clause A3015C.)

(c) Former Public Servant

(i) Former public servants must comply with the Conflict of Interest Act. This is a term of all general conditions and forms part of all solicitations.

(ii) For service contracts, SACC Manual clauses A3025T, A3026T, M3025T, M3026T,

S3025T, as applicable, must be used in all solicitations to ensure compliance with former public servant policies. Suppliers are required to self-identify as a former public servant, if applicable, and to make available to Canada any additional details of their status with respect to cash-out amounts and time equivalents, pension payment details and status of ownership.

(iii) Former public servants must provide the required certification before contract award or

issuance of a standing offer or supply arrangement. Canada will declare a bid/offer/arrangement non-responsive if the required certification(s) is not completed and submitted as requested.

(iv) This certification will be a condition precedent to contract award, as opposed to a

mandatory requirement for evaluation purposes. (v) All certifications that suppliers provide to Canada are subject to verification by Canada

during the evaluation period (before award of a contract) and after award of a contract to ensure compliance. For more information on definitions and exceptional contracting authorities, consult Chapter 3 and Chapter 6.

(d) Canadian Content

(i) When the Canadian Content Policy applies to a requirement, the appropriate SACC Manual Canadian content certification clause must be included in the solicitation. These clauses describe the type of solicitation (limited, open or conditionally limited).

(ii) SACC Manual clause A3050T, which defines Canadian content, must also be included in

the solicitation. See Chapter 3. (e) Price Certification and Rate Certification

(i) A price certification or a rate certification is required for all negotiated firm-price and fixed-time rate contracts valued at $50,000 or more, for the acquisition of commercial or non-commercial goods and/or services.

(ii) Price certification clauses:

(A) C0001T: acquisition of goods and/or services from foreign-based suppliers; (B) C0002T: acquisition of commercial goods and/or services, other than petroleum

products, from Canadian-based suppliers, other than agency and resale outlets;

Chapter 4 – Solicitation Process

Supply Manual Page 23 of 61 Version 10-1 (2010-01-11)

(C) C0003T: acquisition of non-commercial goods and/or services from Canadian-

based suppliers; (D) C0004T: acquisition of commercial goods and/or services from Canadian agency

and resale outlets, including subsidiaries of foreign-based manufacturers; and (E) C0006T: acquisition of petroleum products.

(iii) rate certification clauses: (A) C0600T: acquisition of commercial goods and/or services from Canadian-based

suppliers; and (B) C0601T: acquisition of non-commercial goods and/or services from Canadian-

based suppliers. 4.50 Financial Security (2010-01-11) (a) Financial security can be required from a supplier to:

(i) protect Canada against loss should a supplier fail to enter into a contract (bid financial security);

(ii) ensure that a contractor's obligations under a contract are carried out (contract financial

security); or (iii) protect subcontractors and material suppliers (payment bond).

(b) The financial security may be a security deposit (government guaranteed bonds, bills of

exchange, irrevocable standby letters of credit or a surety bond). (c) The decision to obtain financial security for competitive solicitations must be taken before issuing

the solicitation and the solicitation must state clearly what is mandatory. (d) Suppliers have the right to determine which form of financial security they will provide. See

SACC Manual clauses E0004T and E0007C. (e) Government guaranteed bonds will be valued at current value; (f) Treasury Board has an updated list of insurance companies whose bonds may be accepted as

security by the government. (g) For more information on risk management, consult Chapter 3; for information on the handling of

bid and contract security, consult Chapter 7. 4.50.1 Surety Bond Forms (2010-01-11) The surety bond forms are: (a) PWGSC-TPSGC 504, Bid Bond; (b) PWGSC-TPSGC 505, Performance Bond; and (c) PWGSC-TPSGC 506, Labour and Material Payment Bond.

Chapter 4 – Solicitation Process

Supply Manual Page 24 of 61 Version 10-1 (2010-01-11)

4.50.5 Bid Financial Security (2010-01-11) (a) The decision to obtain bid financial security should take into account the following:

(i) the extent of bidder prequalification possibility; (ii) the type of work and custom of the trade; (iii) the likelihood of attempts to withdraw; (iv) the consequences of the failure or inability of the bidder to enter into a contract.

(b) The amount of bid financial security must be the minimum required to ensure that the bidder

enters into the contract. SACC Manual clause E0004T must be used in conjunction with E0008T when bid financial security is required. When clause E0004T is used to require bid financial security and a contract financial security is required under the resulting contract, it must be used with E0003T. When clause E0004T is used to require bid financial security, but no contract financial security is required, clause E0009T must be used.

(c) If the estimated contract value is $250,000 or less, the security should not exceed 10 percent of

the bid price. In the case of larger acquisition values, the contracting officer will determine the percentage.

(d) Any letter of credit received by Canada must have an appropriate expiry date. The letter of credit

should not have its expiry date coincide with the projected cessation of the risk that it covers. For instance, the expiry date stated in the letter of credit should not be the same date as the one projected for the contract award. The expiry date should allow for a comfortable turn-around time from the estimated date of the contract award, to ensure that the contracting officer is satisfied that the bidder has discharged its obligations for which the letter of credit was provided. If the bidder has not met its obligations, the contracting officer must have sufficient time to prepare and present the required demand for payment under the letter of credit.

(e) To prevent problems in obtaining contract financial security (if required) at a later date, the

solicitation must specify that, if the required contract security is not provided within the period specified, a security deposit (government guaranteed bonds, bills of exchange, irrevocable standby letters of credit) given as bid security will be forfeited or payment demands will be made against the bid support letter of credit. The amount forfeited must not exceed the difference between the bid price and the amount of the contract entered into by Canada. This provision is also contained in form PWGSC-TPSGC 504.

(f) Unless the acceptable form of security is limited to security deposits (government guaranteed

bonds, bills of exchange, irrevocable standby letters of credit), the solicitation must include a list of insurance companies (Treasury Board Contracting Policy Appendix L) whose bonds may be accepted as security by the government, together with the applicable surety bond form. Deviation from the surety bond form will be permitted only with the prior approval of Legal Services.

(g) For more information on procedures on the handling bid security, consult Annex 5.2. The

contracting officer must instruct the specified bid receiving unit of the handling of bid securities received.

4.50.10 Contract Financial Security (2010-01-11) (a) For the successful supplier, the contracting officer must ensure that bid financial security is not

released until the contractor provides the required contract financial security. The decision to obtain contract financial security, and the amount of security required, should take into account the following:

Chapter 4 – Solicitation Process

Supply Manual Page 25 of 61 Version 10-1 (2010-01-11)

(i) the type of work and custom of the trade; (ii) the consequences of the failure or inability of the contractor to carry out its contractual

obligations; (iii) costs associated with the provision of security, compared with the degree of risk involved.

(b) For construction contracts with an estimated value of $100,000 or more, contract financial

security must be sought. (c) Decisions as to whether and how much financial security will be required should be based on the

circumstances of the individual procurement. Some businesses may encounter difficulty in obtaining certain kinds of security; therefore, contracting officers should be sensitive to this and not require unreasonable contract security. In certain cases, perhaps an advance form of security may not be needed; holdbacks in contract payment may suffice. Treasury Board recommends that financial security not be considered until the estimated cost of the contract exceeds $100,000. However, issues relating to the nature of the requirement are usually more important than the dollar value.

(d) When the decision to obtain contract financial security has been taken, the contracting officer

must stipulate in the solicitation documents that contract financial security will be required. When the contractor is required to provide contract financial security after contract award, SACC Manual clause E0007C must be used in conjunction with E0004T and E0008C. When the successful supplier must provide a security deposit as contract financial security, clause E0005C must be used in conjunction with E0008C.

4.55 Controlled Goods (2010-01-11) Whenever the controlled goods program applies to a requirement, the following applies: (a) Controlled goods cannot be released to persons that are not registered, exempt or excluded by

the Controlled Goods Program (CGP). For more information on controlled goods, visit the Controlled Goods Directorate Web site.

(b) SACC Manual clause A9130T must be included in solicitations when there is production of or

access to controlled goods. (c) When the solicitation contains controlled goods (* for example, a drawing or Statement of Work),

only those controlled goods cannot be released to any persons that are not registered, exempt or excluded under the CGP. The remainders of the items are processed as usual.

Note: “Not all drawings” or Statements of Work are controlled goods themselves, even if they

relate to controlled goods. (d) Registered Persons are listed on the Controlled Goods Directorate (CGD) Web site. (NOTE: the

information contained in this list is for information purposes only.) This list is updated daily based on information provided by registered persons. Canada cannot guarantee the completeness of the information contained in this list, as some registered persons have asked not to be listed. If a registered person does not appear in this list, contact CGD at 1-866-368-4646 or by e-mail dmc-cgd@tpsgc-pwgsc.gc.ca for further verification. Once the contracting officer has verified that the person requesting the controlled goods is registered, the solicitation documents, drawings, statements of work, etc. containing the controlled goods may then be released through adequate means to preclude the examination of controlled goods by unauthorized persons.

(e) An export permit to ship a controlled Technical Data Package (TDP) is required to all countries

except, in most cases, the United States. Contracting officers must first determine if their TDP is, in fact, controlled. The ultimate authority for making this determination is the Export Controls

Chapter 4 – Solicitation Process

Supply Manual Page 26 of 61 Version 10-1 (2010-01-11)

Division, Department of Foreign Affairs and International Trade Canada (DFAIT). A determination needs to be made as to whether or not the supplier has access to controlled goods, in Canada, under the Defence Production Act.

(f) Generally, if the TDP contains technical information for the "development, production or use" of

an item controlled under the DFAIT’s Export Control List (most items under Group 2; Item 5504 under Group 5; and all items under Group 6), then the TDP is also controlled. Refer also to a shorter version, published by CGD, of the items that are controlled. If the TDP is designed solely for the solicitation of bids, it is probably not controlled. Contracting officers should contact the Export Controls Division, DFAIT, at 613-996-2387, for assistance in making this determination.

(g) Security precautions for transferring controlled goods will vary, depending on the type and size of

the controlled goods. Safeguards chosen must adequately preclude the examination and unauthorized transfer of controlled goods by a person who is not registered, exempt or excluded under the CGP and should be such as to make tampering evident. These include:

(i) using double envelopes, security seals and security-sealed containers; (ii) marking transfer containers with a return address; (iii) recording how the controlled good is being transferred; (iv) determining the reliability of a postal or courier service; (v) transferring controlled goods by first class or registered mail, or by a reliable postal or

courier service that offers: proof of mailing, a record while in transit, and a record of delivery;

(vi) recording the controlled good being transferred, who is transferring it, and the identity and address of the person to whom it was transferred; or

(vii) upon receipt, examining the packaging and sealing devices, and reporting tampering. 4.60 Transportation Costs (2010-01-11) (a) For most requirements with an estimated expenditure of $25,000 or more, including Goods and

Services/Harmonized Sales Tax (GST/HST), with known delivery points, bids/offers should be solicited on the basis of Free On-Board (FOB) destination.

(b) For requirements with unknown delivery points, bids/offers should be solicited on the basis of

FOB origin only. See the Glossary “Incoterms”. (c) When Incoterms are used, contracting officers must ensure that suppliers understand the

differences in the acronyms used particularly those that use the same letters: FOB in Incoterms means Free On-Board, not Freight on Board.

(d) For more information on transportation costs and the applicable SACC Manual clauses to be

used for good requirements, consult 4.70.100. 4.65 Exchange Rate Fluctuations (2010-01-11) (a) The exchange rate risk on the purchase of materials, components or products from outside

Canada is generally considered a normal business risk. However, in some cases, it may not be appropriate for suppliers to assume the risk of currency fluctuations.

(b) An example of an extreme risk posed by an exchange rate fluctuation, as opposed to a normal

business risk, would be a situation where the exchange rate fluctuates by 5 percent over a two-month period, in an unpredictable manner.

Chapter 4 – Solicitation Process

Supply Manual Page 27 of 61 Version 10-1 (2010-01-11)

(c) Factors to be considered include:

(i) duration of the contract or delivery lead times; (ii) experience and knowledge of similar buys; and (iii) value and type of commodity.

(d) Exchange rate adjustment provisions may be applied to all procurements, except for:

(i) those in the European and Washington regions; (ii) Canadian Commercial Corporation contracts; (iii) telephone buys; and (iv) cost reimbursable contracts and cost reimbursable portions of a contract.

(e) The solicitation must indicate if exchange rate fluctuation provisions are included as an option for

the supplier and explain clearly how such provisions will be applied. The solicitation must then indicate the methods for determining both the initial conversion factor (rate) and the conversion factor to be used at the time of the claim. For example, the initial conversion factor is typically "the noon rate as published by the Bank of Canada on the solicitation closing date".

(f) Whenever suppliers are offered the option for protection against the risk of exchange rate

fluctuation, Standard Acquisition Clauses and Conditions (SACC) Manual clause C3010T must be included in the solicitation. This clause may be used in conjunction with C3015C, C3020C, C3025C or C3030C, as applicable.

(g) If suppliers indicate in the solicitation that they accept the exchange rate fluctuation protection,

the bid/offer must then clearly indicate, for each item, the Foreign Currency Component (FCC) in foreign funds.

(h) Suppliers may use form PWGSC-TPSGC 9411 to identify the value of the FCC. The contracting

officer will complete Column 3 with the initial exchange rate factor that will be the noon rate published by Bank of Canada in effect on the solicitation closing date or on any other date specified in the solicitation. This exchange rate factor will be reflected in the resulting contract for the purpose of calculating the amount of any claim for adjustment.

(i) Whenever exchange rate fluctuation is not expected to be an issue and, therefore, it is not

proposed to offer protection against it, the SACC Manual clause C3011T must be included in the solicitation to clearly indicate to suppliers that a request for exchange rate adjustment will not be considered and that inclusion of such in the bid/offer will render the bid/offer non-responsive.

4.70 Conditions of the Resulting Contract 4.70.1 Security Requirement (2010-01-11) For more information on industrial security and contract clauses, consult 4.30.10. 4.70.5 General Conditions (2010-01-11) (a) SACC Manual general conditions describe the rights and obligations of both the government and

the contractors in various types of contractual situations. Contracting officers must determine which general conditions apply to a specific requirement. Only one set of general conditions is to be used for a requirement. Additional conditions, not addressed in the chosen general conditions, may be added to the procurement document; however, contracting officers must ensure that there are no contradictions, inconsistencies and redundancies in the clauses

Chapter 4 – Solicitation Process

Supply Manual Page 28 of 61 Version 10-1 (2010-01-11)

contained in the template, the standard instructions and the general conditions. Legal Services should be consulted for any additional conditions.

(b) The general conditions are incorporated by reference in the procurement document. The

remarks contained in the general conditions provide instructions on their application. (c) For more information on the general conditions and their use, consult Annex 4.1. 4.70.5.1 Warranty (2010-01-11) (a) In a contract for the sale of goods, any affirmation of fact or any promise by the supplier relating

to the goods is an express warranty. The warranty provisions in the general conditions do not negate or limit in any way the operation of other relevant warranties that are, as a general rule, implied or imposed by law.

(b) Examples of relevant warranties that are implied by law are:

(i) the fitness of the goods for the purpose intended; or (ii) the merchantable quality of the goods.

(c) These warranties are implied in most contracts for the sale of goods through the International

Sale of Goods Contracts Convention Act, a version of which exists in all Canadian provinces and territories except Quebec. In Quebec, the warranty under the Civil Code is a warranty of ownership and of quality, which includes latent defects.

(d) The contracting officer may negotiate an increase to the warranty time period in a contract,

subject to client department agreement to the proposed time period and related cost. This change in warranty time period should be addressed in the contract approval document.

(e) Any requests for lessening Canada’s full rights at law, a disclaimer, limitation of the contractor's

liability, or decrease of the warranty time period, must be reviewed by Legal Services, be acceptable to the client department, and form part of the contract approval document.

(f) It may be necessary to consider obtaining a broader warranty than that contemplated by the

warranty provision appearing in the SACC Manual general conditions to cover "symptomatic defects" or "epidemic failures."

(g) These are cases where the same or similar defects have developed in several identical items of

finished work, or components, and it is reasonable to assume that the same defects will be found in the total quantity of such items, which have already been delivered, or will be delivered.

(h) Where this type of warranty is requested by the client department, or considered desirable by

PWGSC, the contracting officer, in consultation with the client department, must determine the extent and nature of the warranty required, and request Legal Services to prepare a suitable provision to cover the requirement. In the case of negotiated firm price contracts, the contracting officer must obtain the client department’s agreement to the estimated cost of this warranty.

(i) The general conditions provide that contractors must carry out warranty work at their own

expense. The following interpretations apply:

(i) in the case of firm price contracts awarded as a result of a competitive solicitation, where the procurement process precludes any adjustment to the price quoted, costs incurred as a consequence of warranty consideration must be the responsibility of the contractor;

Chapter 4 – Solicitation Process

Supply Manual Page 29 of 61 Version 10-1 (2010-01-11)

(ii) in the case of negotiated firm price contracts, where contingency for warranty work becomes a factor for consideration during the price negotiations, the amount included in the firm price must be kept to reasonable levels, and must be specifically approved. Supporting details must be part of the cost summary presented in the contract approval document;

(iii) in the case of negotiated firm price contracts governed by the Defence Production Act,

the contractor must certify that the price is based on costs computed in accordance with Contract Cost Principles 1031-2, which do not permit any increase in reserves for guaranteed work. Therefore, costs for work and/or expenses in order to provide for product correction/adjustment/replacement under warranty requirements, are not to be included in the contract price since provision for these expenses has already been included in the certified price;

(iv) in cost reimbursable contracts, the contractor is not allowed to charge any contingency

for warranty as an element of cost. If the contractor is required to make good under the warranty provisions, the contracting officer may allow recovery of the reasonable cost incurred for direct labour and direct material only. There is to be no allowance for overhead or profit;

(v) if the contracting officer is of the opinion that reasonable warranty costs may be allowed,

then an appropriate clause approved by Legal Services must be inserted in the contract to authorize such costs. The contract should contain a line item providing for the allowance of costs, with or without a maximum estimated expenditure.

4.70.10 Supplemental General Conditions (2010-01-11) (a) Contracting officers must determine which SACC Manual supplemental general conditions apply

to a specific requirement. The supplemental general conditions must be used in conjunction with one set of SACC Manual general conditions. Their purpose is to expand upon and clarify specific points within the context of an identified subject area.

(b) The supplemental general conditions are incorporated by reference in the procurement

document. The remarks contained in each set of the supplemental general conditions provide instructions on their application.

(c) For more information on the use of supplemental general conditions, consult Annex 4.1 and the

SACC Manual. 4.70.15 Term of the Contract and Options (2010-01-11) The period of the contract or the delivery date must be indicated, as applicable. SACC Manual clause A9022C may be used in contracts for services. If the contract contains option periods, use in conjunction with A9009C. 4.70.20 Basis of Payment (2010-01-11) (a) The following are the bases of payment that may be used. In descending order of preference,

these are:

(i) firm price; (ii) firm price subject to economic price adjustment; (iii) cost reimbursable with fixed time rate;

Chapter 4 – Solicitation Process

Supply Manual Page 30 of 61 Version 10-1 (2010-01-11)

(iv) cost reimbursable with incentive fee; (v) cost reimbursable with fixed fee; (vi) cost reimbursable with fee based on actual costs; (vii) cost reimbursable with no fee.

(b) The Basis of Payment should reflect the commodity, the duration of the contract, and how well

the requirement was defined. Multiple bases of payment may be used in one contract. 4.70.20.1 Firm Price (2010-01-11) (a) This provides for a price, which is not subject to adjustment for performance of the contract or

part of it. It gives maximum profit incentive to the contractor for cost control in that the contractor assumes full responsibility for all costs under or over the firm price. In addition, it places a minimum administrative burden on both contracting parties. See SACC Manual clause C0207C.

(b) Use this basis of payment when buying commercially available goods or readily quantifiable

services when:

(i) the contractor has previously manufactured the particular good or provided the particular service, or similar goods or services, and has sufficient experience to permit a realistic statement of work based on firm specifications;

(ii) the statement of work can have a cost applied to it in terms of quantities of material and

labour time required; and (iii) a realistic estimate of the material prices and labour and overhead rates applicable during

the contract period can be made. (c) Subsequent to the negotiation of a firm price basis of payment for a non-competitive requirement,

the contractor must resubmit the price bid based on the agreement reached. (d) A discretionary audit clause may be included in the contract, as appropriate, subject to the receipt

of a price certification in accordance with SACC Manual clauses C0002T or C0004T or C0006T. 4.70.20.5 Economic Price Adjustments in Firm Price Contracts (2010-01-11) (a) It may not be possible to obtain a realistic estimate of the material prices and/or labour and

overhead rates required for the use of a firm price basis of payment, and it may be necessary to negotiate provisions for price adjustments. These provisions provide for revisions to the firm base price upon the occurrence of certain contingencies.

(b) Under changing market conditions, one or more elements of the cost of a good or service may be

subject to significant fluctuations in price, so that neither the buyer nor the supplier would have confidence in accepting a fixed or firm price over an extended period of time. The purpose of including an exchange price adjustment (EPA) and/or a foreign currency adjustment (FCA) in the contract is to eliminate these risks for the contractor, as they are outside of the contractor’s control. Contracting officers must advise the client departments to seek TB approval for EPA and/or FCA relief and the appropriate financial models to use, before inserting the clauses in the solicitation documents.

(c) Economic price adjustments should not normally be included in contracts with delivery schedules

of less than 12 months, or contracts valued under $100,000. (d) There are a number of possible actions:

Chapter 4 – Solicitation Process

Supply Manual Page 31 of 61 Version 10-1 (2010-01-11)

(i) postpone the procurement; (ii) use available substitute products; (iii) provide advance information on requirements to potential contractors, to benefit from

their improved ability to control costs by forward planning, and to make full use of the commodity futures markets in appropriate circumstances;

(iv) reduce the period of term contracts or the quantities ordered on production contracts; (v) increase production rates to compress the duration of contracts; (vi) reduce administrative time allowances in the procurement process (solicitation, award

decision, award of contract and authority to commence work), but taking into account required time frames under the North American Free Trade Agreement and the World Trade Organization Agreement on Government Procurement;

(vii) procure the unstable element separately in the construction industry. This technique is

known as pre-bidding; (viii) isolate the unstable element in pricing the work and providing for price adjustment, both

upward and downward, on it alone, in accordance with a reliable predetermined formula such as an established economic index.

(e) When a competitive bidding process is used, the proposed economic price adjustment provisions

must be considered in the evaluation of the bid. In all other situations, economic price adjustment provisions must be agreed upon during negotiation of the initial or base year contract price.

(f) When a provision for future wage or price adjustments on one or more elements of the cost of a

good or service, is necessary to protect the contractor and the government against significant economic fluctuations, economic price adjustment provisions may be used in firm price type contracts and in contracts that contain firm price elements within the basis of payment.

(g) Adjustments to firm prices in a contract will be allowed only if provided for in the contract. 4.70.20.10 Cost Reimbursable with Fixed Time Rate (2010-01-11) (a) A fixed time rate provides for the payment to the contractor for the actual amount of time spent in

performance of the work, as determined by government audit, on the basis of a predetermined fixed time rate. The fixed time rate usually includes direct labour rates, overhead rate and profit. See the SACC Manual clauses C0212C and C0214C.

(b) Use this basis of payment when:

(i) it is not possible to estimate in advance the extent or duration of the work, but it is possible to determine within reasonable limits the applicable direct labour and overhead rates during the contract period; and

(ii) there is provision for adequate controls to ensure that the contractor is not using

inefficient or wasteful methods. (c) Contracts or parts of contracts with a fixed time rate basis of payment may also provide for a

ceiling price, by which the contractor is bound to complete the prescribed work without additional payment, whether or not the actual costs exceed the ceiling price. If a ceiling price must be used,

Chapter 4 – Solicitation Process

Supply Manual Page 32 of 61 Version 10-1 (2010-01-11)

there must be full agreement between the parties as to what constitutes the prescribed work. SACC Manual clause C6000C must be used in a ceiling price contracts where it is necessary to ensure against the contractor making changes or carrying out additional work without the prior approval of the contracting officer.

(d) Before deciding on using a ceiling price in a fixed time rate contract, the contracting officer should

consider whether a firm price contract would be more appropriate. (e) When contracts or parts of contracts with a fixed time rate basis of payment do not include a

ceiling price, a limitation of expenditure must be made a term of the contract by including in the contract SACC Manual clause C6001C.

(f) Following the negotiation of fixed time rates, the contractor must resubmit the price bid based on

the agreement reached and include a rate certification. (g) Time verifications, rate certifications and discretionary audits must be provided for in contracts. 4.70.20.15 Cost Reimbursable with Incentive Fee (2010-01-11) (a) A cost reimbursable with incentive fee basis of payment reimburses the contractor for costs

incurred in performance of the work, as determined by government audit, and adds a fee which is adjusted by formula in accordance with the relationship that total allowable actual costs bear to a predetermined target.

(b) Use this basis of payment when the criteria required for a firm price basis of payment are lacking

and the goods and services being acquired are of a nature that the assumption by the contractor of a degree of cost responsibility is likely to provide a positive incentive for effective cost control and contract performance.

(c) When a cost reimbursable with incentive fee basis of payment is used, it is necessary to

negotiate in advance a target, a target fee, a maximum fee and a formula for fee adjustment. (d) The target should be the estimated costs of performing the work, computed in accordance with

Contract Cost Principles 1031-2, assuming the contractor's current efficiency trend is maintained. (e) The target fee, based on the target cost, and the maximum fee should be an amount no greater

than that calculated in accordance with the procedures for profit determination. (f) The formula provides for both an increase in fee above the target fee, up to the maximum fee,

based on a sharing between the contractor and Canada of any decrease in actual acceptable costs below the target, and a decrease in the fee below the target fee, based on a sharing between the contractor and Canada of any increase in actual acceptable costs above target.

(g) Contracts or parts of contracts with this basis of payment should not include a ceiling price, which

requires agreement between the parties as to what constitutes the prescribed work, since this conflicts with the reason why this basis of payment is being used in the first place, that is, the fact that a realistic statement of work cannot be submitted by the contractor.

(h) In contracts or parts of contracts with this basis of payment, which do not include a ceiling price, it

is mandatory that a limitation of expenditure be made a term of the contract by including in the contract SACC Manual clause C6001C.

4.70.20.20 Cost Reimbursable with Fixed Fee (2010-01-11)

Chapter 4 – Solicitation Process

Supply Manual Page 33 of 61 Version 10-1 (2010-01-11)

(a) This provides for the reimbursement to the contractor of the actual cost incurred in performance of the work, as determined by government audit, together with a predetermined fixed fee. Although the fixed fee does not vary with actual costs incurred, it may be renegotiated under certain circumstances. See SACC Manual clause C0202C.

(b) Use this basis of payment when circumstances do not permit the use of a firm price or fixed time

rate, and the possible savings from the use of an incentive fee are likely to be more than offset by the complexities of contract administration resulting from its use.

(c) The amount of the fixed fee, based on an estimate of the costs to be incurred, should be no

greater than the appropriate amount of profit. If it is not possible for both parties to reach agreement on an estimate of the costs to be incurred, as a basis for calculating the fixed fee, swing points are used. Swing points are the amounts of estimated costs, one higher and one lower than the amount used for the calculation of the fixed fee, at which the fixed fee will be renegotiated.

(d) Contracts or parts of contracts with this basis of payment may also include a ceiling price, through

which the contractor is bound to complete the prescribed work without additional payment, whether or not actual costs exceed the ceiling price.

(e) If it is possible to determine the prescribed work and for the parties to agree on an estimated

amount to complete it as a basis for the ceiling price, it may be appropriate to use another basis of payment, that is, one which provides for a more equitable sharing of responsibilities and risks between the contractor and Canada.

(f) In contracts or parts of contracts with this basis of payment, which do not include a ceiling price, it

is mandatory that a limitation of expenditure be made a term of the contract by including in the contract SACC Manual clause C6001C.

4.70.20.25 Cost Reimbursable with Fee Based on Actual Costs (2010-01-11) (a) This basis of payment provides for the reimbursement to the contractor of costs incurred in

performance of the work, as determined by government audit, together with a fee based on the actual costs incurred. See SACC Manual clause C0205C.

(b) Use this basis of payment only when circumstances permit the use of no other basis of payment. (c) The amount of fee, based on the actual costs incurred, as determined by government audit, will

be no greater than the appropriate level of profit. (d) Ceiling prices are not applicable when this basis of payment is used. (e) In contracts or parts of contracts with this basis of payment, which do not include a ceiling price, it

is mandatory that a limitation of expenditure be made a term of the contract by including in the contract SACC Manual clause C6001C.

4.70.20.30 Cost Reimbursable with No Fee (2010-01-11) (a) A cost reimbursable with no fee basis of payment provides only for the reimbursement to the

contractor of actual costs incurred, as determined by government audit. See SACC Manual clause C0201C.

Chapter 4 – Solicitation Process

Supply Manual Page 34 of 61 Version 10-1 (2010-01-11)

(b) Except for contracts covering the provision of assistance to a contractor, this basis of payment is rarely used. Contractors cannot normally be expected to accept a contract, which provides for no profit for the manufacture of goods or the provision of services.

(c) A ceiling amount to be paid by Canada for completion of the prescribed work may be included, if

appropriate. (d) In contracts or parts of contracts with this basis of payment, which do not include a ceiling price, it

is mandatory that a limitation of expenditure be made a term of the contract by including in the contract SACC Manual clause C6001C.

4.70.20.35 Cost Reimbursable Contracts – Audit (2010-01-11) (a) Cost reimbursable contracts or contracts with cost reimbursable elements require special

attention because the price is not specified in the contract, but rather is determined after the completion of the work. All cost reimbursable contracts must include a clause indicating that the costs incurred will be subject to audit by PWGSC. See SACC Manual clause C0205C.

(b) For all cost reimbursable contracts valued at $50,000 or more awarded to Canadian suppliers,

the contracting officer must, on completion of the work, place on file a certification that the final amount paid represents a reasonable price.

(c) This certification may be based on the findings of a formal or an informal audit. This audit

provides the basis for certification that the price is reasonable. (d) All contracts containing cost reimbursable elements must include an appropriate basis of

payment clause (see clauses C0201C, C0202C, C0203C and C0205C.) (e) All cost reimbursable contracts must also include clause C0300C, which calls upon the contractor

to provide a cost submission to the contracting officer upon completion of the contract or annually for multi-year contracts spanning more than one contractor fiscal year.

(f) The requirement for a cost submission will be listed as a mandatory deliverable item within the

contract. However, for repair and overhaul (R&O) service contracts, the contracting officer or audit agency may determine whether a cost submission is needed as a deliverable item. The clause C0307C pertaining to R&O service contracts must be used.

4.70.20.40 Cost and Profit (2010-01-11) Whenever a contract is to be awarded on a non-competitive basis, or when, following a competitive process, price negotiations with the successful supplier are required, contracting officers must consult Chapter 10. 4.70.20.45 Withholding of 15 percent on Service Contracts with Non-residents (2010-01-11) (a) The Income Tax Act and the Income Tax Regulations require client departments, on whose

behalf a contract for services rendered in Canada has been awarded by PWGSC to a non-resident contractor, to withhold 15 percent from the payment of fees, commissions or other amounts paid to non-resident individuals, partnerships or corporations, other than for services performed in the course of employment. Client departments are responsible for: withholding 15 percent of any amounts payable, in lieu of taxes; remittance of this amount to CRA; and reporting the amounts paid, and withheld, to CRA. The SACC Manual general conditions include a

Chapter 4 – Solicitation Process

Supply Manual Page 35 of 61 Version 10-1 (2010-01-11)

provision regarding the withholding of 15 percent from the payment. A waiver or a reduction of the withholding may be obtainable as detailed in paragraph (e) below.

Withholding of the 15 percent of the payment does not represent a definite tax, but rather a payment on account of the non-resident contractor's overall tax liability to Canada.

(b) Payments for duties of employment performed in Canada, made to non-resident individuals, are

not subject to the 15 percent withholding, but are subject to tax deductions on a basis similar to that applicable to residents.

(c) Withholding pursuant to subsection 105(1) of the Income Tax Regulations does not apply to travel

expenses as detailed in the following:

"Reasonable travel expenses

24. The CRA provides an administrative exception from withholding for reasonable travel expenses. Travel expenses reimbursed to the non-resident for meals to a maximum of CAN$45 a day per person and accommodation to a maximum of CAN$100 a day per person will not be subject to Regulation 105 withholding and will not require vouchers to be retained by the payer.

25. Reasonable travel expenses, in excess of the above amounts, supported by vouchers retained by the payer and either paid directly to third parties on behalf of a non-resident, or reimbursed to a non-resident will also not be subject to Regulation 105 withholding.

26. Such travel expenses are limited to those expenses incurred for transportation, accommodation, or meals. These amounts have to be reported on a T4A-NR information slip (see 41-42) as travel expenses, but are not to be included in gross income on this information slip."

Canada Revenue Agency

Income Tax Information Circular 75-6R2 (d) When a contract provides for services to be performed in more than one country, including

Canada, an allocation of the contract price is required. Only the portion of the payment attributable to services performed in Canada will be subject to a withholding of 15 percent. (Client departments should consult sections 32-34 of Income Tax Information Circular IC75-6R2.

(e) Although most tax treaties between Canada and other countries provide for some relief from

Canadian tax, Canada does not normally relinquish its right to withhold tax pursuant to the provisions of section 153 of the Income Tax Act and subsection 105(1) of the Income Tax Regulations. If the non-resident contractor can adequately demonstrate, based on treaty protection, that the withholding normally required is in excess of the ultimate tax liability, or that the withholding creates undue hardship to the contractor, then the CRA may issue permission to the payer authorizing a reduction of the subsection 105(1) withholdings. The procedure to apply for a reduction of withholding is detailed in Income Tax Information Circular 75-6R2 Appendices A and B, as well as in CRA's T4061, Non resident Tax Withholding, Remitting, and Reporting 2-8. Requests for a waiver or a reduction of the withholding will not be entertained unless deductions at source are remitted to CRA.

(f) If asked for information on the withholding, contracting officers may refer client departments and

suppliers to CRA’s Income Tax Information Circular IC75-6R2 or CRA’s helpline. 4.70.20.50 Types of Price Adjustments (2010-01-11)

Chapter 4 – Solicitation Process

Supply Manual Page 36 of 61 Version 10-1 (2010-01-11)

(a) The price adjustment formula must provide for both upward and downward revision of the firm

base price, and include a ceiling price or limitation of expenditure. It must identify, if applicable, the economic wage or price index to be used, the firm price element, and the base period for which adjustments are to be made.

(b) The calculation of any adjustment formula should remain consistent with the cost/price

accounting treatment used to arrive at the firm base price. This will ensure accuracy in measuring the amount of variation from the firm base price.

(c) The various economic price adjustment clauses are in subsection 5-C of the SACC Manual. The

price adjustment method used should be the simplest, most suitable adjustment formula to provide the protection necessary to both parties with the least administrative effort. The requirements of materiality and practicality must be met.

The advice of a cost analyst is appropriate in the development of any significant or major economic price adjustment provisions, or for the implementation of an economic price adjustment provision through the use of an accounting type formula.

(d) Adjustment provisions to prices for commercial goods and services should be based on increases

or decreases from an agreed upon posted reference or firm base price. If the original contract or firm base price includes a discount factor, from the initial or then current established catalogue price, the same discount factor should be applied to the adjusted price, unless otherwise stated in the contract.

(e) Statistics Canada publishes a variety of reports, providing changes in price indices, material and

labour costs. The Department of Labour performs this function in the United States. Private sector surveys may also be used.

(f) Adjustments to actual rates for labour or actual costs for material are based on the increases or

decreases in firm base price elements experienced by the contractor. (g) The use of this adjustment method is limited to contingencies beyond the contractor's control, and

where the contractor's accounting system permits timely compilation of all necessary cost data relative to the economic price adjustment during contract performance.

(h) A company's union agreement with its employees may be considered an acceptable economic

labour rate index for that company, provided that it reflects comparable labour rate movements within that industrial sector.

4.70.25 Contract Performance Incentives (2010-01-11) (a) Contract performance means the fulfillment or accomplishment of the work that is required under

the contract. (b) When required, the contract may contain various mechanisms for encouraging timely

performance, such as:

(i) Contract financial security:

(A) security deposits, whereby the contractor deposits securities (government guaranteed bonds, bill of exchanges or irrevocable standby letters of credit), which PWGSC may convert to complete the contractor’s obligation; or

Chapter 4 – Solicitation Process

Supply Manual Page 37 of 61 Version 10-1 (2010-01-11)

(B) performance bonds, which are a type of surety bond used to guarantee the performance of the contract.

(ii) Holdbacks, whereby an amount is withheld to ensure the due performance of the

contract.

The normal arrangements for holdbacks will be incorporated by including the SACC Manual clause H1003C in the contracts.

(iii) Liquidated damages clause, whereby provision is made for Canada to recover the pre-

estimated loss or rate of loss that would result from a delivery default, without being required to prove actual damages.

(c) Where the inclusion of a liquidated damages clause is appropriate, the contracting officer must

incorporate such provisions by including the SACC Manual clause D0024C in the contract. (d) Care should be taken to ensure that the rate of assessment of liquidated damages is reasonable.

The probable damages should be established by reference to the individual circumstances of the particular procurement. The contract should specify the ceilings for collection of liquidated damages. Such ceilings or maximums can be stated in either of the following two ways:

(i) by specifying a fixed amount payable upon delinquency. This method should be used

when it is intended that the contract will be terminated immediately when delinquency occurs and the goods or services “reprocured” elsewhere. The cost of “reprocurement” must be included in the overall fixed amount; or

(ii) by specifying a rate of assessment of damages. This rate per calendar day of delay must

not exceed a stated percent of the contract price. This method should be used when, upon default occurring, it is intended to serve notice of default requiring the contractor to remedy the default within a stated period of time. The cost of “reprocurement” must be excluded in computing liquidated damages, since this item will be claimable separately in the event that the contract is terminated and the goods or services procured elsewhere.

(e) To ensure uniformity of application, the amount or overall ceiling should not exceed 10 percent of

the contract price. Ceiling prices in excess of 10 percent may be used when justified by the individual circumstances of the particular acquisition, subject to the approval of the contract approval authority.

(f) Incentive payments, whereby provision is made in the pricing basis for increased value to

Canada. (g) Such incentives (e.g., for early delivery cost savings, enhanced performance or additional

warranty or other benefits) should be considered only in the case of major procurements with long lead times for delivery, where such payment provisions can act as an incentive to the contractor in putting forth special efforts to achieve earlier than scheduled delivery, and the client department agrees because of substantial realizable cost savings and other benefits.

4.70.30 Method of Payment (2010-01-11) The method of payment is the way Canada will pay for work performed or goods delivered, such as all arrears (preferred), in advance, as a lot delivery or as each item are delivered. Different types of methods of payment are described below. 4.70.30.1 Standard Payment Period and Interest on Overdue Account (2010-01-11)

Chapter 4 – Solicitation Process

Supply Manual Page 38 of 61 Version 10-1 (2010-01-11)

Canada pays for work performed or goods received under a contract in accordance with Canada’s standard payment period of 30 days as provided in the general conditions. The general conditions also reflect Canada's policy to automatically pay interest to contractors when an account is overdue and Canada is responsible for the delay. When dealing with federally or provincially regulated public utility companies, the conditions for payment of interest must conform to those approved by the appropriate regulatory bodies. The provisions for payment of interest on overdue accounts set out in the general conditions must be strictly adhered to, except in special cases where the client department requisition specifies a payment period longer than 30 days; for example, when extensive product evaluation, inspection or testing requirements are involved. In such cases, the general conditions may be modified subject to consultation Legal Services. 4.70.30.5 Determination of the Method of Payment (2010-01-11) The most appropriate method of payment must be determined based on the particular procurement. Some of the factors for consideration are the following: (a) Risk exposure for Canada, if situations such as insolvency, work cancellation or work default

occurs. Pertinent factors include:

(i) Can securing unconditional guarantees protect an advance payment or performance bonds from financial institutions or from associated or parent companies with good financial credentials?

(ii) What is the likely marketability and resale value of work-in-process to which Canada

acquires title by virtue of making progress payments? The disparity between the amount of progress payments and the resale value of inventory is a measure of the risk exposure for Canada.

(b) Financing Cost Estimates: Since provision for progress payments or advance payments involves

a real or imputed cost to Canada, this cost should be calculated for each of the available options. Apply the chartered bank prime lending rate, as advised periodically by the Director, Cost and Forensic Accounting Directorate, to the cumulative net financing (that is, cumulative cash payout by Canada minus cumulative value of deliveries under the contract), using reasonable assumptions regarding work progress and item deliveries.

(c) The potential reduction in contract price resulting from the various methods of payment. (d) Since progress payments or advance payments reduce the need for borrowing by the contractor,

or reduce the size of equity capital on which a return must be realized, lower prices should flow through to Canada. The price reduction will vary with the different methods of payment and their relative attractiveness to the contractor.

(e) Financial circumstances that may affect the ability of the client department to finance the various

options. 4.70.30.10 Types of Method of Payment (2010-01-11) (a) There are a number of ways payment may be carried out. Payment for the work performed or

goods delivered may be made as a single payment, multiple payments or progress payments.

(i) Single payment: When a single payment will be made upon completion of all work and deliveries, Standard Acquisition Clauses and Conditions (SACC) Manual clause H1000C

Chapter 4 – Solicitation Process

Supply Manual Page 39 of 61 Version 10-1 (2010-01-11)

may be used for contracts for goods and services (except construction and utility contracts).

(ii) Multiple payments: When there are multiple deliveries and payments will be made on

completion of each delivery, SACC Manual clause H1001C may be used in contracts for goods (except construction and utility contracts).

(iii) Progress Payments and Advance Payments: In all cases, a payment cannot be made

in the current fiscal year for a contract that will not start until the next fiscal year. The requirement that payment be made only for goods or services received in the same fiscal year may require modification of the method of payment for requirements whose period of delivery or service spans fiscal years. Specifically, it may be necessary to provide for multiple payments, at the appropriate point in the contract period.

(b) Progress payments or advance payments may be considered only if all of the following conditions

are met:

(i) adequate security for the payment is ensured; (ii) Canada receives value commensurate with the amount of the payment; (iii) the client department has adequate funds to provide the financing; and (iv) one of the following circumstances exists:

(A) There is economic advantage to Canada that clearly outweighs the financing cost

associated with the progress payment or advance payment. (B) The contractor could suffer hardship or provide financing only with difficulty or at

rates considered to be uneconomical in relation to prevailing chartered bank prime lending rates.

(C) The value of the contract is considered to be beyond the assessed financial

capabilities of the contractor. (D) There is to be a long duration for contract performance; or there is an entrenched

tradition or practice of receiving progress payments or advance payments from the purchaser in a particular industry or segment of industry. However, payments can only be made for goods or services received in the same fiscal year. Funds must be spent in the fiscal year for which they are appropriated and cannot be carried forward by means of advance payments.

(E) In the case of subscriptions or insurance premiums, which are often for a term of

one full year and which may not start exactly on April 1, payments can be restricted to goods or services provided in no more than the current and next fiscal years. For instance, a publication subscription paid in February 2009 cannot cover a period beyond March 2010.

(F) In the case of multi-year contracts requiring continuing advances, contracting

officers can negotiate the payment of a series of separate advances covering each fiscal year. Thus, a payment can be made for a maintenance contract, for the period of a contract, from February to March 2009, and then another payment covering the period from April 2009 to March 2010.

(G) In exceptional situations, such as armament purchases or extended warranty

service, where up-front payments covering more than one fiscal year must be

Chapter 4 – Solicitation Process

Supply Manual Page 40 of 61 Version 10-1 (2010-01-11)

made to the supplier, contracting officers can determine if an advance payment is unavoidable and can be substantiated. This type of case should be extremely rare.

(c) Special Considerations for Foreign Purchases:

(i) in the case of United States purchases, progress payments or other payments on account have an effect on the application of taxes, relating to the time and place of ownership being transferred to Canada. Legal Services should be consulted to ensure that appropriate terms in the contract protect against unnecessary taxes;

(ii) for other foreign purchases, where progress payments or other payments on account are

granted, a check should be made to determine if the application of sales, use, or some other form of tax is related to the time and place of ownership being transferred to Canada. If this is the case, Legal Services must be consulted.

4.70.30.15 Progress Payments (2010-01-11) (a) In the case of a progress payment, SACC Manual general conditions 2010A, 2029, 2030, 2035

and 2040 provide that ownership of the materials or work-in-process will be transferred to Canada upon making such payment.

(b) When a progress payment is to be used; milestones, when possible, should be specified to relate

payments to measurable progress on the contract. Technical or other contractual achievement yardsticks may be used as milestones. Milestone payment is a form of progress payment addressed under the policy related to progress payments. The value of each milestone should be negotiated before contract award. SACC Manual clause H3009C may be used in contracts when progress payment against milestone will be made in accordance with an established schedule of milestones using form PWGSC-TPSGC 1111 and the amount claimed is subject to holdback. When the amount claimed is not subject to holdback, clause H3010C may be used. Either clause may be used in conjunction with H3022C or H3024C and H4012C

(c) When progress payments against milestones are not possible because of the nature of the

contract, progress payments may be made at set periods of time on a calendar basis (time payment method), or based upon the actual costs incurred for material purchases and the partial completion of work, as certified by company and government inspectors. When progress payments will be made based on cost incurred using progress claim form PWGSC-TPSGC 1111, clause H1003C may be used in conjunction with H3022C or H3024C, if applicable. The clause H1003C may also be used in conjunction with H4500C in all contracts for goods with a Canadian-based contractor when advance or progress payments will be made. When payment will be made on a monthly basis for work performed in contracts for services, clause H1008C may be used. In contracts for maintenance services invoiced monthly or bi-monthly or quarterly, the clause H3020C may be used. The clause H3018C may be used in standing offers for air charter services for the carriage of goods and people.

(d) A combination of milestone and cost incurred progress payments is also possible for different

phases of the contract. The combination method can be used, for example, to pay incurred costs in the early stages of a major procurement when it would be difficult to define milestones, with payments for later and more definable stages of the production process made against specified milestone achievements.

(e) If milestone or cost incurred progress payments are not possible, the time payment method of

making progress payments should be used with caution. The overriding requirement for use of this method is the existence of a project progress monitoring and control system, to provide the contracting officer with reliable indicators of the actual value of work accomplished when a

Chapter 4 – Solicitation Process

Supply Manual Page 41 of 61 Version 10-1 (2010-01-11)

payment is due. With the exception of rental and service contracts, the time payment method must be approved at the director level or above.

4.70.30.20 Advance Payments (2010-01-11) (a) TB guidelines specify that advance payments should be considered only in extraordinary

circumstances

(i) Contracts for services: Contracts for services valued over $25,000, some form of guarantee given by a financially strong third party should protect any advance payment. The guarantee usually takes the form of a surety bond from an associated or parent company or a financial institution, or an irrevocable Letter of Credit from a Canadian bank. It should provide for return to Canada of the unliquidated balance of the advance, plus interest, in the event of work cancellation or other contract termination for Canada’s convenience. Other types of guarantees may be discussed with a cost analyst.

(ii) A decision to not request guarantees requires a strong business case. (iii) Contracts for services valued to less than $25,000, security may be dispensed with

where the contracting officer certifies that the contractor has been actively engaged in the particular industry and enjoys a good reputation in that industry, and that PWGSC has no record of significant financial or performance problems encountered in past dealings, if any, with the contractor.

(b) Cash Discount Considerations: For all contracts, except those for advertising, payment may be

made in advance of the due date when the contractor offers a cash discount for advance payment and the discount at least offsets the cost to Canada for early payment. Cash discounts for advance payment will not be considered in the evaluation of bids/offers.

(c) Special Considerations for Foreign Purchases: In the case of purchases from the United States

(U.S.) Government, through the Foreign Military Sales (FMS) program, advance payments are required in accordance with U.S. law before the start of delivery for any goods and services to a foreign-based contractor. In this case, Treasury Board has approved the standard conditions for FMS sales from the U.S. Government. Any change in the standard conditions will require a submission for Treasury Board approval.

4.70.30.25 Holdbacks (2010-01-11) (a) For all contracts where progress payments are provided, holdbacks must be used to avoid

overpayment and to act as an incentive for the contractor to complete the job. However, for contracts using milestone payments, a requirement for a holdback may be included at the discretion of the contracting officer.

(b) The following limits on payments for contracts involving progress payments apply:

(i) Firm Price with milestone payments:

Total Allowable Costs: up to 100 percent of negotiated milestones Purchased Accountable Advance Materials: Nil Goods and Services Tax/Harmonized Sales Tax: Nil Profit: Nil

Chapter 4 – Solicitation Process

Supply Manual Page 42 of 61 Version 10-1 (2010-01-11)

(ii) Firm Price with progress payment on basis of negotiated cost 3:

Total Allowable Costs: Up to 90 percent Purchased Accountable Advance Materials: 100 percent Goods and Services Tax/Harmonized Sales Tax: If payable Profit: Pro rata

(iii) Cost Reimbursable:

Total Allowable Costs: Up to 90 percent Purchased Accountable Advance Materials: 100 percent Goods and Services Tax/Harmonized Sales tax: If payable Profit: Pro rata

(iv) Fixed Time Rate:

Total Allowable Costs: Up to 90 percent Purchased Accountable Advance Materials: 100 percent Goods and Services Tax/Harmonized Sales Tax: If payable Profit: Pro rata

(v) Price to be negotiated:

(A) Last year's negotiated rates/prices serve as interim rates for the new year 4:

Total Allowable Costs: Up to 100 percent Purchased Accountable Advance Materials: 100 percent Goods and Services Tax/Harmonized Sales Tax: If payable Profit: Pro rata

(B) All Other Contracts 3:

Total Allowable Costs: Up to 75 percent Purchased Accountable Advance Materials: 100 percent Goods and Services Tax/Harmonized Sales Tax: If payable Profit: Pro rata

(c) Exceptions to these payment ceilings may be considered:

(i) when recognized trade practices supporting such exceptions can be demonstrated; (ii) in the case of organizations that do not receive a profit or fee; or (iii) when alternative methods of financial protection are employed, for example, security

deposits (government guaranteed bonds, bills of exchange, irrevocable standby letters of credit) or surety bonds.

(d) The timing for making decisions relating to the method of payment to be used varies with the

solicitation method employed:

(i) for an Invitation to Tender (ITT), the method of payment must be selected, before issuing, and included in the solicitation documents (see SACC Manual clause H1003C.) Financing costs will not constitute an evaluation factor;

3 The percentages shown apply to incurred costs (incurred hours for fixed time rate contracts). 4 The percentages shown apply to the previous year's rates.

Chapter 4 – Solicitation Process

Supply Manual Page 43 of 61 Version 10-1 (2010-01-11)

(ii) for competitive solicitations, the solicitation will clearly specify that any requirement on the part of the supplier for receipt of progress or advance payments will constitute an evaluation criterion (this may require SACC Manual clause H1003C). When evaluating bids/offers, the cost to Canada of providing the progress payments or advance payments will be taken into account, as will the risk of exposure from the method of payment, and the availability of funds.

(e) This cost determination may be waived when all responsive suppliers have requested the

identical method and pattern of payment (for example, progress payments on a cost-incurred basis with virtually identical payout schedules).

4.70.35 Audit (2010-01-11) (a) The provision for audit is an integral part of the procurement planning process. SACC Manual

general conditions 2029, 2010A, 2010B and 2010C include a clause allowing the government to audit the amount claimed. The general conditions 2030, 2035 and 2040 include a clause allowing authorized representatives of Canada to audit, inspect and examine the accounts and records of the contractor.

(b) There are a number of circumstances where additional, specific provisions for audit (or

verification) must be included in a contract. The need for additional audit (or verification) provisions is most often associated with the requirements of a contract to include price certification, time verification, and/or rate certification clauses.

4.70.35.1 Firm Price Contracts – Price Certification and Discretionary Audit (2010-01-11) (a) All non-competitive firm price contracts valued over $50,000 whether for the acquisition of

commercial or non-commercial goods and services require the submission of a price certification by the contractor. All such contracts must also have a discretionary audit clause included in the contract.

(b) This applies to all such contracts issued by PWGSC and those issued by Canadian Commercial

Corporation (CCC) on behalf of the United States Department of Defence (DoD) and the National Aeronautics and Space Administration (NASA), except for contracts for which the price is based on tariffs fixed by public regulatory bodies and not subject to negotiation by PWGSC.

4.70.35.5 Cost Reimbursable Contracts – Certification and Audit (2010-01-11) (a) In the case of cost reimbursable contracts, a price is not specified in the contract but will be

ascertained after completion of the work. Therefore, in accordance with section 34 of the Financial Administration Act, it is necessary for the appropriate authority to certify that the price, based on actual costs incurred when these are known on completion of the work, is reasonable. The purpose of the reference, in all cost reimbursable contracts valued over $50,000, to the costs incurred being determined by government audit, is to provide a basis for such certification of the reasonableness of the price.

(b) Contracts containing cost reimbursable elements must contain an appropriate audit clause. The

term "cost reimbursable" covers the following bases of payment: actual cost; cost plus fixed fee; cost plus incentive fee; and target price/ceiling price/target cost.

(c) Upon completion of a cost reimbursable contract, the contractor will be required to provide a cost

submission to the contracting officer. The requirement for a cost submission must be listed as a

Chapter 4 – Solicitation Process

Supply Manual Page 44 of 61 Version 10-1 (2010-01-11)

mandatory deliverable item within the contract, except that it is discretionary in the case of repair and overhaul contracts. (See SACC Manual clause C0300C.)

4.70.35.10 Fixed Time Rate Contracts – Time Verification (2010-01-11) (a) Time charged and the accuracy of the contractor's time recording system are subject to

verification by Canada, before or after payment is made to the contractor under the terms of the contract, whether competitive or non-competitive and regardless of value. The extent of the verification carried out should, however, reflect the value of the contract. (See SACC Manual clause C0711C.)

(b) This applies to all such contracts except those for provision of temporary help services and rental

of equipment. (c) Upon completion of a fixed time rate contract, the contractor must provide a submission detailing

the actual time incurred in performance of the contract. In addition, SACC Manual clause C0710C or C0711C must be used to provide for the verification of time charged and the contractor’s time recording system.

4.70.40 Discretionary Audit Clauses (2010-01-11) Contracting officers must include the following applicable discretionary audit SACC Manual clause in contracts, as follows: C0100C: for commercial goods and/or services when price certification clause C0002T, C0004T,

or C0006T is used; or when rate certification clause C0600T is used; C0101C: for non-commercial goods and/or services when price certification clause C0003T is

used; or when rate certification clause C0601T is used. 4.70.45 Time Verification Clauses (2010-01-11) Contracting officers must include the following applicable time verification SACC Manual clause in contracts, as follows: C0710C: for fixed time rate contracts for services and material; C0711C: for fixed time rate contracts for the verification of time charged and accuracy of recording.

Do not use this clause when C0705C is used. 4.70.50 Invoicing Instructions (2010-01-11) (a) The SACC Manual general conditions provide conditions on invoice submission, and the

procurement templates provide invoicing instructions. (b) SACC Manual clause H5001C must be used in contracts for goods or services when the

contractor must submit invoices in accordance with all the information required under section "Invoice Submission" of the applicable general conditions, and invoices will be submitted once all the work identified in the invoice has been completed.

(c) When progress payments or advance payments are proposed, the appropriate clause from the

SACC Manual must be included in the contract. When progress claim form PWGSC-TPSGC

Chapter 4 – Solicitation Process

Supply Manual Page 45 of 61 Version 10-1 (2010-01-11)

1111 is required to make progress or milestone payments and supporting documents must be submitted with the claim, clause H3022C may be used. Alternatively, clause H3024C may be used when no supporting document is required with the claim. In contracts for maintenance services invoiced monthly or bi-monthly or quarterly, clause H3020C may be used.

4.70.55 Payment by Acquisition Card (2010-01-11) (a) Contractor invoices may be paid using the Government of Canada Acquisition Card (credit card)

in lieu of cheque issue; however, contractors are not obligated to accept credit cards as a payment instrument, unless it is specifically set out in the contract or standing offer. In some instances, advance payment via credit card may still represent a cost saving to the contractor.

(b) The decision to use credit cards for payment of contractor invoices or for payment at point of sale

is a cash management decision made by the client department. Where it is anticipated that the client department may use the credit card to pay invoices, this must be identified in the contract (see SACC Manual clauses H3027T and H3027C.) Where it is anticipated that the client department may use the credit card for payment at point of sale in a standing offer, consult the required clause contained in SACC Manual template 2T-RFSO1.

4.70.60 Certifications (2010-01-11) When the supplier provides certifications in its bid/offer/arrangement, these certifications are subject to verification by Canada during the entire period of the contract/offer/arrangement. If the contractor/offeror/supplier does not comply with any certification or it is determined that any certification made by the contractor/offeror/supplier is untrue, whether knowingly or unknowingly, then Canada may terminate the contract for default, set aside the standing offer or the supply arrangement and remove the supplier from the list of qualified suppliers. Consult the following SACC Manual documents: 2T-MED1, 2T-HIGH1, 2T-RFSO1 and 2T-RFSA1 for the certification clause. 4.70.65 Defence Contract and Defence Supplies (2010-01-11) (a) Any contract constituting a “defence contract”, as defined in the Defence Production Act (DPA),

must contain Standard Acquisition Clauses and Conditions (SACC) Manual clause A9006C. (b) A contract awarded on behalf of the Department of National Defence (DND) is not necessarily a

defence contract. For example, a contract for goods purchased for DND’s day-to-day operations is not a defence contract. Furthermore, it is also possible for a defence contract to be awarded on behalf of a department other than DND. The client department, as the technical authority, will determine whether a particular requirement will result in a defence contract, as defined in the DPA.

(c) Solicitations and contracts for defence supplies valued at $250,000 or more, which involve

importation of defence supplies, and require the contractor to be the importer, must contain SACC Manual clause C2611C. This clause specifies that the contractor will be responsible for pre-arranging remission on importation or for paying customs duties on importation and applying to the Canada Border Services Agency (CRA) for a refund. Use SACC Manual clause C2610C when DND is the importer. DND is responsible for applying to Public Works and Government Services Canada in good time for the certification required by the Customs Tariff.

(d) According to CRA, “defence supplies” include only those specified goods that are, or may be,

used directly or indirectly in the defence of Canada. Goods purchased for DND’s day-to-day operations are not eligible.

Chapter 4 – Solicitation Process

Supply Manual Page 46 of 61 Version 10-1 (2010-01-11)

4.70.70 Services – Non-permanent Residents (2010-01-11) (a) The Immigration and Refugee Protection Act and Regulations set out the conditions under which

non-permanent residents obtain employment authorization before receiving permission to enter Canada for temporary work. This includes temporary entry to perform work under contract to the federal government.

(b) For the procurement of goods and services that may result in the need for the services of non-

permanent residents to be performed in Canada, the following appropriate SACC Manual clauses must be included:

(i) A2000C when the contract is to be with a Canadian-based supplier; and (ii) A2001C when the contract is to be with a foreign-based supplier.

4.70.75 Insurance (2010-01-11) (a) When there are specific insurance requirements for a requirement, SACC Manual clause G1001C

may be used in the contract. Alternatively, when insurance provisions do not apply to a specific requirement, clause G1005C may be used in the contract.

(b) Contracting officers must insert the applicable insurance clauses contained in subsection 5-G of

the SACC Manual. For more information, see Annex 4.7 for insurance clauses, Annex 4.8 for insurance of government-owned or leased vehicles, and Annex 4.9 for insurance of government-owned or leased equipment. Also consult the Risk Management Web site. (NOTE: Only government employees can access this site.) For any additional information related to insurance, contracting officers may contact the Risk Management Advisory Services, PWGSC, by e-mail at: ncr.rmias-rcn.scgra@pwgsc-tpsgc.gc.ca.

4.70.80 Contract Financial Security (2010-01-11) (a) When the decision to obtain contract financial security has been taken, the contracting officer

must stipulate in the solicitation documents that contract financial security will be required. SACC Manual clause E0007C must be used in conjunction with E0004T and E0008C when the contractor is required to provide contract financial security after contract award. The clause E0005C must be used in conjunction with E0008C when the successful supplier must provide a security deposit as contract financial security.

(b) Any letter of credit received by Canada must have an appropriate expiry date. The letter of credit

should not have its expiry date coincide with the projected cessation of the risk it covers. For instance, the expiry date stated in the letter of credit should not be the same date as that projected for the completion of the work. The expiry date should allow for a comfortable turn-around time from the estimated date of completion of the work to ensure that the contracting officer is satisfied that the contractor has discharged its obligations for which the letter of credit was provided. If the contractor has not met its obligations, the contracting officer must have sufficient time to prepare and present the required demand for payment under the letter of credit.

(c) When financial security in the form of a performance bond is required in the contract, clause

E5000C must be used. (d) When a contract financial security in the form of labour and material payment bond is required,

clause E8000C must be used.

Chapter 4 – Solicitation Process

Supply Manual Page 47 of 61 Version 10-1 (2010-01-11)

4.70.85 Controlled Goods (2010-01-11) Whenever the controlled goods program applies to a requirement, SACC Manual clause A9131C must be used in contracts to inform the contractor of its obligations under the controlled goods program. When the contract is for the Department of National Defense, clause B4060C must be used in the contract. 4.70.90 Limitation of Liability (2010-01-11) When limitation of liability applies to a requirement, SACC Manual limitation of liability clauses may be included in the contract. (a) For Information Management/Information Technology (IM/IT) requirements where special

authority was granted by the Treasury Board to allocate risk, SACC Manual clause N0000C must be used only for IM/IT contracts. The applicable dollar amount in the clause is to be determined from the appropriate commodity grouping (usually "the Contract Price at the time the damage occurs" or a pre-determined dollar amount established by the commodity grouping), or in consultation with Risk Management Advisory Services (RMAS).

(b) When limiting a contractor's liability to Canada, but not limiting each party's liability for damages

to third parties, clause N0001C must be used. Typically, this clause would be used when a commodity grouping exists (other than IM/IT or satellite services, which have their own clauses) or after a risk assessment has been performed to determine the risk exposure and amount of protection required by Canada. Limiting a contractor's liability should be an exception to the normal practice of using the standard conditions. When the decision is made to limit a contractor's liability to Canada, contracting officers, in conjunction with client departments, must be able to demonstrate that the risks associated with the procurement have been analyzed and that the limitation of liability provides adequate protection to Canada. Decisions with respect to limiting a contractor's liability should be made before the solicitation release or, in instances of non-competitive contracts, before the start of negotiations. The applicable dollar amount in the clause must be determined using the amount from the appropriate commodity grouping, or in consultation with RMAS.

(c) When limiting a contractor's liability to Canada and requiring the contractor to indemnify Canada

against third party claims, clause N0002C must be used. Limiting a contractor's liability should be an exception to the normal practice of using the standard conditions. When the decision is made to limit a contractor's liability to Canada, contracting officers, in conjunction with client departments, must be able to demonstrate that the risks associated with the procurement have been analyzed and that the limitation of liability provides adequate protection to Canada. Decisions with respect to limiting a contractor's liability should be made before solicitation release or, in instances of non-competitive contracts, before the start of negotiations. The applicable dollar amount in the clause is to be determined using the amount from the appropriate commodity grouping, or in consultation with RMAS.

(d) Clauses N0001C and N0002C are similar, in that both create a limit on the contractor's liability for

damages to Canada. However, the two clauses deal with the contractor's liability for claims made by third parties in different ways. N0001C essentially provides that the parties agree to allow the laws in the jurisdiction of the contract to determine who is responsible for any damages to third parties. It then goes on to provide that, if Canada must pay the third party for damages caused by the contractor because of joint and several liability, the contractor must reimburse Canada for that amount. In short, under clause N0001C, each party is responsible for any damages that it causes to third parties. On the other hand, clause N0002C states that the contractor must indemnify Canada against any third party claims that relate to the contract.

Chapter 4 – Solicitation Process

Supply Manual Page 48 of 61 Version 10-1 (2010-01-11)

(e) When limiting a contractor's liability to Canada for first and third party claims, clause N0003C must be used. Limiting a contractor's liability to Canada should be an exception to the normal practice of using the standard conditions. Limiting a contractor's liability to Canada for third party claims should be avoided at all costs, as the exposure of risk to Canada could be extensive. Limiting a contractor's third party liability can only be done under a very limited number of circumstances, the main one being non-competitive contracts. When the decision is made to limit a contractor's liability to Canada, contracting officers, in conjunction with client departments, must be able to demonstrate that the risks associated with the procurement have been analyzed and that the limitation of liability provides adequate protection to Canada or, if there is a substantive transfer of risk to Canada, that appropriate approvals have been sought. Decisions with respect to limiting a contractor's liability should be made before the start of negotiations. The applicable dollar amount in the clause is to be determined using the amount from the appropriate commodity grouping, or in consultation with RMAS.

(f) For the satellite services requirements where special authority was granted by the Treasury

Board to allocate risk, clause N0008C must be used. The applicable dollar amount in the clause is to be determined in consultation with RMAS or in accordance with published commodity groupings approved by RMAS.

(g) For more information on risk management, consult Chapter 3. 4.70.95 Fair Wages (2010-01-11) (a) The purpose of this policy is to make provision for ensuring that, on federal government

construction contracts, contractors will pay their employees at least the minimum wages as and where established by the federal government across Canada and described in the applicable fair wages schedule(s). The applicable fair wage schedule is the one that is in effect in the area in which the work, the majority of the work or the largest component of the work is located.

(b) For requirements involving fair wages, contracting officers must include SACC Manual clause

R2940D in their documents. The clause requires the prime contractor to pay its employees at least the minimum wage rates as established by the relevant federal authority. The contractor is also required to flow down this commitment to any subcontractor. The clause provides the right to audit to ensure compliance with the requirement of the labour conditions and Schedule of Wage Rates.

(c) When the wages quoted are below those in the schedule published by the federal authority,

contracting officers should, before the award of the contract or issuance of the standing offer or arrangement, exercise due diligence by:

(i) challenging the validity of the quoted wages, (ii) requesting the supplier to confirm its intention to comply with the policy and/or regulations

and to explain how it intends to comply, and (iii) providing that supplier with the opportunity to withdraw (not correct / fix) its

bid/offer/arrangement. 4.70.100 Transportation Costs Information (2010-01-11) (a) All goods requirements with an estimated expenditure of $25,000 or more, including the Goods

and Services Tax or Harmonized Sales Tax, as applicable, and with transportation costs exceeding $7,500, must be submitted to the Traffic Management Directorate, with the following exceptions:

Chapter 4 – Solicitation Process

Supply Manual Page 49 of 61 Version 10-1 (2010-01-11)

(i) requirements for repair and overhaul, development, engineering services, technical

studies and tooling; (ii) capital assistance; (iii) construction of complete ships or complete aircraft; (iv) contracts in which client departments retain control of all or part of the delivery; (v) contracts for perishable foods; (vi) purchases from Canadian suppliers on behalf of a foreign government or agency, unless

assistance is requested by that government or agency; (vii) standing offers, where order quantities and destination are unknown; (viii) food and bulk fertilizer purchases under an external aid program; (ix) requirements for multiple items that may result in more than one contract and for which

identification of individual transportation costs is not practicable; (x) contracts for complete systems where multiple components may be shipped from multiple

sources and locations, and for which establishment of an FOB Origin cost is impractical; (xi) service contracts; and (xii) procurements covered by the North American Free Trade Agreement (NAFTA) or the

World Trade Organization Agreement on Government Procurement (WTO-AGP), unless a non-competitive process under one of the limited tendering reasons in the agreement is used.

(b) The Incoterms 2000 “FCA Free Carrier (...named place)” must be used in all Department of

National Defence (DND) sole source contracts, all repair and overhaul contracts where transportation is not part of the competitive bid, and in all United States (U.S.) Foreign Military Sales contracts (not all U.S. contracts). DND will manage the inbound logistics (coordinate, arrange and pay for all inbound transportation) for these contracts. For these contracts, the contractor must deliver these goods “FCA Free Carrier”, and the named place will always be the contractor’s facility, unless specified otherwise by DND. The contracting officer must include in the contract either Standard Acquisition Clauses and Conditions (SACC) Manual transportation clause D0035C or D0037C. These clauses direct the contractor to obtain shipping instructions from DND and how to do so.

(c) If the contractor is not located in Canada, and the goods are to be imported into Canada by DND,

the contracting officer must include clause C2608C and, when applicable, clause C2610C. If the goods are to be imported into Canada by the contractor, include clause C2611C, if applicable.

NOTE: Contracting officers must forward a copy of all DND contracts to the Inbound Logistics

Coordination Centre, by e-mail at: ILHQOttawa@forces.gc.ca. (d) To assist contracting officers in determining which shipping clause is applicable for use in their

procurement, the following list of clauses and their application is provided for consideration:

(i) DND contracts: (A) D0035C: for foreign-based contractors and U.S. Foreign Military Sales contracts

(clauses C2608C and C2610C may apply);

Chapter 4 – Solicitation Process

Supply Manual Page 50 of 61 Version 10-1 (2010-01-11)

(B) D0037C: for Canadian contractors; (C) D4001C: for delivery FOB destination.

(ii) All other government departments:

(A) D4000C: for delivery FOB origin (use clauses C5200T in bid solicitations and C5200C or C5201C in contracts);

(B) D4001C: for delivery FOB destination (use clauses C5200T in bid solicitations

and C5200C in contracts). 4.70.105 Ontario Labour Legislation (2010-01-11) For contracts for janitorial, food catering and security services when the contractor must keep its employees' records up to date and provide, upon request, information to the contracting officer in accordance with Ontario labour legislation, SACC Manual clause A0075C must be used. See Annex 4.6. 4.75 Issuance of the Solicitation 4.75.1 Client Department Review of Elements of a Solicitation (2010-01-11) (a) For sensitive or high-risk procurements, before issuing the solicitation, the contracting officer

must clearly explain to the client department their responsibilities with respect to the solicitation and obtain written confirmation from the client department via e-mail, facsimile or mail, the following:

(i) that the Statement of Work, Statement of Requirement and/or the technical

specifications, which will be included in the solicitation, accurately represent their requirements; and

(ii) that the client department concurs with the evaluation criteria and contractor selection

methodology detailed in the solicitation, and that the ratio of percentages with respect to the technical evaluation in relation to the price evaluation represents value for money.

(b) Contracting officers should refer their client departments to any formal agreements between

PWGSC and the client department concerning the division of responsibilities relating to the procurement process (see Annex 1.1). The contracting officer must record on file all significant decisions made in consultation with the client department, regarding requirement definition and technical evaluation. For more information on evaluation criteria, see 4.35.

(c) It is the client department’s responsibility to determine the required level of authority of the

personnel authorized to provide the client department confirmation detailed above. 4.75.5 Determining the Solicitation Period (2010-01-11) (a) The setting of a solicitation closing date must take into account the level of complexity of the

procurement, the extent of subcontracting anticipated. Sufficient time must be allowed for a supplier to obtain the solicitation, and any additional material, if applicable, and to prepare and submit a response.

Chapter 4 – Solicitation Process

Supply Manual Page 51 of 61 Version 10-1 (2010-01-11)

(b) For procurements that are not subject to North American Free Trade Agreement (NAFTA) or the World Trade Organization Agreement on Government Procurement (WTO-AGP), the solicitation period (whether publicly advertised or not), unless there are pressing circumstances, should not be less than 15 calendar days either from the date the requirement is posted publicly, or, in the case of procurements not publicly advertised, from the date the solicitation is released. Low dollar value procurements below $25,000, including all applicable taxes, may be for less than 15 days, as appropriate for efficiency and cost effectiveness.

(c) For procurements that are subject to NAFTA and/or WTO-AGP, the following periods apply:

(i) For open tendering procedures, the solicitation period must not be less than 40 calendar days from the date that the Notice of Proposed Procurement (NPP) is published on Government Electronic Tendering Service (GETS).

(ii) For selective tendering procedures not involving the use of a permanent list of qualified

suppliers, an invitation to qualify must be published for a minimum of 25 days on GETS. Following the 25-day period, a NPP can then be published on GETS for a period of no less than 40 days.

(iii) When conducting procurement using selective tendering from a permanent list of qualified suppliers, in addition to sending solicitations to the selected suppliers from the list, a NPP must be published. The NPP should be published at the same time as the initial issuance of the solicitations. When this is done, the period for receipt of solicitation must be no less than 40 days from the date of the publication of the NPP. In the event that it may not be possible to publish the NPP at the same time as the initial issuance of the solicitation, contracting officers should consult with the Acquisition Strategy and Relations Directorate (ASRD), at 819-956-6501. (iv) Any time period for publication noted above may be reduced in certain circumstances:

(A) in the case of recurring contracts where the original NPP provided an estimate of when the subsequent notices will be published, the solicitation period for subsequent procurements may be reduced, but not to less than 24 calendar days; and

(B) where a state of urgency can be duly substantiated, the solicitation period may

be reduced, but not less than 10 calendar days. (d) NAFTA and the WTO-AGP specify minimum publication periods. ASRD can assist in determining

whether a proposed reduction to the minimum solicitation period is within the provisions of the agreements. At that point, the contracting officer must make a business decision on how much the solicitation period need to be reduced.

(e) At the end of the day of closing, notices published on GETS are rendered inactive and the

associated documents are no longer available to suppliers. 4.75.10 Public Advertisement (2010-01-11) Public advertisement using GETS is Public Works and Government Services Canada's (PWGSC) preferred notification process for competitive procurement. A private sector company under contract operates GETS. The electronic service, commonly known as MERX, allows users, including contracting authorities and suppliers, with Internet capability to view and search procurement notices and to order federal solicitations at no charge. Additional information about GETS may be found at the Business Access Canada Web site or call the Info Line at 1-800-811-1148.

Chapter 4 – Solicitation Process

Supply Manual Page 52 of 61 Version 10-1 (2010-01-11)

4.75.15 Notice of Proposed Procurement (2010-01-11) (a) Notification that a solicitation opportunity is available occurs through the posting of a Notice of

Proposed Procurement (NPP) on GETS. (b) A NPP is a summary of the solicitation that briefly describes the requirement, and provides

pertinent information that will assist suppliers to determine their interest in fulfilling the requirement and their ability to successfully meet any key conditions for participating. If applicable, contracting officers must indicate in the NPP which trade agreement or agreements apply or if Canadian content restrictions apply. (For example, solicitations may specify that the requirement has been set aside under the Procurement Strategy for Aboriginal Business or restricted to Canadian-based suppliers as a result of a National Security Exception. In these cases only aboriginal suppliers or Canadian-based suppliers respectively would be eligible to bid.)

(c) The NPP must indicate whether additional material will be sent or is available separately. (d) Many procurement units have developed templates to assist contracting officers to develop

NPPs. Contracting officers should consult with their managers to determine if templates are routinely used in that procurement unit.

(e) The NPP should advise the suppliers of their option to request a debriefing. For samples of

suggested text, refer to the templates 2T-LDV1, 2T-MED1, 2T-HIGH1, 2T-RFSO1 and 2T-RFSA1 of the SACC Manual.

(f) Any other notices (i.e. newspapers) should contain the same statement. 4.75.15.1 Official Language Policy Applicable to a Notice of Proposed Procurement (2010-01-11) (a) All NPPs must be prepared and posted in both official languages and are to specify the language

of service of the issuing office. Suggested wording is:

“This PWGSC office provides procurement services to the public in their ______ (insert one of the following: “official languages”; ”English” or “French”).”

This notice is not automatically generated by the system.

(b) Contracting officers who are identified in NPPs issued by bilingual offices, must be able to deal

with inquiries equally well in both official languages. This may require identifying different officers in each language version of the NPP. Contracting officers who are identified in NPPs issued by unilingual offices will provide service in the language of that office. Contacting officers identified in the NPP should be familiar with the requirements associated with the NPPs.

4.75.15.5 Language Designation of Offices (2010-01-11) (a) PWGSC offices designated as being bilingual offices:

Moncton, N.B. Montreal, Que.

Saint John, N.B. Quebec, Que.

National Capital Region Bagotville, Que.

Chapter 4 – Solicitation Process

Supply Manual Page 53 of 61 Version 10-1 (2010-01-11)

(b) PWGSC offices designated as being unilingual offices:

St. John’s, Nfld. Winnipeg, Man. Calgary, Alta. Halifax, N.S. Brandon, Man. Vancouver, B.C. Pembroke, Ont. Saskatoon, Sask. Victoria, B.C. Willowdale, Ont. Regina, Sask. Whitehorse, Y.T. Mississauga, Ont. Edmonton, Alta.

4.75.20 Procedure for Publication of Notice of Proposed Procurement on GETS (2010-01-11) (a) For procurements subject to NAFTA, WTO-AGP and AIT, publication on the GETS is required

when using:

(i) open tendering; and, (ii) selective tendering:

(A) subject to NAFTA and WTO-AGP (or these agreements in combination with other agreements, including the Agreement on Internal Trade [AIT]);

(B) when using a one-time source list, notice must be published to invite suppliers to

qualify for inclusion on the list. Notice must also be given to solicit bids/offers/arrangements. This would normally require the publishing of two separate notices;

(C) when using a permanent source list, a notice must be published annually,

identifying the existence of the source list, and how to qualify. Notice must also be published for each bid solicitation, involving the use of the list; and

(D) covered by AIT only when using a one-time or permanent source list: a notice

must be published annually, identifying the existence of the source list and how to qualify.

(b) Contracting officers can create and transmit NPPs, as well as the solicitation document to GETS,

through the Automated Buyer Environment (ABE). (c) The NPP is posted on GETS when the related solicitation is received by GETS. (d) If the electronic notices are received at GETS by 5:15 p.m. (ET) on a given day, then the notice

will be posted on GETS the following working day. Notices are posted on GETS only once a day, after midnight.

(e) To ensure that GETS receives all the notices by 5:15 p.m. (ET), it is strongly recommended that

contracting officers send them no later than 3:30 p.m. (ET). (f) The contracting officer is responsible for preparing and posting on GETS, all procurement notices

and, in the case of selective tendering procedures, any annual notices, which establish and maintain a permanent list of qualified suppliers.

4.75.25 Procedures for Posting Solicitation Documents on GETS (2010-01-11)

Chapter 4 – Solicitation Process

Supply Manual Page 54 of 61 Version 10-1 (2010-01-11)

(a) Contracting officers must forward solicitations to GETS for each publicly advertised competitive solicitation.

(b) The ABE Support Team – Acquisitions Systems Support Desk (ASSD), Business Operations

Service Management Directorate, acts as a focal point between GETS and the System Administrator and contracting officers to facilitate corrections. Once the solicitation is received by GETS, all elements are matched and verified correct (that is, have passed the applicable GETS Distribution Unit Quality Assurance checks), and ASSD and the contracting officer are alerted to discrepancies via the confirmation feed from GETS. A solicitation received at GETS, which does not have all elements matching and correct, will be rejected, and the NPP will be placed in a "suspend" file until corrective action is taken. Contracting officers should check the GETS site the day after issuing the notice and notify the System Administrator if the notice has not been posted. The ASSD Team may be contacted either by telephone at 819-956-3325, by facsimile at 819-956-8272, or by e-mail at: basa-assd@pwgsc-tpsgc.gc.ca.

(c) The contracting officer must ensure that the notice and solicitation(s) have been successfully

transmitted to GETS and properly posted. Corrections required on solicitations remain the responsibility of the contracting officer.

(d) In order to reduce distribution costs, contracting officers are encouraged to send solicitations to

GETS electronically through ABE. Depending on the complexity of attachments and inclusions in the solicitation, contracting officers are now able to transmit most solicitations electronically through ABE to GETS. Contracting officers are encouraged to maximize electronic procurement by obtaining relevant client department supplied solicitations electronically. ABE’s ability to generate full electronic notices and solicitations for transmission to GETS for distribution to suppliers can yield substantial savings to suppliers in the form of lower document costs.

4.75.30 Distribution of Material Not Electronically Available (2010-01-11) (a) When the solicitation or additional material cannot be sent electronically to GETS through ABE,

contracting officers must ensure that sufficient quantities of the solicitations, in a physical format (such as paper, diskette, CD or DVD), or the additional materials (for example, samples, technical drawings and specifications) are available and are sent to the applicable GETS Distribution Unit for distribution.

(b) Contracting officers should confirm that documents are not protected by any ownership

restrictions and that they can be copied and distributed. A copyright clause is attached to each notice posted on GETS.

(c) Should the quantities of the solicitations in physical format sent by the contracting officer be

insufficient, GETS will contact the contracting officer when supplies are getting low and need to be replenished. Contracting officers will then be required to send additional quantities of the solicitations in physical format to GETS.

(d) To obtain the required copies of non-electronic solicitations, contracting officers may make the

copies themselves or request the required copies from the client department. The client department initiating the requisition will be responsible for the duplication costs associated with ensuring that sufficient copies of a procurement package are available.

(e) When additional materials associated with an opportunity (for example, samples, technical

drawings, technical data packages, specifications, etc.) are being sent directly to suppliers and not through GETS, the originating PWGSC office is responsible for selecting an appropriate method to ensure that this documentation or material is sent to each supplier that requests a solicitation.

Chapter 4 – Solicitation Process

Supply Manual Page 55 of 61 Version 10-1 (2010-01-11)

(f) If technical data must be sent to suppliers from a different source, for example, distributed by the client department), the solicitation should not be posted until the data is available from that source. The solicitation must identify the source.

(g) Suppliers are responsible for obtaining copies of the necessary technical data if they are available

to the trade through normal business channels. 4.75.35 Contacting Suppliers Directly During the Solicitation Period (2010-01-11) (a) On occasion, based on commodity/market knowledge, a contracting officer may conclude that

suppliers of a good or service will not see or respond to a solicitation if it appears only on the GETS. In such cases, in order to stimulate effective competition and seek best value for Canadian taxpayers, the contracting officer may contact all such known suppliers to inform them that the solicitation opportunity has been posted.

(b) This contact must only take place after the Notice of Proposed Procurement has appeared on the

GETS, and it should take place as quickly as possible so that the suppliers contacted do not lose time. To ensure that there will be no question of preferential treatment, this communication should be in writing so that it can be shown that all suppliers had access to the same information at the same time.

(c) The specific purpose of this contact is to ensure that the suppliers know that there is an

opportunity available and to direct them to GETS. For that reason, the contact will be limited to giving brief information about the good or service being procured and to providing the appropriate reference (one or more of reference number, Source ID and solicitation number). It must not include any information that will not be available to suppliers who find out about the opportunity directly through GETS.

(d) Contracting officers must document on the file, the date and name of each supplier that was

contacted. The recommended method of notification is the provision of a copy of the NPP. 4.75.40 Distribution of Solicitation Material to Invited Suppliers (2010-01-11) (a) When procurement is not going to be advertised on GETS, the contracting officer must ensure

the distribution of solicitations to invited suppliers. In the National Capital Region, the Tender Contract Distribution Unit may provide assistance with this service.

(b) For requirements not subject to public advertising, the list of suppliers being invited must be

released automatically to all suppliers on that list at the time of solicitation. Lists should be updated as new suppliers request the solicitation.

(c) When the client department is responsible for distributing additional technical documentation that

may accompany the solicitation, the contracting officer must forward the name and address of the invited suppliers to the client department. Client departments should be requested to document that the technical material was distributed to the appropriate recipients.

(d) When dealing with sensitive (designated/classified) requirements, the source list or solicitation

and contract information are not generally released. Requests for the List of Suppliers should be referred to the Access to Information and Privacy Office at 819-956-1820.

4.75.45 Use of Source Lists 4.75.45.1 Solicitation by Direct Invitation (2010-01-11)

Chapter 4 – Solicitation Process

Supply Manual Page 56 of 61 Version 10-1 (2010-01-11)

Source lists are generally the basis for requesting suppliers to bid/provide an offer or arrangement when a competitive procurement is not publicly advertised. 4.75.45.5 Requirements Subject to Trade Agreements (2010-01-11) (a) For requirements subject to the international trade agreements, source lists may be established

for particular goods and services, where it is appropriate to establish a list of pre-qualified suppliers. Such lists should be refreshed at a minimum annually.

(b) Open tendering procedures, using GETS, should be used to invite suppliers to submit their

expressions of qualifications for evaluation and placement on the list, if they meet the selection criteria. Suppliers will be allowed to qualify at any time between the refreshment of the list.

(c) Selective tendering procedures can then be used to invite the suppliers on the list to submit

bids/offers/arrangements for a particular requirement for the specific good or service for which the list was created. See Article 1010 and Article 1011 of NAFTA and Article VIII of WTO-AGP.

4.75.45.10 Requirements Not Subject to Trade Agreements (2010-01-11) (a) For requirements, which are not subject to the international trade agreements and where open

competition is not appropriate, due to the nature of the requirement, bids/offers/arrangements may be solicited directly from a list of suppliers. If a source list for the particular good or service does not exist, contracting officers should consider using the Supplier Registration Information service to identify potential sources of supply, especially for low dollar value goods and services.

(b) In preparing the source list, the contracting officer may include suppliers suggested by the client

department. (c) Whenever a supplier requests an opportunity to submit a bid/offer/arrangement on a specific

requirement, that supplier must be given the opportunity, provided that it is not necessary to cancel the existing solicitation and issue a new one. This provision does not generally apply to rotational source lists such as SELECT, which typically limits the solicitation to those suppliers selected for a particular requirement.

(d) Contracting officers are reminded that an effort should be made to ensure best value to Canada

in terms of who is invited, and also that the principle of “fairness and access” be displayed in a practical manner by rotating opportunities to submit a bid/offer/arrangement within the suppliers on any given list.

4.80 Solicitation Period (2010-01-11) The following information is in relation to activities that may occur during the solicitation period. For more information on setting the solicitation period, see Chapter 3. 4.80.1 Communications during the Solicitation Period (2010-01-11) (a) To ensure the integrity of the competitive solicitation process, enquiries and other

communications, regarding the solicitation, must be directed only to the contracting officer that is identified in the solicitation, not to the client department, or other government officials. See Standard Acquisition Clauses and Conditions Manual standard instructions and clause A0012T.

Chapter 4 – Solicitation Process

Supply Manual Page 57 of 61 Version 10-1 (2010-01-11)

(b) Contracting officers should avoid one-on-one contact or meetings with suppliers during the solicitation period. All communications should be in writing, to the extent possible.

4.80.5 Handling Questions during the Solicitation Period (2010-01-11) (a) Questions from suppliers should be submitted in writing to the contracting officer before the date

indicated in the solicitation document. (b) Simple questions where the answer does not affect other suppliers, and how they will respond to

the solicitation, may be answered directly to the supplier asking the question. (c) More complex questions or questions concerning the requirement itself should be forwarded to

the client department for response back to the contracting officer. Technical questions and answers, together with questions and answers that can be addressed by the contracting officer, should be accumulated and posted as an addendum/amendment to the solicitation, in the case of public advertisement, or issued directly as an addendum/amendment to the suppliers. When posting questions during the solicitation period, care should be taken to protect the identity of the supplier asking the question(s).

(d) Changes to the solicitation itself, to reflect clarifications resulting from the questions, including

extensions to the solicitation period, if granted, must be released as an amendment to the solicitation.

4.80.10 Changes to the Solicitation (2010-01-11) (a) Any significant change in the information provided in the Notice of Proposed Procurement (NPP)

or solicitation documents before the solicitation closing date, requires an amendment to the NPP and/or solicitation document. All amendments must be given the same circulation as the original NPP and/or solicitation documents.

(b) Contracting officers must ensure that the amendments to the NPP and/or solicitation documents

are complete. GETS will forward a Notice of Amendment to all suppliers that originally requested the solicitation document, within four working hours of receipt, first by e-mail, then by facsimile or by mail, if e-mail is not feasible. The supplier may then view the actual solicitation amendment document on-line through GETS and/or download it electronically or order a hard copy from GETS. The update will then form part of the solicitation document.

(c) When a solicitation document is cancelled and reissued, a new NPP must be submitted for

publication on GETS. (d) Any significant information given to one supplier with respect to a proposed procurement must be

given to all other interested suppliers in adequate time to permit the suppliers to consider such information and respond to the solicitation. In providing this information, contracting officers must take into consideration the time required to post amendments on GETS.

(e) If there is insufficient time to ensure that all suppliers can consider the information and respond

accordingly, contracting officers may consider extending the solicitation period or cancelling and reissuing the solicitation.

(f) The contracting officer must inform the Bid Receiving Unit (BRU) of any change to solicitation

closing dates or times and must ensure that such notification has been received by the BRU. (g) A decision to extend the solicitation period beyond the initially established closing date is a

business decision that can be made by the contracting officer, based on the circumstances of the

Chapter 4 – Solicitation Process

Supply Manual Page 58 of 61 Version 10-1 (2010-01-11)

particular procurement. It may be possible to process an extension of the bidding period in a relatively short time frame (more or less 24 hours) when the solicitation of bids has been done using source lists or when the publicly advertised procurement is posted on GETS.

4.80.15 Assistance to Suppliers (2010-01-11) For general information on doing business with the federal government, contracting officers should direct suppliers to the PWGSC Information for Businesses and Business Access Canada Web sites. Suppliers interested in doing business with the federal government are encouraged to register in the Supplier Registration Information service, or on MERX. Questions on a particular solicitation must be addressed to the contracting officer. 4.85 Closing Procedures (2010-01-11) In the National Capital Region, bids/offers/arrangements are received and processed centrally at the Bid Receiving Unit (BRU) located in Place du Portage, Gatineau, Quebec. In the regions, operating procedures may be adapted to suit local conditions. 4.85.1 Late Bids/Offers/Arrangements (2010-01-11) (a) For all solicitations, except requests for quotations sent directly to the contracting officer, the

solicitation closing date and time stipulated in the solicitation are firm. It is the responsibility of suppliers to ensure that the bid/offer/arrangement is delivered on time to the BRU that is specified in the solicitation. The only acceptable evidence to show timely receipt of the bid/offer/arrangement is the receipt issued by the specified BRU.

(b) Late bids/offers/arrangements will not to be accepted and will be returned. Records will be kept

of all returned bids/offer/arrangements. (c) Contracting officers should consult the applicable Standard Acquisition Clauses and Conditions

(SACC) Manual standard instructions for late bids/offers/arrangements. 4.85.5 Delayed Bids/Offers/Arrangements (2010-01-11) Contracting officers should consult the applicable SACC Manual standard instructions for delayed bids/offers/arrangements. 4.85.10 Transmission by Facsimile (2010-01-11) (a) Contracting officers should consult the applicable SACC Manual standard instructions on

transmission by facsimile for bids/offers/arrangements. (b) To ensure that official receipt time-keeping equipment represents the correct time, the specified

Bid Receiving Unit must calibrate this equipment and other official time pieces against the official National Research Council (NRC) time standard, at least once every two working days.

The NRC time standard can be checked 24 hours a day at 613-745-1576 (English) or 613-745-9426 (French).

Chapter 4 – Solicitation Process

Supply Manual Page 59 of 61 Version 10-1 (2010-01-11)

4.90 Receipt of Bids/Offers/Arrangements (2010-01-11) (a) Contracting officers should consult the section on submission of the bid or offer or arrangement

contained in the applicable SACC Manual standard instructions. (b) Bids, offers and arrangements received by the specified BRU will be logged and kept unopened

in a locked receptacle until after the closing date and time. (c) If the envelope or the package containing the bid/offer/arrangement does not provide sufficient

information for identification, that is, the solicitation number, the name of the supplier, return address and solicitation closing date and time, it will be necessary to open the envelope or the package. The specified BRU staff will, in these instances, transfer the necessary information to the envelope or the package, reseal and initial the envelope or the package before it is placed in the bid box.

(d) Bids/offers/arrangements received after the solicitation closing date and time, or any solicitations that have been cancelled, are returned to the suppliers unopened, if possible, with a covering letter, explaining why the bid/offer/arrangement is being returned. If the envelope or the package does not contain sufficient information to identify the supplier and/or the solicitation number, the specified BRU staff will open the envelope or the package for identification purposes, and return the bid/offer/arrangement with the appropriate letter explaining the reason for opening the bid/offer/arrangement. (e) In the NCR, bids/offers/arrangements received by the mailroom are time and date stamped and delivered unopened to the BRU. (f) After the solicitation closing date and time, bids/offers/arrangements are removed from the locked

receptacle and opened by a designated official, in the presence of at least one witness. (g) The specified BRU will screen bids/offers/arrangements to ensure that they are complete. Where

penciled in or corrected information is shown, a photocopy of the bid/offers/ arrangements is made and kept for audit purposes. This is to ensure that a bid/offer/arrangement cannot be altered. As evidence that the documents were processed and verified, all financial security documents are perforated, and the front page of each technical documentation volume is hand-stamped. The bids/offers/arrangements are then verified and certified against the source list, which is kept on the procurement file.

(h) When a need is identified to receive bids/offers/arrangements at a location other than the specified BRU (for example, a large number of bulky bids/offers/arrangements are expected), contracting officers must make arrangements with the bid receiving personnel before establishing a solicitation closing date. (i) An assessment of this other location will be carried out by bid receiving personnel, in consultation with departmental security personnel, to ensure the complete physical security of bids/offers/arrangements from the time of receipt to the time of opening. The personnel of the bid receiving location are responsible for recording bids/offers/arrangements received at these locations. (j) When bids/offers/arrangements are solicited by telephone, the contracting officer must accurately

transcribe the information taken, enter the time and date, and initial the written record on file immediately. Bids/offers/arrangements received in writing that have been solicited by telephone and sent to the specified BRU should not be opened publicly.

4.90.1 Secure Handling of Bids/Offers/Arrangements (2010-01-11) (a) The specified BRU will follow the instructions given by the contracting officer regarding security of

bids/offers/arrangements.

Chapter 4 – Solicitation Process

Supply Manual Page 60 of 61 Version 10-1 (2010-01-11)

(b) If a bid/offer/arrangement is marked as “PROTECTED”, “CONFIDENTIAL”, “SECRET” or “TOP SECRET”, the government procedures for the transmittal of “Protected/Classified” information or assets must be followed. All bids/offers/arrangements and other information or assets concerning a sensitive bid/offer/arrangement must be hand-delivered to the contracting officer that originated the solicitation, and a receipt must be obtained.

Information about security procedures is available from the Canadian Industrial Security Directorate Web site.

4.90.5 Public Opening (2010-01-11) (a) When bids are opened publicly, they are removed from the locked receptacle, transported to the

place of public opening and opened in the presence of a witness. The name and address of each bidder and the amount of each bid are read out.

(b) If there are multi-items listed in the bid but there is no total bid price, the bid price on each item is

read out. It is also confirmed that bid security (if required) is included in the bid. 4.90.10 Receipt of Quotations (2010-01-11) (a) Written bids (quotations) submitted in response to a Request for Quotations, which are sent

directly to the contracting officer, will be declared non-responsive if received after the closing date and time, regardless of the date of mailing.

(b) To ensure that all responsive quotations are considered and to accommodate internal mail

delivery schedules, contracting officers may need to delay the award of a purchase order until after delivery of the first morning mail on the day following the closing date.

(c) Quotations must be signed and dated by the contracting officer upon receipt. Sectors/regions

must ensure that the receipt, custody and handling of quotations submitted directly to the contracting officer are conducted in a manner that reflects the principle of fairness to all suppliers.

4.95 Modification and Withdrawal of Bids (2010-01-11) (a) Bids/offers/arrangements may normally be modified, withdrawn or resubmitted before the

solicitation closing date if it is done in writing. This includes electronically transmitted responses. (b) For quotations directed to the contracting officer only, to maintain the integrity of the bidding

system, no modification will be considered after receipt of the quotation, unless negotiated by PWGSC. Negotiations must be held with all suppliers that submitted responsive quotations.

(c) If the solicitation conditions permit and a supplier increases a price before closing, any additional

financial security required must be received within a reasonable period of time (normally within five working days).

(d) A bid/offer/arrangement withdrawn after solicitation closing cannot be resubmitted. (e) Bids submitted with bid security may be withdrawn without compensation to Canada if there is a

significant error on the face of the bid. Approval at the director level is required before an error can be declared significant on the face of the bid. Examples of such errors include a missing page.

Chapter 4 – Solicitation Process

Supply Manual Page 61 of 61 Version 10-1 (2010-01-11)

(f) If a supplier wishes to withdraw a bid/offer/arrangement for any reason other than a significant error on the face of the bid/offer/arrangement, Legal Services must be consulted.

(g) If PWGSC allows a supplier to withdraw a bid submitted with bid security without a penalty due to

a significant error on the face of the bid, and there was a public opening, an advice notice to that effect, signed by a director, must be sent to all suppliers.

4.100 Cancelling and Reissuing a Solicitation (2010-01-11) (a) If a solicitation is cancelled before the closing date, contracting officers must issue a cancellation

notice through the Automated Buyer Environment (ABE) for transmission to the Government Electronic Tendering Service (GETS). Alternatively, the contracting officer may cancel solicitations directly on GETS. The contracting officer must notify the Bid Receiving Unit of the cancellation and provide instructions regarding the disposal of any responses to the original solicitation.

(b) The contracting officer is responsible for internal distribution of solicitations and updates within

PWGSC and to the client departments. (c) If the cancellation takes place after the closing date, suppliers should be advised within 10

calendar days of the cancellation of the solicitation. (d) Contracting officers may reissue a solicitation, with the approval of the director

(headquarters)/manager (regions) or above, where:

(i) a significant change has occurred in a requirement before a contract is awarded or a standing offer or supply arrangement is issued;

(ii) all bids/offers/arrangements are non-responsive or do not represent fair value; or (iii) the acceptance period for the bid or offer or arrangement has expired before a contract is

awarded or a standing offer or supply arrangement is issued. (e) Contracting officers may reissue a solicitation, with the approval of the manager

(headquarters)/Supply Team Leader (regions) or above, where no bids/offers/arrangements were received in response to a competitive solicitation. The North American Free Trade Agreement (NAFTA), the World Trade Organization Agreement on Government Procurement (WTO-AGP) and the Agreement on Internal Trade (AIT) permit limited tendering procedure in such circumstances.

(f) Whenever a solicitation is issued to replace an earlier one, the contracting officer must insert

Standard Acquisition Clauses and Conditions Manual clause A9043T as the first statement in the reissued solicitation and new Notice of Proposed Procurement (NPP).

(g) For procurements that are subject to the international trade agreements, a new NPP should be

published when a solicitation is cancelled and reissued. If there were no responsive bids/offers/arrangements received in response to the original competitive solicitation and the requirement is not being changed significantly, contracting officers may send solicitations directly to suppliers without publishing a new NPP. However, when following this approach, it is strongly recommended that contracting officers consider reposting the NPP in the interests of openness and transparency, and include in the notice that some suppliers will be invited directly.

Annex 4.1 – General Conditions and Supplemental General Conditions

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Annex 4.1: General Conditions and Supplemental General Conditions (2010-01-11) General Conditions Supplemental General

Conditions General Conditions – Standing Offers – Goods or Services

2005

General Conditions - Goods (Medium Complexity) 2010A

General Conditions – Professional Services (Medium Complexity)

2010B

General Conditions – Services (Medium Complexity) 2010C

General Conditions – Supply Arrangement – Goods or Services

2020

General Conditions - Goods or Services (Low Dollar Value)

2029

General Conditions – Higher Complexity - Goods 2030

Goods with some research and development, contractor to own intellectual property rights in foreground information

2030 4006

Goods with some R&D, Canada to own intellectual property rights in foreground information

2030 4007

General Conditions - Research & Development (contractor to own intellectual property rights)

2040

General Conditions – Higher Complexity -Services (except those listed below)

2035

Electronic Data Processing (EDP) Requirements

Hardware Purchase, Lease and Maintenance All general conditions except 2010C and 2029

4001

Software Development and Modification Services All general conditions except 2010C and 2029

4002

Licensed Software All general conditions except 2010C, and 2029

4003

Maintenance and Support Services for Licensed Software

All general conditions except 2010C, and 2029

4004

Ships

Supplies - Firm Price (construction) 1026A 1028 or 1036

Construction - Cost Reimbursement 1026B 1033

Supplies – Firm Price (repairs) 1026A 1029

Construction Subsection 5-R LAB 180

Procurement for the Canadian Commercial Corporation

Defence requirements (other than US Government) 1026A or 1026B

Defence requirements (US Government) 1026A or 1026B (See CCC-6 for exceptions)

Non-defence requirements CCC50

Annex 4.1 – General Conditions and Supplemental General Conditions

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

(a) If any software must be delivered under the contract, including any software necessary to run the hardware, supplemental general conditions 4003 must form part of the contract. Other supplemental general conditions must also be incorporated, if applicable.

(b) General conditions and supplemental general conditions must be used as complete sets. Do not

include two sets of general conditions. A clause can be taken from a set of general conditions and added to the Articles of Agreement (i.e. a warranty provision in a contract mainly for services but that includes the delivery of some equipment).

(c) A specific procurement may require the modification or deletion of individual conditions. These

changes must be discussed with the client department before inclusion in the solicitation or contract, to ensure that complete understanding exists as to the extent of the client department's rights and responsibilities. Modifications may be discussed with Legal services to ensure that the rights of Canada are protected.

Annex 4.2 – Intellectual Property

Supply Manual Page 1 of 3 Version 10-1 (2010-01-11)

Annex 4.2: Intellectual Property (2010-01-11) Structure for Use of Intellectual Property Terms General Conditions, Supplemental General Conditions, Clauses

1: Research and Development Contracts 1A: Client Department Decision: CONTRACTOR to own Foreground Intellectual Property (IP)

Number Title Comments General Conditions & Supplemental General Conditions

2040 General Conditions - Research & Development Broader background license

Optional Clauses: K3015C Confidentiality of Foreground Information

K3020C Licence to Canada's Information

K3415C Commercialization in Canada

K3420C Liquidated Damages – Commercial Exploitation To enforce K3415C

1B: Client Department Decision: CANADA to own Foreground IP

General Conditions & Supplemental General Conditions

2040 General Conditions - Research & Development IP terms replaced by K3410C

K3410C Canada to Own Intellectual Property Rights in Foreground Information

Broader background license

Mandatory Fill-in Clause K3200T Basis for Canada's Ownership of Intellectual

Property

Optional Clauses K3305C License to Intellectual Property Rights in

Foreground Information

K3310C No Right for Contractor to Sub-license

K3315C License to Intellectual Property Rights in Canada-owned Information

2: Goods Contract with associated Research and Development

2A: Client Department Decision: CONTRACTOR to own Foreground IP

General Conditions & Supplemental General Conditions 2030 General Conditions – Higher Complexity -

Goods IP terms replaced by 4006

4006 Contractor to Own Intellectual Property Rights in Foreground Information

Narrower background license

Optional Clauses K3015C Confidentiality of Foreground Information

K3020C Licence to Canada's Information

K3415C Commercialization in Canada

Annex 4.2 – Intellectual Property

Supply Manual Page 2 of 3 Version 10-1 (2010-01-11)

K3420C Liquidated Damages – Commercial Exploitation

To enforce K3415C

2B: Client Department Decision: CANADA to own Foreground IP

General Conditions & Supplemental General Conditions

2030 General Conditions – Higher Complexity - Goods

IP terms replaced by 4007

4007 Canada to Own Intellectual Property Rights in Foreground Information

Narrower background license

Mandatory Fill-in Clause

K3200T Basis for Canada's Ownership of Intellectual Property

Optional Clauses

K3305C License to Intellectual Property Rights in Foreground Information

K3310C No Right for Contractor to Sub-license

K3315C License to Intellectual Property Rights in Canada-owned information

3: Goods Contract with no Research and Development Expected

3A: Client Department Decision: CONTRACTOR to own all Foreground IP, including Copyright Number Title Comments

General Conditions & Supplemental General Conditions (Alternatives)

2030 General Conditions - Higher Complexity - Goods

2010A General Conditions - Goods (Medium Complexity)

Copyright (Re: Treasury Board Policy on IP, Section 6.5, Exceptions to Contractor Ownership)

Clause Needed to effect Client Department Decision

K3002C Contractor to Own IP: No Explicit License Rights for Canada

Optional Clause

K3030C License to Material Subject to Copyright For use with K3002C

4: Services Contract with no Research and Development Expected

4A: Client Department Decision: CONTRACTOR to own all Foreground IP, including Copyright

Number Title Comments

General Conditions & Supplemental General Conditions (Alternatives)

2035 General Conditions - Higher Complexity - Services

Copyright (Re: Treasury Board Policy on IP, Section 6.5, Exceptions to Contractor Ownership)

Clause Needed to effect Client Department Decision

K3002C Contractor to Own IP: No Explicit License Rights for Canada

Optional Clause

K3030C License to Material Subject to Copyright For use with K3002C

4B: Client Department Decision: CANADA to own Foreground IP (Copyright)

Annex 4.2 – Intellectual Property

Supply Manual Page 3 of 3 Version 10-1 (2010-01-11)

Number Title Comments General Conditions & Supplemental General Conditions (Alternatives)

2035 General Conditions - Services Copyright (Re: Treasury Board Policy on IP, Section 6.5, Exceptions to Contractor Ownership)

Note: The above terms provide Canada with ownership of Foreground IP that is subject to copyright, other than software and its associated documentation. Contract is silent on other IP.

Mandatory Clause

K3200T Basis for Canada's Ownership of Intellectual Property

Annex 4.3 – Taxes and Duties

Supply Manual Page 1 of 12 Version 10-1 (2010-01-11)

Annex 4.3: Taxes and Duties (2010-01-11) 1. Goods and Services Tax or Harmonized Sales Tax Suppliers must show the Goods and Services Tax/Harmonized Sales Tax (GST/HST) separately in the bid/offer/arrangement. They must also indicate whether their items are fully taxable, zero-rated, or exempt (see Annex 4.4), and must show into which category each item falls. 2. Customs Duties (a) Solicitations must contain all customs duties information necessary to permit suppliers to submit

responsive bids/offers/arrangements. (b) Canadian-based suppliers must include all applicable customs duties in their prices, unless

otherwise specified. In resulting contracts, all applicable customs duties and taxes must be included in the price and the total estimated price.

(c) Foreign-based suppliers must not include Canadian customs duties, except when it is specifically

requested that the prices include the customs duties and taxes in Canadian dollars. In resulting contracts, customs duties must not be included in the price, but will be paid by the client department, upon the importation of goods. However, a foreign-based supplier who subcontracts in Canada for the manufacture and delivery of goods in Canada will include all customs duties applicable to the subcontract.

(d) For the purpose of the solicitation, suppliers with an address in Canada are considered

Canadian-based suppliers and suppliers with an address outside of Canada are considered foreign-based suppliers.

3. Customs Duties and Excise Taxes (a) Suppliers located in Canada must include all applicable excise taxes in the solicitations. In

resulting contracts, the applicable taxes must be included in the total estimated price. Suppliers located outside Canada must not include excise taxes. In resulting contracts, the applicable taxes must not be included in the total estimated price.

(b) When foreign-based suppliers are requested to submit firm prices in their bids/offers, in Canadian

dollars, Canadian customs duties and excise taxes and GST/HST must be excluded from those prices. See Standard Acquisition Clauses and Conditions (SACC) Manual clause A0222T for bid solicitations and M0222T for standing offers.

(c) In resulting contracts, customs duties must not be included in the price, but will be paid, upon the

importation of goods, by the client department. However, a foreign-based supplier who subcontracts in Canada for manufacture and delivery of goods in Canada will include all acceptable customs duties, applicable to the subcontract.

(d) Occasionally, it may be appropriate to request foreign-based suppliers to respond on prices, in

Canadian dollars, inclusive of these customs duties and excise taxes. (See SACC Manual clause A0220T.) However, this may have an effect on the number of suppliers, many of who are accustomed to bidding FOB plant, and who are not prepared to take the time to gather the required information and make the necessary calculations. NOTE: it is the importer of record who is responsible for paying these customs duties and excise taxes, so a foreign-based supplier has no direct interest in the calculations unless the requirement is to be FOB destination.

Annex 4.3 – Taxes and Duties

Supply Manual Page 2 of 12 Version 10-1 (2010-01-11)

(e) For contracts awarded on behalf of Department of National Defence (DND), the GST/HST must be reimbursed for non-GST/HST registrants. DND will reimburse prime contractors only the actual GST/HST that is paid to the Canada Revenue Agency.

4. Goods and Services Tax/Harmonized Sales Tax This section provides information on GST/HST and the application of GST/HST to the federal government. (a) GST/HST, as applicable, is payable on the invoiced amount, before any discount for prompt

payment or penalty for late payment. (b) GST/HST is payable when the progress payment, milestone payment or advance payment

becomes due, or the client department pays it. (c) Canada Revenue Agency (CRA) considers advance payments to be progress payments. (d) GST/HST is normally paid on the total amount claimed before any holdback is deducted. No

GST/HST is paid when the holdback is released. (e) The exception is a holdback under legislation or under a contract for the construction, renovation

or repair of a marine vessel or real property. GST/HST calculated on the holdback amount becomes payable on the earlier part of the day on which the holdback is paid or the day on which the holdback period expires.

(f) The GST/HST applies to supplies made in Canada of real property, tangible personal property

(that is, goods), intangible personal property (such as intellectual property) and services. “Supply” means provision of property or service in any manner.

(g) The GST/HST on a supply made in Canada is payable by the recipient of the supply to a supplier

who is registered for GST/HST. The supplier is responsible to remit the tax to CRA. (h) A supply is declared to be made in Canada if:

(i) for a supply of goods, the goods are made available or delivered in Canada to the recipient of the supply. This means the goods are in Canada when they are sold and transferred from the supplier to the purchaser, or they are imported into Canada for the delivery to the purchaser; (ii) for a supply of intangible personal property, the property may be used in Canada or relate to real property situated in Canada, to tangible personal property situated in Canada or to a service to be performed in Canada; (iii) for a supply of real property or a service in respect of real property when the property is situated in Canada; (iv) for a supply of other services, the service is performed in whole, or in part, in Canada; (v) for a supply of a telecommunications service consisting of making available telecommunication facilities when the facilities, or any part thereof, are located in Canada.

(i) The GST/HST applies also to goods imported into Canada. The GST/HST on the importation of

goods is payable on the duty paid value of the goods (determined under the Customs Act) and is payable by the importer of the goods directly to Canada Border Services Agency. It is payable at the time of importation or when the goods are taken out of bond for use.

Annex 4.3 – Taxes and Duties

Supply Manual Page 3 of 12 Version 10-1 (2010-01-11)

(j) Goods imported into Canada for supply are subject to GST at the time of importation and are subject to GST/HST when supplied in Canada by a supplier who is registered for GST/HST.

(k) The GST/HST also applies to supplies of services and intangible personal properties made

outside Canada (generally by a non-resident supplier) to a person who is resident in Canada, if the person acquires the supply for use in Canada, but not exclusively in the course of commercial activities. These supplies are referred to as “imported taxable supplies”. The GST/HST on imported taxable supplies is determined by the Canadian recipient of the supply (self-assessment) and remitted directly to Canada Revenue Agency (CRA).

(l) Lease payments on tangible goods under a lease entered into before August 8, 1989, are not

subject to GST. If a lease for tangible goods is amended to alter its term, or the property is leased on or after August 8, 1989, then the payments become subject to GST/HST, as applicable.

(m) The trade-in of a used good on the purchase of a new good constitutes two separate transactions

for the purposes of the GST/HST. The GST/HST applies to the full sale price of the new good, regardless of the allowance for the trade-in. Each party must collect GST/HST on the fair market value of the supply to the other, and both pay the GST/HST. This treatment applies where the person trading in the used goods on the purchase of new goods is a GST/HST registrant.

(n) If the person trading in the used goods is not required to charge tax on the supply (for example,

non-registrant supplier, or goods not used in commercial activities), then the supplier of the new goods deducts the value of the old goods accepted as a trade-in from the value of the new goods when determining the GST/HST on the supply.

(o) The GST/HST does not apply to: exempt supplies; zero-rated supplies; or certain imports. These

areas are covered in Annex 4.4. Also, it generally does not apply to Indian, Indian Bands and Band-empowered Entities; this is also covered in Annex 4.4.

(p) The GST/HST does not apply to transactions between parts of the same organization. As the

federal government has registered its departments (those entities listed in Schedule I, Schedule I.I and Schedule II of the Financial Administration Act), as a single person, the GST/HST does not apply to transactions between departments. However, the GST/HST will apply to taxable transactions between departments and Crown corporations.

(q) Government-supplied Materiel (GSM) is not subject to additional GST/HST costs, as the

owner/end-user has already paid it. Contractors should not charge GST/HST against the value of GSM used in the performance of a contract. Foreign-based contractors must identify the GST separately on Canada Border Services Agency form CI1, Canada Customs Invoice, describing them as Canadian goods returned and providing a value. Should GSM be provided from one foreign-based contractor directly to another, this value should be included in the value of the item for customs clearance purposes, as this GSM would not have had GST paid yet.

(r) The federal government does not pay GST/HST on imported taxable supplies, as the federal

government is not required to self-assess tax. Imported taxable supplies include services performed wholly outside Canada for use in Canada, or services performed in Canada and supplied by a non-resident supplier who is not registered for GST/HST purposes. They also include intangible personal property supplied by a non-resident supplier who is not registered for GST/HST purposes.

(s) The federal government is required to pay tax on importation of goods if it is the importer of

record, unless the goods qualify as non-taxable importations. 5. Taxes and Duties Associated with Payments

Annex 4.3 – Taxes and Duties

Supply Manual Page 4 of 12 Version 10-1 (2010-01-11)

This section provides information on the taxes and duties associated with progress and final payments made to the contractor. (a) After-imposed and after-relieved taxes

(i) A contract price will be increased by the actual amount of any after-imposed taxes, provided the contractor forwards to the contracting officer a certified statement, showing that the increase in cost is directly attributable to the after-imposed taxes, and that no amount for such newly imposed taxes was included in the contract price. (ii) A contract price will be decreased by the actual amount of any after-relieved taxes.

(b) After-imposed and after-relieved duties – firm price contract

(i) Provision for price adjustments, upward or downward, may be made in firm price contracts, in the event that changes in duties, which affect the cost of the work to the contractor, are made after the contract date.

(ii) The contract price must be increased by the actual amount of any after-imposed duties,

provided the contractor forwards to the contracting officer a certified statement, showing that the increase in cost is directly attributed to the after-imposed duties, and that no amount for such newly imposed duties was included in the contract price.

(iii) The contract price must be decreased by the actual amount of any after-relieved duties.

(c) Excise taxes: the general conditions provide for contract price, in the event of changes in duties,

excise taxes, charges and impositions after the contract date. 6. Taxes and Duties Associated with Customs and Imports/Exports This section provides information relevant to customs, imports/exports, drawbacks and taxes and duties. (a) Excise taxes, duties and GST/HST

(i) Excise taxes are payable on certain goods (see Annex 4.5.)

(A) When goods are manufactured or produced and sold in Canada, the excise tax is payable by the manufacturer or producer, at the time of delivery of such goods.

(B) When goods are imported, the excise tax is payable by the importer or

transferee, who takes the goods out of bond, at the time of importation or when taken out of bond for consumption.

(ii) Federal government contract enquiries regarding excise taxes and duties; including those

relating to rates, exemptions, refunds, other methods of valuation, prohibited items, and other applications of legislation concerning excise taxes and duties, should be referred to the nearest Canada Border Services Agency (CBSA) office.

(iii) Federal government contract enquiries related to the GST/HST, Defence Supplies

Remission of Customs Duty and Federal/Provincial Reciprocal Tax Agreements should be referred to the Acquisition Policy and Process Directorate.

(b) Customs duty

Annex 4.3 – Taxes and Duties

Supply Manual Page 5 of 12 Version 10-1 (2010-01-11)

(i) Imported goods are charged with duties from the time of importation. The rates of duties on imported goods will be the rates applicable to the goods at the time when the documentation is presented to obtain release of the goods from CBSA.

(ii) The primary basis for determining the value of duty on imported goods is the Transaction

Value System of Valuation, which is generally the invoice price (see Memorandum D13-3-1 from CBSA). For assistance, contact the CBSA Business Enquiry and Registration.

(iii) If this method cannot be used, contact the nearest CBSA office.

(c) Drawbacks and duties relief

(i) Drawbacks and duties relief programs are intended to help exporters become and remain more competitive in foreign markets, by granting them relief from the duties and taxes paid in respect of:

(A) goods imported and then exported before any use is made of those goods; (B) goods imported and used in the manufacture in Canada of goods that are

exported; or (C) materials imported and consumed or expended in the manufacture in Canada of

exported goods (ii) the Duty Deferral Program grants relief from duties on imported goods that are exported

either in the same condition or after having been manufactured. Those goods qualify for relief from the customs duties, anti-dumping and countervailing duties, and excise duties and taxes other than the GST. Relief is granted at the time the goods are imported. For more information, see Memorandum D7-4-1.

(iii) the Duty Drawback Program has similar characteristics and advantages as the Duties

Relief Program, with the exception that duties and taxes must be paid at the time of importation and are refunded after the goods have been exported. For more information, see Memorandum D7-4-2.

7. Remission of Customs Duty for Defence Supplies (a) Remission of customs duty payable (for more information, see Memorandum D13-3-1) is granted

under the Tariff Item No. 9982.00.00 when:

(i) the total contract value of the defence supplies is $250,000 or more. This reflects the import value of the goods plus the duty that would be applicable in the absence of the customs tariff;

(ii) the goods are certified by Public Works and Government Services Canada (PWGSC) to

be defence supplies; (iii) for more information, see Memorandum D8-9-3.

(b) Since duty rates vary depending on the type of product, country of origin and mix of imported

components, it may be difficult to decide whether the defence supply is subject to the tariff. Where there is uncertainty as to whether the total estimated expenditure would exceed the $250,000 threshold, contracting officers should request prices with customs duty identified as a separate item.

Annex 4.3 – Taxes and Duties

Supply Manual Page 6 of 12 Version 10-1 (2010-01-11)

(c) When the party responsible for importation is other than the Department of National Defence (DND), a copy of the following certification must be attached to the contract.

CERTIFICATE FOR DEFENCE SUPPLIES I certify that the items purchased under contract number____________ are "defence supplies", as defined in the Defence Production Act, pursuant to Tariff Item No. 9982.00.00.” Approved by Authorized Officer: __________________________ __________________________ Signature Date __________________________ Title The only proof acceptable to the Canada Border Services Agency (CBSA) from the contractor that the import is a defence supply is a copy of the certification.

(d) A copy of the certification may be requested by the DND Director Supply Chain Operations /

Customs, or by the investigating Regional Compliance Verification Division of the CBSA. These parties investigate claims for remission and may contact the contracting officer to verify the claim.

(e) When DND is the party responsible for importation, a copy of the contract for defence supplies is

accepted by the CBSA, as sufficient proof for remission. A copy of the certification for defence supplies does NOT need to be attached to the awarded contract.

(f) When the total estimated value of a standing offer exceeds $250,000, each call-up is subject to

the Tariff Item No. 9982.00.00. 8. Duty and the GST/HST on Tools, Equipment or Spare Parts in Contracts for Services by

Non-residents (a) Customs duty and the GST/HST, as applicable, may be imposed on any tools, equipment or

spare parts that are brought into Canada by non-resident personnel performing certain services under a PWGSC contract. When assessed, such duties and the GST/HST are payable to the CBSA.

(b) The following interpretation of applicable regulations is intended as background information only.

If necessary, specific questions relating to actual cases should be directed to the nearest regional CBSA Office. The application or relief of customs duty and the GST/HST is stated in each item below in italics:

(i) a non-resident worker entering Canada with personal tools or other equipment to erect,

install or repair machinery or other plant equipment, the said worker being sent here by the foreign manufacturer of the machinery or plant equipment, may import the tools or other equipment under authority of the Temporary Importation (Tariff Item no. 9993.00.00) Regulations. For more information, see CBSA Memorandum D8-1-1;

(Full relief of customs duty. The GST/HST is payable on 1/60th of the value of the tools and/or equipment for each month the goods remain in Canada.)

Annex 4.3 – Taxes and Duties

Supply Manual Page 7 of 12 Version 10-1 (2010-01-11)

(ii) a non-resident worker entering Canada with tools or other equipment supplied by the manufacturer of the machine to be erected, installed or repaired may bring the tools or other equipment into Canada on a 1/60th basis under the Temporary Importation (Tariff Item No. 9993.00.00) Regulations. For more information, see Memorandum D8-1-1;

(iii) a non-resident worker entering Canada with tools or other equipment to repair, erect or

install machinery or other equipment, when the contract is with a foreign-based supplier, which is not the manufacturer of the machinery or other equipment;

(Full customs duty will apply. The GST/HST is also payable on full value where there is no relief available under any other provision ([for example, Canadian Goods Returned])

(iv) duty and the GST/HST are levied on all spare parts at the time of entry. Following the

export from Canada of the balance of the unused spare parts under CBSA supervision, a drawback claim may be filed for return of the customs duty applicable to the unused spare parts under authority of the Goods Imported and Exported Drawback Regulations.

(The GST is not refundable.)

(c) Contracts for the services in Canada of a non-resident must contain a provision, which instructs

the non-resident contractor, its employees or a subcontractor and its employees, to comply with CBSA’s requirements and to pay customs duties, excess taxes and the GST/HST, as applicable.

(d) If it is anticipated that a non-resident may be required to import tools, equipment or spare parts to

perform services in Canada, Standard Acquisition Clauses and Conditions (SACC) Manual clause C2604C must be used.

(e) When customs duties, excise taxes and GST/HST associated with payment or customs and

imports/exports apply, see Chapter 8. 9. Duty and GST/HST on the Repair and Overhaul of Canadian Goods Abroad (a) The treatment of Canadian goods returning to Canada, having been repaired or overhauled

abroad, varies depending on the country where the repair or overhaul is done. Where the country is a free trade partner country, the goods return to Canada under the provisions of Tariff Item No. 9992.00.00; or in the case of vessels, Tariff Item No. 9971.00.00. The policy and procedures relating to the administration of these tariff items are outlined in CBSA Memorandum D8-2-26 and Memorandum D8-2-25, respectively. When the country is not a free trade partner country, the goods may be entitled to the provisions of the Canadian Goods Abroad Program contained in sections 101-105 of the Customs Tariff. Under certain conditions, subsection 101(1) of the Customs Tariff provides full customs duties and GST/HST relief on the Canadian export value of goods when the goods are returned to Canada. The policy and procedures relating to the administration of this program are outlined in CBSA Memorandum D8-2-1.

(b) Goods imported under Tariff Item Nos. 9992.00.00 and 9971.00.00 are customs duty free. Under

the Canadian Goods Abroad Program, customs duties are owed on the value of the repair or overhaul. Whichever provision is used to account for the customs duties, GST is owed on the value of the repair or overhaul, unless it is done under a warranty arrangement.

(c) The goods qualify for Tariff Item Nos. 9992.00.00 and 9971.00.00 if the following conditions are

met:

(i) the required documents are submitted according to the Tariff Item Nos. 9971.00.00 and 9992.00.00 Accounting Regulations (see CBSA Memorandum D8-2-25 and Memorandum D8-2-26), including an invoice and proof of export;

Annex 4.3 – Taxes and Duties

Supply Manual Page 8 of 12 Version 10-1 (2010-01-11)

(ii) the invoice or written statement from the foreign processor should include the value of the repair or alteration;

(iii) proof of export can be a customs or transportation document, an exporter declaration, or

other documents, set out in the Regulations, which describe the goods sufficiently, to establish that the re-imported goods are the same goods that were exported. Records of the make, model, and serial numbers help identify the goods.

(d) The goods qualify under the Canadian Goods Abroad Program where:

(i) the goods are documented in a manner acceptable to the CBSA; (ii) the CBSA is satisfied that the repair or overhaul could not have been done in Canada;

and (iii) the goods are returned to Canada within 12 months from the day on which they are

exported. (e) Contracting officers should verify:

(i) that no claim for drawback has been paid in respect of the goods temporarily exported; and

(ii) in the case of the Canadian Goods Abroad Program, that repair facilities are not available

within a reasonable distance in Canada. (f) The CBSA imposes different requirements, depending upon the type of work carried out abroad,

and may accept a verbal declaration from the consignee, or PWGSC, that proper facilities are not available to do the repairs or overhaul within a reasonable distance in Canada.

(g) In addition, Canadian and U.S. government agencies establish lists of approved repair suppliers

for certain articles for use at defence establishments that are manufactured to rigid specifications. In such cases, if no Canadian-based supplier is approved to perform the repairs, this will be accepted as satisfactory evidence that the repairs could not be made in Canada.

(h) When calculating duty and the GST/HST on the service performed abroad, the pricing factors to

be taken into consideration are: the cost of the material used; the cost of labour; factory overhead; and a normal profit mark-up. The value for duty remains the same, even where the repair is done under a warranty arrangement, and there is no charge made for the repair or overhaul.

(i) Where it is not possible to repair the goods, and they are replaced under a warranty arrangement,

the replacement goods are subject to full customs duties, but under Section 5 of Schedule VII to the Excise Tax Act are non-taxable for GST purposes.

(j) There is no GST/HST payable on goods imported after having been exported for warranty repair

work. This is provided for under paragraph 3.(j) of the Non-Taxable Imported Goods (GST/HST) Regulations.

10. Duty and GST/HST on Canadian Goods Returned (a) The following paragraphs discuss the application of duty and GST/HST for goods that are re-

imported into Canada after having been exported for reasons other than for repairs, equipment additions, or work done abroad.

Annex 4.3 – Taxes and Duties

Supply Manual Page 9 of 12 Version 10-1 (2010-01-11)

(i) Customs duty does not apply to Canadian goods returned from abroad without having been advanced in value or improved in condition by any process of manufacture or other means, or combined with any other article abroad. For more information, see CBSA Memorandum D10-14-11.

For more information on the application of the GST/HST, see CBSA Customs Notice CN-118.

(ii) Articles to be tested only and not adjusted, altered or enhanced in value in any way in

conjunction with, or as a result of, a test regardless of whether a charge is made for the test.

(iii) Customs duty and the GST/HST do not apply to Canadian government-owned munitions

and supplies of war, on their return from abroad to a department or agency of the government. This is not intended for the remission of the duty and the GST/HST on goods that have been purchased by government departments and agencies, specifically for import into Canada. It applies only to munitions and military stores being shipped to departments or agencies of the government from a Canadian Armed Forces Establishment abroad. For more information, consult section 27 of the CBSA Memorandum D10-14-11.

11. Reciprocal Taxation Agreements and Comprehensive Integrated Tax Coordination

Agreements (a) The federal government has agreed to pay, directly or indirectly, most provincial and territorial

taxes on the goods and/or services it purchases, as set out in the general conditions of the Standard Acquisition Clauses and Conditions Manual. The federal government does not pay the general Provincial Sales Tax (PST). In addition, when the department or agency is a supplier, it must collect and remit PST to the province.

(b) The Treasury Board (TB) Policy on the Collection and Remittance of Provincial Sales Taxes

includes all the information that may be required by contracting officers to comply with the Application of Reciprocal Taxation Agreements (RTAs) and Comprehensive Integrated Tax Coordination Agreements (CITCA). Appendix C, of the same policy, also provides details of the RTA and CITCA by province and territory. Contracting officers should also consult the TB Policy on the Application of the Goods and Services Tax and Harmonized Sales Tax in the Departments and Agencies of the Government of Canada. Provinces and territories are grouped as follows: (i) the provinces that have not entered into a RTA are considered “non-partaking” and at the

present time, the only non-partaking provinces are Alberta and New Brunswick; (ii) a non-participating province is a province that did not enter into a CITCA and at the

present time, the non-participating provinces include all provinces and territories, except New Brunswick, Nova Scotia and Newfoundland and Labrador (the participating provinces);

(iii) the PST is paid in non-participating provinces by Crown corporations, except in Alberta,

Northwest Territories, Yukon and Nunavut, where there is no PST; (iv) federal departments pay the Harmonized Sales Tax (HST), ancillary taxes and reimburse

tax on third party purchases in the participating provinces;

Annex 4.3 – Taxes and Duties

Supply Manual Page 10 of 12 Version 10-1 (2010-01-11)

(v) when federal departments and Crown corporations are suppliers, they must charge, collect and remit HST when the goods or services are delivered or rendered in a participating province.

(c) Crown corporations are not covered by the RTAs, and are required to pay PST on their

purchases, for delivery to or consumption in the partaking provinces, on the same basis as companies in the private sector. Crown corporations may not use the licence numbers or certificates in the RTAs. HST is paid in the participating provinces.

Some Crown corporations hold their own special PST licences, which enable them to purchase goods and services, for their own use, free of PST at the time of purchase.

(d) Persons selling to federal departments may not quote the federal government's licence numbers

to their own suppliers. (e) Contracting officers should take special care when dealing with the following:

(i) ancillary taxes: The federal government has agreed to pay certain ancillary provincial taxes. These taxes apply to specific goods and services, and their applicability varies from province to province. In addition, departments will reimburse third parties for PST paid for goods or services purchased on behalf of a department or during work-related travel;

(ii) fuel taxes: Liquid fuels may be taxed in certain provinces under the provincial fuel tax or

under provincial retail sales tax, depending on the end use. Under certain circumstances, liquid fuel may be exempt from provincial tax;

(iii) construction contracts: In all contracts for the construction or repair of a building or

structure, the contractor is declared to be the consumer of any materials used. The contractor usually is not registered as a supplier, and must pay tax on purchases of materials. PST is an element of cost to the contractor, and as such is included in the price to PWGSC. No further PST is imposed on the transaction between the contractor and PWGSC.

(f) Construction contracts should not contain a mix of "real property" and "tangible personal

property". If unavoidable, the use of the licence numbers applies only to the acquisition of the "tangible personal property" component of the requirement.

(g) In contracts for the supply and installation of equipment that remains free standing, and is affixed

to a building or structure for purposes other than providing a direct service to such building or structure, the PST is not to be included in the contract price, and the licence number or certificate should be quoted in the contract. In New Brunswick, such contracts are treated as real property contracts and, therefore, are subject to the procedure, outlined in the preceding paragraph.

12. United States Sales Tax, Use Tax and Personal Property Tax (a) When there is a possibility that United States-based suppliers may be submitting responses,

contracting officers must specify in the solicitation that prices do not include any United States Sales Tax or Use Tax, from which exports are exempted. Any resulting contract awarded to a foreign-based contractor must include SACC Manual clause C2000C.

(b) Items exported from the United States of America (U.S.A.) by the purchaser, are entitled to

exemption from state Sales and Use Taxes. Care should be taken to ensure that such procurements are not taxed in error.

Annex 4.3 – Taxes and Duties

Supply Manual Page 11 of 12 Version 10-1 (2010-01-11)

(c) Particular care is required in dealing with the State of California, which has Sales, Use and Personal Property taxes that may affect PWGSC procurement.

(d) In these procedures, the State of California is highlighted because of its stringent tax

requirements. Similar precautions should be taken to deal with requirements in the other states. (e) California Sales and Use taxes (Cal Tax) are collected by the seller from the purchaser and, if

applicable, will require the contract to provide for payment of the tax. The Use Tax is not payable on items for which Sales Tax is payable.

(f) Items exported outside the State by the purchaser are exempt from Cal Tax but, as California law

is very precise about what constitutes an export, contracting officers should ensure that procurement in California is considered an export by the State.

(g) For example, goods may not be subject to Cal Tax if:

(i) they are delivered California FCA Free Carrier (...named place) with title passing upon such delivery, and are shipped to a point outside California; or

(ii) title passes at time of delivery, and the goods are delivered by the seller to a conveyance

furnished by the purchaser (for example, where they are picked up by the Canadian Armed Forces), and are shipped to a point outside the U.S.A.

(h) California Personal Property tax is assessed against work-in-process, finished work and baled

items, title to which is vested in either PWGSC or the contractor, which are located in California at 12:00 o'clock noon on the first Monday in March on an annual basis. It is immaterial whether such items relate to a fixed price or cost reimbursable type of contract.

(i) Contracting officers should confirm the manner in which California contractors charge the

Personal Property Tax on PWGSC contracts. If the tax is charged as a direct charge to the PWGSC contract, there should not also be an indirect charge, and overhead should not be applied to the direct charge.

(j) Another area for particular attention is the use of progress payments or advance payments.

California taxes may be payable when ownership is transferred to the purchaser - and this transfer of ownership may be declared by the State to take place when the progress payment or advance payment is made. Contracting officers should ensure that ownership is not transferred until the goods are delivered.

13. Purchases from the State of California (a) The State of California has a sales and use tax, which a supplier must apply to goods when title

to the goods is transferred to the purchaser in the State and the goods will be used in the State. However, imports and exports are not taxed. The use tax is the same as the sales tax but the use tax is the one that applies when the goods are purchased by an out-of-state entity for use in the state.

(b) To be exempt as an export, the good sold must be intended for a destination in a foreign country

and actually delivered to the foreign country before making any use of the property. This means that the sales and use tax will not apply when the good pursuant to the contract is shipped to Canada. Therefore, if Canada desires to have title to the goods transferred in California, the contract must state that the goods are to be shipped to Canada and are for use in Canada only. Canada can still take title in California and also be responsible for loss of goods during transport.

(c) If the contract provides for progress or advance payments or if the goods are to be left in

California for a period of time, Canada’s normal contract provisions would cause the sales and

Annex 4.3 – Taxes and Duties

Supply Manual Page 12 of 12 Version 10-1 (2010-01-11)

use tax to be payable since ownership would be transferred to Canada before delivery of the goods. Therefore, in order for Canada to avoid paying this sales tax, it must ensure that ownership will not be transferred until delivery of the goods.

(d) To avoid paying the use tax inappropriately, the following SACC Manual clauses should be

included in the contract: D4003C, C2002C and K9010C.

Annex 4.4 – Supplies Exempt from GST/HST

Supply Manual Page 1 of 3 Version 10-1 (2010-01-11)

Annex 4.4: Supplies Exempt from GST/HST (2010-01-11) 1. Overview An exempt supply is not taxable. Thus, a supplier does not collect the Goods and Services Tax or the Harmonized Sales Tax (GST/HST) on sales of exempt supplies. The supplier is not eligible for any input tax credits on purchases related to the exempt supply. As a result, the supplier passes on to the consumer the GST/HST that the supplier has paid, as part of the overhead. This is where exempt supplies differ from zero-rated supplies. The following are exempt supplies. (a) Health and dental services (only services performed for medical or reconstructive purposes are

exempt. Services performed for cosmetic reasons are not exempt.). This includes:

(i) hospital and nursing home services; (ii) medical devices prescribed by a medical practitioner **; (iii) diagnostics, treatments and other health care services prescribed by a medical practitioner; (iv) ambulance services; (v) nursing services; (vi) dental hygienist services.

** (A medical practitioner is a person who is entitled under the laws of a province to practise the profession of medicine or dentistry.)

(b) Day care services for children less than 15 years old. (c) Personal care services in an institution for children or disabled or underprivileged persons. (d) Legal aid services. That is, the person receiving the services pays no GST/HST. The lawyer

performing the service bills the legal aid plan and charges GST/HST. (e) Most educational services. This includes virtually everything associated with primary or

secondary education, including tutoring. Most other educational services are exempt, except for those that are purely recreational in nature. University and college meal plans are also exempt.

(f) Most supplies by charities and many supplies of a public service nature by public service bodies.

These are exempt except for exclusions given in Schedule V, Part VI, section 2 of the Excise Tax Act. Example: The sale by a charity of property acquired for resale and any service in connection with it are not exempt (2(e)). Most universities in Canada are charities for the purposes of the GST/HST, and therefore their supplies are generally exempt.

(g) Most financial services provided in Canada. (h) Long-term residential rents and sales of used housing. 2. Zero-Rated Supplies (a) Zero-rated supplies are taxable supplies on which the tax rate is 0 percent. Persons involved in

the production of zero-rated supplies can claim input tax credits on the supplies they use. This ensures that there is no GST/HST paid by the consumer. The following are zero-rated supplies:

(i) Goods and services supplied or to be supplied to a purchaser outside of Canada. (ii) Basic groceries, except soft drinks, candies and confections and snack foods. (iii) Agriculture and fisheries products, except the following:

Annex 4.4 – Supplies Exempt from GST/HST

Supply Manual Page 2 of 3 Version 10-1 (2010-01-11)

(A) cut flowers, foliage or trees; (B) bedding plants; (C) sod; (D) soil and soil additives; (E) seeds, in quantity ordinarily sold or offered to consumers; (F) natural fertilizer, unless sold in bulk; (G) wood; (H) horses; (I) wool other than in an unprocessed state; (J) fur and animal hide.

(b) Prescription drugs for human use, dispensed by a medical practitioner or on the prescriptions of a

medical practitioner for the personal use of the recipient or a related individual. (c) Medical devices (includes replacement parts and charges for installation and repair). (d) International freight services. This includes freight outbound from Canada and freight into

Canada from outside. Freight from one part of Canada to another is included if it is part of a continuous movement into or from Canada.

3. Non-taxable Importations (a) Non-taxable importations under the GST/HST refers to certain imports listed in Schedule VII of

the Excise Tax Act. No tax is paid on the importation of these supplies. (b) Certain goods, which are exempt from customs duties; for example, foreign-based conveyances

coming into Canada, settler's effects, foreign diplomat's effects, tourist's baggage, foreign purchases brought back by returning residents.

(c) Prizes and trophies won abroad (other than saleable goods, such as an automobile). (d) Tourist literature supplies by foreign governments or like organizations, which is to be distributed

for free. (e) Goods donated to charities. (f) Warranty replacement parts. (g) Zero-rated supplies in Section 2 of Part I or in parts Il, Ill, IV, or VIII of Schedule VI of the Excise

Tax Act. (h) Imported goods valued at under $40 when delivered by mail or courier. This parallels current

customs remission orders and like them does not cover alcohol, tobacco, etc. (i) Prescribed imports. Provision is made for granting relief from GST/HST on importation of goods

by way of regulations of the Governor in Council. 4. Indians, Indian Bands and Band-empowered Entities (a) Technical Information Bulletin B-039R3, GST/HST Administrative Policy - Application of

GST/HST to Indians, sets out Canada Revenue Agency's (CRA) guidelines concerning the treatment of purchases made by Indians, Indian bands and band-empowered entities (BEEs). The conditions described therein must be satisfied for tax relief to apply (e.g., an Indian must present proof of registration under the Indian Act to a vendor in order to acquire goods or services on reserve without the payment of GST/HST.

Annex 4.4 – Supplies Exempt from GST/HST

Supply Manual Page 3 of 3 Version 10-1 (2010-01-11)

(b) Generally, GST/HST does not apply to:

(i) goods acquired on reserve by Indians, Indian bands or BEEs; (ii) goods acquired off reserve by Indians, Indian bands or BEEs, where the vendor or the

vendor's agent delivers the goods to the reserve; (iii) services performed totally on reserve where they are acquired by Indians;

(iv) services performed on or off reserve, such as legal or accounting services, where they are acquired by Indian bands or BEEs for band management activities or for real property on reserve (exception: Indian bands or BEEs pay GST/HST on off-reserve purchases of transportation, short-term accommodation, meals and entertainment and recover the GST/HST paid through a rebate mechanism if the purchases are for band management activities or for real property on reserve); (v) services acquired by Indians for real property interests on a reserve.

(c) Unincorporated Indian-owned businesses receive the same tax relief on the acquisition of goods

and services as that of their Indian owner. Indian-owned corporations are treated like all other businesses and are required to pay GST/HST on their purchases unless they qualify as BEEs and the conditions set out in Technical Information Bulletin B-039R3 are met.

(d) Indian bands and BEEs (e.g., band-run schools and hospitals) may also be entitled to file the

applicable Public Service Body Rebate to recover a partial rebate on any remaining GST/HST paid. Funding provided by Indian bands to non-profit organizations is the same as government funding to qualify for the 50 percent GST/HST rebate to non-profit organizations.

NOTE: Indian-owned businesses are required to collect and remit GST/HST on the supply of taxable goods and services to non Indians on or off a reserve.

Annex 4.5 – Goods Subject to Excise Tax

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Annex 4.5: Goods Subject to Excise Tax (2010-01-11) 1. Petroleum Products

(a) gasoline: gasoline, aviation, unleaded aviation, and unleaded (b) fuel: diesel and aviation

2. Automobiles

(a) automobiles (not including ambulances) in excess of 2,007 kg; station wagons and vans in excess of 2,268 kg

(b) air conditioners designed for use in automobiles, station wagons, vans or trucks 3. Jewellery, Watches

(a) jewellery, real or imitation; certain goldsmiths’ and silversmiths’ products (b) clocks and watches, which the duty paid value exceeds $50

4. Others

(a) amusement devices: coins, discs or token operated games (b) cigarettes and manufactured tobacco (c) cigars (d) lighters (cigarette) (e) matches (f) playing cards (per pack) (g) wines

Insurance premiums on policies placed with unlicensed insurers or through non-resident brokers or agents.

Annex 4.6 – Ontario Labour Legislation

Supply Manual Page 1 of 6 Version 10-1 (2010-01-11)

Annex 4.6: Ontario Labour Legislation (2010-01-11) 1. Overview (a) On November 5, 1992, Ontario Bill 40 received royal assent. Included in the legislation were

certain amendments to the Employment Standards Act (ESA) intended to protect the jobs and the level of benefits of workers who work primarily at one specific site to provide building cleaning, food and security services.

(b) Although the federal government is not bound by provincial legislation, contractors bidding on

federal government work are subject to the Act and any amendments. Canada, as building owner, has an information-handling role under this legislation.

(c) Treasury Board Contracting Policy requires departmental contracting authorities to observe the

intent of the Ontario labour legislation, and, in practice, to follow its provisions. (d) On November 1995, Ontario Bill 7 received royal assent. It amended Ontario Bill 40 by repealing

Part XIII.2, “Successor Employers”, of the ESA and adding section 13.1 'Successor Employers'. The Ontario Regulation (138/96) sets out successor employer exemptions from compliance with Part XIV of the ESA (termination and severance provisions) and the type of information that building owners or managers may obtain from incumbent contractors and provide to prospective bidders or successor employers. The Employment Standards Act (R.S.O. 1990, c. E14) was repealed and replaced by the Employment Standards Act, 2000 (ESA 2000) and the Ontario Regulation 138/96 was superseded by Ontario Regulation 287/01. ESA 2000 came into force on September 4, 2001, and governs employment standards entitlements arising out on or after that date.

(e) ESA 2000 Section 77(1) applies to contracts for building cleaning, food catering and security

services which are provided at a specific premise directly or indirectly by or to a building owner manager in the province of Ontario, and which commenced on or after 31 October 1995. Not included are construction, maintenance, such as snow removal, lawn care, window cleaning, and the production of goods, other than goods related to the provision of food services at the premises for consumption on the premises.

2. Expiry of Existing Contract (a) Contracting officers must obtain from the outgoing contractor the following information as set out

in Ontario Regulation 287/01 for each employee providing services at the premises, preferably four months before the completion date of the existing contract:

(i) the employee's name, residential address, and telephone number; (ii) the employee's job classification or job description, wage rate, benefits, average weekly

hours and initial hire date; (iii) the number of weeks worked in the preceding 26 weeks (or a longer period if services

were temporarily discontinued or an employee was on pregnancy or parental leave); (iv) a statement indicating whether the employee was not primarily employed at the premises

during the 13 weeks before the request date or during the most recent 13 weeks of active employment.

Annex 4.6 – Ontario Labour Legislation

Supply Manual Page 2 of 6 Version 10-1 (2010-01-11)

In addition to the above information, the contractor must provide, within seven days following a request from the contracting officer, an up-to-date copy of the collective agreement, or a copy of the union certificate or a copy of any pending union application if it exists. (b) The information should be obtained by filling out form PWGSC-TPSGC 5116, Information on

Incumbent Employees. Copies of the form could be attached to the letter proposed for obtaining information from the outgoing contractor. When contracts contain a provision for obtaining information, a suggested letter is provided for this purpose at Exhibit A. If contracts do not contain a provision for obtaining this information, the suggested letter at Exhibit B should be used.

3. Bid Solicitation (a) In accordance with the Ontario labour legislation, information concerning each employee of the

previous supplier, with the exception of his/her name, residential address and telephone number, must be provided to potential bidders in the bid solicitation for building cleaning, food catering and security services.

(b) Contracting officers must include Standard Acquisition Clauses and Conditions (SACC) Manual

clause A0075T in their bid solicitation. The clause informs the bidder of the requirements of Bill 7 and the purpose to which information required under Bill 7 should be used.

4. Contract Award (a) After contract award, the name, residential address and telephone number of each employee as

they appear in the previous employer’s records must be provided to the successful bidder. (b) Contracting officers must include SACC Manual clause A0075C in their contract. The clause

informs the contractor of its obligation to keep employee’s records up to date and to provide the information, upon request, to the contracting officer, in accordance with the Ontario labour legislation.

(c) It is important to remember that there is no onus on the PWGSC to mediate between the outgoing

and incoming contractors in the event that the information provided is incomplete or erroneous. If there are any difficulties, enquiries should be referred to the local Ontario Ministry of Labour offices for resolution.

(d) Performance problems require prompt follow up action and reporting, preferably in writing, to the

contractor. Written reports should identify the location, date, situation or circumstances surrounding the performance difficulties. The contractor is responsible for remedying the situation or improving the performance as required.

Annex 4.6 – Ontario Labour Legislation

Supply Manual Page 3 of 6 Version 10-1 (2010-01-11)

Exhibit A Proposed Letter – Requesting Information from Outgoing Contractor (WITH a clause)

(2010-01-11) Dear _______________ (insert name of contractor), As you are aware, contract ___________ (insert contract no.) for the provision of ____________ (insert type of building-related services) will expire on ____________ (insert date). Pursuant to the clause included in the above-noted contract, you are hereby required to provide, within seven days of the date of this letter, the following information with respect to your current employees at these premises and providing the services performed under this contract: (a) the employee's name, residential address and telephone number; (b) the employee's job classification or job description; (c) the wage rate actually paid to the employee; (d) a description of the benefits, if any, provided to the employee including the cost of each benefit

and the benefit period to which the cost relates; (e) the number of hours that the employee works in a regular work day and in a regular work week;

or if the employee’s hours of work vary from week to week, the number of the employee's non-overtime hours for each week that the employee worked during the thirteen (13) weeks before the date of the request for information;

(f) the date on which the employer hired the employee; (g) any period of employment attributed to the employer under section 10 of the Act; (h) the number of weeks that the employee worked at the premises during the twenty-six (26) weeks

before the request date. The 26-week period must be calculated without including any period during which the provision of services at the premises was temporarily discontinued, or during which the employee was on leave of absence under Part XIV of the Act;

(i) a statement indicating whether:

(i) the employee's work, before the request date, included the provision of services at the premises, but the employee did not perform his or her job duties primarily at those premises during the 13 weeks before the request date; or

(ii) the employee's work included the provision of services at the premises, but the employee

was not actively at work immediately before the request date, and did not perform his or her job duties primarily at the premises during the most recent 13 weeks of active employment.

In addition to the above information, you are required to provide an up-to-date copy of the collective agreement regarding the employees at the premises, or, if no collective agreement exits for these premises, a copy of the union certificate regarding these employees or, if no union certificate was issued, a copy of any pending union application, if it exists. You are also required to provide to the Contracting Authority with updated information if changes occur between the date the requested information to the Contracting Authority is provided and the expiry date of the contract.

Annex 4.6 – Ontario Labour Legislation

Supply Manual Page 4 of 6 Version 10-1 (2010-01-11)

All information must be provided using form PWGSC-TPSGC 5116 or any other form as directed by the contracting authority. With the exception of (a), this information will be provided to potential bidders for a future contract for these services relating to the premises. The name, residential address and telephone number of each employee must only be given to the successful bidder. Signed by: ________________________ Contracting Authority

Annex 4.6 – Ontario Labour Legislation

Supply Manual Page 5 of 6 Version 10-1 (2010-01-11)

Exhibit B: Proposed Letter – Requesting Information from Outgoing Contractor (NO clause) (2010-01-11) Dear _______________ (insert name of contractor), As you are aware, contract ___________ (insert contract no.) for the provision of ____________ (insert type of building-related services) will expire on ____________ (insert date). Pursuant to the laws of the province of Ontario, you are hereby requested to provide the following information with respect to your current employees at these premises and providing the services performed under this contract: (a) the employee's name, residential address and telephone number; (b) the employee's job classification or job description; (c) the wage rate actually paid to the employee; (d) a description of the benefits, if any, provided to the employee including the cost of each benefit

and the benefit period to which the cost relates; (e) the number of hours that the employee works in a regular work day and in a regular work week,

or if the employee's hours of work vary from week to week, the number of the employee's non-overtime hours for each week that the employee worked during the thirteen (13) weeks before the date of the request for information;

(f) the date on which the employer hired the employee; (g) any period of employment attributed to the employer under section 10 of the Act; (h) the number of weeks that the employee worked at the premises during the twenty-six (26) weeks

before the request date. The 26-week period must be calculated without including any period during which the provision of services at the premises was temporarily discontinued, or during which the employee was on leave of absence under Part XIV of the Act;

(i) a statement indicating whether:

(i) the employee's work, before the request date, included the provision of services at the premises, but the employee did not perform his or her job duties primarily at those premises during the thirteen (13) weeks before the request date; or

(ii) the employee's work included the provision of services at the premises, but the employee

was not actively at work immediately before the request date, and did not perform his or her job duties primarily at the premises during the most recent thirteen (13) weeks of active employment.

In addition to the above information, you are required to provide an up-to-date copy of the collective agreement regarding the employees at the premises or, if no collective agreement exits for these premises, a copy of the union certificate regarding these employees or, if no union certificate was issued, a copy of any pending union application, if it exists. With the exception of (a), this information will be provided to potential bidders for a future contract for these services relating to the premises. The name, residential address and telephone number of each employee must only be given to the successful bidder.

Annex 4.6 – Ontario Labour Legislation

Supply Manual Page 6 of 6 Version 10-1 (2010-01-11)

Your reply is requested no later than _____________ (insert date). Signed by: ________________________ Contracting Authority

Annex 4.7 – Insurance Clauses

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Annex 4.7: Insurance Clauses (2010-01-11) A. Type of Risk - Lease of motor vehicles by Canada Number Description G6001C Vehicles – Long Term Lease G6005C Short Term Lease B. Clauses below must be used in all contracts as applicable Number Description G1001C Insurance Requirements – when there are insurance requirements in the contract G1005C Insurance – when there are no insurance requirements in the contract G1007T Insurance Requirements – when proof of insurance is required either at solicitation

closing or upon request from the contracting officer Risk concerning B.1. Loss or Damage to Government Property Number Description G3001C All Risk Property Insurance G3002C Marine Hull Insurance G3003C Aircraft Hull Insurance G3005C Comprehensive Crime Insurance G3010C All Risk in Transit Insurance B.2. Third Party Liability Number Description G2001C Commercial General Liability Insurance Depending on the requirement, one or more of the following clauses may also need to be included in the bid solicitation and contract. Third Party Liability - Special Risks Number Description G2002C Errors and Omissions Liability Insurance G2004C Medical Malpractice Liability Insurance

Annex 4.7 – Insurance Clauses

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

G2020C Automobile Liability Insurance G2030C Aviation Liability Insurance G2040C Environmental Impairment Liability Insurance G2050C Bailee's Customer's Goods Insurance G2052C Warehouseman's Legal Liability Insurance G4001C Aircraft Charter Insurance G5001C Ship Repairers' Liability Insurance G5003C Marine Liability Insurance G6002C Garage Automobile Liability Insurance

Annex 4.8 – Insurance of Government-owned or Leased Vehicles

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Annex 4.8: Insurance of Government-owned or Leased Vehicles (2010-01-11) I. Government-owned Vehicles

Country Period Policy Requirement

CANADA Long-term Self-underwriting option

UNITED STATES Long-term OR for trips to the United States

(1) Third party liability and collision: commercial insurance (2) Damage to vehicle: self-underwriting option

II. Other Vehicles, Including those leased by the Government

Type of Vehicle Country Term of Lease Policy Requirement

executive CANADA long-term Comprehensive commercial insurance, including collision and third party liability;

- self-underwrite the deductible -

executive CANADA short-term - ditto -

executive U.S. long-term - ditto -

executive U.S. short-term Purchase additional commercial insurance to cover third party liability and collision for the U.S. risks;

- self-underwrite the deductibles -

non-executive CANADA long-term Self-underwrite except if provincial legislation applies

non-executive CANADA short-term Comprehensive commercial insurance, including collision and third party liability;

- self-underwrite the deductible -

non-executive U.S. long-term Purchase additional commercial insurance to cover third party liability and collision for the U.S. risks;

- self-underwrite any damage to government vehicle -

non-executive U.S. short-term Utilize commercial insurance coverage (third party liability and collision for the U.S. risks) administered by Services and Specialized Acquisitions Management Sector, PWGSC;

- self-underwrite the deductible -

Annex 4.9 – Insurance of Government-owned or Leased Equipment

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Annex 4.9: Insurance of Government-owned or Leased Equipment (2010-01-11) I. Government-owned equipment A. Operated by government employees

Self-underwriting option must be utilized. B. Leased to contractor

1. Without operator or driver: equipment floater insurance or any equivalent insurance coverage must respond to any loss or damage to government equipment.

2. With operator or driver:

Control of Work Policy Requirement

Work of operator or driver controlled by government

Self-underwriting option is applicable concerning any loss or damage to government equipment while being driven or operated by government employees. However, contractor's insurance must respond to any loss or damage to the equipment while property is in the care, custody and control of the contractor.

Work of driver controlled by contractor Contractor's insurance must respond to any loss or damage to government equipment (contractor's responsibility because the property is in the care, custody and control of the contractor).

II. Leased from dealer A. Operated by government employees

Self-underwriting option must be utilized. B. Operator or driver being employees of the contractor

Control of Their Work Policy Requirement

By government: - employer-employee relationship

Self-underwriting option must be utilized for any damage or loss to equipment while being operated or driven by government employees

Work of driver controlled by dealer Contractor's insurance must respond to any loss or damage to government equipment

TABLE OF CONTENTS Chapter 5 - Evaluation and Selecting the Contractor ..............................................................1 5.1 Overview..........................................................................................................................................1 5.5 Evaluation Procedures.....................................................................................................................1 5.10 Confidentiality of Bids ......................................................................................................................1 5.15 Verifying Compliance with Security Requirements..........................................................................2 5.20 Use of Subject Matter Experts/Specialists.......................................................................................2 5.25 Use of Fairness Monitors.................................................................................................................3 5.30 Clarifications ....................................................................................................................................3 5.35 Evaluating the Bids ..........................................................................................................................4 5.40 Technical Evaluation of Bids ...........................................................................................................4

5.40.1 Evaluation of Technical Mandatory Criteria....................................................................5 5.40.5 Evaluation of Technical Rated Criteria ...........................................................................5

5.45 Financial Evaluation of Bids ............................................................................................................5 5.45.1 Provincial Taxes .............................................................................................................6 5.45.5 Foreign Taxes and Canadian Customs Duties...............................................................6 5.45.10 Transportation Costs ......................................................................................................6 5.45.15 Bids in Foreign Currency ................................................................................................6 5.45.20 Exchange Rate Fluctuation ............................................................................................7

5.50 Selecting the Successful Bidder ......................................................................................................7 5.55 Vendor Performance........................................................................................................................7

5.55.1 Role of the Contracting Officer .......................................................................................7 5.55.5 Authority to Reject a Bid/Offer/Arrangement ..................................................................7 5.55.10 Notice to the Bidder/Offeror/Supplier..............................................................................7 5.55.15 Review ............................................................................................................................8

5.60 Financial Capabilities of Contractor.................................................................................................8 5.60.1 Financial Capability.........................................................................................................8 5.60.5 Bid Security (Financial)...................................................................................................9 5.60.10 Business Credit Services..............................................................................................10 5.60.15 Statement of Cost Accounting Practices ......................................................................10

5.65 Identical Low Bids – Best Value ....................................................................................................11 5.70 One Responsive Bid ......................................................................................................................11 5.75 No Responsive Bids ......................................................................................................................12 5.80 Bid Rigging/Collusion/Fraud ..........................................................................................................12 5.85 Negotiations...................................................................................................................................12 5.90 Extending the Bid Validity Period ..................................................................................................13 5.95 Evaluating Joint Venture Bids........................................................................................................14 5.100 Special Program Considerations ...................................................................................................14 5.105 Evaluation Report ..........................................................................................................................14 5.110 Communications before Contract Award.......................................................................................14

5.110.1 Early Notification for Ship Construction and Refit ........................................................15 Annex 5.1: Federal Contractors Program .............................................................................................1

Annex 5.2: Handling, Custody and Safekeeping of Financial Security/Handling of Bills of Exchange.1

Chapter 5 – Evaluation and Selecting the Contractor

Chapter 5 - Evaluation and Selecting the Contractor 5.1 Overview (2010-01-11) (a) This chapter contains information concerning the evaluation process, which includes both the

evaluation of bids and the selection of a successful bidder. The chapter further addresses negotiations with the bidder(s) before contract award.

(b) It is recommended that contracting officers familiarize themselves with the Basic Guidelines for

Bid Evaluation Process - Contractor Selection Methods. 5.5 Evaluation Procedures (2010-01-11) (a) The main purpose of bid evaluation is to determine the best responsive bid, in accordance with

the evaluation and selection methodology specified in the solicitation document, among the bids submitted before the bid closing time on the date specified in the bid solicitation.

(b) The responsive bid offering the best value to Canada may or may not necessarily be the one with

the lowest price. In order to accurately determine best value, a logical systematic evaluation procedure covering all aspects of the evaluation process must be followed.

(c) Before starting the actual technical and financial evaluation of bids, it is necessary to ensure that

all the information required at bid closing is available and ready to be transmitted to the evaluators. It is the responsibility of Public Works and Government Services Canada (PWGSC) to determine whether the bids received are complete, as specified in the bid solicitation, before further detailed evaluation of the bids. This means, for example, verifying:

(i) that required certifications or required securities are included; (ii) that bids are properly signed; (iii) that the bidder is properly identified (particularly important in the case of joint ventures); (iv) acceptance of the terms and conditions of the bid solicitation and resulting contract, such

as bid validity period; (v) ability to meet a clearly specified critical delivery schedule; (vi) whether the bid is conditional (e.g. limitation of liability), or (vii) that all supporting documents, required by the bid solicitation to determine technical

responsiveness, have been submitted. Note: It is recommended that the contracting officer creates and uses a check list of all

requirements, which can be used throughout the evaluation of each bid. (d) Evaluation of bids must be in accordance with the procedures stipulated in the bid solicitation.

They must be checked for responsiveness to the contractual, technical and financial requirements of the bid solicitation. Fair, accurate and transparent evaluation of bids is an important aspect of procurement process. Generally, financial bids should not be sent to the technical evaluators until after completion of the technical evaluation.

5.10 Confidentiality of Bids (2010-01-11) (a) The contracting officer must treat all information in a secure and confidential manner to ensure

the integrity of the contracting process.

Supply Manual Page 1 of 15 Version 10-1 (2010-01-11)

Chapter 5 – Evaluation and Selecting the Contractor

(b) When referring bids to the client (or technical evaluators) during the evaluation process, the following cautionary note must be provided to the client:

"Bid information must be divulged only to individuals authorized to participate in this contracting process. Information must not be divulged to, or discussed with, the private industry."

(c) During the period from bid closing to contract award, (including the contract approval process),

contracting officers receiving requests from suppliers for the names of bidders must not release this information. Contracting officers may, however, release information on the number of bids received. Contracting officers may also inform suppliers that they can consult the Government Electronic Tendering Service (GETS) to view the suppliers who had requested a copy of the bid documents. For more information, suppliers should contact the Access to Information and Privacy Office.

(d) After contract award, the names of bidders and other information may be released in accordance

with departmental policy. (See 7.30.) 5.15 Verifying Compliance with Security Requirements (2010-01-11) (a) Before contract award, the contracting officer must verify with the Canadian Industrial Security

Directorate (CISD) that the proposed contractor meets the security requirements of the bid solicitation. This verification can be done by contacting the CISD call centre and requesting a security status sheet for the successful bidder. The request for a security status sheet should include the proposed contract number, the full name and address of the proposed contractor, as well as the required security levels stipulated in the proposed contract. If the supplier has the appropriate security clearance, the contracting officer must sign the Security Requirements Check List (SRCL) at block 16 and include the fully signed SRCL as an annex in the resulting contract.

(b) During the period of the contract, the client must ensure that all contractor or subcontractor

personnel who will have access to any classified or protected information, assets or sensitive work sites, or to government systems are identified as working under the contract and that their security status has been verified with CISD. The contracting officer will assist in this process as required.

(c) When security clearances are mandatory, they must be obtained before the commencement of

any work. However, it is recognized that there may be circumstances under which, for reasons of urgency, the contractor, or the contractor’s employee(s) must begin the work before the completion of the security process. In these cases, consult with CISD for options. However, in a competitive solicitation, the method of selection must be followed; therefore, any delay must be in accordance with the solicitation procedures.

(d) If, at any time during the period of the contract, the contracting officer becomes aware that a

subcontractor, whose security status has not been verified with CISD, will require access to any classified or protected information, assets or sensitive work sites, the contracting officer must verify with CISD that the subcontractor meets the security requirements.

5.20 Use of Subject Matter Experts/Specialists (2010-01-11) (a) Contracting officers should take advantage of the knowledge of specialists or subject matter

experts. They are available to provide guidance in their areas of expertise, whenever it would be helpful and/or appropriate in making a recommendation or confirming a decision.

Supply Manual Page 2 of 15 Version 10-1 (2010-01-11)

Chapter 5 – Evaluation and Selecting the Contractor

(b) Subject matter experts/specialists include: legal services, Access to Information and Privacy

officers, contract quality control officers, cost analysts and risk management advisors, auditors, policy authorities, green procurement specialists, ethics officers, Human Resources authorities, commodity team leaders, client engagement officers, experienced contracting officers, industry/association representatives, etc.

5.25 Use of Fairness Monitors (2010-01-11) (a) When a fairness monitor has been engaged to support a procurement process, he/she will

provide written reports to the Departmental Oversight Branch (DOB), in accordance with the statement of work included in the fairness monitor’s contract, attesting to the fairness of the procurement process.

(b) If a fairness monitor observes a situation that constitutes, or has the potential to create, fairness

deficiencies, the fairness monitor will inform the project team of its concerns and seek a resolution. If a resolution cannot be reached, the fairness monitor will immediately advise DOB.

(c) The fairness monitor will submit a final report to DOB, which includes among other things, the

fairness monitor’s overall attestation of assurance on the fairness of the monitored activity and any unresolved fairness deficiencies observed. This report will be made public after tabling with senior management.

5.30 Clarifications (2010-01-11) (a) To be considered for contract award, a bid must, at closing date meet all mandatory requirements

stipulated in the bid solicitation. Bidders are responsible to meet the criteria stipulated in the bid solicitation as well as request clarification before submitting a bid if they are not sure they understand a requirement. The instructions to bidders clearly provide that PWGSC may request clarification from bidders, but it is under no obligation to do so.

(b) If PWGSC decides to request clarifications or additional supporting data from the bidders, the

contracting officer must ensure that this process does not give any bidder an advantage over the others. In no event can this clarification alter the price quoted or any substantive element of a bid.

(c) Only clarifications which do not change the substance or price of a bid may be requested and

accepted. The request for clarifications and response must be in writing. Any response, which leads to a substantial change in the bid is considered bid repair and must not be considered in the bid evaluation. Pursuant to the Canadian International Trade Tribunal (CITT), a clarification is acceptable only if it is an explanation of some existing aspect of the bid that does not amount to a substantive revision or modification of the bid. Bidders cannot be allowed to repair their bid through a clarification process.

(d) In conducting its evaluation of the bids, Canada may, but has no obligation to correct any error in

the extended pricing of bids by using unit pricing and any error in quantities in bids to reflect the quantities stated in the bid solicitation. In the case of error in the extension of prices, the unit price will govern.

(e) If an unusually low price is identified, the bidder must be given the opportunity to either confirm or

withdraw its bid in writing. Once confirmed, the supplier must accept the price in any resulting contract. The contracting officer must not divulge the difference in price between that bid and the next lowest bid. In no event will the bidder be permitted to increase the price. In solicitations with

Supply Manual Page 3 of 15 Version 10-1 (2010-01-11)

Chapter 5 – Evaluation and Selecting the Contractor

bid security, this provision may not apply. (f) The contracting officer will specify in the request the number of days the bidders will have to

comply with any request. Failure to comply with the request may result in the bid being declared non-responsive.

5.35 Evaluating the Bids (2010-01-11) (a) The client is responsible for the evaluation of the technical portion of the bids, and, where

applicable, the management portion. PWGSC is responsible for the evaluation of the contractual terms and conditions and the financial portion of the bids. Bids must meet all the mandatory requirements and criteria set out in the bid solicitation. Bids that fail to meet a mandatory requirement (such as a bid bond or any information or document) or any other mandatory evaluation criteria (technical, financial or other) will be declared non-responsive.

(b) In some cases, third parties may be invited to assist in evaluating bids, for example, scholars and

other experts. When third parties will be involved, bidders must be advised in the bid solicitation. In general, third parties participating in the evaluation, or in the bid preparation, must sign a non-disclosure agreement and a conflict of interest agreement before such participation.

(c) Bids must be evaluated in accordance with the evaluation criteria established in the bid

solicitation. Even though the onus is on bidders to submit clear and well-organized bids, bids must be reviewed with diligence and thoroughness to ensure that no essential information is missed. The evaluators must not use criteria or factors not included in the bid solicitation or derive conclusions from information contained in bids that may prove wrong. Whenever possible, the same evaluators should evaluate all bids. When evaluating bids, evaluators must consider all vital information provided in the bid, and must not base their evaluation on undisclosed criteria.

(d) Documents pertaining to the evaluation of bids must be retained. Evaluators must provide the

original or a copy of all evaluation notes and communications to the contracting officer for filing on the procurement file. All such information is subject to the Access to Information Act. For example, evaluators' worksheets must not be destroyed even if the information contained in the worksheets is recorded in other evaluation documents. Following a relevant Canadian International Trade Tribunal decision, it was found that evaluators' worksheets are an integral part of the evaluation process and constitute part of the complete record regarding the procurement and part of the written record of all communications substantially affecting the procurement within the meaning of the international trade agreements. Destroying the evaluators' worksheets is a breach of the international trade agreements. Although no similar provision exists in the Agreement on Internal Trade (AIT), the maintenance of complete documentation is also essential under the AIT to promote fair and open procurement procedures. Contracting officers can also refer to the Treasury Board Directive on Recordkeeping.

5.40 Technical Evaluation of Bids (2010-01-11) (a) The client department is responsible for the technical evaluation of the bids. (b) Following the completion of the technical evaluation, the client department must provide a report

to the contracting officer detailing the results of the evaluation, including details on all non-responsive bids and the reasons for declaring them non-responsive. Each person who participated in the technical evaluation as an evaluator must sign the report.

(c) Complete documentation, including all notes, worksheets, etc. made during the processing or

evaluation of the bids must be retained, for future reference, on the PWGSC procurement file.

Supply Manual Page 4 of 15 Version 10-1 (2010-01-11)

Chapter 5 – Evaluation and Selecting the Contractor

5.40.1 Evaluation of Technical Mandatory Criteria (2010-01-11) (a) Mandatory criteria are assessed on a simple pass/fail basis. Bids that fail to meet any of the

mandatory criteria will be considered non-responsive. (b) The reasons for declaring a bid non-responsive must be clearly documented by the contracting

officer in the procurement file. 5.40.5 Evaluation of Technical Rated Criteria (2010-01-11) (a) Only bids that meet the mandatory criteria will be subject to point rating, as applicable. Rated

criteria are used to assess various elements of the technical bid so that the relative merits of each bid can be determined. The maximum points that can be achieved for each rated criterion must be specified in the bid solicitation.

(b) When point rating is used, bids may have to achieve a minimum number of points overall to be

considered responsive, and often they must also achieve a minimum number of points for certain individual criteria. Bid solicitations must clearly identify any mandatory minimum thresholds.

(c) Over the years, there have been numerous complaints to the CITT alleging that the scoring

against individual criteria was unfair. In the majority of cases however, the CITT has said that it cannot undertake a re-weighting of the points assigned unless the treatment of the bid under review amounts to a denial of fair treatment. In the absence of evidence that the evaluation was not conducted in a fair manner, the CITT will generally defer to the judgment of the evaluators who are best qualified to assess the merits of the bids. The CITT will intervene however if it feels that the evaluators improperly applied the evaluation criteria and methodology set out in the bid solicitation.

5.45 Financial Evaluation of Bids (2010-01-11) (a) PWGSC is responsible for the evaluation of the financial portion of the bids. PWGSC does not

provide client departments with price information during the technical evaluation process to ensure its integrity. Pricing information should only be provided to the client following the completion of the technical evaluation.

(b) Under the following circumstances, more than one PWGSC employee must be involved in the

evaluation of the bid prices to ensure an appropriate level of checks and balances, and to ensure that, in terms of price, the bids are ranked properly, in accordance with the bid solicitation:

(i) for any competitive procurement requiring contract entry approval of the Minister, the

Assistant Deputy Minister or Treasury Board; and (ii) for any procurement which is considered to be sensitive or high-risk.

(c) Contracting officers should also consider having more than one PWGSC employee involved in

the evaluation of the bid prices, under the following circumstances:

(i) when the evaluation involves extensive computation or is mathematically complex; and (ii) for standing offers and supply arrangements requiring the approval of the Assistant

Deputy Minister. (d) All PWGSC employees involved in evaluating the bid prices must sign the financial evaluation

Supply Manual Page 5 of 15 Version 10-1 (2010-01-11)

Chapter 5 – Evaluation and Selecting the Contractor

report. 5.45.1 Provincial Taxes (2010-01-11) Excluding legislated exceptions, departments and agencies are not required to pay any provincial sales tax (PST) payable to the province in which the taxable goods or services are delivered, except for reimbursement of actual costs which include PST (e.g. PST on actual travel and living expenses incurred during the performance of the contract). Federal departments are required to pay the Harmonized Sales Tax (HST). For further details, consult the relevant section of the Standard Acquisition and Clauses (SACC) Manual general conditions (e.g. section 11 of 2010A or section 13 of 2035.) 5.45.5 Foreign Taxes and Canadian Customs Duties (2010-01-11) (a) Customs duties must be considered in the evaluation of bids when bids are received from both

Canadian-based and foreign-based bidders, since foreign-based bidders exclude duties in their bids. When rates of duties or exemption status need to be verified, the contracting officer may: (i) obtain from the client department the information on the rate of duty applicable to the

goods being imported, and add the estimated amount of duties to the price quoted by the foreign-based bidder; or

(ii) verify with the Canada Border Services Agency (CBSA) the application of customs duty

to the goods being imported.

The tariff and value administrator at the CBSA will provide a written ruling to any request for rate of duty, tariff classification, or customs value. Importers or their agents who wish a written ruling must send their request to the nearest CBSA office.

(b) Contracting officers are responsible for verifying the application of excise taxes and the amount

and specific rate(s) set out in bids. Contracting officers must evaluate bids exclusive of the Goods and Services Tax (GST) or the HST, as applicable. For the list of goods on which excise tax is payable, see Annex 4.5.

(c) Clients may be entitled to exemption from taxes or duties. They should, in such cases, refer to a

certificate of exemption or remission or drawback Order in Council. Issues relating to such remissions should be resolved between the client department and CBSA.

5.45.10 Transportation Costs (2010-01-11) All goods requirements with an estimated value of $25,000 or more, including Goods and Services Tax/Harmonized Sales Tax (GST/HST), and with transportation costs exceeding $7,500 must be submitted to the Traffic Management Directorate (TMD) for a detailed analysis of the charges subject to the exceptions of 4.60. TMD will provide an analysis and recommendations regarding the proposed transportation method(s) and costs within two working days or advise the contracting officer of any delay. 5.45.15 Bids in Foreign Currency (2010-01-11) Unless the bid solicitation specifically requires bids to be made in Canadian currency, bids that are made in a foreign currency must be converted to Canadian currency for evaluation. The noon rate given by the Bank of Canada in effect on the bid closing date, or on another date specified in the bid solicitation, must be applied as a conversion factor to the bids made in foreign currency.

Supply Manual Page 6 of 15 Version 10-1 (2010-01-11)

Chapter 5 – Evaluation and Selecting the Contractor

5.45.20 Exchange Rate Fluctuation (a) For bids submitted by Canadian-based suppliers that request the exchange rate adjustment on

the Foreign Currency Component (FCC) (site in English only) identified on form PWGSC-TPSGC 9411, Claim for Exchange Rate Adjustments, the contracting officer will show in Column 3 of the form, the Bank of Canada rate in effect on the bid closing date, or on another date specified in the bid solicitation. This rate will be reflected in the resulting contract and will establish the conversion rate against which claims for adjustment will be calculated. The Bank of Canada rate may be obtained by visiting the Bank of Canada Web site.

(b) If a bidder requests an exchange rate adjustment and an exchange rate is used other than the

rate specified in the bid solicitation, the price will then be adjusted based on the rate stipulated in the bid solicitation and confirmed with the bidder.

5.50 Selecting the Successful Bidder (2010-01-11) The successful bidder must be selected in accordance with the methodology specified in the bid solicitation. 5.55 Vendor Performance 5.55.1 Role of the Contracting Officer (2010-01-11) (a) The contracting officer should ascertain whether a bidder/offeror/supplier selected as a result of a

competitive process or a supplier being considered for a sole source contract, is subject to any Vendor Performance Corrective Measure (VPCM), and should determine if that measure affects the procurement the contracting officer is working on. If so, then it may be that the contract award cannot be made or that there are conditions to be imposed with the award.

(b) When accessing the VIM file on a bidder/offeror/supplier, the contracting officer will have a clear

notice of any VPCM. The Automated Buyer Environment (ABE) will not interfere with the awarding of a contract or the issuance of a standing offer or a supply arrangement to a bidder/offeror/supplier subject to a VPCM. As the VPCM details area is limited to about 250 characters, additional information may be contained on VPCM type comments, which should also be consulted.

5.55.5 Authority to Reject a Bid/Offer/Arrangement (2010-01-11) The authority to reject a bid/offer/arrangement, under the section on vendor performance contained in Standard Acquisition Clauses and Conditions Manual standard instructions 2003, 2004, 2006, 2007 and 2008, rests with the contracting officer responsible for evaluating the bids/offers/arrangements, except that in the case of bids/offers/arrangements being considered for rejection in accordance with 1.(d)(ii), (iii) or (iv), the authority to reject a bid/offer/arrangement rests with the appropriate director general. 5.55.10 Notice to the Bidder/Offeror/Supplier (2010-01-11) (a) Notice of intent to reject a bid/offer/arrangement under the above-mentioned section should be

given by telephone, and followed by confirming facsimile or letter, except that a bidder/offeror/supplier excluded under the section on vendor performance contained in all SACC

Supply Manual Page 7 of 15 Version 10-1 (2010-01-11)

Chapter 5 – Evaluation and Selecting the Contractor

Manual standard instructions will not be notified. Notice of intent is considered to have been received by the rejected bidder/offeror/supplier at the time of the telephone call. The person making the call should note on the file the date and time of the call, and the person spoken to.

(b) The notice of intent must set out the facts and the reasons for the decision to reject the

bid/offer/arrangement. For example, when a bidder/offeror/supplier with a record of persistent lateness is excluded from a procurement where timeliness is critical, in accordance with 1.(d) of the section on vendor performance contained in all SACC Manual standard instructions, the notice must cite the contracts on which the bidder/offeror/supplier was late (facts) and state that this record shows an unacceptable risk in light of the critical nature of the time requirement in the present procurement (reason). However, when a bid/offer/arrangement is being rejected in accordance with 1.(b) or (c) of that section because of a VPCM that is in place, it is sufficient to reference that VPCM.

5.55.15 Review (2010-01-11) (a) A bidder/offeror/supplier, except a bidder/offeror/supplier excluded in accordance with 1.(b) of the

section on vendor performance contained in all the SACC Manual standard instructions, may request that the decision to reject the bid/offer/arrangement be reviewed by the Assistant Deputy Minister, Acquisitions Branch (ADM/AB). It is entirely in the ADM/AB's discretion, whether the bid evaluation and contract award process will be held up, to give time to review the decision.

(b) A review by the ADM/AB will result in an investigation, and a decision. Such a decision can have

an effect beyond the particular procurement from which the bidder/offeror/supplier has been rejected. When the decision has been made, the bidder/offeror/supplier should be informed of the results, in writing.

5.60 Financial Capabilities of Contractor 5.60.1 Financial Capability (2010-01-11) (a) The bidder must have the financial capability to fulfill the requirement. (b) Treasury Board (TB) Policy states "firms considered qualified are those which have the technical,

financial and managerial competence to discharge the contract. Contracting officers are responsible for verifying this information, prior to entering into a contract”.

(c) As part of the evaluation process, the contracting officer may obtain an opinion about a

successful contractor's capability to finance a requirement through to completion. (d) If the selection of the bidder is competitive and the contract is for commercially available goods or

services, the risks of financial loss to Canada are minimized because of the ability to find alternate sourcing. However, under any other circumstance, re-sourcing can be costly both in terms of performance delays and monetary risk.

(e) Assessing the financial capability of potential and existing suppliers is not normally required for:

(i) assistance contracts on behalf of Industry Canada (IC), (determination of a contractor's financial capability in these cases is the responsibility of IC);

(ii) contracts with universities and colleges, Crown corporations, government departments and agencies;

(iii) contracts for the services of individuals; and (iv) contracts for generally available commercial goods or services from bidders selected by

Supply Manual Page 8 of 15 Version 10-1 (2010-01-11)

Chapter 5 – Evaluation and Selecting the Contractor

competition. (f) A financial analysis of a potential supplier may be warranted at the time of sourcing. (g) A financial review of a supplier can be initiated at any stage of the contracting process when

considered necessary by the contracting officer. The contracting officer should arrange for ongoing financial capability analysis by a cost analyst during contract performance, when necessary.

(h) When PWGSC must deal with a financially weak supplier, the risk to Canada must be reduced as

much as possible through contract financial security, based on recommendations by a cost analyst.

(i) For contracts requiring senior director’s or regional director's approval, a condition of exercising

delegated authority is that the cost analyst be given the opportunity to review the contractual documents and to provide comments. For contracts above a senior director’s or regional director's approval level, comments received from the cost analyst must be included as supporting data on form PWGSC-TPSGC 1151-2, Contract Request, in Part 2, Section F. (NOTE: Only government employees have access to the site.)

5.60.5 Bid Security (Financial) (2010-01-11) (a) If bid security is obtained, it must be held until the terms of the security are fulfilled, including

award of a contract and/or expiration of the bid validity period. (b) If a bidder submits a bid, which includes insufficient security, that is, less than the exact financial

security stipulated, or none at all, the bid will be considered non-responsive. (c) Security deposits in the form of government guaranteed bonds with coupons are not acceptable

unless all coupons that are not matured at the time the security deposit is provided are attached to the bonds.

(d) Surety bonds provided by bidders must be examined by the contracting officer, with advice from

Legal Services, as necessary, to ensure that they are correct, original, and legally enforceable in all respects; including the bidder's legal name and address, the date of the contract, the contract serial number, and the description of the "Obligee”, which is "Her Majesty the Queen in right of Canada”. Surety bonds requiring correction are returned to the bidder and not to the surety company.

(e) PWGSC will hold any bid bond, payment bond, performance bond, non-negotiable security

deposit (government guaranteed bonds, bills of exchange, irrevocable standby letters of credit) until the terms of the security are fulfilled. For detailed instructions on the safekeeping of these instruments, see Annex 5.2.

(f) The contracting officer must request written instructions from the bidder concerning the action to

be taken with respect to any coupons attached to the bonds that will mature while the bond is pledged as security, and the instructions must be forwarded to the Financial Operations Sector.

(g) The contracting officer must examine the letters of credit submitted by bidders and obtain advice

from Legal Services, as necessary, to ensure that each letter is correct in all respects, including:

(i) the face amount that may be drawn against it; (ii) its expiry date;

Supply Manual Page 9 of 15 Version 10-1 (2010-01-11)

Chapter 5 – Evaluation and Selecting the Contractor

(iii) provision for sight payment to the Receiver General for Canada by way of the financial institution’s draft against presentation of a written demand for payment signed by the authorized departmental representative, and identified in the letter of credit by their office;

(iv) provision that more than one written demand for payment may be presented subject to

the sum of those demands, not exceeding the face amount of the letter of credit; (v) provision that it is subject to the International Chamber of Commerce (ICC) Uniform

Customs and Practice for Documentary Credits, 2007 Revision, ICC Publication No. 600; (vi) clear specification that it is irrevocable or deemed to be irrevocable, pursuant to the ICC

Uniform Customs and Practice for Documentary Credits, 2007 Revision, ICC Publication No. 600;

(vii) it has been issued or confirmed, in either official language, by a financial institution, which

is a member of the Canadian Payments Association and must be on the letterhead of the Issuer or Confirmer. The format is left to the discretion of the Issuer or Confirmer.

5.60.10 Business Credit Services (2010-01-11) (a) Business credit services companies provide both general credit ratings and comprehensive credit

reports on individual firms. Their comprehensive reports generally include: simplified financial statements; details of maximum credit obtained from the firm; promptness of payments made; banking information; firm's history and some information into the firm's operations.

(b) Contracting officers are not to contact a business credit services company directly. They must

send all requirements for business credit services to the Policy, Risk, Integrity and Strategic Management Sector (PRISMS).

(c) Business credit services reports are considered commercially confidential. The information is not

to be disclosed outside the government, and is only disclosed within the government on a "need to know" basis.

(d) Copies of these reports are available for use only within PWGSC. The reports are retained by

PRISMS. 5.60.15 Statement of Cost Accounting Practices (2010-01-11) (a) PRISMS has a comprehensive program to ensure that contractors' cost accounting practices

comply with the Contract Cost Principles 1031-2 and related Cost Interpretation Bulletins. (b) The general principle of Contract Cost Principles is that the total cost of the contract must be the

sum of the applicable direct and indirect costs, which may be reasonably and properly incurred and/or allocated during the performance of the contract, less any applicable credits. These costs must be determined in accordance with the contractor's cost accounting practices, as accepted by Canada and applied consistently over time.

(c) Contracting officers should inform PRISMS when a contractor or subcontractor has negotiated

contracts with Canada and meets the following criteria:

(i) the supplier's divisions/entities previous fiscal year and/or current fiscal year forecasted negotiated Canada business volume exceeds $5,000,000 or

(ii) the supplier's divisions/entities previous fiscal year and/or current fiscal year forecasted

Supply Manual Page 10 of 15 Version 10-1 (2010-01-11)

Chapter 5 – Evaluation and Selecting the Contractor

negotiated Canada business volume exceeds $2,000,000 and represents more than half of that division's/entities total business volume.

(d) The Statement of Cost Accounting Practices (SCAP) is a form used as a management

representation describing the cost accounting practices of a supplier. The Cost, Policy and Financial Review Division will determine whether the supplier must complete a SCAP.

5.65 Identical Low Bids – Best Value (2010-01-11) (a) If identical low bids are received, the Treasury Board Contracting Policy (subsection 10.8.17)

provides that the contract should be awarded on the basis of best value. The factors below should be used, subject to directives on national policies and objectives that may be issued from time to time. These criteria may be weighted as considered appropriate by the contracting officer:

(i) a bidder with an overall satisfactory performance record is given preference over a bidder

known to have a less satisfactory performance record; (ii) a bidder in a position to provide adequate after-sales service, with a good record in this

regard, will be given preference over a bidder who is less able to provide adequate service or who has a poor record;

(iii) when delivery is an important factor, the bidder offering the best delivery date should be

given preference; (iv) when there are several items included in the bid and only some items are priced

identically, the bid offering the greatest dollar value should be given preference; and (v) when there are several items included in the bid and one or more bidders bid lower on

one or more of the items, the lowest bidder with the greatest dollar value should be given preference both for the items on which it bid equal prices and for the items on which it bid lower.

(b) If there are two (or more) identical bids, and provided that the bid selected would still be

considered the most advantageous to Canada, preference should be given to the bidder who assumes all or part of the exchange rate adjustment risk over a bidder who does not assume any of this risk. Furthermore, preference should be given to the bidder who assumes all of the exchange rate adjustment risk over a bidder who assumes only part of this risk.

(c) If none of the above applies, a method of tie breaking that is mutually acceptable to Canada and

bidders with identical bids can be used. As an example, a simple coin toss could be agreed upon. The mutually agreed solution should involve legal advice.

5.70 One Responsive Bid (2010-01-11) (a) When only one responsive bid is received in response to a competitive bid solicitation, if the

contracting officer is satisfied that Canada is obtaining fair value, the contract may be awarded using competitive authorities to the single responsive bidder, without obtaining additional price support.

(b) If the contracting officer is not satisfied that the bid represents fair value, price justification must

be requested from the bidder. If this does not show that the price is fair and reasonable, the contracting officer may consider negotiating or cancelling and reissuing the bid solicitation.

Supply Manual Page 11 of 15 Version 10-1 (2010-01-11)

Chapter 5 – Evaluation and Selecting the Contractor

5.75 No Responsive Bids (2010-01-11) When no responsive bid is received as a result of a competitive bid solicitation, the bid solicitation must be cancelled. For more information on reissuing a solicitation, see 4.100. 5.80 Bid Rigging/Collusion/Fraud (2010-01-11) The contracting officer must notify Legal Services and his or her immediate director whenever there is an indication of possible bid-rigging activities, collusion or fraud. When it is considered necessary, Legal Services will assist in subsequent discussions with Competition Bureau Canada, a federal independent law enforcement agency responsible for the administration and enforcement of the Competition Act. Bid rigging is addressed in section 47 of the Act. The following are examples of possible bid-rigging activities: (a) bid rates/prices are much higher than published price lists, engineering cost estimates, or

previous bid rates/prices by the same suppliers, for no apparent reason; (b) the successful bidder subcontracts work to suppliers who submit higher bids on the same project; (c) bidders use identical wording to describe non-standard items, or submit identical bids for non-

standard items; (d) there are indications of unusual communications among suppliers, before submitting the bids with

regards to bid prices, or allocation of clients, or references to "standard industry prices”, "industry self-regulation”, etc.;

(e) the same supplier wins bids for specific clients, or in specific geographic locations, or for specific

sizes or types of work, and loses most other bids on a regular basis; or (f) a recognizable pattern of systematic or random low bid rotation exists. 5.85 Negotiations (2010-01-11) (a) When two or more responsive bids are received in response to a competitive bid solicitation and if

no responsive bid represents fair value, contracting officers should examine the solicitation to determine possible causes. Subsequently, the contracting officer may consider negotiating with all responsive bidders or cancelling and reissuing the bid solicitation.

(b) Subsection 10.6.6 of the Treasury Board Contracting Policy states: “when negotiating with more

than one firm, care should be taken that all are treated fairly and impartially. The negotiations should not become an auction of the contract, as firms progressively improve their bids in the light of information about the position of other firms. The confidentiality of each firm’s negotiating position is to be assured”.

(c) The contracting officer must conduct all negotiations. If it is of a technical nature, the contracting

officer and the client should conduct the negotiations. A negotiation report must be placed on the procurement file.

(d) For procurements subject to the international trade agreements contracting officers must conduct

negotiations in accordance with the conditions of these agreements. See Article 1014 of the North American Free Trade Agreement or Article XIV of the World Trade Organization Agreement

Supply Manual Page 12 of 15 Version 10-1 (2010-01-11)

Chapter 5 – Evaluation and Selecting the Contractor

on Government Procurement. The various bilateral free trade agreements have similar rules to NAFTA.

(e) For procurements not subject to NAFTA or WTO-AGP,

(i) when a bid solicitation was used, negotiations may be entered into: (A) before the completion of bid evaluation, provided that they are held with all

bidders that submitted responsive bids; or (B) after the bid evaluation, with only one bidder, provided that the bidder submitted

the only responsive bid. Or, the bidder was selected after evaluating more than one responsive bid, but it can be demonstrated that if the negotiations had been held with all of the bidders that submitted responsive bids, there would have been no change in the bidder selected;

The ability to prove that the same bidder will be selected, regardless of whether negotiations are conducted with all responsive bidders, presupposes that the requirement (for example, technical specifications) will not change during negotiations and, therefore, that other bidders given the same opportunity could not submit different or better offers.

(ii) when an Invitation to Tender (ITT) was used and there is more than one responsive bid,

but neither the lowest bid nor the other bids represent fair value, the contracting officer must have determined, before considering entering into negotiations, that it would not be more effective to cancel the solicitation and meet the requirement using another method of supply. When urgency is a major factor, the results of the original ITT might be capable of being used as the basis for entering into negotiations with bidders; and

(iii) when a Request For Quotation was used, negotiations should be avoided.

5.90 Extending the Bid Validity Period (2010-01-11) (a) Bids will remain open for acceptance for a period of 60 days (30 days for construction), from the

closing date of the bid solicitation, unless otherwise indicated in the bid solicitation (see Standard Acquisition Clauses and Conditions [SACC] Manual standard instructions 2003, 2006 and 2008). Contracting officers must carefully assess the potential for extended bid evaluation periods and indicate in the bid solicitation the modified period for bid acceptance. Contracting officers must also carefully monitor events during the bid evaluation period and contract approval process in order to award the contract before the bid acceptance period has expired. Expiry of bid acceptance periods before contract award should thus become an exceptional circumstance.

(b) If the bid acceptance period has expired, and the contract has not been awarded, the bid

solicitation must be reissued. (c) Any contract awarded to a bidder after the bid expiry date is considered a sole-source contract,

and must be justified accordingly. (d) If the evaluation is incomplete and is unlikely to be completed within a reasonable period of time,

and the bid acceptance period will expire before the evaluation is complete, the process should be halted and an assessment made to identify the cause of the delay. Any necessary corrections to the solicitation or evaluation methodology may then be made and the bid solicitation reissued.

(e) As stated in the standard instructions, Canada may seek an extension of the bid validity period

from all responsive bidders in writing within a minimum of three (3) days before the end of the bid

Supply Manual Page 13 of 15 Version 10-1 (2010-01-11)

Chapter 5 – Evaluation and Selecting the Contractor

validity period. If all responsive bidders accept the extension, Canada will continue with the evaluation of the bids. If all responsive bidders do not accept the extension, Canada will, at its sole discretion, either continue with the evaluation of the bids of those who have accepted the extension or cancel the solicitation.

(f) Where a bidder does not agree to the extension and it is clear that this particular bidder has no

chance of being recommended for award, then it may be appropriate to exercise Canada’s right to proceed with the evaluation of only those bids submitted by the bidders that have agreed to an extension. Legal Services may be consulted in instances where a bidder does not agree to the extension, particularly in the case of procurements subject to the trade agreements.

5.95 Evaluating Joint Venture Bids (2010-01-11) (a) Joint ventures may respond to bid solicitations in accordance with the applicable conditions

contained in the solicitation. The relevant section of standard instructions 2003, 2006 and 2008 of the SACC Manual permits joint venture bids and provide further details.

(b) If a contract is awarded to a joint venture, all members of the joint venture will be severally liable

for the performance of any resulting contract. (See standard instructions referenced above.) (c) If a financial capability assessment is done, then all members of the joint venture will be

assessed. 5.100 Special Program Considerations (2010-01-11) In the evaluation of bids, consideration may be given to various programs such as Canadian content, green procurement, and the Federal Contractors Program, all as applicable. Employment equity requirements are described in Annex 5.1. 5.105 Evaluation Report (2010-01-11) (a) An evaluation report must be prepared outlining in detail the review of the bids, including any

clarifications requested and how the final decision was taken to rank and select the bidders. (b) The evaluation report should include the evaluation criteria, the rationale of mandatory and point-

rating for each criterion, as well as the names and contact information of all evaluators. (c) All persons involved in evaluating the bids must sign the evaluation report. (d) All notes taken during the evaluation must be kept in their original form and retained on the

procurement file for audit purposes. Some sectors/regions have developed checklists to assist contracting officers in the tabulation of bids. They should be used where available. 5.110 Communications before Contract Award (2010-01-11) (a) Before contract award, contracting officers must not advise unsuccessful suppliers that they will

not be awarded a contract except in unusual circumstances. See 5.110.1 for specific exemptions on ship construction and refit.

Supply Manual Page 14 of 15 Version 10-1 (2010-01-11)

Chapter 5 – Evaluation and Selecting the Contractor

(b) Particular care is required where bid validity period may require extension. (See 5.90.)

Note: No information about other bids may be released. Disclosure of information after contract award is covered in 7.45.

5.110.1 Early Notification for Ship Construction and Refit (2010-01-11) (a) For new ship construction and ship refit contracts awarded by Public Works and Government

Services Canada headquarters, contracting officers will notify bidders whether their bid is among the two most favourable and responsive when:

(i) there are more than two responsive bidders; (ii) a lengthy approval process is anticipated (generally for contracts requiring approval

above the director general level); and, (iii) none of the following circumstances apply:

(A) all bids received are extremely close; or (B) the manager feels that notifying bidders of bid status would not be in the best

interests of Canada. (b) For shipbuilding or ship refit contracts that do not fall within the normal criteria, contracting

officers should consult with the Senior Director, Marine Systems Directorate (SD/MSD), Defence and Major Projects Sector.

(c) Early notification before contract award can only be made after the SD/MSD has recommended

the "Contract Request" (form PWGSC-TPSGC 1151-2). (NOTE: Only government employees have access to the site.)

(d) Bidders will be advised of the circumstances under which notification of their status may be

withheld. (e) Bidders whose bids are clearly not the two most favourable responsive bids will be permitted to

withdraw their bids upon written application to the contracting officer.

Supply Manual Page 15 of 15 Version 10-1 (2010-01-11)

Annex 5.1 - Federal Contractors Program

Annex 5.1: Federal Contractors Program (2010-01-11) 1. Overview

The requirements of the Federal Contractors Program (FCP) apply, with the exceptions listed below, to suppliers of goods and services, including a supplier who is a member of a joint venture, having a workforce in Canada of 100 employees or more, and bidding on requirements valued at $200,000 or more, including all applicable taxes. They may also apply, depending on the proposed contractor, to procurements valued between $25,000 and $200,000. An employee is defined as a full-time or part-time permanent employee, or a temporary employee having worked 12 weeks or more.

(b) Even if only one member of a joint venture does not meet the FCP requirements, the bid will be

declared non-responsive. (c) To determine applicability, the thresholds are compared to the total estimated value of the

contract, standing offer, or supply arrangement, including any option years and all applicable taxes.

(d) All contracts, bid solicitations, Requests for Standing Offers (RFSOs) and Requests for Supply

Arrangements (RFSAs), meeting the above criteria, are subject to the FCP requirements. (e) The requirements of the FCP apply to foreign-based suppliers if they have a workforce in Canada

of 100 employees or more, as defined above. 2. Exclusions from the FCP The FCP policy does not apply to: (a) suppliers having a combined workforce of less than 100 employees in Canada, including any

branch offices and Canadian divisions of the organization; (b) offshore suppliers who will conduct and perform the work outside Canada; (c) federally regulated companies, that is, those companies regulated under the Canada Labour

Code and Crown corporations, as they have to comply with the provisions of the Employment Equity Act;

(d) Canadian Commercial Corporation (CCC) contracts where CCC, as the prime contractor,

purchases goods and services from Canadian sources and sells the products to foreign governments or international agencies through back-to-back contracts;

(e) contracts with or on behalf of provincial governments; (f) construction contracts and contracts for the acquisition or lease of real property (architecture and

engineering [A&E] services requirements are not excluded); and (g) subcontractors. 3. Ineligible Suppliers (a) Suppliers that have withdrawn voluntarily from the FCP for a reason other than the reduction of

their workforce have been warned of the consequence of their withdrawal. That is, they will be ineligible to receive future government contracts over the threshold of $25,000, including all

Supply Manual Page 1 of 4 Version 10-1 (2010-01-11)

Annex 5.1 - Federal Contractors Program

applicable taxes, for solicitation of bids, as set out in the Government Contracts Regulations (GCRs).

(b) For requirements valued over $25,000 and below $200,000, including all applicable taxes,

contracting officers must use Standard Acquisition Clauses and Conditions (SACC) Manual clause A3031T in their bid solicitations, M2002T in their RFSOs, or S3031T in their RFSAs, to advise suppliers of the above consequence and to require bidders to certify that they have not been declared ineligible by Human Resources and Skills Development Canada (HRSDC).

(c) For requirements valued at $200,000 or more, including all applicable taxes, contracting officers

must use SACC Manual clause A3030T in their bid solicitations, M2000T in their Request for Standing Offers or S3030T in their Request for Supply Arrangements. This clause requires that suppliers confirm their eligibility to receive government contracts by indicating that a previously assigned certificate number in the past is still valid. The clause A3015C must be used in conjunction with A3030T, A3031T, M2000T, M2002T, S3030T and S3031T. If a verification of the Certificate of Commitment (LAB 1168) discloses a misrepresentation on the part of the contractor, the contract may be terminated for default.

Note: The clause A3015C is included in all the templates, with the exception of the low dollar

value 2T-LDV1 template. (d) Contracting officers must declare non-responsive any bid, including a joint venture bid, over the

threshold for soliciting bids, received from a supplier under sanction, either as a result of a finding of non-compliance by HRSDC, or following its voluntary withdrawal from the FCP for a reason other than the reduction of its workforce to less than 100 employees. Even if only one member of a joint venture does not meet the FCP requirements, the bid will be declared non-responsive.

(e) Treasury Board Contracting Policy on FCP (Appendix D) requires that contracting officers verify

the eligibility of contractors before awarding a contract. Contracting officers must ensure that they are not recommending the award of contracts to any ineligible supplier by consulting the List of Ineligible Contractors available on the “Publiservice” site. (NOTE: Only government employees have access to the site.)

(f) If an ineligible supplier is the only supplier, which can perform the work in a non-competitive

situation or the recommended bidder(s) in a competitive solicitation, the contracting officer should obtain approval from senior management before awarding the contract. In such cases, the contracting officer should inform the FCP officer who would then attempt to obtain a commitment from the supplier to seek re-instatement in the FCP.

For policy advice and guidance, contact a FCP officer from HRSDC, at phone number 819-953-7536.

4. Contracts Valued at $200,000 or More (a) When it is proposed to award a contract of $200,000 or more, including all applicable taxes, to a

supplier subject to the FCP, the contract will not be awarded unless a signed Certificate of Commitment (LAB 1168) or valid certificate number is provided by the supplier.

The Certificate of Commitment or a valid certificate number is an essential pre-condition to the award of the contract. Compliance with FCP is not a term of the resulting contract or standing offer; however, if a verification of the Certificate of Commitment discloses a misrepresentation on the part of the contractor, the contract may be terminated for default.

(b) Contracts, including standing offers and supply arrangements, for goods and services

requirements, including A&E services, valued at $200,000 or more, including all applicable taxes, may be awarded only to suppliers who:

Supply Manual Page 2 of 4 Version 10-1 (2010-01-11)

Annex 5.1 - Federal Contractors Program

(i) have signed and submitted the Certificate of Commitment identified above, and have not

been declared ineligible by HRSDC to receive government contracts over the threshold for solicitation of bids, as set out in the GCRs, either as a result of a finding of non-compliance by HRSDC, or following their voluntarily withdrawal from the FCP for a reason other than the reduction of their workforce to less than 100 employees; or

(ii) have provided a valid certificate number before contract award or issuance of a standing

offer or a supply arrangement; or (iii) are exempted from the employment equity policy (refer to the list above). When the bid, the RFSO or the RFSA is accompanied by an original certificate, the contracting officer will forward that original to the: Workplace Equity - Operations Human Resources and Skills Development Canada Portage II, 10th Floor 165 Hôtel de Ville Street Gatineau, Québec K1A 0J2 OR by Fax: 819-953-8768.

5. Contracts Valued Over $25,000 and Below $200,000 Contracts, including standing offers and supply arrangements, valued over $25,000 and below $200,000, including all applicable taxes, must be awarded only to suppliers who, if subject to FCP in the past, have not been declared ineligible by HRSDC to receive government contracts over the threshold for solicitation of bids, as set out in the GCRs, either as a result of a finding of non-compliance by HRSDC, or following their voluntarily withdrawal from the FCP for a reason other than the reduction of their workforce to less than 100 employees. 6. Compliance Reviews Once a certified supplier is awarded a contract of $200,000 or more, the contractor is required to honour its commitment of implementing employment equity as an ongoing obligation, and not simply during the duration of the contract. HRSDC provides assistance to contractors throughout this process. It also monitors the contractor’s performance in relation with the requirements of the FCP, and conducts compliance reviews. The findings and recommendations of HRSDC are forwarded to the contractor involved, who is expected to initiate remedial action should the findings be unfavourable. Contractors have the right to appeal to the Minister of HRSDC, and an independent assessor will study the findings. 7. Sanctions for Non-compliance or Withdrawal from FCP Findings of non-compliance will be communicated to Public Works and Government Services Canada, which will be advised that the contractor, due to its failure to live up to the commitment to implement employment equity, will be declared ineligible to do business or receive government contracts valued over the threshold for the solicitation of bids, as set out in the GCRs. Contractors who voluntarily withdraw from the FCP for a reason other than the reduction of their workforce to less than 100 employees are subject to the same sanction as those who are found non-responsive, as a result of a compliance review. In either case, the contractor’s Certificate of Commitment number will be cancelled, and the contractor in

Supply Manual Page 3 of 4 Version 10-1 (2010-01-11)

Annex 5.1 - Federal Contractors Program

question will not be eligible to receive government contracts over the threshold for solicitation of bids, as set out in the GCRs. 8. Reinstatement To be reinstated, ineligible suppliers must contact HRSDC and demonstrate compliance with the requirements of the FCP before bidding on government contracts. The List of Certified Employers with their certificate numbers, as well as the List of Ineligible Contractors (withdrawn) can be verified on the “Publiservice” site. (NOTE: Only government employees have access to the site) For policy advice and guidance, contact a FCP officer from HRSDC, at phone number 819-953-7536.

Supply Manual Page 4 of 4 Version 10-1 (2010-01-11)

Annex 5.2 - Handling, Custody and Safekeeping of Financial Security/Handling of Bills of Exchange

Annex 5.2: Handling, Custody and Safekeeping of Financial Security/Handling of Bills

of Exchange (2010-01-11) (a) A bill of exchange tendered as a security deposit in connection with a bid for a contract must be

held uncashed in a secure and fireproof place until the successful bid is selected or for up to one year, whichever occurs first. (If at the end of one year the contract still has not been awarded, the contracting officer must exchange the bill of exchange for a current-dated one.) The Bid Receiving Unit (BRU) sends security deposits received with headquarters bids to the Finance Sector, Public Works and Government Services Canada (PWGSC), for safekeeping. The BRU sends three copies of the list together with the deposits to the Finance Sector, showing beside the name of each bidder, the amount and nature of the deposit (for example, certified cheque, bonds). The Finance Sector signs and returns two copies of the list to the BRU, who sends one copy to the contracting officer.

(b) When a bid is accepted and the bill of exchange is then required as security until completion of

the contract, a contractor may request PWGSC to hold and not cash the bill of exchange. It should be stored in approved security equipment by the directorate. If the directorate does not have adequate facilities, it should be sent to the Financial Operations Directorate (FOD), which will arrange for storage. If the contractor makes no such request, the bill of exchange must be forwarded to the FOD for deposit in the Consolidated Revenue Fund (CRF).

(c) When a bid is rejected or accepted and the bill of exchange submitted in connection with the bid

is not required as security until completion of the contract, the bill of exchange is returned to the contractor.

(d) Bills of exchange received as contract security must be forwarded immediately to FOD for deposit

in the CRF, in accordance with the Receipt and Deposit of Public Money Regulations. (e) A security deposit provided as collateral for the return of plans and specifications will be forfeited

if those plans and specifications are not returned in time and in satisfactory condition. Furthermore, the contracting officer must so inform the Manager, FOD.

1. Government Guaranteed Bonds, Bills of Exchange and Letters of Credit The Finance Sector must ensure that the receipt of bills of exchange and/or government guaranteed bonds and/or irrevocable standby letters of credit is recorded in the accounting records of PWGSC and that it is also appropriately recorded in the Accounts of Canada, as an asset and a liability. Directorates must promptly notify the Finance Sector of all such receipts, regardless of whether they are held by the directorate. 2. Safekeeping of Bonds, Negotiable Instruments and Letters of Credit (a) There are three acceptable methods for the safekeeping of government bonds, negotiable

instruments and letters of credit:

(i) custody by FOD, which was established to provide a safekeeping service for securities and any other valuable assets requiring theft-proof storage;

(ii) storage by the directorate in approved security equipment, in accordance with Part II of the Government Contracts Regulations; or

(iii) storage by the Security Deposit Division, 350 King Edward Ave, Ottawa. (b) The adequacy of departmental security equipment can be assessed by referring to the PWGSC

Security Equipment Catalogue, which lists equipment that is approved for the storage of negotiable instruments. Canadian Industrial Security Directorate assistance is also available on

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Annex 5.2 - Handling, Custody and Safekeeping of Financial Security/Handling of Bills of Exchange

this subject.

(c) Where proper security equipment is not available, all security deposits (government guaranteed

bonds, bills of exchange, irrevocable standby letters of credit) must be forwarded to FOD for safekeeping using a PWGSC deposit form entitled "Contractor's Security Deposit”.

(d) To lessen the risk of loss, bonds should be transmitted directly to FOD from wherever the

contracting authority first receives the security (for example, if a bond is received in a regional office, it should not be routed to Headquarters but sent directly to FOD).

(e) When transmitting bonds from PWGSC to FOD (or to the owner when the securities are held by

directorates), registered and hypothecated bonds must be transmitted by registered mail. Bearer bonds may be transmitted by "money packet" or bonded courier, armoured car service or a courier provided from within departmental resources.

(f) When bearer bonds are transmitted by the "money packet" system, the maximum indemnity from

Canada Post is $100; therefore, appropriate additional insurance should be considered. (For the examination and management of risks, directorates should refer to the Treasury Board Policy Risk Management – Policies and Publications.)

(g) While coupon-bearer bonds are in its custody, FOD is responsible for their security and for

clipping matured coupons and remitting them, as directed by the contracting officer.

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

TABLE OF CONTENTS Chapter 6 Approval and Authorities ........................................................................ 1 6.1 General ............................................................................................................................................1 6.5 Procurement Approval Documents ..................................................................................................1

6.5.1 Procurement Plan ...............................................................................................................2 6.5.1.1 Procurement Plan for Procurements below Director General Level ...............2 6.5.1.5 Formal Procurement Plan ...............................................................................2

6.5.5 Contract Planning and Advance Approval ..........................................................................3 6.5.5.1 CPAA Instructions ...........................................................................................3 6.5.5.5 CPAA Resubmission .......................................................................................4 6.5.5.10 Contract Summary...........................................................................................4

6.5.10 Contract Request ................................................................................................................5 6.5.15 Treasury Board Submission................................................................................................5

6.5.15.1 Translation.......................................................................................................6 6.5.15.5 Retroactive Approval of Contract: ...................................................................6

6.5.20 Contract Amendment ..........................................................................................................6 6.10 Additional Reviews...........................................................................................................................7

6.10.1 Contract Quality Control Review.........................................................................................7 6.10.5 Legal Services Review........................................................................................................7 6.10.10 Cost Analysis Review .........................................................................................................7 6.10.15 Industrial Security................................................................................................................8 6.10.20 Client Department Review ..................................................................................................8

6.15 Solicitation Checklist ........................................................................................................................8 6.20 Contract Approval and Signing Authorities ......................................................................................8

6.20.1 Delegated Authority to Incumbents...................................................................................10 6.20.1.1 General Information.......................................................................................10 6.20.1.5 Incumbent......................................................................................................11 6.20.1.10 Acting Incumbent...........................................................................................11

6.25 Special Approval Considerations ...................................................................................................12 6.25.1 Go-Ahead Letters..............................................................................................................12 6.25.5 Forgiveness of Debts ........................................................................................................12 6.25.10 Waive of Interest ...............................................................................................................13 6.25.15 Per Diem Rates.................................................................................................................13 6.25.20 Nil Value Amendment .......................................................................................................13 6.25.25 Financial Evaluation of Bids/Offers/Arrangements ...........................................................13 6.25.30 CORCAN...........................................................................................................................13 6.25.35 Stop Work Orders and Notices of Termination .................................................................13 6.25.40 Contracts with Task Authorizations...................................................................................13 6.25.45 Trade-ins ...........................................................................................................................14 6.25.50 Treasury Board Exceptional Contracting Limits................................................................14 6.25.55 Contracts for Legal Services.............................................................................................14 6.25.60 Standing Offer ...................................................................................................................14

Annex 6.1: Procurement Plan Instructions ...............................................................................................1 Annex 6.2: Contract Request Instructions................................................................................................1 Annex 6.3: Preparation of Contract Amendment Approval Documents...................................................1 Annex 6.4: Conditions Imposed on the Approval Authority Limits for PWGSC Personnel ......................1

Annex 6.4.1: Approval Authorities and Additional Signing Authorities in Support of Clients’ Programs Only - Other than for Canadian Commercial Corporation ..............1

Annex 6.4.2: Basic Contracting Limits..................................................................................1

Annex 6.4.3: Exceptional Contracting Limits ........................................................................1 Annex 6.4.4: Notes to Exceptional Contracting Limits..........................................................1 Annex 6.4.5: Table of Equivalent Positions ..........................................................................1 Annex 6.4.6: Contract Amendment Approval Instructions....................................................1

Chapter 6 – Approval and Authorities

Supply Manual Page 1 of 14 Version 10-1 (2010-01-11)

Chapter 6 Approval and Authorities 6.1 General (2010-01-11) (a) This chapter addresses the various types of plans, reviews and approval processes associated

with procurement based on the different authority levels. These forms and approval processes apply to contracts/standing offers and supply arrangements. It also contains the authorities for approving and signing procurement documents and details special approval considerations and exceptions to approval authorities. Contracting officers will also find information for interpreting and using the authorities.

(b) Contracts are entered into by Her Majesty the Queen as represented by a minister. The authority

to enter into contracts is generally in the legislation constituting the department and conferring certain powers on the minister. The Department of Public Works and Government Services Act confers the Minister's contracting authority. The Minister's authority is delegated to officers throughout the Department in order to carry out the internal contract process.

(c) The financial limits are established by Treasury Board pursuant to the Financial Administration

Act and are set out in the Treasury Board Contracts Directive. (d) Contracting officers are delegated authorities to enter into contracts and to sign and amend

contracts in accordance with the level of responsibility of the position they occupy. Details of the delegated authorities and obligations are provided in 6.20.

(e) Contracting officers must not split contracts or contract amendments in order to avoid obtaining

either the approval required by statute, the Treasury Board Contract Directives or appropriate management approval. Furthermore, contracts must not be split to avoid Canada’s obligations under national or international trade agreements, or the application of Public Works and Government Services Canada (PWGSC) procurement policies.

6.5 Procurement Approval Documents (2010-01-11) (a) The commodity, the dollar value of a procurement and other factors such as an emergency or the

stage in the procurement process will determine the level of approval that contracting officers will need to seek, as well as the associated process that will be followed. To determine the appropriate approval level and approval document required, contracting officers must refer to the approval authorities for various commodities and other considerations outlined in 6.20.

(b) The different types of approval processes or forms are listed below:

(i) Procurement Plan; (ii) Contract Planning and Advance Approval (CPAA); (iii) CPAA Resubmission; (iv) Contract Summary; (v) Contract Request; (vi) Treasury Board Submission; (vii) Contract Amendment Request.

(c) The sections below describe these documents. The approval documents may require additional

reviews as detailed in 6.10.

Chapter 6 – Approval and Authorities

Supply Manual Page 2 of 14 Version 10-1 (2010-01-11)

(d) For requirements valued over $50,000, before the contracting officer takes any significant procurement actions, the procurement strategy must be approved to use either a procurement plan or a CPAA. Significant actions include publishing a Letter of Interest, an Advance Contract Award Notice (ACAN), a Notice of Proposed Procurement (NPP) or the solicitation. The CPAA or procurement plan must be approved before the NPP, ACAN or the solicitation is released.

(e) Requirements for less than $50,000 are approved according to sector/region procedures.

However, when invoking 6.(d) of the Government Contracts Regulations (GCRs), all procurements over $25,000 must have appended to all approval documents, and documented on file, answers to the seven questions at Annex 3.1.

6.5.1 Procurement Plan (2010-01-11) (a) The Procurement Plan is a document that sets out the intended strategy for how a procurement

will be carried out before any significant procurement actions are performed, such as the posting of an ACAN or the commencement of negotiations. The procurement plan is a key point for discussing and reviewing such matters as competition or sole source and industrial and regional benefits.

(b) Before issuing a solicitation for any procurement, contracting officers must obtain approval for the

procurement plan at the appropriate level. The appropriate approval document must be used depending on the approval authority level required, as indicated in 6.5.1.1 and 6.5.1.5. Before issuance of the resulting contract, the contracting officer will also need to seek contract approval.

(c) There are two forms available for procurement plans:

(i) the Procurement Plan for procurements at or below director general approval level; and, (ii) the Formal Procurement Plan template.

6.5.1.1 Procurement Plan for Procurements below Director General Level (2010-01-11) (a) The Procurement Plan form, available in the Automated Buyer Environment (ABE), is used for

procurements estimated to be at or below director general level. This procurement plan is used when there is insufficient information required for a CPAA.

(b) The procurement plans are prepared for the signature of the appropriate approval authority.

Contracting officers should refer to 3.5 for a list of some items that could be included in the procurement plan.

6.5.1.5 Formal Procurement Plan (2010-01-11) (a) The Formal Procurement Plan is required for the approval of the procurement strategy and is

normally prepared for:

(i) all procurements estimated to exceed the approval levels of directors general; (ii) all procurements for the services of former public servants in receipt of a pension where

the fee component is estimated to exceed $25,000 for non-competitive contracts or $100,000 for competitive contracts;

(iii) all procurements which will or may require the Minister’s involvement at some stage.

Chapter 6 – Approval and Authorities

Supply Manual Page 3 of 14 Version 10-1 (2010-01-11)

(b) The procurement plan is prepared for the signature of the assistant deputy minister who has full authority to approve procurement plans (e.g., no dollar threshold). Contracting officers should normally prepare the formal procurement plan in accordance with the template at Annex 6.1.

(c) The exclusions are the supply of edible agricultural and fishery products purchased for foreign aid

programs, and Canadian Commercial Corporation (CCC) contracts. (d) If there are significant changes to the original Procurement Plan, then a procurement plan

resubmission must be submitted. 6.5.5 Contract Planning and Advance Approval (2010-01-11) (a) The Contract Planning and Advance Approval (CPAA) process allows for the Procurement Plan

and the Contract Request approval to be done at the same time for simple requirements when most, if not all, details are known early on.

(b) The CPAA is used when the estimated value of the procurement is $50,000 or more and falls

within approval levels up to and including director general and regional director general, unless a procurement plan applies to the procurement (see 6.5.1). Sector and regional procedures apply for requirements estimated at less than $50,000.

(c) The CPAA should not be used if there is insufficient known information about the expected results

of the procurement action, (e.g., price may not be within a certain range). (d) The CPAA process allows contracting officers to issue contracts/standing offers/supply

arrangements without further reference to the approval authority when there are no significant changes to the procurement strategy in the approved CPAA. Following approval of the CPAA, the contracting officer will proceed with the procurement action until the contract is ready to be awarded. If the procurement action results in a significant change from the originally approved plan before the contract is awarded, the CPAA must be resubmitted in accordance with 6.5.5.5. If there is no significant change, the contracting officer will prepare the contract for the appropriate signing authority.

(e) Contracting officers must use a Contract Summary detailed in 6.5.5.10 in accordance with sector

and regional procedures to document the procurement pursuant to a CPAA. (f) The CPAA form is available on the Automated Buyer Environment (ABE) system. 6.5.5.1 CPAA Instructions (2010-01-11) (a) Contracting officers must complete the CPAA form available in ABE and explain the procurement

strategy. For competitive procurements, state whether the Government Electronic Tendering Service (GETS), other public advertising, or source lists (i.e. one time, ongoing), etc., will be used. When a non-competitive (sole source) procurement strategy is chosen, the legal authority to use an exception to the competitive bidding process must be stated in the document (see 3.15).

(b) Contracting officers should include the following information, as applicable:

(i) proposal/description: state the action proposed (e.g. to obtain approval to; to obtain advance approval, etc. Describe the requirement including options, if applicable;

(ii) approval value;

Chapter 6 – Approval and Authorities

Supply Manual Page 4 of 14 Version 10-1 (2010-01-11)

(iii) under Remarks: address applicable issues such as:

(A) for competitive procurements, state whether GETS or other public advertising, source lists (i.e., one time, ongoing), etc. will be used.

(B) when a non-competitive (sole source) procurement strategy is chosen,

the document must state the legal authority to use an exception to competitive bidding;

(iv) policy issues: identify any socio-economic considerations, potential major risks or

deviations from policy and recommended course of action. (v) evaluation criteria: identify the evaluation criteria and the solicitation method to be used

including the pricing basis, mandatory and/or point rating criteria. (vi) contractor selection method: selection method to be used. (vii) milestones: give target dates for important milestones (e.g. bid solicitation, contract

award, delivery schedule). (viii) additional remarks: indicate any additional information that should be brought to the

attention of the approval authority. (c) Before submitting the CPAA to the appropriate approval authority, copies of the completed form

must be sent to all line management officers between the contracting officer and the approval authority as well as sector/region resources such as Legal Services, Contract Quality Control (CQC) and cost analysis, where applicable. (See Annex 6.4 relative to conditions imposed on the approval authority limits).

(d) On receipt of the submission, the approval authority will, within two working days, review it and

either grant full approval to proceed or identify concerns and direct changes to the proposed strategy.

(e) Following approval of the CPAA, the contracting officer will proceed with the procurement action.

If the procurement action results in a significant change from the originally approved plan before the contract is awarded, the CPAA must be resubmitted in accordance with 6.5.5.5. If there is no significant change, the contracting officer will prepare the contract for the appropriate signing authority.

6.5.5.5 CPAA Resubmission (2010-01-11) (a) The CPAA Resubmission form is used when there is significant change to the originally approved

CPAA. Contracting officers must address the change in this form and submit to the appropriate approval authority in accordance with sector and region procedures.

(b) Once the approval is received, the contracting officer will proceed with the procurement action

required. (c) The CPAA Resubmission form is available on ABE. 6.5.5.10 Contract Summary (2010-01-11) (a) The Contract Summary is used pursuant to an approved CPAA to document the actions take

before issuing a contract/standing offer/supply arrangement. If a significant change was done to

Chapter 6 – Approval and Authorities

Supply Manual Page 5 of 14 Version 10-1 (2010-01-11)

the approved CPAA, then a Contract Request form must be used. Note also that the approval authority can request that a Contract Request be done, either automatically or based on certain conditions.

(b) The Contract Summary is also used to detail the results of the bid evaluation and selection. (c) The Contract Summary form is available on the ABE System. 6.5.10 Contract Request (2010-01-11) The Contract Request is used pursuant to a formal procurement plan to seek approval to issue a contract/standing offer/supply arrangement at the assistant deputy minister, deputy minister or minister approval level. It is also used when there has been a significant change to the expected result detailed in the CPAA and appropriate approval authority is required. See Annex 6.2 for instructions on the preparation of the contract request. 6.5.15 Treasury Board Submission (2010-01-11) (a) A Treasury Board (TB) submission is an official document submitted by the Minister on behalf of

a department and is used to seek approval from TB ministers when there is a requirement for TB approval. TB approval is required for any contract or contract amendment exceeding the limits outlined in Annex 6.4.2 or Annex 6.4.3.

(b) A TB submission can also be used to seek advance approval (e.g., at the stage when the

procurement strategy has not been fully developed) with appropriate justification. TB ministers base their decision to approve, in this circumstance, on the information provided in the remarks section of the TB submission. Treasury Board Secretariat (TBS) analysts include in the analysis a risk assessment of the elements in the solicitation process outlined in the submission. If at any point during the bid solicitation process there is any deviation from what has been stated in the TB submission, the contracting officer must contact the TBS analyst to determine whether the change warrants further action, such as a letter to the TB President or a new TB submission. Contracting officers are to keep written advice from the TBS analyst on the procurement file.

(c) Contracting officers must prepare TB submissions in accordance with the following:

(i) the TB guidelines found in its publication : A Guide to Preparing Treasury Board Submissions and supplemented by the Acquisitions Branch (AB) “Treasury Board Submission Guide for Goods or Services Contracting”. (Note: Document to be available in the very near future on the AB Web site.) The contracting officers must consult the AB guide as it contains the most recent requirements provided by TBS.

(ii) the following substantiation, as required, must be included in all TB submissions:

(A) submissions seeking approval of a non-competitive contract must provide an explicit and compelling rationale for not using a competitive process; and,

(B) submissions seeking approval for a competitive or non-competitive

contract must provide an assessment of the extent to which TB approval of the proposals could limit, or encourage, the competitiveness of related procurement activities in the future.

Chapter 6 – Approval and Authorities

Supply Manual Page 6 of 14 Version 10-1 (2010-01-11)

(d) Proposed contracts and contract amendments, which require TB approval, must be approved by TB before they are entered into and before any work has begun.

(e) Public Works and Government Services Canada (PWGSC) cannot enter into a contract, or make

any contractual commitment (i.e., Letter of Intent), which constitutes the first step of a project that may subsequently require TB consideration and approval.

(f) When TB has approved an amendment, PWGSC may further amend the contract without TB

approval if the cumulative value of the amendments after each issuance of an amendment pursuant to a TB approval does not exceed the non-competitive amendment level set out in Annex 6.4.2 or Annex 6.4.3.

(g) TB approval is also required for a number of areas described in the TB directives and circulars,

as well as for the making of any "extra payment," i.e., a payment where a legal liability does not exist or has not been accepted by Canada, or where there is uncertainty that a legal liability exists under the contract.

6.5.15.1 Translation (2010-01-11) (a) Part 1 of the TB submissions must be prepared in both official languages, presented side by side. (b) When translation services are required for a technical or specialized document, it is helpful to

send the translators a copy of an early draft so that any required terminology research may commence in order to expedite translation. Departmental standard procurement templates or other templates that have been translated and approved must be provided as a reference guide to the Translation Bureau to ensure consistency of terminology.

(c) Contract amendment requests requiring TB approval must be prepared in a bilingual format using

the form PWGSC-TPSGC 1151-1, Contract Request/Contract Amendment Request. (Note: Only government employees have access to the site.)

6.5.15.5 Retroactive Approval of Contract: (2010-01-11) TB ministers will entertain submissions requesting retroactive approval of a contract or contract amendment only under exceptional circumstances, e.g., urgent cases involving public safety or security, incidents or cost overruns. In such cases, TB requires certification that the minister concerned agreed to the commencement of the work before receiving TB approval including a full report on the reasons, the managerial responsibilities involved and corrective actions taken. 6.5.20 Contract Amendment (2010-01-11) (a) The contract amendment approval document is used to seek approval to amend a

contract/standing offer/supply arrangement. The amendment approval authority required will determine the document to be used. The amendment approval documents are: (i) the ”Contract Amendment Request” form, available in ABE, is used for director general

and regional director general approval and below, at the sector’s or region’s discretion; (ii) the form PWGSC-TPSGC 1151-1, Contract and Contract Amendment Request, must be

used for assistant deputy minister, deputy minister or minister approval; (iii) the TB submission form, available in the TB publication A Guide to Preparing Treasury

Board Submissions, must be used for amendments requiring TB approvals;

Chapter 6 – Approval and Authorities

Supply Manual Page 7 of 14 Version 10-1 (2010-01-11)

(iv) see Annex 6.3 for instructions on the preparation of contract amendment approval

documents listed in (i) and (ii) above. For TB submissions, see 6.5.15. 6.10 Additional Reviews (2010-01-11) The contracting officer is responsible for ensuring that the procurement document(s) receive appropriate review and approval by the proper area or authority. Below are some of the reviewing authorities that must be consulted before or during the approval process. 6.10.1 Contract Quality Control Review (2010-01-11) (a) Contract Quality Control (CQC) within the Acquisition Program Integrity Secretariat must conduct

a pre-award review of all proposed approval documents for Senior Director and above. CQC will review the accuracy and adequacy of the approval documents and provide observations on a “Comments Sheet” to the contracting officer.

(b) In the regions, the Regional Quality Assurance (RQA) reviews proposed approval documents for

Regional Director approval level and up, and is responsible for reviewing the accuracy and adequacy of the approval documents. For approval documents above the RDG approval level, CQC provides input to the RQA.

(c) Regardless of value, recommendations involving deviations from government contracting policies

must be submitted to CQC for review, following which, the DG/RDG will recommend the approval documents to the Assistant Deputy Minister, Acquisitions Branch, for approval.

(d) For contracts requiring approval at the level of Senior Director and Regional Director or above, a

condition of exercising delegated authority is that CQC, the cost analyst and legal counsel must be given the opportunity to review the approval documents and provide comments. For contracts above a DG’s approval level, these comments should be included as supporting data in Part 2, Section F of the form PWGSC-TPSGC 1151-2, Contract Request (see Annex 6.2.)

6.10.5 Legal Services Review (2010-01-11) (a) A legal review must be obtained for any TB submission, contract or contract amendment requests

and the Contract Planning and Advance Approval (CPAA), which either: (i) is at or above the Senior Director/Regional Director approval level; or (ii) is in excess of $50,000,000.

(b) Legal Services must also be consulted when the contracting officer is considering a deviation

from Standard Acquisition Clauses and Conditions Manual clauses or the departmental standard procurement templates. The contracting officer should also seek advice from Legal Services on sensitive requirements. See 3.110 for other situations requiring consultation with Legal Services.

(c) Legal Services must review any requests for lessening Canada’s full rights at law, a disclaimer,

limitation of the contractor’s liability, or decrease of the warranty time period. The proposed changes must also be acceptable to the client, and form part of the submission requesting approval.

6.10.10 Cost Analysis Review (2010-01-11)

Chapter 6 – Approval and Authorities

Supply Manual Page 8 of 14 Version 10-1 (2010-01-11)

(a) The cost analysis review must be obtained for any TB submission, contract or contract

amendment requests and CPAA, which either:

(i) is at or above the Senior Director/Regional Director approval level; or (ii) is in excess of $50,000,000.

(b) The Cost Analyst will be required to review the approval documents and provide an opinion on:

(i) the financial capability of the supplier; (ii) the reasonableness of the proposed costing rates in sole source procurement only.

6.10.15 Industrial Security (2010-01-11) Contracting officers should ensure that any industrial security requirement is addressed in the approval documents and that the Canadian Industrial Security Directorate (CISD) has done a review as appropriate. For more information on industrial security, see 4.30.10 to 4.30.30 and 5.15. 6.10.20 Client Department Review (2010-01-11) (a) Client departments must review and provide their written concurrence with the solicitation

document and the TB submission. (b) For the generic division of anticipated types of responsibilities between PWGSC and client

departments, consult Annex 1.1; for the two client-specific agreements with the Department of National Defence, consult Annex 1.2.

(c) A specific procurement may require the modification or deletion of individual conditions. These

changes must be discussed with the client before inclusion in the solicitation or contract/standing offer/supply arrangement, to ensure that complete understanding exists as to the extent of the client’s rights and responsibilities. For the responsibilities of the client department with respect to the solicitation, see 4.75.1.

6.15 Solicitation Checklist (2010-01-11) The contracting officer must complete the form PWGSC-TPSGC 515, Solicitation Checklist, available to PWGSC only for solicitations for goods or services, with the exception of requirements below $25,000. The completed Solicitation Checklist and the solicitation document must be reviewed and approved by the appropriate approval level (including requirements at the contracting officer’s approval level) and placed on the procurement file. 6.20 Contract Approval and Signing Authorities (2010-01-11) (a) The internal approval and signing authorities, the conditions imposed on the approval authority

limits, the exceptions to the approval authority limits and other guidelines are contained in the following annexes:

(i) Annex 6.4, Conditions Imposed on the Approval Authority Limits for PWGSC Personnel:

This annex provides information on the conditions imposed on approval authority limits.

Chapter 6 – Approval and Authorities

Supply Manual Page 9 of 14 Version 10-1 (2010-01-11)

(ii) Annex 6.4.1, Approval Authorities and Additional Signing Authorities in Support of Clients’ Programs Only – Other than for Canadian Commercial Corporation:

This annex provides a summary of the authorities and exceptions to these authorities.

(iii) Annex 6.4.2, Basic Contracting Limits

(A) Instructions on using the following tables; (B) Basic Contracting Limits – Goods; (C) Basic Contracting Limits – Services; (D) Basic Contracting Limits – Construction; (E) Basic Contracting Limits – Non-regulated Telecommunications Services; (F) Basic Contracting Limits - A&E Services;

(iv) Annex 6.4.3, Exceptional Contracting Limits

(A) Instructions relative to the following tables; (B) Table 1 addresses: conditional emergency contracting authority, special

contracting limits (transportation services from common carriers; regulated electricity, gas, water, sewage disposal, heat and telecommunications services; deregulated electricity and natural gas); repair and overhaul of military equipment; and procurement under U.S. Foreign Military Sales Program.

(C) Table 2 addresses: procurement of ammunition under the Munitions

Supply Program; agreements for the supply of edible agricultural products for foreign aid programs; agreements for the transport by ocean-going vessel of any goods shipped for CIDA; and procurement of bulk fuels.

(D) Table 3 addresses: standing offers and supply arrangements; and

energy management contracts. (E) Table 4 addresses: disposal of surplus Crown assets; sales limitations,

inventory shortages, claims and discrepancies. (F) Table 5 addresses: other authority limits (Canadian Commercial

Corporation, instructions tools and equipment required by contractors for repair and overhaul of defence supplies; Certification of Defence Supplies, Seized Property Management and Disposal and Disposal of Seized Real Property).

(v) Annex 6.4.4, Notes to Exceptional Contracting Limits; (vi) Annex 6.4.5, Table of Equivalent Positions; (vii) Annex 6.4.6, Contract Amendment Approval Instructions;

(b) Contract approval and signing authorities in support of clients’ programs must be exercised in

accordance with the applicable legislation and regulations, and within PWGSC policies and guidelines.

(c) The contract approval and signing authorities detailed in Annex 6.4.2 and Annex 6.4.3 are

applicable to procurement requirements from client departments including when PWGSC is a client.

Chapter 6 – Approval and Authorities

Supply Manual Page 10 of 14 Version 10-1 (2010-01-11)

(d) The contract approval and signing authorities in support of clients’ programs apply to all

contractual documents and arrangements, including the following:

(i) purchase orders; (ii) contracts; (iii) formal agreements and arrangements (e.g., Interdepartmental Memorandum of

Understanding (MOU)); (iv) standing offers and supply arrangements; (v) letters of intent; (vi) go-ahead letters and go-ahead messages; (vii) Stores Transfer Orders; (viii) Supply Transfer Orders; (ix) written direction to the Agency of Record (e.g., work authorization); (x) assignments; (xi) consents to subcontract; (xii) termination for convenience notices; and (xiii) amendments to any of the above.

(e) Conditions and limits set out in Annex 6.4 to Annex 6.4.3 will apply to the approval and signing of

all contractual documents and arrangements, including those arrangements that are not subject to the Government Contracts Regulations and TB Contracts Directive, unless approval and signing limits are set out within an existing Memorandum of Understanding. Limits must be read in conjunction with the instructions at the beginning of the annex as well as the notes contained in each table. The Deputy Minister’s approval is required when the value of transfer agreements between departments (e.g., transfer orders with CORCAN) exceeds the approval limits set out in Annex 6.4 to Annex 6.4.3. TB approval is required when the value of contractual arrangements with provincial or municipal governments, or provincial or federal Crown corporations exceeds the approval limits set out in Annex 6.4 to Annex 6.4.3.

(f) The Assistant Deputy Minister, Acquisitions Branch, has full approval authority to use a standing

offer method of supply or a supply arrangement, in accordance with Annex 6.4.3, column 56. For more information on standing offers, see 3.40 and 4.10.20; for more information on supply arrangements, see 3.45 and 4.10.25. The inclusion of a limitation of expenditure in standing offers is optional (see 4.10.20.1.) Approval and signing authorities for standing offers which do not contain a limitation of expenditure will be as set out in Annex 6.4.3 using the total estimated procurement value for the entire standing offer period to determine the appropriate approval and signing authority for the standing offer.

(g) Approval of contracts that include options must be sought in accordance with the total estimated

cost including any options for which funds are available or expected to be provided in the future (see Annex 6.4.6, section 6.)

(h) More than one contractual document must not be issued, under any circumstance, in order to

circumvent the necessity of obtaining the proper approval authority. (i) For the purposes of contract approval authorities, an Advance Contract Award Notice (ACAN) is

classified under the “electronic bidding” category. The electronic bidding approval levels apply whenever an ACAN has been posted and no valid Statement of Capabilities was submitted. See Annex 6.4.2.

6.20.1 Delegated Authority to Incumbents 6.20.1.1 General Information (2010-01-11)

Chapter 6 – Approval and Authorities

Supply Manual Page 11 of 14 Version 10-1 (2010-01-11)

All the authorities granted to and exercised by contracting officers in PWGSC are provided subject to the following: (a) if a contracting officer’s responsibilities do not require the officer to exercise a particular authority

(for any type of authority or above a particular dollar level) then that contracting officer does not, in fact, have that authority. Any and all authority granted to an incumbent of a position must be commensurate with, but not greater than, the level required to carry out the responsibilities assigned to the incumbent; and

(b) it is a requirement that the relationship between responsibilities and authorities for each

designated contracting officer be recognized on individual delegation forms. (See PWGSC Delegation of Authorities Manual.)

6.20.1.5 Incumbent (2010-01-11) (a) The contract approval and signing authorities granted by the Minister and Deputy Minister to

incumbents of designated positions are as set out in Annex 6.4.2 and Annex 6.4.3. These are maximum limits which may be reduced at the discretion of the appropriate managers.

(b) A person is normally designated the incumbent of a position following staffing action. Supervisors

must inform new incumbents of the levels of contract approval and signing authority to be exercised, by signing an individual delegation form PWGSC-TPSGC 524, Delegation of Common Service Acquisition Authorities – Schedule 3. (NOTE: Only government employees have access to this site.)

(c) Contracting officers who have previously exercised contract approval and signing authorities in

another position may exercise, upon promotion, the authorities delegated to incumbents at the new level once a new individual delegation form is completed and signed. General information on Delegation of Authority Instruments is available to PWGSC employees on-line at Delegation of Authorities. Further information on the principles of delegation of authority and proper use of the authorities is available at Delegation Principles.

(d) Directors general must withhold full contract approval and signing authorities from anyone who

has had no PWGSC purchasing/contracting experience until competence has been demonstrated at a lower level of authority for at least six months.

(e) To facilitate audit requirements, the signed original of the individual delegation form must be

forwarded to the office of the Director General, Policy, Risk, Integrity and Strategic Management Sector/Acquisition Policy and Process Directorate. Regional offices are requested to send a copy of the signed form. A signed copy should be kept on file in the procurement area or central location.

6.20.1.10 Acting Incumbent (2010-01-11) (a) Designation of an acting incumbent for a position, to which a level of authority has been granted,

must be made by an authority level no less than that of the incumbent’s supervisor. (b) The acting incumbent should normally be given the full contract approval and signing authorities

of the position. However, the acting incumbent must not exercise these authorities on a procurement file for which he/she was responsible in his/her normal position.

(c) If an incumbent is to perform the duties of a position in an acting capacity for an indeterminate

period, then the incumbent’s supervisor will delegate authorities by signing the individual

Chapter 6 – Approval and Authorities

Supply Manual Page 12 of 14 Version 10-1 (2010-01-11)

delegation form PWGSC-TPSGC 524, indicating the period that these authorities are to be in effect.

(d) In those situations where an incumbent must perform the duties of a position in an acting capacity

for a short period (e.g. vacation replacement), then the incumbent’s supervisor will delegate authorities by email, indicating the period that these authorities are to be in effect. An example of an email is as follows: Objet / Subject: Absence de ______________ / Absence of ______________ Par la présente je vous avise que l’employé(e) sous nommé(e) sera absent(e) pendant la période spécifiée. Pour assurer la continuité des opérations, les pouvoirs contractuels seront délégués au(à la) candidat(e) nommé(e) ci-dessous. This is to advise that the individual named below will be absent for the specified period. To ensure continuity of operations, acting contractual authorities have been delegated to the following appointee. Personne absente / Person Absent: ___________________ Titre du poste comblé / Postion Title occupied: ___________________ Période / Period: ___________________ Candidat(e) nommé(e) / Appointee’s name: ___________________ Approuvé par / Approved by: ___________________

(e) The e-mail must be sent to the acting incumbent, with a copy to all contracting officers reporting

to that position, and the Senior Purchasing Assistant of the supervisor's immediate superior. In addition, a copy of the e-mail must be placed on the file of any contractual document approved/signed by the incumbent while exercising the acting authority.

6.25 Special Approval Considerations 6.25.1 Go-Ahead Letters (2010-01-11) Go-ahead Letters may be issued after obtaining final approval of the contract submission, provided all appropriate terms and conditions of the proposed contract are known and acceptable to the potential contractor. Go-ahead Letters are subject to the appropriate signing authorities. 6.25.5 Forgiveness of Debts (2010-01-11) No PWGSC employee, without the appropriate delegated authority, is authorized to forgive debts arising out of contractual actions and which are owed to Canada. For the authority to write-off debts refer to “Debt Write-Off” in the departmental Delegation of Authorities Instrument. (NOTE: Only government employees have access to the site.) For more information regarding debt write-off, see Debt Write-off Regulations, 1994.

Chapter 6 – Approval and Authorities

Supply Manual Page 13 of 14 Version 10-1 (2010-01-11)

6.25.10 Waive of Interest (2010-01-11) No PWGSC employee is authorized to waive interest owed to Canada without the appropriate delegated authority. For the authority to waive interest charges, refer to “Waive of Interest” in the departmental Delegation of Authorities Instrument. For more information regarding waive of interest, see TB Interest and Administrative Charges Regulations. 6.25.15 Per Diem Rates (2010-01-11) Directors general may establish, at their discretion, lower internal authority limits for the approval of non-competitive service contracts containing per diem rates. Where such limits do not exist within a sector/region, contract approval will be in accordance with the delegated authorities in Annex 6.4.2 and Annex 6.4.3. 6.25.20 Nil Value Amendment (2010-01-11) Nil value amendments involving a simple administrative change are the responsibility of each procurement sector/region. For nil value amendments where risk or liability will be transferred to Canada, refer to Annex 6.4.6, section 11. 6.25.25 Financial Evaluation of Bids/Offers/Arrangements (2010-01-11) (a) For any competitive procurement requiring contract entry approval of the Assistant Deputy

Minister, Minister or Treasury Board, more than one PWGSC employee must be involved in the evaluation of the prices. For more information on financial evaluation of bids/offers/arrangements, see 5.45.

(b) Contracting officers should also consider having more than one PWGSC employee involved in

the evaluation of the prices for standing offers and supply arrangements requiring the approval of the Assistant Deputy Minister.

6.25.30 CORCAN (2010-01-11) Although arrangements with CORCAN are not governed by the Government Contracts Regulations and the Treasury Board Contracts Directive, all existing departmental limits governing the approval of entry into and signing of contracts apply. 6.25.35 Stop Work Orders and Notices of Termination (2010-01-11) Stop work orders and notices of termination must be approved and signed by a contracting officer with the signing authority (see Annex 6.4.2 and Annex 6.4.3) for the total contract value at the time of the termination. 6.25.40 Contracts with Task Authorizations (2010-01-11) The minimum approval authority for Task Authorization (TA) contracts is director level. Directors are accountable for ensuring that the contract will be properly managed, including appropriate procedures for

Chapter 6 – Approval and Authorities

Supply Manual Page 14 of 14 Version 10-1 (2010-01-11)

administering the TA process and appropriate control and reporting of expenditures under TA’s. For more information on task authorizations procedures, see 3.35.1. 6.25.45 Trade-ins (2010-01-11) Contracts for which trade-ins have been approved through disposal operations procedures are subject to approval and signing authorities as detailed in Annex 6.4.2 and Annex 6.4.3. (All trade-ins are disposal operations and, as such, are subject to disposal operations procedures.) The trade-in value will not be considered in determining the required level of authority. 6.25.50 Treasury Board Exceptional Contracting Limits (2010-01-11) (a) PWGSC may enter into any form of agreement used by a railway company for permission to

construct or maintain a private crossing or a pipe or cable crossing over, across or under the property of the company at a rate or in an amount no greater than those normally charged for each permission.

(b) PWGSC may enter into any agreement with a railway, telegraph, telephone or power company

for permission to attach wire to poles belonging to the company at a rate or in an amount no greater than those normally charged for each permission.

(c) PWGSC may enter into a good or a service contract, regardless of the amount, if the contract

results from a standing offer already approved by TB. (d) PWGSC may enter into and amend contracts with the United States Government containing that

government's usual terms dealing with indemnity and liability, subject to the limits of the TB Contracts Directive.

6.25.55 Contracts for Legal Services (2010-01-11) Contracts for the performance of legal services may be entered into only by or under the authority of the Minister of Justice. 6.25.60 Standing Offer (2010-01-11) (a) When more than one standing offer will be issued, the signing authority level for the standing

offers (and, in the case where a formal procurement plan was used, the approval authority level for the Contract Requests) must be determined based on the total estimated value of each standing offer, not the total estimated value of the requirement.

(b) Authorities for standing offers are included under the exceptional contracting authorities in Table

3 of Annex 6.4.3.

Annex 6.1 – Procurement Plan Instruction

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Annex 6.1: Procurement Plan Instructions (2010-01-11) The Procurement Plan must be prepared as a memorandum from the Director General or Regional Director General to the Assistant Deputy Minister and must include the elements identified below. Examples and forms (accessible to PWGSC employees only) can be found on the Acquisitions Branch Web site. FORMAL PROCUREMENT PLAN DESCRIPTION Give a brief description of the requirement, including any options, advance approvals and set-aside amounts. Indicate the period of the proposed contract and options, where applicable. BACKGROUND Provide background information and overall context. Address any audit recommendations, Canadian International Trade Tribunal (CITT) determinations, Treasury Board decisions, etc. specific to the requirement. ESTIMATED COST AND NAME OF CLIENT State the estimated cost, the Goods and Services Tax or Harmonized Sales Tax included, for the requirement. Include any options, set-aside amounts, etc., and state which client department it is chargeable to. ANTICIPATED CONTRACT (OR STANDING OFFER OR SUPPLY ARRANGEMENT) APPROVAL AUTHORITY REQUIRED Indicate the anticipated contract approval authority. Explain why this would be the approval authority, if not evident. SOURCING: Identify applicable trade agreements (North American Free Trade Agreement, World Trade Organization Agreement on Government Procurement, Agreement on Internal Trade, and Comprehensive Land Claims Agreements) and any significant policies governing sourcing decisions (Set-aside Program for Aboriginal Business; Canadian Content; Shipbuilding, Repair, Refit and Modernization, Policy on Green Procurement, etc.) Explain the sourcing strategy, i.e. GETS, other public advertising, source lists (one time, ongoing). Substantiate any decision to use sole source. For procurement plans for which Treasury Board (TB) submissions will be required, a substantiation as detailed in 6.5.15(b)(ii) must be included. POLICY ISSUES Attach relevant Procurement Review Committee document. Identify any other relevant socio-economic or environmental considerations. For more information on the Industrial and Regional Benefits Program, see 3.70. Outline any special or unusual aspects of the procurement, including the use of a fairness monitor.

Annex 6.1 – Procurement Plan Instruction

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

Recommend a course of action to resolve or handle any problems involving potential major risks or deviations from sourcing policy or other PWGSC policy. Where there are major risks inherent in the proposed approach, they must be examined in consultation with PWGSC financial authorities and Legal Services. EVALUATION AND CONTRACTOR SELECTION METHODOLOGY Identify the evaluation criteria and the selection method to be used with any bid solicitation, including pricing basis, point rating or mandatory/desirable criteria for the technical evaluation. ANTICIPATED BASIS OF PAYMENT Provide an indication of the anticipated basis of payment to be used in the contract, (e.g., firm price, fixed time rates, ceiling price, limitation of expenditure, etc.) Use this section to substantiate the use of advance payments, and to indicate when financial security (e.g., surety bond, irrevocable standby letter of credit) will be required from the supplier/contractor. Address contract audit provisions. MILESTONES Give target dates for important milestones (for example, bid solicitation, contract award, delivery schedule) in the form of “early” May or “mid” August or “late” October, rather than specific dates. ADDITIONAL COMMENTS Include any information that should be brought to the approval authority's attention, e.g., limitation of contractor’s liability, fairness monitor, industrial security requirements, intellectual property, business line consultations, green procurement. CONTRACTING OFFICER State the name, sector/region, division and telephone number of the authority responsible for the project. Recommended by: _____________________________ _________________

DG or RDG Date Sector or Region

Approved by: _____________________________ _________________

Assistant Deputy Minister Date Acquisitions Branch

ADM’s COMMENTS: Leave two or three lines for comments by the approval authority. Add the Sole Source Questions and Answers as Annex A

Annex 6.2 – Contract Request Instructions

Supply Manual Page 1 of 7 Version 10-1 (2010-01-11)

Annex 6.2: Contract Request Instructions (2010-01-11) Contract Request 1. General (a) For requirements requesting the Assistant Deputy Minister (ADM), Deputy Minister (DM) or

Minister approval authority and for contracts not pre-approved through the Contract Planning and Advance Approval (CPAA) process, a Contract Request for authority to enter into a contract must be prepared. Approval must be obtained before accepting any offer from a supplier or requesting a potential contractor to carry out specific work.

(b) The Contract Request must give an accurate description of the terms and conditions requiring

approval, which must reflect and be supported by data contained in the applicable files. Each Contract Request must identify and explain any proposed deviations from applicable policies and procedures.

(c) Details of the proposed contract must be recorded clearly and briefly on the Contract Request.

The signed Contract Request must be submitted for review to at the Contract Quality Control (CQC) Division within the Acquisition Program Integrity Secretariat (APIS).

(d) The Contract Request must be supported by a copy of the proposed contract and the applicable

files. After any CQC officer's concerns are addressed, the Contract Request will be submitted for approval.

(e) Regardless of value, all recommendations involving deviations from government contracting

policies must also be submitted to CQC for pre-award review. (f) The sector's legal counsel will review all contract requests at or above Senior Director/Regional

Director and provide a legal risk assessment. (See 6.10.5.) (g) The cost analysis review will be required in accordance with 6.10.10. (h) After considering the advice of CQC, Legal Services and the cost analyst, the Director General

(DG) will recommend the Contract Request to the ADM, Acquisitions Branch, for approval. (i) On receipt of the Contract Request, the approval authority will review it and grant full approval to

proceed or identify concerns and direct changes to the request or request additional steps before award.

2. Responsibility of the Contracting Officer (a) The contracting officer must see to the preparation, recommendation and completion of the

Contract Request on forms PWGSC-TPSGC 1151-1 and PWGSC-TPSGC 1151-2 (NOTE: Only government employees have access to this site.) in accordance with the following preparation instructions:

(i) certify that the information provided in the Contract Request is an accurate representation

of information on file;

(ii) submit the Contract Request to the appropriate approval authority and ensure that:

(A) the submission is forwarded and recommended by all line management officers between the contracting officer and the approval authority;

Annex 6.2 – Contract Request Instructions

Supply Manual Page 2 of 7 Version 10-1 (2010-01-11)

(B) sector or region resources such as legal counsel, contract quality control, cost

analysts, and commodity teams review the submission, as required; (iii) obtain policy interpretations from the Acquisition Policy and Process Directorate and

opinions from departmental specialists (e.g., Legal Services) on the consequences of any proposed deviations from general conditions, policies and regulations;

(iv) obtain the client department's agreement for any deviations from specifications,

standards and delivery requirements; and (v) highlight, in the recommendation, the facts surrounding any proposed deviations and

their negative consequences to Canada. 3. Preparation of the Contract Request (a) Contracting officers must prepare the Contract Request as outlined below. (b) Contract Request form PWGSC-TPSGC 1151-1 is used for contracts requiring approval from the

Assistant Deputy Minister, Deputy Minister or Minister. Information can be presented in either French or English.

Part 1 Submission Data - Contract Request - form PWGSC-TPSGC 1151-1 (a) The key elements of a Contract Request include the following:

(i) the requirement and its end use; (ii) the supplier and the selection criteria; (iii) the cost, basis of payment and cash flow.

(b) The preparation should focus on these general key elements. The following sections provide

additional considerations for the contracting officer’s attention, when applicable. 1. Priority Attention If priority consideration is requested because of delivery requirements or for any reason, including expiry of price validity, state the consequences of not meeting the expiry date. 2. Subject State whether this is a request for authority to enter into contract or authority to utilize a standing offer method of supply or supply arrangement. 3. Proposal (a) State action proposed (e.g., to contract with; to authorize the use of a standing offer or the use of

a Master (Regional) standing offer). Identify the contractor by correct legal name and give its location (e.g., city, town or village; province; country if other than Canada). Briefly describe the goods or services being supplied and their end use; part numbers and specification numbers should be referred to in Part 2 of form PWGSC-TPSGC 1151-2 only. State the delivery point (e.g., city, town, etc.). If there are numerous delivery points, state 'Delivery to various destinations' but do not list them in this section. Refer to an appendix.

(b) Specify any proposed deviations from Cabinet or TB contracting policies.

Annex 6.2 – Contract Request Instructions

Supply Manual Page 3 of 7 Version 10-1 (2010-01-11)

(c) When certain terms or certain deviations from departmental policies are being recommended in the Contract Request, creating a financial obligation for Canada, request authority for the monetary obligation in this section and, in the Remarks section, explain why it is recommended that Canada be responsible in this case.

(d) If any advance payments are being proposed, specify in this section and describe in the Basis of

Payment section. (e) If there is an option to be exercised by Canada by a specific date, and the method of pricing is

known or pricing formula agreed upon and the funds for the option are available in the requisition (or expected to be provided in the future), request approval to exercise the option in this section. Provide the method of pricing for the option or pricing formula, and the final date for exercise of the option in the Basis of Payment section.

(f) Indicate in a separate paragraph when approval is being requested for an additional estimated

amount so that provision may be made for unscheduled work such as work arisings, design changes or escalation.

(g) In the case of a proposed contract for a specified term or period only, or of a proposed standing

offer, state whether the expiry date is for ordering or delivery. 4. Cost (a) Show the total estimated cost to Canada to complete the proposed contract, Goods and Services

Tax/Harmonized Sales Tax (GST/HST) included. When the price to be paid is in a foreign currency, the estimated Canadian equivalent, based on the conversion rate currently in effect, should follow in brackets. Identify the funding source (vote and requisition number) and name the certifying department or agency. For standing offers which are not funded, state that the amount is chargeable to the client.

(b) The total estimated cost, as mentioned in the first line of the preceding paragraph, refers to the

total amount payable to the contractor, GST/HST included, under the contract, including payment for all goods or services, plus any options for which funds are available (or expected to be provided in the future) and any additional estimated amount for foreseeable subsequent amendments covering unscheduled work, etc., for which approval is being sought.

(c) Include a schedule of cash flow, providing a distribution by fiscal year of the funds expected to be

disbursed during the course of the contract. 5. Basis of Payment (a) Summarize all factors which have a bearing on the proposed purchase, such as (details of major

elements of cost should be provided in an appendix):

(i) price to be paid; (ii) method of pricing;

(A) firm lot price; (B) firm unit price; (C) target price, ceiling price and incentive fee formula; (D) target price and incentive fee formula without ceiling price;

Annex 6.2 – Contract Request Instructions

Supply Manual Page 4 of 7 Version 10-1 (2010-01-11)

(E) fixed time rate; or (F) price-to-be-negotiated (PTBN) - include a formula for determination of

firm basis of payment, or provide an explanation as to why inclusion of a formula is not possible, and why PTBN is not a ceiling price, if this is the case.

(iii) audit or verification provisions; (iv) customs duty; (v) Goods and Services Tax:

(A) included, (B) extra, (C) exempt or zero-rated (indicate reason for exemption), or (D) not applicable;

(vi) other taxes; (vii) delivery terms, for example:

(A) FOB (free on board) destination, (B) FAS (free alongside ship), (C) FAF (free alongside flight), (D) FOB common carrier, contractor's plant, (E) CIF (cost, insurance and freight);

(viii) exchange rate fluctuation provisions, if applicable. Identify the amount of foreign currency which is subject to the fluctuation and any special conditions;

(ix) any escalation provisions except those provided for in the general conditions forming part

of the contract (e.g., sales tax, excise tax, customs duties); (x) option – method of pricing or pricing formula plus final date for exercise of option.

(b) Describe any advance payment requirements. (c) Provide the proposed basis of payment for any unscheduled work (introduced in the "Proposal"

section and included in the "Cost" section as an estimated amount). (d) If a large number of items and/or destinations are involved, insert the following statement under

Basis of Payment:

”Unit (and/or Lot) prices totalling $ ________, sales tax _____________, F0B _______________, as detailed in the attached annex or in an annex attached to the proposed contract.”

6. Remarks

Annex 6.2 – Contract Request Instructions

Supply Manual Page 5 of 7 Version 10-1 (2010-01-11)

Ensure that source and price are adequately justified, by using the following criteria: (a) Indicate how many suppliers were requested to bid and the method of soliciting bids. If a

competitive process was followed, state the number of bids received and the relative standing of the recommended bidder with regard to price, e.g., the lowest being recommended. When a non-competitive (sole source) procurement strategy is chosen, the legal authority to use an exception to a competitive bidding process must be stated. (See 3.10 and 3.15.)

(b) If other than the lowest-responsive bid is recommended, explain clearly why any lower bid is not

acceptable. (c) If a bid is considered non-responsive because it does not meet the mandatory requirements of

the solicitation, but is lower in price than the lowest-responsive bid, concisely describe the major deficiencies.

(d) If two bids have an identical price and one of the two is recommended for acceptance, detail the

governing selection criteria. (e) If selection is not made by competitive bid, provide sufficient support for the choice made. In the

absence of competition, quote the price certification obtained and explain why the price is considered to be reasonable and justifiable. Include a brief summary of Part 2, Section F2, Previous Price, of form PWGSC-TPSGC 1151-2. (NOTE: Only government employees have access to the site.)

(f) If deviations from Cabinet or TB contracting policies are recommended, quote opinions given by

the functional branches, specifying any financial or other consequences, and give reasons for such recommendations. Whenever possible, express Canada's proposed obligations in monetary terms.

(g) If deviations from the provisions of the North American Free Trade Agreement, World Trade

Organization Agreement on Government Procurement, or the Agreement on Internal Trade are recommended, provide reasons for the deviation.

(h) If approval is being requested for any estimated amount for unscheduled work arisings, design

changes or escalation, as introduced in the “Proposal” section, estimated in the “Cost” section and substantiated in the “Basis of Payment” section, provide support in this section.

(i) Describe any options in this section and include the criteria that will be used for determining

whether the option should be exercised. (j) If the proposed contract is of a value in excess of $2 million for goods and services or of any

value with a socio-economic impact judged to be significant, include a section dealing with the socio-economic considerations, including any funding implications. Attach the recommendations of the dedicated management committee or of the Procurement Review Committee.

(k) If advance payments are recommended, explain why and state the benefits to Canada. (l) Include a statement on the amount of Canadian content and the creation/maintenance of jobs in

Canada and their location. (m) Describe briefly the profit calculations. (n) State the dates for commencement and completion of deliveries included in the bid being

recommended for acceptance. Do not include all of the delivery details.

Annex 6.2 – Contract Request Instructions

Supply Manual Page 6 of 7 Version 10-1 (2010-01-11)

(o) Whenever possible, give the TB number which grants the client program approval. 7. Expiry Date State the expiry date of the bid. NOTE: If genuine urgency exists, the reason should be stated in Part 1, “Priority Attention” section. Part 2 Supporting Data - Contract Request - form PWGSC-TPSGC 1151-2 In particular, note the information in sections A to F below. When a non-competitive (sole source) procurement strategy is chosen based on exception 6.(d) of the Government Contracts Regulations, the responses to the questions found in Annex 3.1 must be attached to this Part 2. Section A - Details of Contract Demand or Requisition (a) If all of the goods or services requisitioned by the client are not in the proposed contract for which

approval is being sought and Part 1 of form PWGSC-TPSGC 1151-1 (NOTE: Only federal government employees have access to the site) did not make this clear, briefly summarize, for the understanding of the approval authority, the total number of items on the requisition and the number included in the proposed contract. If there is not enough space because of the size of the summary explanation, refer to the appendix or document on file which provides the details.

(b) If the goods and/or services requisitioned are the same as those being recommended for

acceptance from the proposed supplier, describe them in this section or refer to the work specifications.

Section B - Special Terms not Included in Part 1 (a) Detail any special terms which will have an effect on the proposed contract which are not

included in Part 1 of form PWGSC-TPSGC 1151-1, such as financial security, royalty payments, etc. Address conformance with the following policies (some sectors/regions may prefer to address these policies in Section F, either location is acceptable):

(i) International Sanctions, (ii) Federal Contractors Program (quote the certificate of commitment number), and (iii) Conflict of Interest.

(b) It is not necessary to refer to normal escalation provisions contained in the general conditions. Section C – Delivery State the delivery requirements specified by the client and promised by the supplier and the acceptability of delivery if not in accordance with the delivery specified. Section D - Type of Contract Document State the type of contract document, e.g., "Your Tender is Accepted"; "You are Requested"; "Standing Offer"; "Your Proposal is Accepted"; "Formal Agreement". Section E - Bids Received State if there was a public opening of bids.

Annex 6.2 – Contract Request Instructions

Supply Manual Page 7 of 7 Version 10-1 (2010-01-11)

Section F - Basis of Recommendation F1 - Price support for negotiated cases In the absence of competition, detail the price support which has been obtained, if this was not provided in Part 1 of form PWGSC-TPSGC 1151-1. State reasons why the various price elements are considered to be reasonable and justifiable. Substantiate the profit or mark-up factor being recommended. F2 - Previous Price Provide details of previous prices for negotiated contracts when available, including the percentage of increase or decrease, and an explanation for any substantial increases. Provide this information also for competitive contracts unless the number of low dollar value items makes the comparison too complex to serve a useful purpose. F3 - Discrepancies, if any, between bid solicitation and bid recommended Provide details and reconcile amounts, when discrepancies occur between bid solicitation and bid recommended. F4 - Support for deviations from departmental policy, changes or deletions in general conditions and supplemental general conditions Support deviations from departmental policy in this section. F5 - Acceptability of goods and/or services if not in accord with specifications Support acceptability of supplies if not to specifications. F6 - Method of Payment (a) Detail the method of payment. If progress payments are being proposed, fully describe them,

including any holdbacks.

Note: If there are numerous items, and items and unit prices are not detailed in Part 1 of form PWGSC-TPSGC 1151-1, or in an appendix to Part 1, make reference in Section F to the specific document on the file which details the information.

(b) Other data, if applicable, should be stated under Section F, such as:

(i) Add list of suppliers who were invited to bid and their ownership. (ii) Attach financial officer's opinion on supplier's financial status. (iii) Attach legal counsel's opinions on the legal nature of the case and on the contract

submission, including its consistency with the contract. (iv) If not previously mentioned in Section B, address the contractor's compliance with:

(A) international sanctions; (B) Federal Contractors Program (quote the certificate of commitment number); and (C) conflict of interest provisions.

Annex 6.3 – Preparation of Contract Amendment Approval Documents

Supply Manual Page 1 of 4 Version 10-1 (2010-01-11)

Annex 6.3: Preparation of Contract Amendment Approval Documents (2010-01-11) 1. Preparation of the Contract Amendment Request form:

(a) The Contract Amendment Request, available in the Automated Buyers Environment (ABE), may be used for Director General and Regional Director General approval and below.

(b) Contracting officers should include the following information, as applicable:

(i) Description/Proposal: Briefly describe the goods or services as provided in the original CPAA and state the purpose of the proposed amendment.

(ii) Amendment Increase/Decrease: Show total cost of the proposed

amendment in Canadian dollars or foreign currency, as applicable. If using foreign currency, give the equivalent in Canadian currency.

(iii) Provide the name of the client involved. (iv) Approval Summary: Provide a table addressing the approval

documents, the document value, the approval value of each approval documents, and the approval level.

(v) Proposed Basis of Payment: If any alteration in the Basis of Payment is

proposed, provide justification and support. (vi) Remarks: Provide the following information, as a minimum:

(A) Give additional important information required for a proper assessment of the proposed amendment. For example, if the proposed amendment is for a substantial increase, state why this additional requirement did not form part of the original requirement.

(B) Provide a justification for the amendment.

(c) Preparation of Contract Amendment Request: Form PWGSC-TPSGC 1151-4, Contract Amendment Request, (NOTE: Only government employees have access to the site.) can be presented for Assistant Deputy Minister, Deputy Minister and Minister’s approval in either French or English.

Part 1 - Submission Data Contract Amendment Request - form PWGSC-TPSGC 1151-1 (a) The key elements that should be included in a Contract Amendment Request are:

(i) the purpose of the amendment; and (ii) the amendment cost.

(b) The preparation of Part 1 should focus on these general key elements. The following sections

provide additional considerations for the contracting officer’s attention, when applicable. Subject

Annex 6.3 – Preparation of Contract Amendment Approval Documents

Supply Manual Page 2 of 4 Version 10-1 (2010-01-11)

(a) Authority to Amend Contract

Form PWGSC-TPSGC 1151-1, can be used to obtain approval to utilize a standing offer that has been revised by the bidder.

(b) Proposal

(i) State the purpose of the proposed amendment and briefly describe the goods and/or services, as provided in the original contract request (for example, to amend the contract with ABC for the supply of 20 additional widgets). Include, in the case of goods or services being added, the prices, sales tax position, delivery points, etc.

(ii) Identify any differences between funds previously authorized and contract commitments. (iii) If a large number of items are involved, state:

"Unit (and/or Lot) prices totalling $ ____________, sales tax ____________, FOB _____________, as detailed in the attached appendix or in an appendix attached to the proposed amendment."

(iv) If the proposed amendment involves any deviations from Cabinet or TB contracting

policies, not included in the original approval, describe the deviations fully. (c) Additional Costs (or Reduction in Cost)

(i) Show total cost of the proposed amendment in Canadian dollars or foreign currency, as applicable. If using foreign currency, give the equivalent in Canadian currency.

(ii) Show the proposed amended estimated cost of the contract. If the previously authorized

total contains an amount for specific future work or foreseen yet unscheduled work (such as design changes or work arisings), always include this amount in the total estimated cost. If not, authority for the amount set aside is lost.

(iii) Also, provide the name of the client involved, cash flow, etc., as explained under the

“Cost” section of the contract request in Annex 6.2. (iv) Provide a brief description of previous amendments and their cost.

(d) Remarks

(i) Give additional important information required for a proper assessment of the proposed amendment. For example, if the proposed amendment is for a substantial increase, state why this additional requirement did not form part of the original requirement. Refer to the Remarks section of the contract request in Annex 6.2 for a guide to the information, which should be provided, if applicable.

(ii) When a Contract Amendment Request requires a higher approval level than originally

authorized in the contract, detail the basis for the selection of the contractor and the Basis of Payment. It is not necessary to repeat in Part 1, the present Basis of Payment if it was previously approved at a higher level or by the contracting authority being approached now for approval of this amendment.

(iii) If any alteration in the Basis of Payment is proposed, provide justification and support. (iv) If a difference exists between funds authorized and contractual commitments, explain

why.

Annex 6.3 – Preparation of Contract Amendment Approval Documents

Supply Manual Page 3 of 4 Version 10-1 (2010-01-11)

(v) If items are being added, or when establishing a firm Basis of Payment for a contract,

previously issued on a price-to-be-negotiated basis, provide price support. (e) Authority Show the original authority for entry into the contract and the authority for each approved amendment. When Treasury Board (TB) authority has been obtained, give the TB number and date and when the Minister's approval has been obtained and state "ministerial authority." In all other cases, state "departmental authority." Do not show amounts in Part 1. Part 2 - Supporting Data Contract Amendment Request - form PWGSC-TPSGC 1151-4 In completing this form, pay particular attention to providing all supporting information. In particular, note the following: Section A - Physical Progress to Date In this section, summarize the progress of the contract, such as quantities already delivered and the percentage completed; work in progress or completed; advance or progress payments made or any other preliminary expenses; and other matters of a similar nature. Section B - Authorities for and Status of Contract, plus Amount of Proposed Amendment Give specific authorities and authorized amounts under the "Authority and Amount" column for the contract and each amendment (that is, TB, Minister, Deputy Minister, Director General, Director, etc.). Any differences between authorities (approvals) and commitments should be reconciled in Section B. Also, if the amount of the proposed amendment exceeds the funds available, it should be noted in this section. Section C - Basis and Method of Payment as Last Amended Describe briefly the Basis of Payment and Method of Payment as Last Amended, including sales tax position, delivery terms [for example, FOB], advance and progress payments), unless it is proposed to amend the Basis of Payment or Method of Payment. In this case, give a detailed description of the present Basis of Payment and Method of Payment for any portion of the work for which a new Basis of Payment or Method of Payment is being recommended. Section D - Basis of Recommendation (a) Support price and changes in terms or method of payment. (b) Detail all price support for any items being added or when establishing a firm Basis of Payment

for a contract, previously issued on a price-to-be-negotiated basis. (c) Explain any discrepancies between: (a) the amount approved for the contract and amendments (if

any), and (b) the total committed. Note: If numerous items and unit prices have not been detailed in Part 1 of form PWGSC-TPSGC 1151-

1, or in an annex to Part 1, make reference in Section D to the specific document of the file that details the information.

4. Preparation of Treasury Board Amendment Submission

Annex 6.3 – Preparation of Contract Amendment Approval Documents

Supply Manual Page 4 of 4 Version 10-1 (2010-01-11)

Treasury Board approval is required for any contract amendment exceeding the limits outlined in Annex 6.4.2 and Annex 6.4.3 and subject to the exceptions detailed in Annex 6.4.1.

Annex 6.4 – Conditions Imposed on the Approval Authority Limits for PWGSC

Supply Manual Page 1 of 4 Version 10-1 (2010-01-11)

Annex 6.4: Conditions Imposed on the Approval Authority Limits for PWGSC Personnel

(2010-01-11) The approval authority limits for Public Works and Government Services Canada (PWGSC) personnel are subject to the following conditions: (a) that contracting authorities ensure that, for contracts and contract amendments requiring their

approval, the conditions of the contract are consistent with the representations made to them as to the substantive nature of the transaction;

(b) that the Assistant Deputy Minister/Directors General/Regional Directors General/Senior

Directors/Regional Directors ensure that, for contracts and contract amendments requiring their approval, the contract quality control officers in place have been duly consulted and have had an opportunity to review the contractual documents and the substance of the business case (see 6.10.1);

(c) that the Assistant Deputy Minister/Directors General/Regional Directors General/Senior

Directors/Regional Directors ensure that, for contracts and contract amendments requiring their approval, the cost analyst and legal officer assigned to the sector/region have been given the opportunity to review the contractual documents and provide comments. See 6.10.5 and 6.10.10;

(d) that legal review of a solicitation be obtained when the total value of the requirement:

(i) falls within the delegation of authority for Senior Director/Regional Director and above; or (ii) is valued in excess of $50,000,000, whichever is the lowest.

(e) Legal Services must also be consulted when the contracting officer is considering a deviation

from Standard Acquisition Clauses and Conditions Manual clauses or the departmental standard procurement templates. The contracting officer should also seek advice from Legal Services on sensitive requirements. For other situations requiring consultation with Legal Services, see 3.110.

NOTE: The Minister’s approval authority is required for specific submissions described in Annex 6.4.1

Annex 6.4.1 – Approval Authorities and Additional Signing Authorities in Support of Clients’ Programs Only - Other than for Canadian Commercial Corporation

Supply Manual Page 1 of 3 Version 10-1 (2010-01-11)

Annex 6.4.1: Approval Authorities and Additional Signing Authorities in Support of Clients’ Programs Only - Other than for Canadian Commercial Corporation

(2010-01-11) This annex describes the internal approval and signing authorities and exceptions to the internal approval authorities. It also addresses additional signing authorities such as for progress payments, certifications, etc. 1. Approval Authorities

(a) Internal approval and signing authorities are in accordance with Annex 6.4.2 and Annex 6.4.3.

(b) Treasury Board (TB) approval is required for submissions exceeding the authority found

in Annex 6.4.2 and Annex 6.4.3. (c) Exceptions to Annex 6.4.2 and Annex 6.4.3 are described in 1.1 below.

1.1 Exceptions to Internal Approval Authorities 1.1.1 Former Public Servants (a) Contracting limits in Annex 6.4.2 and Annex 6.4.3 apply to submissions granting approval to enter

into a contract including amendments for the services of former public servants in receipt of a pension when the contract value, including amendments, does not exceed $100,000 (competitive) or $25,000 (non-competitive).

(b) TB approval is required for submissions granting approval to enter into a contract including

amendments for the services of former public servants in receipt of a pension when the contract value, including amendments, exceeds $100,000 (competitive) or $25,000 (non-competitive).

NOTE: For more information on the definition of former public servants and pension, see 3.90(b). (c) The fee component in any non-competitive contract must be abated if the individual has been

retired for less than one year and is in receipt of a pension. See 3.90(e). (d) TB approval is required for submissions granting approval to enter into or amend a contract with

former public servants in receipt of a lump sum payment pursuant to the terms of a work force reduction program where the fee component will exceed $5,000 of either the individual contract or a combination of contracts, during the period covered by the lump sum payment. See 3.90(e).

1.1.2 Confirming Orders Submissions granting approval to issue a confirming order must be approved at the Director level or higher based on 50 percent of the non-competitive contract approval authority limits in Annex 6.4.2 and Annex 6.4.3. The 50 percent reduction and the limitation to non-competitive contract approval authority limits apply to all positions below Assistant Deputy Minister. (See 2.75.) 1.1.3 Royalty Payments (a) When royalty payments exceed five percent, Deputy Minister approval is required before entering

into a contract. (b) If there is an increase in the amount of the royalty to be paid or if further items become subject to

royalty payments during the life of a contract, the same guidelines for approval apply.

Annex 6.4.1 – Approval Authorities and Additional Signing Authorities in Support of Clients’ Programs Only - Other than for Canadian Commercial Corporation

Supply Manual Page 2 of 3 Version 10-1 (2010-01-11)

(c) To obtain the approval of the Assistant Deputy Minister for royalties exceeding five percent, the

following information is to be provided on Part 2 of the contract request:

(i) details of the royalties; (ii) a forecast of anticipated future purchases beyond the requirement in the present

submission; (iii) the comments of Legal Services.

1.1.4 National Security Exception (a) The Assistant Deputy Minister, Acquisitions Branch (ADM/AB) must have approved the National

Security Exception (NSE) pursuant to a letter from the client ADM requesting the NSE before the document approval process takes place.

(b) Following NSE approval by the ADM/AB, the normal document approval process and authority

apply. (c) For complete details of the NSE process, see 3.105. 2. Additional Signing Authorities 2.1 Signing authorities for purchase orders, contracts, standing offers, supply arrangements, formal

agreements and arrangements, stores and supply transfer orders, written direction to the Agency of Record, assignments, go-ahead letters and messages, letters of intent, consents to subcontract, termination for convenience notices, and amendments to any of the above, are as follows: (a) in accordance with Annex 6.4.2 and Annex 6.4.3 for goods, services, construction, non-

regulated telecommunication, and architecture and engineering services; (b) and if under departmental seal, together with the Corporate Secretary.

2.2. Advance, Milestone and Progress Payments The authority for certification of advance, milestone and progress payment claims (form PWGSC-TPSGC 1111, Claim for Progress Payment), as a prerequisite for client certification pursuant to section 34 of the Financial Administration Act is as follows: (a) For incumbents of positions listed in Annex 6.4.2, with the exception of Intern Officers/Trainees,

Senior Purchasing Assistants and Procurement Assistants, unlimited certification authority applies;

(b) For Science Procurement Senior Purchasing Assistants:

(i) for contracts beyond their approval authority: certification authority for claims up to $40,000, with the exception of a final claim or of a release of a holdback;

(ii) for contracts within approval authority: certification for all claims.

2.3 Settlement and Release Documents (a) The authority to sign release and settlement documents (form PWGSC-TPSGC 9223-2,

Settlement and Release) for terminations on behalf of the Minister is delegated as follows: (i) Arising from termination for convenience:

Annex 6.4.1 – Approval Authorities and Additional Signing Authorities in Support of Clients’ Programs Only - Other than for Canadian Commercial Corporation

Supply Manual Page 3 of 3 Version 10-1 (2010-01-11)

(A) Director General, Policy, Risk, Integrity and Strategic Management

Sector, Acquisitions Branch (PRISM/AB) (B) Director, Acquisition Program Integrity Secretariat, PRISM/AB (C) Chairman, Contracts Settlement Board

(ii) Other than for termination of convenience, authority is one of the following in the order

listed: (A) Chief Risk Officer (B) Chairman, Contracts Settlement Board.

(b) For assistance, contracting officers may consult the Specialized Support Services for

Procurement Division, at 819-934-1382. 2.4 Industrial Security The Director, Canadian Industrial Security Directorate, has the authority to provide instructions to contractors concerning industrial security requirements. 2.5 Certificates under departmental seal The Assistant Deputy Minister, Corporate Services, Policy and Communications Branch, has the authority for certifying that documents under departmental seal are true copies.

Annex 6.4.2 – Basic Contracting Limits

Supply Manual Page 1 of 7 Version 10-1 (2010-01-11)

Annex 6.4.2: Basic Contracting Limits (2010-01-11)

Instructions (a) The limits shown in the following tables are expressed in terms of thousands (K) or millions (M) of

dollars or, where dollars are not appropriate, in terms of policy or regulatory constraints. (b) The relevant limits for individual officers, which may be lower than the maximums delegated to

the levels above, are contingent upon Acquisitions Branch policies and procedures. Contracting officers must ensure that any authorities they exercise are in accordance with their approved delegation form.

(c) For the purposes of contract approval authorities, an Advance Contract Award Notice (ACAN) is

classified under the “electronic bidding” category. The electronic bidding approval levels apply whenever an ACAN has been posted and no valid Statement of Capabilities was submitted.

(d) In addition to dollar references in the tables, some limits are shown as "Full". This means that

officers in specified organizational positions have full authority for contracting subject to the lesser of Treasury Board/Public Works and Government Services Canada restriction or the availability of funds in the client budget. Unless specified otherwise, the authorities delegated in these tables apply only in the area of responsibility of the contracting officers exercising the authorities. This is directly related to the function contracting officers perform in their positions and the associated responsibilities of that function.

(e) Position titles shown in the tables are examples only. For more information on the Table of

Equivalent Positions, see Annex 6.4.5. Ratifications: Authorities for approving agreements which involve: pre-contractual work, ratification of

contractual commitments, confirming orders, or contracts/amendments which include pre-contractual work clauses, or any other retroactive elements are limited to 50 percent of the non-competitive dollar thresholds specified above. The minimum approval authority is the Director level. The 50 percent reduction and the limitation to non-competitive contract approval authority limits apply to all positions below assistant deputy minister level.

Annex 6.4.2 – Basic Contracting Limits

Supply Manual Page 2 of 7 Version 10-1 (2010-01-11)

GOODS - Contract Approval and Signing Authority Limits

Level Position Electronic Competitive Non-competitive

Approval Signing Approval Signing Approval Signing

Contract Entry

Aggreg. Amend.

Contract Entry

Aggreg. Amend.

Contract Entry

Aggreg.Amend.

Minister $40M $20M Full $10M $5M Full $2M $1M Full

1 ADM $40M $20M Full $10M $5M Full $2M $1M Full

DG, RDG $30M $1.5M Full $7.5M $1.5M Full $1.5M $750K Full

Sr Director, Regional Director

$20M $1M Full $5M $1M Full $1M $750K Full

2 Director $10M $500K Full $2.5M $500K Full $500K $500K Full

Manager $5M $200K Full $1M $200K Full $400K $200K Full

3 Supply Team Leader $1M $100K C:$10M

A:$500K $400K $100K C:$2.5M A:$500K $150K $100K C:$500K

A:$500K

Supply Specialist $300K $50K C:$5M

A:$200K $300K $50K C:$1M A:$200K $100K $50K C:$400K

A:$200K

4 Supply Officer $100K $15K C:$1M

A:$100K $100K $15K C:$400K A:$100K $30K $15K C:$150K

A:$100K

Intern Officer/ Trainee $70K $10K C:$300K

A:$50K $70K $10K C:$300KA:$50K $20K $10K C:$100K

A:$50K Sr.

Purchasing Assistant

$40K $5K C:$100KA:$15K $40K $5K C:$100K

A: $15K $10K $5K C:$30K A:$15K

Proc. Assistant $10K $2K C:$70K

A:$10K $10K $2K C:$70K A:$10K $4K $2K C:$20K

A:$10K Legend: C = Contract Signing Authority

A = Aggregate Contract Amendment Signing Authority Remarks: When using this table, contracting authorities must refer to the Instructions found at the

beginning of this annex.

Annex 6.4.2 – Basic Contracting Limits

Supply Manual Page 3 of 7 Version 10-1 (2010-01-11)

SERVICES - Contract Approval and Signing Authority Limits

(excluding construction, non-regulated telecommunication, and A&E services)

Level Position Electronic Competitive Non-competitive

Approval Signing Approval Signing Approval Signing Contract

Entry Aggreg. Amend

Contract Entry

Aggreg. Amend

Contract Entry

Aggreg. Amend

Minister $20M $10M Full $10M $5M Full $3M $1.5M Full

1 ADM $20M $10M Full $10M $5M Full $3M $1.5M Full

DG, RDG $15M $1.5M Full $7.5M $1.5M Full $2.25M $1.125M Full

Sr. Director, Regional Director

$10M $1M Full $5M $1M Full $1.5M $750K Full

2 Director $5M $400K Full $2.5M $400K Full $400K $400K Full

Manager $2.5M $200K Full $1M $200k Full $300K $200K Full

3 Supply Team Leader

$1M $100K C:$5M A:$400K

$400K $100K C:$2.5M A:$400K

$200K $100K C:$400KA:$400K

Supply Specialist

$300K $50K C:$2.5M A:$200K

$300K $50K C:$1M A:$200K

$100K $50K C:$300KA:$200K

4 Supply Officer $100K $15K C:$1M A:$100K

$100K $15K C:$400KA:$100K

$30K $15K C:$200KA:$100K

Inter Officer/Trainee

$70K $10K C:$300KA:$50K

$70K $10K C:$300KA:$50K

$20K $10K C:100K A:$50K

Sr. Purchasing Assistant

$40K $5K C:$100KA:15K

$40K $5K C:$100KA:15K

$10K $5K C:30K A:$15K

Proc. Assistant

$10K $2K C:$70K A:$10K

$10K $2K C:$70K A:$10K

$4K $2K C:$20K A:$10K

Legend: C = Contract Signing Authority

A = Aggregate Contract Amendment Signing Authority Remarks: When using this table, contracting authorities must refer to the Instructions found at the

beginning of this annex.

Annex 6.4.2 – Basic Contracting Limits

Supply Manual Page 4 of 7 Version 10-1 (2010-01-11)

CONSTRUCTION - Contract Approval and Signing Authority Limits (unless otherwise approved by Treasury Board, these limits are effective

from April 1, 2009 to March 31, 2011) Level Position Electronic Competitive Non-competitive

Approval Signing Approval Signing Approval Signing

Contract Entry

Aggreg. Amend.

Contract Entry

Aggreg Amend

Contract Entry

Aggreg. Amend.

Minister $40 M $20 M Full $20 M $10 M Full $1M $1M Full

1 ADM $40 M $20 M Full $20 M $10 M Full $1M $1M Full

DG, RDG $30 M $3 M Full $15 M $1.5 M Full $750 K $750 K Full

Sr Director, Regional Director

$20 M $2M Full $10 M $1M Full $500 K $500 K Full

2 Director $10 M $1M Full $5 M $500 K Full $250 K $125K Full

Manager $5 M $500 K Full $2.5 M $250 K Full $200 K $100 K Full

3 Supply Team Leader

$2.5 M $250 K C:$10M A:$1M $1M $100K C:$5M

A:$500K $100 K $50 K C:$250KA:$125K

Supply Specialist $750 K $75 K C:$5 M

A:$500 K $500 K $50K C:$2.5MA:$250K $50K $25 K C:$200K

A:$100K

4 Supply Officer $250 K $25K C:$2.5M

A:$250K $150 K $25K C:$1M A:$100K $25K $15 K C:$100K

A:$50K

Intern Officer/ Trainee

Sr. Purch. Assistant

Proc. Assistant

Legend: C = Contract Signing Authority

A = Aggregate Contract Amendment Signing Authority Remarks: (a) When using this table, contracting authorities must refer to the Instructions found at the beginning

of this annex. (b) Defence Construction Canada (DCC) has exclusive authority to acquire or construct defence

projects required by the Department of National Defence (DND). Contract authorities for construction services carried out on behalf of DND are limited by an agreement between PWGSC and DCC, which stipulates that PWGSC will carry out construction services on behalf of DND

Annex 6.4.2 – Basic Contracting Limits

Supply Manual Page 5 of 7 Version 10-1 (2010-01-11)

only if the value of the services does not exceed $60,000. If the value of such services carried out on behalf of DND exceeds $60,000, approval to proceed must be obtained from DCC.

Authority Reference: • Defence Production Act, articles 6.(1), 10.(2) and 16(c) • Operating Agreement between DND and DCC dated November 16, 1994.

Annex 6.4.2 – Basic Contracting Limits

Supply Manual Page 6 of 7 Version 10-1 (2010-01-11)

NON-REGULATED TELECOMMUNICATION SERVICES

- Contract Approval and Signing Authority Limits Level Position Electronic Competitive Non-competitive

Approval Signing Approval Signing Approval Signing

Contract Entry

Aggreg. Amend.

Contract Entry

Aggreg. Amend.

Contract Entry

Aggreg. Amend.

Minister $200M $100M Full $20M $10M Full $3M $1.5M Full

1 ADM $200M $100M Full $20M $10M Full $3M $1.5M Full

DG, RDG $150M $1.5M Full $15M $1.5M Full $2.25M $1.125M Full

Sr. Director, Regional Director

$100M $1M Full $10M $1M Full $1.5M $750K Full

2 Director $50M $400K Full $5M $400K Full $400K $400K Full

Manager $2.5M $200K Full $1M $200K Full $300K $200K Full

3 Supply Team Leader

$1M $100K C:$50M A: $400K $400K $100K C:$5M

A:$400K $200K $100K C:$400KA:$400K

Supply Specialist $300K $50K C:$2.5M

A:$200K $300K $50K C:$1M A:$200K $100K $50K C:$300K

A:$200K

4 Supply Officer $100K $15K C:$1M

A:$100K $100K $15K C:$400KA:$100K $30K $15K C:$200K

A:$100K

Intern Officer/ Trainee

$70K $10K C:$300K A:$50K $70K $10K C:$300K

A:$50K $20K $10K C:$100KA:$50K

Sr. Purch. Assistant $40K $5K C:$100K

A:$15K $40K $5K C:$100KA:$15K $10K $5K C:$30K

A:$15K

Proc. Assistant $10K $2K C:$70K

A:$10K $10K $2K C:$70K A:$10K $4K $2K C:$20K

A:$10K Legend: C = Contract Signing Authority

A = Aggregate Contract Amendment Signing Authority Remarks: When using this table, contracting authorities must refer to the Instructions found at the

beginning of this annex.

Annex 6.4.2 – Basic Contracting Limits

Supply Manual Page 7 of 7 Version 10-1 (2010-01-11)

A&E SERVICES - Contract Approval and Signing Authority Limits

(unless otherwise approved by Treasury Board, these limits are effective from April 1, 2009 to March 31, 2011.)

Level Position Electronic Competitive Non-competitive

Approval Signing Approval Signing Approval Signing

Contract Entry

Aggreg. Amend.

Contract Entry

Aggreg. Amend.

Contract

Entry

Aggreg. Amend.

Minister $5 M $2.5M / $1.25M 1 Full $2.5 M $1.25M /

$625K 1 Full $250K $250K / $250K 1 Full

1 ADM $5 M $2.5M / $1.25M 1 Full $2.5M $1.25M /

$625K 1 Full $250K $250K / $250K 1 Full

DG, RDG $3.75 M $750 K/

$375K 1 Full $1.5M $375K / $200K 1 Full $200K $200K /

$100K 1 Full

Sr Director, Regional Director

$2.5M $500K / $250K 1 Full $1M $250K /

$125K 1 Full $175K $150K / $75K 1 Full

2 Director $1.5M $150K /

$75K 1 Full $750K $100K / $50K 1 Full $150K $125K /

$67.5K 1 Full

Manager $1M $100K /

$50K 1 Full $500K $75K / $37.5K 1 Full $125K $100K /

$50K 1 Full

3 Supply Team Leader

$750 K $75K / $37.5K 1

C:$1.5M A: $150K $300 K $50K /

$25K 1 C:$750K A:$100K $100K $50K /

$25K 1 C:$150K A:$125K

Supply Specialist $500 K $50K /

$25K 1 C:$1M

A:$100 K $200K $25 K / $15K 1

C:$500K A:$75 K $75K

$25K / $12.5K

1

C:$125K A:$100K

4 Supply Officer $125K $25K /

$10K 1 C:$750K A:$75 K $75 K $25K /

$5K 1 C:$300K A:$50K $50K $15K /

$5K 1 C:$100K A:$50K

Intern Officer/ Trainee

Sr. Purchasing Assistant

Proc. Assistant

Legend: C = Contract Signing Authority

A = Aggregate Contract Amendment Signing Authority 1 = Authority to issue subsequent amendments to an amendment approved by Treasury Board to the

maximum limit shown. Remarks: When using this table, contracting authorities must refer to the Instructions found at the

beginning of this annex.

Annex 6.4.3 – Exceptional Contracting Limits

Supply Manual Page 1 of 7 Version 10-1 (2010-01-11)

Annex 6.4.3: Exceptional Contracting Limits (2010-01-11)

INSTRUCTIONS (a) The tables that form part of this annex must be read in conjunction with the "Notes to Exceptional

Contracting Limits” (Annex 6.4.4), using the column numbers for reference. The notes provide additional information about the authorities contained in the tables, describing the meanings of column headings and documenting the relevant restrictions that apply to various authorities but which are not shown in the tables themselves.

(b) The limits shown in this table are expressed in terms of thousands (K) or millions (M) of dollars or,

where dollars are not appropriate, in terms of policy or regulatory constraints. (c) The relevant limits for individual officers, which may be lower than the maximums delegated to

the levels above, are contingent upon Acquisitions Branch policies and procedures. Acquisitions personnel are to ensure that any authorities they exercise are in accordance with their approved individual delegation form.

(d) In addition to dollar references in the tables, some limits are shown as "Full". This means that

officers in specified organizational positions have full authority for contracting subject to the lesser of Treasury Board/Public Works and Government Services Canada restriction or the availability of funds in the client budget. Unless specified otherwise, the authorities delegated in these tables apply only in the area of responsibility of the contracting officers exercising the authorities. This is directly related to the function contracting officers performs in their positions and the associated responsibilities of that function.

(e) Position titles shown in the tables are examples only. For more information, see the Table of

Equivalent Positions in Annex 6.4.5.

Annex 6.4.3 – Exceptional Contracting Limits

Supply Manual Page 2 of 7 Version 10-1 (2010-01-11)

Table 1 - Contract Approval and Signing Authority Limits*

(*Authority limits on this page apply to the cumulative value of the contract including amendments)

Level Position

Conditional Emergency Contracting

Authority

Special Contracting Limits Repair and overhaul of

military equipment

Procurement under the U.S.

Foreign Military Sales

Program Transp.

services from common carriers

Regulated electricity, gas, water, sewage disposal, heat and telecom.

services

Deregulated electricity

and natural gas

Minister $15M Full Full $100M $50M $25M

1 ADM $15M (See Notes)

Full (See Notes)

Full (See Notes)

$100M (See Notes) $50M $25M

DG, RDG

Full (See Notes

1 and 2)

Full (See Notes

1and 2)

$50M (See Notes

1 and 2)

$25M (See Notes

1 and 2)

$12.5M (See Notes

1 and 2) Sr Director,

Regional Director

Full

(See Notes 1and 2)

Full (See Notes

1 and 2)

$50M (See Notes

1 and 2)

$25M (See Notes

1 and 2)

$12.5M (See Notes

1 and 2)

2 Director Max. $1M (See Note 1)

Max. $1M (See Note 1)

Max. $1M (See Note 1)

Max. $20M (See Note 1)

Max. $20M (See Note 1)

Manager Max. $1M (See Note 1)

Max. $1M (See Note 1)

Max. $1M (See Note 1)

Max. $20M (See Note 1)

Max. $20M (See Note 1)

3 Supply Team Leader

Max. $500K (See Note 1)

Max. $500K (See Note 1)

Max. $500K (See Note 1)

Max. $10M (See Note 1)

Max. $10M (See Note 1)

Supply Specialist Max. $500K

(See Note 1) Max. $500K (See Note 1)

Max. $500K (See Note 1)

Max. $10M (See Note 1)

Max. $10M (See Note 1)

4 Supply Officer Max. $50K

(See Note 1) Max. $50K

(See Note 1) Max. $50K

(See Note 1)Max. $1M

(See Note 1) Max. $1M

(See Note 1) Intern

Officer/ Trainee

Max. $50K (See Note 1)

Max. $50K (See Note 1)

Max. $50K (See Note 1)

Max. $1M (See Note 1)

Max. $1M (See Note 1)

Sr. Purchasing Assistant

Max. $50K (See Note 1)

Max. $50K (See Note 1)

Max. $50K (See Note 1)

Max. $1M (See Note 1)

Max. $1M (See Note 1)

Proc. Assistant Max. $50K

(See Note 1) Max. $50K

(See Note 1) Max. $50K

(See Note 1)Max. $1M

(See Note 1) Max. $1M

(See Note 1)

See Note in Column 46 47 48 49 50 51

Position Titles: Position titles shown above are examples only - all equivalent positions (as shown in the Table of Equivalent Positions found in Annex 6.4.2) have the same authorities as indicated above. The relevant limits for individual officers, which may be lower than the maximums delegated to the levels above, are contingent upon Acquisitions Branch policies and procedures. Contracting officers must ensure that any authorities they exercise are in accordance with their approved delegation form.

Annex 6.4.3 – Exceptional Contracting Limits

Supply Manual Page 3 of 7 Version 10-1 (2010-01-11)

The limits shown in this table are expressed in terms of thousands (K) or millions (M) of dollars or, where dollars are not appropriate, in terms of policy or regulatory constraints. The word “Full” means that the authority limit is subject to the lesser of TB/departmental restriction or budgetary limit (i.e., the availability of funds). Remarks: Contracting authorities must refer to the following: (a) Instructions to Exceptional Contracting Limits, found at the beginning of this annex. (b) Explanation of Notes (as referred to in table above) found in Annex 6.4.4.

Annex 6.4.3 – Exceptional Contracting Limits

Supply Manual Page 4 of 7 Version 10-1 (2010-01-11)

Table 2 - Contract Approval and Signing Authority Limits*

(*Authority limits on this page apply to the cumulative value of the contract including amendments)

Level Position Procurement of

ammunition under the Munitions

Supply Program

Agreements for the supply of

edible agricultural products for foreign aid programs

Agreements for the transport by

ocean-going vessel of any

goods shipped for CIDA

Procurement of Bulk Fuels

Minister $50M $10M $5M $10M 1 ADM $50M $10M

(See Notes ) $5M

(See Notes ) $10M

(See Notes)

DG, RDG $25M (See Notes 1 and 2)

$5M (See Notes 1 and 2)

$2.5M (See Notes 1 and 2)

$10M (See Notes 1 and 2)

Sr. Director, Regional Director

$25M (See Notes 1 and 2)

$5M (See Notes 1 and 2)

$2.5M (See Notes 1 and 2)

$10M (See Notes 1 and 2)

2 Director Full (See Note 1)

Max. $2.5M (See Note 1)

Max. $1M (See Note 1)

Max. $2.5M (See Note 1)

Manager Full (See Note 1)

Max. $2.5M (See Note 1)

Max. $1M (See Note 1)

Max. $2.5M (See Note 1)

3 Supply Team Leader

Full (See Note 1)

Max. $1M (See Note 1)

Max. $250K (See Note 1)

Max. $1M (See Note 1)

Supply Specialist

Full (See Note 1)

Max. $1M (See Note 1)

Max. $250K (See Note 1)

Max. $1M (See Note 1)

4 Supply Officer Full (See Note 1)

Max. $250K (See Note 1)

Max. $100K (See Note 1)

Max. $250K (See Note 1)

Intern Officer/ Trainee

Full (See Note 1)

Max. $250K (See Note 1)

Max. $100K (See Note 1)

Max. $250K (See Note 1)

Sr. Purchasing Assistant

Full (See Note 1)

Max. $250K (See Note 1)

Max. $100K (See Note 1)

Max. $250K (See Note 1)

Proc. Assistant Full (See Note 1)

Max. $250K (See Note 1)

Max. $100K (See Note 1)

Max. $250K (See Note 1)

See Note in Column 52 53 54 55

Remarks: Contracting authorities must refer to the following: (a) Instructions to Exceptional Contracting Limits found at the beginning of this annex. (b) Explanation of Notes (as referred to in table above) found in Annex 6.4.4.

Annex 6.4.3 – Exceptional Contracting Limits

Supply Manual Page 5 of 7 Version 10-1 (2010-01-11)

Table 3 - Contract Approval and Signing Authority Limits

(*Authority limits on this page apply to the cumulative value of the contract/standing offer/supply arrangement including amendments/revisions)

Level Position Standing Offers and Supply Arrangements

Energy Management Contracts

Approval Authority Signing Authority

Contract Entry Aggregate of Amendment

Minister Full $25M including amendments Full 1 ADM Full (See Notes) $25M including amendments

(See Notes) Full

DG, RDG Full (See Note 1) $25M including amendments (See Notes) Full

Sr. Director, Regional Director Full (See Note 1) $25M including amendments

(See Notes) Full

2 Director Max. $20M (See Note 1) $10M (See Notes) $5M (See Notes) Full

Manager Max. $20M (See Note 1) $5M (See Notes) $2.5M (See Notes) Full

3 Supply Team Leader Max. $10M (See Note 1) Full

Supply Specialist Max. $10M (See Note 1) Full

4 Supply Officer Max. $1M (See Note 1) Full

Intern Officer/ Trainee Max. $1M (See Note 1) Full

Sr. Purchasing Assistant Max. $1M (See Note 1) Full

Proc. Assistant Max. $1M (See Note 1) Full

See Note in Column 56 57 58 59

Remarks: Contracting authorities must refer to the following: (a) Instructions to Exceptional Contracting Limits found at the beginning of this annex. (b) Explanation of Notes (as referred to in table above) found in Annex 6.4.4. For standing offers: Approval, signing and amendment authorities are set out in above. The Contract Planning and Advance Approval (CPAA) issued to seek advance approval (or the formal procurement plan to seek procurement strategy approval) to use the standing offer method of supply must be approved based on the total estimated value, Goods and Services Tax/Harmonized Sales Tax (GST/HST) included, of the requirement (the whole project/program) that is proposed to be satisfied by this method of supply. Therefore, if it is intended to issue more than one standing offer against a Request for a Standing Offer, the sum of the total estimated value, GST/HST included, of all resulting standing offers must be used to obtain CPAA or formal procurement plan approval.

Annex 6.4.3 – Exceptional Contracting Limits

Supply Manual Page 6 of 7 Version 10-1 (2010-01-11)

Table 4 - Disposal of Surplus Crown Assets

(See Notes) Level Position Disposal Approval and Signing Authority Limits

Sales Limitations Inventory Shortages

Claims and Discrepancies

Comp. Non-comp.

Aggreg. Amend.

Minister Full Full Full Full Full

1 ADM Full Full Full Full Full DG, RDG Full Full Full Full Full Sr. Director, Regional Director Full Full Full Full Full

2 Director (incl. Crown Assets Distribution, Seized Property) Full Full Full Full Full

Manager $250K $75K $50K $2.5K Full

3 Supply Team Leader, Chief (Crown Assets Dist.) $100K $25K $5K $0.2K

Supply Specialist $100K $25K $5K

4 Supply Officer $30K $10K $1K

Intern Officer/Trainee

Sr. Purchasing Assistant

Procurement Assistant

See Note in Column 60 61 62 63 64 Remarks: Contracting authorities must refer to the following: (a) Instructions to Exceptional Contracting Limits found at the beginning of this annex. (b) Explanation of Notes (as referred to in table above) found in Annex 6.4.4.

Annex 6.4.3 – Exceptional Contracting Limits

Supply Manual Page 7 of 7 Version 10-1 (2010-01-11)

Table 5 - Other Authority Limits

Level Position

Canadian Commercial Corporation Instructions Tools and Equipment required by Contractors for R&O of

Defence supplies

Cert. of Defence supplies

Seized Property

Management and

Disposal (See Notes)

Disposal of Seized Real

Property (See Notes)

Contracting Documents Bid Certification Contract Signing Bids,

Proposals and

Quotations

Aggreg. Amend. Contract Aggreg.

Amend.

Minister Full Full Full Full Full Full Full Full

1 ADM Full Full Full Full Full Full Full (See Notes)

Full (See notes)

DG, RDG Full Full Full Full Full Full Full (See Notes)

Full (See notes)

Sr Director, Regional Director

Full Full Full Full Full Full Full (See Notes)

Full (See notes)

2 Director Full Full Full Full Full Full Full (See Notes)

Full (See notes)

Manager $1M $250K $4M $2M Full Full $150K (See Notes)

Full (See notes)

3 Supply Team Leader $500K $125K $2M $500K $100K

(See Notes)

Supply Specialist $250K $75K $1M $250K $70K

(See Notes)

4 Supply Officer $100K $25K $200K $50K $30K (See Notes)

Intern Officer/ Trainee $60K $12K $100K $20K $20K

(See Notes)

Sr. Purchasing Assistant

$40K $8K $50K $10K 10K (See Notes)

Procurement Assistant $20K $4K $20K $4K 5K

(See Notes)

See Note in Column 65 66 67 68 69 70 71 72

Remarks: Contracting authorities must refer to the following: (a) Instructions to Exceptional Contracting Limits found at the beginning of this annex. (b) Explanation of Notes (as referred to in table above) found in Annex 6.4.4.

Annex 6.4.4 - Notes to Exceptional Contracting Limits

Supply Manual Page 1 of 6 Version 10-1 (2010-01-11)

Annex 6.4.4: Notes to Exceptional Contracting Limits (2010-01-11) The notes below apply to the matching column number in each table contained in Annex 6.4.3: Column 46 Conditional Emergency Contracting Authority Approval authorities for non-competitive contracts and amendments, for goods and services up to $15M rests with the Minister of Public Works and Government Services Canada (PWGSC) and the Assistant Deputy Minister, Acquisitions Branch, in response to pressing emergencies by departments where there will be significant human and/or financial risk on condition that a report be sent to the Treasury Board (TB) Secretariat within 60 calendar days of the authorization or beginning of work. This emergency contracting authority can be used only if all of the following criteria are met: (a) the Assistant Deputy Minister, Acquisitions Branch, invokes the National Security or Extreme

Urgency provisions of the applicable trade agreements; (b) the requirement cannot be satisfied by normal contracting procedures due to the urgency of the

situation; and (c) the applicable client departmental minister requests that the PWGSC Minister or the Assistant

Deputy Minister, Acquisitions Branch, approve the use of this authority. This authority remains subject to the reporting requirement for the use of emergency contracting as set out in the TB Contracting Policy. Authority Reference: • TB Contracting Policy, Appendix C - Contracts Directive, Part III, Emergency Contracting Limit -

Section 5. Column 47 Transportation Services from Common Carriers Approval authority to enter into or amend a service contract for transportation services from common carriers, if the rates charged do not exceed the normal rates for such services: Note 1: in accordance with Annex 6.4.2, up to the maximum indicated; Note 2: if the estimated value of the contracts or amendments exceeds the limits in Annex 6.4.2. • All positions in Level 1: Full Authority Reference: • TB Contracting Policy, Appendix C - Contracts Directive, Part II, Departmental Index to

Exceptional Contracting Limits, Article 1.(a). Column 48 Regulated electricity, gas, water, sewage disposal, heat and telecommunication

services Approval authority to enter into or amend a service contract for electricity, gas, water, sewage disposal, heat and telecommunication services, which by full or partial regulation, are only available from suppliers at regulated prices or at prices accepted by a regulatory mechanism, if (a) the rates do not exceed the normal rates, and (b) the contract does not involve negotiated installation or capital charges in excess of $200,000.

Annex 6.4.4 - Notes to Exceptional Contracting Limits

Supply Manual Page 2 of 6 Version 10-1 (2010-01-11)

Note 1: in accordance with the applicable table of Annex 6.4.2, up to the maximum indicated; Note 2: if the estimated value of the contract or contract amendment exceeds the limits in the applicable

table of Annex 6.4.2. • All positions in Level 1: Full Authority Reference: • TB Contracting Policy, Appendix C - Contracts Directive, Part II, Departmental Index to

Exceptional Contracting Limits, Article 1.(b). Column 49 Deregulated electricity and natural gas Approval authority to enter into or amend a service contract for deregulated electricity and natural gas using competitive electronic bidding, when the deregulated portion does not exceed $100M: Note 1: in accordance with Annex 6.4.2, up to maximum indicated; Note 2: if the estimated value of the contract or contract amendment exceeds the limits in Annex 6.4.2, up

to the maximum indicated. Authority Reference: • TB Contracting Policy, Appendix C - Contracts Directive, Part II, Departmental Index to

Exceptional Contracting Limits, Article 1.(c). Column 50 Repair and overhaul of military equipment Approval authority to enter into or amend a contract to repair and overhaul military equipment: Note 1: in accordance with the applicable table of Annex 6.4.2 up to the maximum indicated; Note 2: if the total amount payable under the contract, including any amendments, exceeds the limits in

the applicable table of Annex 6.4.2 up to the maximum indicated. Authority Reference: • TB Contracting Policy, Appendix C - Contracts Directive, Part II, Departmental Index to

Exceptional Contracting Limits, Section 7. Column 51 Procurement under the U.S. Foreign Military Sales Program Approval authority to enter into or amend a contract for procurement under the U.S. Foreign Military Sales Program: Note 1: in accordance with the applicable table of Annex 6.4.2; Note 2: if the total amount payable under the contract, including any amendments, exceeds the limits in

the applicable table of Annex 6.4.2, up to the maximum indicated. Authority Reference: • TB Contracting Policy, Appendix C - Contracts Directive, Part II, Departmental Index to

Exceptional Contracting Limits, Section 31. Column 52 Procurement of ammunition under the Munitions Supply Program Approval authority to enter into or amend a goods contract for the procurement of ammunition under the Munitions Supply Program: Note 1: in accordance with Annex 6.4.2; Note 2: if the total amount payable under the contract, including any amendments, exceeds the limits in

Annex 6.4.2, up to the maximum indicated.

Annex 6.4.4 - Notes to Exceptional Contracting Limits

Supply Manual Page 3 of 6 Version 10-1 (2010-01-11)

Authority Reference: • TB Contracting Policy, Appendix C - Contracts Directive, Part II, Departmental Index to

Exceptional Contracting Limits, Section 30. Column 53 Agreements for the supply of edible agricultural products for foreign aid programs Approval authority to enter into or amend a goods contract for the procurement of any edible agricultural product for foreign aid programs, if: (a) the price offered is reasonable under prevailing market conditions, the lowest-priced bid is

accepted or, when necessary to obtain the tonnage demanded, successive lowest-priced bids are accepted, or

(b) a bid solicitation FAS (Free Alongside Ship) multiple ports is issued, the lowest-priced bid is

accepted or, when necessary to obtain the tonnage demanded, successive lowest-priced bids that result in the lowest total cost to the recipient country are accepted:

Note 1: in accordance with Annex 6.4.2, up to the maximum indicated; Note 2: if the total amount payable under the agreement, including any amendments, exceeds the limits

in Annex 6.4.2, up to the maximum indicated. Authority Reference: • TB Contracting Policy, Appendix C - Contracts Directive, Part II, Departmental Index to

Exceptional Contracting Limits, Section 5. Column 54 Agreements for the transport by ocean-going vessel of any goods shipped for the

Canadian International Development Agency Approval authority to enter into or amend an agreement for the transport by ocean-going vessel of any goods shipped for the Canadian International Development Agency, if (a) the price offered is considered to be reasonable under prevailing market conditions, and (b) the lowest-priced bid is accepted or, if it is necessary to accept more than one bid to

accommodate the quantity of goods to be shipped, successive lowest-priced bids are accepted: Note 1: in accordance with Annex 6.4.2, up to maximum indicated; Note 2: if the total amount payable under the agreement, including any amendments, exceeds the limits

in Annex 6.4.2, up to the maximum indicated. Authority Reference: • TB Contracting Policy, Appendix C - Contracts Directive, Part II, Departmental Index to

Exceptional Contracting Limits, Section 6. Column 55 Procurement of bulk fuels Approval authority to enter into or amend a contract for the procurement of bulk fuels, if the total amount payable under the contract, including any amendments, or call-up against a standing offer, does not exceed $10,000,000: Note 1: in accordance with the applicable table of Annex 6.4.2, up to the maximum indicated; Note 2: if the planned limit on the total expenditure exceeds the limits in the applicable table of Annex

6.4.2, up to the maximum indicated. Authority Reference:

Annex 6.4.4 - Notes to Exceptional Contracting Limits

Supply Manual Page 4 of 6 Version 10-1 (2010-01-11)

• TB Contracting Policy, Appendix C - Contracts Directive, Part II, Departmental Index to Exceptional Contracting Limits, Section 32.

Column 56 Standing Offers and Supply Arrangements Approval authority to use a standing offer method of supply or a supply arrangement when the resulting individual call-ups or contracts will not exceed the limits prescribed by TB: Note 1: in accordance with the applicable table of Annex 6.4.2 up to the maximum indicated; Note 2: if the total estimated expenditure exceeds the limits in the applicable table of Annex 6.4.2. NOTE: See Column 55 for Procurement of Bulk Fuels. Columns 57, 58 and 59 Energy Management Contracts Approval authority to enter into or amend a service contract for the procurement of energy supply, energy efficiency improvements, energy management services and energy management monitoring and training if the total amount under the contract, including any amendments: (a) does not exceed $25M or the maximum indicated, and (b) provided that each custodian’s first energy management contract over $1M is submitted for TB

approval. Authority References: • TB Contracting Policy, Section 8.10; • TB Contracting Policy, Appendix C - Contracts Directive, Part II, Departmental Index to

Exceptional Contracting Limits; Section 49. Columns 60 to 64 Disposals of Surplus Crown Assets These are the approval authorities required for the sale, exchange, transfer to another department, lease, lend or otherwise disposal of surplus government assets by Crown Assets Distribution Centres and the Crown Assets Distribution Directorate. These authorities must be exercised only by: the ADM, Acquisitions Branch; the Director General, Commercial Acquisitions and Supply Management Sector; the Director, Crown Assets Distribution; the Regional Directors General, the Regional Directors, Acquisitions, and those positions under the Crown Assets Distribution Directorate and Crown Assets Distribution Centres. The authorities in these columns apply to all sales transacted with: (a) the general public; (b) any preferred customer, defined in two groups:

(i) Group 1, consisting of federal government departments or agencies listed in Schedules I and II of the Financial Administration Act, as well as Branches Designated as Departments for the purposes of the Act; and

(ii) Group 2, consisting of provincial government departments and agencies; municipal

government bodies and boards; incorporated Indian bands or councils; educational institutions, supported financially through federal, provincial or municipal subsidy or concession; or charitable or non-profit organizations with appropriate certification status.

(c) if surplus assets have been offered to the public, preferred status will not be recognized.

However, the party may submit an offer in the normal manner. Authority References:

Annex 6.4.4 - Notes to Exceptional Contracting Limits

Supply Manual Page 5 of 6 Version 10-1 (2010-01-11)

• Surplus Crown Assets Act • TB Directive on Disposal of Surplus Material Columns 65 to 68 Canadian Commercial Corporation This is the authority for PWGSC to carry out contracting services in relation to Canadian Commercial Corporation (CCC)’s export activities. Authority Reference: • Interdepartmental Memorandum of Understanding between CCC and PWGSC. Column 69 Instructions - Tools and Equipment As part of the fulfilment of the Minister’s duties and responsibilities under the Defence Production Act, this is the authority to issue instructions for shipment, transportation, storage and warehousing of machine tools, special production tooling and special test equipment that are required by contractors in the manufacturing or in the repair and overhaul of defence supplies or other equipment. Authority Reference: • Defence Production Act. Column 70 Certification of Defence Supplies This is the authority to provide the certification required by the Canada Revenue Agency from PWGSC that items imported, pursuant to contract, by the Department of National Defence are "defence supplies". “Defence supplies”, as defined in the Defence Production Act, means (a) arms, ammunition, implements of war, vehicles, mechanical and other equipment, watercraft,

amphibious craft, aircraft, animals, articles, materials, substances and things required or used for the purposes of the defence of Canada or for cooperative efforts for defence being carried on by Canada and an associated government,

(b) ships of all kinds, and (c) articles, materials, substances and things of all kinds used for the production or supply of

anything mentioned in paragraph (a) or (b) or for the construction of defence projects. Authority Reference: • Canada Border Services Agency, Memorandum D8-9-3, Tariff Item 9982.00.00; • Defence Production Act. Column 71 Seized Property Management and Disposal Approval and signing authorities under the Seized Property Management Act and Regulations are to manage and dispose of all seized properties (excluding disposal of seized real property). These authorities are to be exercised only by the ADM, Acquisitions Branch, Director General Commercial Acquisitions and Supply Management Sector, and by those officers occupying a position within the Seized Property Management Directorate who have been delegated authorities under the Seized Property Management Act. Authority Reference: • Seized Property Management Act and Regulations Column 72 Disposal of Seized Real Property

Annex 6.4.4 - Notes to Exceptional Contracting Limits

Supply Manual Page 6 of 6 Version 10-1 (2010-01-11)

This statutory authority to dispose of seized real property is found in the Seized Property Management Act. Section 10 of the Seized Property Disposition Regulations specifies that where the Minister of Public Works and Government Services disposes of property that is real property, the Minister will do so in accordance with the Federal Real Property and Federal Immovables Act and Regulations. Therefore, the Minister has signed a stand-alone Section 3 Authorization pursuant to the Federal Real Property and Federal Immovables Act. This authority is delegated as follows:

Specific Delegation of Authority Level 1 Assistant Deputy Minister, Acquisitions Branch

Director General, Commercial Acquisitions and Supply Management Sector

FULL

Level 2 Director, Seized Property Management Directorate FULL Authority Reference: • Seized Property Management Act • Seized Property Disposition Regulations • Federal Real Property and Federal Immovables Act and Regulations

Annex 6.4.5 – Table of Equivalent Positions

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Annex 6.4.5: Table of Equivalent Positions (2010-01-11) Purpose Unless otherwise specified, all positions in this table are in the Acquisitions Branch, located in either headquarters or at client locations, or in regional operations with responsibility for common service acquisition functions. Remarks: 1. Unless restricted by legislation, regulation, or policy, the Deputy Minister and the Associate

Deputy Minister have the same authorities as the Minister. 2. For any position titles not listed in this Table of Equivalent Positions, the equivalent positions as

recognized by the Chief Financial Officer will apply.

TABLE OF EQUIVALENT POSITIONS Level 1 Assistant Deputy Minister, Acquisitions

Director General, Acquisitions Regional Director General

Senior Director, Acquisitions Regional Director, Acquisitions

Level 2 Director, Acquisitions Director, Seized Property Management Directorate

Manager Project Manager Procurement Manager Manager (Koblenz) Senior Contracts Officer (Washington)

Level 3 Supply Team Leader Chief Supervisor Senior Procurement Officer Senior Contract Management Officer

Supply Specialist Team Leader Senior Case Officer Project Officer Procurement Officer Contract Management Officer Marine Technical Inspector (when performing purchasing functions) Senior Contracts Officer

Level 4 Supply Officer Export Transportation Officer Purchasing Officer Contracts Officer Case Officer

Intern Officer/Trainee Senior Purchasing Assistant Procurement Assistant

Purchasing Assistant Sales Representative (Crown Assets Distribution)

Annex 6.4.5 – Table of Equivalent Positions

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

Project Clerk Contract Clerk

Annex 6.4.6 – Contract Amendment Approval Instructions

Supply Manual Page 1 of 6 Version 10-1 (2010-01-11)

Annex 6.4.6: Contract Amendment Approval Instructions (2010-01-11) When the correct approval authority level for a proposed amendment is being determined, consideration must be given not only to the value of the amendment but also to the cumulative value (or aggregate) of amendments. The amendment approval authority level is based on the aggregate amendment value excluding negative and pre-approved amendments. Following is an example of how to determine the appropriate authority for amendments to a contract awarded on a competitive basis. 1. Determining the Amendment Approval Authority for Competitive Contracts for Goods A Contract Planning and Advance Approval (CPAA) was approved at the director level for a total original procurement value estimated at $10,000,000. The electronic bidding process was utilized. The original contract was awarded at $8,500,000 and signed by the Manager, the applicable signing authority level. The CPAA included a quantity option equaling $1,000,000 to be exercised at anytime before the expiry date of the contract. The CPAA also included a set aside amount for design changes equaling $500K. The quantity option and the set aside amount for design changes were not funded at the time of contract award and were not included in the contract value. Amendments 1 to 10 are determined as follows: (a) Amendment 1: not pre-approved, is needed to add some items equaling $28,400.

The amendment approval authority is the Supply Specialist. The Signing Authority is the Intern Officer/Trainee. Revised contract value is now $8,528,400.

(b) Amendment 2: not pre-approved, is for a mutually agreeable one-month delay in the estimated

delivery date of the first shipment (i.e., delivery date is not firm). A NIL amendment. Amendment aggregate value for not pre-approved amendments is $28,400. NIL value amendments where no further risk or liability accrued to Canada are administrative in nature and can be approved by the contracting authority. The signing authority is the Intern Officer/Trainee. Revised contract value is now $8,528,400 (no change).

(c) Amendment 3: a pre-approved option quantity, exercises half of the option quantity amount

equaling $500,000. Aggregate amendment values for not pre-approved amendments are separate from the aggregate amendment values of either options or set-aside amounts. If required, options or set-aside amounts can be exercised to the maximum value in one amendment. Cumulative amendments to exercise a pre-approved option are $500,000. The amendment to exercise an option has already been pre-approved at the CPAA stage. The signing authority is the Supply Team Leader.

Annex 6.4.6 – Contract Amendment Approval Instructions

Supply Manual Page 2 of 6 Version 10-1 (2010-01-11)

Revised contract value is now $9,028,400. (d) Amendment 4: not pre-approved, is for unscheduled work equaling $76,400.

Amendment aggregate value for not pre-approved amendments is 104,800. The amendment approval authority is the Manager. The signing authority is the Supply Specialist. Revised contract value is now $9,104,800;

(e) Amendment 5: pre-approved option quantity exercises the second half of the option quantity for a

value of $500,000. The cumulative value for the pre-approved option is $1,000,000. The option is now fully exercised. The amendment to exercise an option has already been pre-approved at the CPAA stage. The signing authority is the Supply Team Leader. Revised contract value is now $9,604,800.

(f) Amendment 6: not previously approved, a NIL amendment is required to add a Standard

Acquisition Clauses and Conditions (SACC) Manual clause, inadvertently omitted from the original document.

Amendment aggregate value for not pre-approved amendments is $104,800. NIL value amendments where no further risk or liability accrued to Canada are administrative in nature and require no approvals. The signing authority is the Supply Specialist. Revised contract value is now: $9,604,800. No change.

(g) Amendment 7: pre-approved set aside amount, is raised to exercise a portion of the pre-approved

set aside amount for design changes equaling $280,000. The cumulative value for amendments to exercise the pre-approved set aside amount is $280,000. The amendment approval authority is the Manager. The signing authority is the Supply Team Leader. Amendments issued to use an amount set aside amount for unscheduled work, work arisings, or design changes must be approved by the appropriate non-competitive contract entry approval authority, not to exceed the Director level. Aggregate amendment values of set aside amounts, previously approved, are separate from the aggregate amendment values of either options or normal amendments. If required, options or set-aside amounts can be exercised to the maximum value in one amendment. Revised contract value is now $9,884,800.

Annex 6.4.6 – Contract Amendment Approval Instructions

Supply Manual Page 3 of 6 Version 10-1 (2010-01-11)

(h) Amendment 8: pre-approved set aside amount, is raised to exercise a portion of the pre-approved

set-aside amount for design changes equaling $100,000. The cumulative value for amendments to exercise the pre-approved set-aside amount is $380,000. Balance remaining is $120,000. * The set-aside amendment value stands alone: non-competitive contract entry approval authority is sought for $100,000. The amendment approval authority is the Supply Specialist. The signing authority is the Supply Officer. Revised contract value is now $9,984,800.

(i) Amendment 9: not pre-approved, is for unscheduled work equaling $210,000.

Amendment aggregate for not pre-approved amendments is now $314,800. As per the Electronic Aggregate Amendment levels, the Director can approve amendments to a maximum aggregate amendment value of $500,000. The amendment approval authority is the Director. The signing authority is the Supply Team Leader based on aggregate amendment amount. Revised contract value is now $10,194,800.

(j) Amendment 10: not pre-approved; the client decides, due to cut backs, that Amendment 9, is no

longer required. The supplier agrees to forego this work at no additional cost to Canada, (having just recently ordered materials and was able to negotiate no cancellation fees, etc. from his suppliers) for a negative value amendment of $210,000. Amendment aggregate value for not pre-approved amendments remains at $314,800. The amendment approval authority is the Contracting Authority, designated as such in the contract. The signing authority is the Supply Team Leader based on aggregate amendment amount. Revised contract value is now $9,984,800.

2. Reductions in Contract Value (a) Situation: The client reduces the quantity required and the supplier/contractor agrees to the

reduced quantity with no increase in the unit price.

Approval Level: The contracting authority, designated as such in the contract, may approve the amendment that reduces the value of the contract (if amendment is deemed administrative in nature).

(b) Situation: The client reduces the quantity required but the supplier/contractor wants to increase

the price because of the reduced quantity. Renegotiation is necessary.

Annex 6.4.6 – Contract Amendment Approval Instructions

Supply Manual Page 4 of 6 Version 10-1 (2010-01-11)

Approval Level: The approval level for the contract amendment is that required for the revised unit price multiplied by the new quantity. Aggregate amendment approval authorities apply.

(c) Situation: The client wishes to disencumber funds allocated to a repair and overhaul contract in

the last quarter of the fiscal year, because no more work arisings will be forthcoming during that period.

Approval Level: The contracting authority, designated as such in the contract, may approve an amendment to reduce the value of the contract.

(d) Situation: The client requires a work package to be removed from a research and development

contract. There is no clear relationship between the reduced cost and the reduced work package.

Approval Level: The amendment will be approved at a level equal to the value of the proposed cost reduction. Aggregate amendment approval authorities apply. Nil value amendment is not appropriate as there is no link between the value of the work package and the reduction.

3. Substitute Item (or work package) If a client requests the contracting authority to amend a contract by deleting an item (or work package) and substituting a different item (or work package), the value of the substitute item (or work package) will determine the contract amendment approval level. If the contract amendment approval level, based on the value of the substitute item (or work package) exceeds the Director General's approval authority, the standard method of determining the amendment approval authority, based on cumulative value of amendments, must be used to determine whether the Deputy Minister, the Minister, or TB approval is required. 4. Additional Risks Contract amendments that propose changes to either the basis of payment, the method of payment or the contract conditions, so that additional risk or liability is transferred to Canada, must be authorized at or above the original approval level for that contract only if corresponding compensatory benefits accrue to Canada. In the absence of corresponding benefits, such changes would constitute extra payments for which only TB has approval authority. The following are examples of changes that would constitute additional risk to Canada: (a) liberalizing the progress payments; (b) eliminating the requirement for a performance bond; (c) slippage, by the contractor, of firm delivery dates. 5. Advance Approval for Amount Set Aside (a) If the original authority to enter into a contract also included advance approval for an amount to

be set aside for unscheduled work, design changes or work arisings, then on each occasion when any of the amount set aside is used, it must be approved by the appropriate non-competitive contract entry approval authority, not to exceed the Director level.

(b) If an amendment to use the remainder of the amount set aside for a specific purpose exceeds the

amount set aside, the approval authority for the excess amount will revert back to the appropriate aggregate amendment approval authority in accordance with Annex 6.4.2. Aggregate amendment values of set asides, previously approved, are separate from the aggregate amendment values of either options or normal amendments. If required, set-asides can be exercised to the maximum value in one amendment.

Annex 6.4.6 – Contract Amendment Approval Instructions

Supply Manual Page 5 of 6 Version 10-1 (2010-01-11)

(c) If a condition of the original approval requires other levels of approval for encumbering amounts set aside, the levels established in the original contract approval will take precedence.

(d) The amount of the set aside/option should be based on sound front-end planning and

preparation. The better the planning and preparation the better the ability to predict additional quantities or unforeseen work arisings, and the more accurate the assigned dollars values. A procurement plan that is thoroughly justified as to the purpose of each planned expenditure, is more likely to be approved.

6. Advance Approval for Options (a) Once approval has been obtained to exercise an option, the contract amendment to exercise the

option requires only the contract amendment signing authority as per Annex 6.4.2. Funds and approval received for an option can only be used for the specific purpose stated in the approval document. The original approval authority must approve any change to the scope or period of the option.

(b) Aggregate amendment values of options, previously approved, are separate from the aggregate

amendment values of either set asides or normal amendments. If required, options can be exercised to the maximum value in one amendment.

(c) Approval and funding for unexpected changes in the scope of the work, that were not specifically

provided for in the approval document as an Advance Approval for Amount Set-Aside (see section 5 above), cannot be drawn from the approval for an option. For example, if approval is obtained for a 1 year services contract valued at $200,000, with an option year also valued at $200,000, the contracting officer cannot use the approval and funding related to the option year to cover an increase in the services required during the first year. Any change in the scope of work that was not approved as part of the original submission is a change in the requirement and must be approved on its own merits.

7. Contract Code for Pre-approved Amendments (a) Document Type number 22, Contract Code for Pre-approved Amendments, is available in ABE

(Automated Buyer Environment) and SELECT systems, and is used to identify all pre-approved amendments.

(b) These include, but are not limited to:

(i) amendments issued to exercise an option for additional quantities or years that were included in the original bid solicitation and approved as part of the original contract approval submission; and,

(ii) amendments which use amounts set-aside for anticipated, but not yet clearly defined,

changes (e.g., unscheduled work, design changes, work arisings), which were approved as part of the original contract approval submission.

(c) Amendments that do not fit within the description of the original approval or go beyond the scope

or value of the approval will be coded as "Normal Amendments" and must be approved at the appropriate level as determined by the Minister's delegation of amendment authorities.

8. Rates (or prices-to-be-negotiated) / Interim Rates (or prices) If the basis of payment in a contract includes interim rates (or prices) and it is proposed to amend the contract to provide for firm rates (or prices) in lieu, then the amendment approval authority level will be as follows (unless otherwise instructed by the contract approval authority):

Annex 6.4.6 – Contract Amendment Approval Instructions

Supply Manual Page 6 of 6 Version 10-1 (2010-01-11)

(a) one level above that required for signing the contract, only if the firm rates (or prices) are equal to or less than the interim rates (or prices); or

(b) at the original contract approval authority level, when the firm rates (or prices) exceed the interim

rates (or prices); or (c) Director General, if the contract was approved by the Assistant Deputy Minister, the Minister or

TB. 9. Combining Several Types of Contract Changes in One Amendment When a contract amendment is raised to incorporate several types of changes enumerated in sections 1 to 7 above (i.e., firming up price-to-be-negotiated items, using a portion of an amount set aside, addition of items/quantities, etc.), the highest approval level must apply for any one type of these changes or combinations being incorporated into the contract by that amendment. 10. Amendments to Contracts with Former Public Servants TB must approve all amendments to service contracts with former public servants in receipt of a pension pursuant to the Public Service Superannuation Act, in accordance with section 1.1.1 of Annex 6.4.1. 11. Interpretation of Aggregate Amendment Value (a) All amendment approval authorities (for amendments not pre-approved) must be determined on

the basis of the aggregate amendment value. (b) Aggregate amendment value means the sum total of the amendments to a contract, including

positive and negative amendments. It applies only to amendments requiring TB approval. For internal purposes and to ensure adequate control measures are in place, the aggregate amount for amendments not pre-approved will be calculated using only positive amendments.

(c) As a general principle, once an approval level has been reached it can never be lowered. As an

example, once the ministerial level for approval has been reached every subsequent positive amendment reverts to the minister regardless of dollar value.

(d) Nil value amendments where no further risk or liability accrued to Canada are administrative in

nature and can be approved and signed by the Contracting Authority. Nil value amendments where further risk or liability will be Canada's responsibility require approval authority at or above the original approval authority.

12. Amendment Approved by Treasury Board When TB has approved an amendment, PWGSC may further amend the contract without TB approval if the cumulative value of the amendments after each issuance of an amendment pursuant to a TB approval does not exceed the non-competitive contract amendment approval authority limits set out in Annex 6.4.2.

TABLE OF CONTENTS Chapter 7 Award of Contracts and Issuance of Standing Offers and Supply

Arrangements .......................................................................................... 1 7.1 Overview ..........................................................................................................................................1 7.5 Contract Award ................................................................................................................................1 7.10 Issuance of Supply Arrangements and Standing Offers..................................................................2

7.10.1 Standing Offers...............................................................................................................2 7.10.5 Supply Arrangements .....................................................................................................2

7.15 Legal Entity ......................................................................................................................................3 7.20 Letter of Intent ..................................................................................................................................3 7.25 Go-Ahead Letters.............................................................................................................................3 7.30 Procurement Reporting and Posting of Award Notices ...................................................................4 7.35 Notification to Unsuccessful Bidders/Offerors/Suppliers .................................................................5 7.40 Debriefings to Unsuccessful Bidders/Offerors/Suppliers .................................................................5 7.45 Disclosure of Information .................................................................................................................7 7.50 Bid and Contract Security ................................................................................................................8 7.55 Industrial Security Requirements .....................................................................................................9 7.60 Environmental Considerations .........................................................................................................9 7.65 Proactive Disclosure ........................................................................................................................9 7.70 Coding Procedures ..........................................................................................................................9 Annex 7.1: Samples of Regret Letters ..................................................................................................1

Appendix A: Regret Letter to Unsuccessful Bidders/Offerors/Suppliers – Responsive Bid/Offer/Arrangement ..............................................................................1

Appendix B: Regret Letter to Unsuccessful Bidders/Offerors/Suppliers - Non-responsive Bid/Offer/Arrangement ...........................................................3

Chapter 7 – Award of Contracts and Issuance of Standing Offers and Supply Arrangements

Chapter 7 Award of Contracts and Issuance of Standing Offers and Supply Arrangements

7.1 Overview (2010-01-11) (a) This chapter describes the process of contract award to a successful bidder, as well as the

issuing of the authorization to use a standing offer or a supply arrangement received from a successful offeror or supplier. It also provides general instructions for release of information to the public about the results of the bid solicitation.

(b) Before award/issuance of the document, the contracting officer must ensure that the following

elements have been appropriately addressed:

(i) industrial security requirements (see 3.55 and 5.15); (ii) vendor performance corrective measures (see 8.180); (iii) supplier financial capability or financial security (see 5.60); (iv) award/issuance is in accordance with the approval obtained and any exceptions to

internal approval authorities (see article 1.1. of Annex 6.4.1). 7.5 Contract Award (2010-01-11) (a) Contract award may take place at any time, after bid closing and completion of the evaluation,

and before the bid validity expiry date. The contract document will depend on the type of bid solicitation.

(b) A "purchase order" will be issued when quotations are received, either by way of a Request For

Quotation (RFQ) or a telephone buy. If quotations were solicited by telephone, the supplier must confirm, in writing, the terms of the purchase order.

(c) A “Your Tender/Proposal is accepted” document will be issued when tenders/proposals are

requested, and the bid is received in writing and accepted. This type of document is used when the contract reflects those conditions proposed or agreed to in writing by the successful bidder. The document should make reference to the bid and any amendments to it.

Note: Construction contracts are awarded under a true bid and acceptance process. The

bidder submits the completed bid and acceptance form, and Public Works and Government Services Canada (PWGSC) sends an acceptance document.

(d) A "You are Requested" document is issued where the proposed contract may reflect a condition

not agreed to in writing by the successful bidder. This type of contract constitutes a counter-offer by PWGSC, and must be accepted by the successful bidder in writing to constitute a legally binding contract.

Note: The "You are Requested" documents, and in some cases purchase orders, are not

contracts but only offers by PWGSC to potential contractors. Although a legal contract does not exist, such offers usually reflect the contracting officer's understanding of the conditions, which are agreeable to the successful bidder. If the successful bidder does not accept the PWGSC offer, or proposes modifications to the contract, the matter should be referred to Legal Services.

(e) Formal Agreements. Contracting officers must consult with Legal Services when considering this

type of contract.

Supply Manual Page 1 of 11 Version 10-1 (2010-01-11)

Chapter 7 – Award of Contracts and Issuance of Standing Offers and Supply Arrangements

7.10 Issuance of Supply Arrangements and Standing Offers (2010-01-11) Following a Request for Standing Offers (RFSO) or a Request for Supply Arrangements (RFSA)process, an authorization document is issued, which gives contracting officers and client departments, when applicable, the authority to use the instrument. For more information on the use of these instruments, see 3.5, 3.15, 4.10.20 and 4.10.25. 7.10.1 Standing Offers (2010-01-11) (a) The authorization document for standing offers, entitled "Standing Offer and Call-Up Authority",

may take one of the following forms:

(i) a "National Master Standing Offer (NMSO)", which is generally issued for the use of all departments. PWGSC contracting officers and client departments are both authorized to make call-ups;

(ii) a "Departmental Individual Standing Offer (DISO)", which is generally issued for the use

of a single client. Only PWGSC contracting officers are authorized to make call-ups. However, software DISOs, which are structured more like NMSOs, are an exception as they authorize the client to make call-ups;

(iii) a "National Individual Standing Offer (NISO)", which is generally issued for the use of a

single client. Both PWGSC contracting officers and client department are authorized to make call-ups;

(iv) a "Regional Master Standing Offer (RMSO)", which is generally issued for the use of

many clients within a specific geographic area; and

(v) a "Regional Individual Standing Offer (RISO)", which is generally issued for the use of a single client within a specific geographic area.

(b) Call-ups must be made in accordance with the procedure set out in the standing offer and, in the

case of multiple standing offers, in accordance with the call-up methodology described in all of the standing offers being referenced. Call-ups cannot exceed the contracting limit set out in the standing offer. For more information on allowable call-up limitations, see 4.10.20.1(a)

(c) A call-up against a standing offer carried out by an identified user constitutes acceptance of the

offer. The standing offer (offer) and call-up (acceptance) form a binding contract between Canada and the offeror. Form PWGSC-TPSGC 942 is the standard document for identified users to make call-ups against a standing offer. Form PWGSC-TPSGC 944 (English only) is used for call-ups against multiple standing offers.

7.10.5 Supply Arrangements (2010-01-11) (a) The authorization to use a supply arrangement will take the form of a supply arrangement

document that is generally issued for use by all client departments. Client departments may or may not be authorized to award contracts or issue bid solicitations. If authorized, they will award contracts under their own contracting authority within their own financial contracting authority. For contracts beyond client departments’ contracting authority, PWGSC will be the contracting authority.

Supply Manual Page 2 of 11 Version 10-1 (2010-01-11)

Chapter 7 – Award of Contracts and Issuance of Standing Offers and Supply Arrangements

(b) Resulting contracts must be awarded in accordance with the procedures, and within the contracting limits, described in the supply arrangement.

7.15 Legal Entity (2010-01-11) (a) Whatever the form of procurement document, the contracting officer must ensure that it is with a

supplier that is a legal entity having the legal capacity to contract, and that the supplier's legal name is used.

(b) Possession of a Procurement Business Number (PBN) is not equivalent to having the legal

capacity to contract. The contracting officer must still verify that the supplier has the legal capacity to contract.

(c) For example, a contract may not be awarded to a division of a corporation, as it is not a legal

entity. Be aware that computerized source lists may include an abbreviated name for a supplier. In some cases, a legal entity (for example a numbered company) will use a business name to do business. In such cases, the legal name (the number of the company) must be used and it could be followed by “doing business as ______ (insert the business name)”.

7.20 Letter of Intent (2010-01-11) (a) When the timely delivery of goods or services would be jeopardized by lengthy negotiations, a

Letter of Intent authorizes commencement of the work before the contract is awarded. It is a binding commitment to place a contract with a designated supplier.

(b) Letters of Intent can only be used in exceptional circumstances, and must not be issued without

prior approval of the Deputy Minister (DM). (c) A Letter of Intent is issued subsequent to DM approval of the conditions already agreed to by the

proposed contractor, but before obtaining contract approval of all the conditions of the proposed contract.

(d) Letters of Intent are prepared by Legal Services with the cooperation of the contracting officer. (e) No contractual commitment may be made that would constitute the first step of a procurement

that might require subsequent Treasury Board approval. (f) The Letter of Intent must accurately describe the work authorized, state the maximum liability of

Canada, expressed as funds to be spent by the contractor, and specify how the payment will be made. The contract serial number that will be assigned to the subsequent contract must be indicated on the Letter of Intent.

(g) After DM approval is received, the original Letter of Intent must be signed by the appropriate

contract signing authority and distributed in the same manner as a contract. (h) On completion of negotiations of all the conditions of the proposed contract, the contract approval

document will be submitted for review and approval at the appropriate level. (i) The contracting officer must clearly indicate in the contract that the work authorized under the

Letter of Intent is not to be duplicated. 7.25 Go-Ahead Letters (2010-01-11)

Supply Manual Page 3 of 11 Version 10-1 (2010-01-11)

Chapter 7 – Award of Contracts and Issuance of Standing Offers and Supply Arrangements

Go-ahead letters may be issued after obtaining final approval of the contract approval document, provided all appropriate conditions of the proposed contract are known and accepted by the proposed contractor. Go-ahead letters are subject to the appropriate signing authorities. After issuing the go-ahead letter, the contract must be sent to the contractor in a timely manner. 7.30 Procurement Reporting and Posting of Award Notices (2010-01-11) (a) Contracting officers must ensure that procurement reporting is accurate as the information is

used in the reports below, which are required to meet legal, policy, corporate and parliamentary needs. Documentation includes:

(i) posting award notices on Government Electronic Tendering Service (GETS);

(ii) annual government-wide “Purchasing Activity Reports”;

(iii) Business Access Canada “Contract History” database;

(iv) Comprehensive Land Claim Agreement contract reporting;

(v) Procurement Strategy for Aboriginal Business reporting;

(vi) coverage by trade agreements.

(b) For all procurements posted and contracts awarded through the Automated Buyer Environment

(ABE), award notices are generated automatically through ABE and posted on GETS when the contracting officer releases the Procurement Summary. If the "National Security" box is checked, then an award notice will not be posted. For further information on completing the Procurement Summary, see the ABE Blue Book.

Note: When the procurement is not in ABE for reasons related to national security or other

reasons, contracting officers must still create an award notice, if required, using the GETS on-line notice creation tool.

(c) For procurements subject to the international trade agreements, an award notice must be posted

on GETS within 72 days of contract award. Although there are no minimum time periods identified for the Agreement on Internal Trade (AIT), the 72-day limit applies for reasons of consistency.

(d) The following information is also posted on the Business Access Canada Web site when the

contracting officer releases the ABE Procurement Summary or the non-ABE electronic coding sheet, as applicable:

(i) contracts for goods and services purchased by PWGSC for PWGSC and other

departments and agencies;

(ii) call-ups against DISOs, and

(iii) standing offers (total estimated dollar value) issued by PWGSC. (e) The following information is not posted on Business Access Canada Web site:

(i) contracts for goods and services purchased by other departments, agencies and Crown corporations;

Supply Manual Page 4 of 11 Version 10-1 (2010-01-11)

Chapter 7 – Award of Contracts and Issuance of Standing Offers and Supply Arrangements

(ii) contracts subject to national security exception, for those cases where an award notice cannot be posted;

(iii) call-ups against most standing offers made by client departments, and

(iv) contracts issued by the Information Technology Services Branch.

7.35 Notification to Unsuccessful Bidders/Offerors/Suppliers (2010-01-11) Contracting officers should notify unsuccessful bidders/offerors/suppliers as soon as possible after contract award and issuance of a standing offer or supply arrangement. Samples of regret letters are provided in Annex 7.1. 7.40 Debriefings to Unsuccessful Bidders/Offerors/Suppliers (2010-01-11) (a) Bidders/offerors/suppliers should be informed that they will be advised of the outcome to the

solicitation following contract award (upon request). A notice that the bidders/offerors/suppliers may request a debriefing about the results of the solicitation and the way in which their bid was evaluated should be included in every solicitation.

(b) Debriefings can educate bidders/offerors/suppliers regarding how their bids can be improved so

those lessons can be applied in response to future opportunities. Therefore, the information provided should be sufficient to assist each bidder/offeror/supplier in understanding why their bid/offer was not considered, which may assist them in responding to future solicitations. Debriefings also demonstrate to bidders/offerors/suppliers that the federal government contracting process is fair, open, and transparent. Through debriefings, contracting officers may also be able to improve future solicitations by using the feedback provided by bidders/offerors/suppliers.

(c) Debriefings should be requested by the bidder/offeror/supplier within 15 working days of their

receipt of the notification that they were unsuccessful. Debriefing information should be made available to the unsuccessful bidder/offeror/supplier soon after being requested but only after contract award or issuance of a SO or SA. Efforts should be made by the contracting officer to provide the information within 10 working days from the date the request was received. In providing debriefing information, care must be taken to protect the confidentiality of information relating to other bids/offers/arrangements. The release of information relating to other bids/offers/arrangements by contracting officers must comply with the disclosure of information outlined in 7.45. Contracting officers should keep a record of the debriefing information provided, including, but not limited to, minutes or a record of any meeting and comments and suggestions from the bidder/offeror/supplier.

(d) There are three approaches that may be used for debriefings:

(i) in writing, (ii) by telephone, or (iii) in person.

(e) The approach should be tailored by the contracting officer to the complexity and dollar value of

the procurement; however, as a minimum, the contracting officer should provide a written debriefing, which can be combined with a regret letter. In any written debriefing, the contracting officer should advise the bidder/offeror/supplier who can be contacted for further information. If a bidder/offeror/supplier requests additional information, the contracting officer should consider the most effective method of providing that information, which may be in writing, by telephone, or in

Supply Manual Page 5 of 11 Version 10-1 (2010-01-11)

Chapter 7 – Award of Contracts and Issuance of Standing Offers and Supply Arrangements

person. The contracting officer should also consider any request from the bidder/offeror/supplier to provide the information in a particular way, as well as factors such as the complexity and dollar value of the procurement.

(f) A debriefing should include:

(i) the name of the successful bidder/offeror/supplier; (ii) the value of the contract as awarded or the SA or SO as issued; (iii) the overall evaluation result of the successful bidder/offeror/supplier, (iv) an outline of the reasons the bidder/offeror/supplier was not successful, making reference

to the evaluation criteria and selection methodology; (vi) where appropriate, very general information on the relative strengths of the successful

bid/offer, ensuring that any such statements do not provide any confidential commercial information.

(g) If requested by the unsuccessful bidders/offerors/suppliers, the contracting officers should

provide the following general information about the judicial and quasi-judicial bodies to which bid protests can be made. For any given procurement, one or more of the following avenues may be available to a supplier that wishes to make a claim regarding the conduct of the procurement:

(i) The Canadian International Trade Tribunal (CITT): Whether or not the CITT has

jurisdiction to conduct an inquiry regarding any particular procurement will depend on factors such as the government institution conducting the procurement, the estimated value of the procurement, and the nature of the goods, services or construction services being procured.

More information can be obtained by visiting the CITT Website and the Web page “How to File a Complaint”.

(ii) The Office of the Procurement Ombudsman (OPO): If the value of the procurement is

below the monetary thresholds established under the Agreement on Internal Trade, the OPO may have jurisdiction to conduct a review.

More information can be obtained by visiting the OPO Website and the Web page “Making a Complaint”.

(iii) An Application for Judicial Review at Federal Court: Visit the Federal Court Website

and the Web page “Information for Litigants”.

(iv) An Action in a Provincial Superior Court or in Federal Court: Each province has a provincial superior court.

NOTES: Suppliers may wish to consult with a lawyer regarding the appropriate forum for bringing a bid protest in any given case.

Suppliers should note that there are strict deadlines for bringing bid protests, and the time periods vary depending on where the bid protest is brought.

(h) A written debriefing is usually done in the form of a Regret Letter sent out to each unsuccessful

bidder/offeror/supplier. If a Regret Letter is used to provide the debriefing information required to satisfy any trade agreement obligations, the contracting officer is required to provide the specific provisions required by the applicable trade agreements. The information that will need to be provided to satisfy this obligation will depend on the circumstances.

(i) If a fairness monitor was used during the evaluation process, then the contracting officer must

Supply Manual Page 6 of 11 Version 10-1 (2010-01-11)

Chapter 7 – Award of Contracts and Issuance of Standing Offers and Supply Arrangements

advise the fairness monitor and request its presence during any telephone or in-person debriefings.

(j) If a legal counsel is to accompany the supplier to any in-person debriefing or participate in a

telephone debriefing, the contracting officer must advise Legal Services and discuss their participation in the debriefing.

7.45 Disclosure of Information (2010-01-11) (a) The following information can be released by contracting officers on a routine basis, after award

of a contract or issuance of a Standing Offer or Supply Arrangement:

(i) for all solicitations for goods and services, the name of the successful and unsuccessful bidders/offerors/suppliers, responsive and non responsive, together with the total evaluated price of the successful bidder/offeror/supplier and total score, if applicable. Since information on bidders/offerors/suppliers who are individuals may qualify for exemption under the Privacy Act, such requests should be directed to the Access to Information and Privacy Office as indicated in 7.45(b);

(ii) for all goods and services requirements subject to public opening, information which was

released at the public opening of bids; for example, name of each bidder and the total amount of each bid; and

(iii) individual unit pricing information including labour rates contained in standing offers (see

instructions at 7.45(c)). (b) The following types of requests for bid, contract or standing offer and supply arrangement

information should be referred to the Access to Information and Privacy Office:

(i) names of bidders/offerors who are individuals and the content of their bids/offers, including prices, since such information may be subject to an exemption under the Privacy Act;

(ii) copies of bids/offers, including any accompanying catalogues, handbooks or pricing

guides; (iii) copies of contracts, purchase orders or standing offer documents, including any

accompanying PWGSC-produced catalogues, handbooks, or acquisition guides; (iv) bid and contract information pertaining to classified requirements; (v) information contained in bids/offers/arrangements that have been cancelled or

superseded by later bids/offers; (vi) individual unit pricing pertaining to contracts or purchase orders for goods and services

and construction; and (vii) any other information not covered in (a) above.

Any disclosures not referred to the Access to Information and Privacy Office should first be discussed with Legal Services.

(c) To ensure a consistent approach to the public disclosure of information, PWGSC will release on a

routine basis the unit prices and labour rates contained in standing offers for goods and services. Offerors must be informed of PWGSC’s intention to disclose unit prices and labour rates

Supply Manual Page 7 of 11 Version 10-1 (2010-01-11)

Chapter 7 – Award of Contracts and Issuance of Standing Offers and Supply Arrangements

contained in successful offers in the event of a resulting standing offer. General conditions 2005 of the Standard Acquisition Clauses and Conditions (SACC) Manual include a provision to this effect.

There may be circumstances where the provisions related to the disclosure of information, as set out above, cannot be applied. Such circumstances must be handled on a case-by-case basis and would require the approval of the manager or higher, depending on the approval authority, before issuing the RFSO or RFSA.

7.50 Bid and Contract Security (2010-01-11) (a) Surety bonds lapse automatically on expiration of the purpose or period for which they were

required. Security deposits (government guaranteed bonds, bills of exchange, irrevocable standby letters of credit) must be returned to bidders. The bidder must return the letters of credit to the issuer to complete the discharge.

(b) Lapsing of surety bonds or return of security deposits (government guaranteed bonds, bills of

exchange, irrevocable standby letters of credit) must occur in the following way for all requirements except construction:

(i) for all bidders, at the expiration of the bid validity period, either as originally set or as

extended; (ii) for unsuccessful bidders, prompt notification or return of a security deposit, immediately

after a contract is awarded, is essential in such cases so as not to constrain the their ability to make new bids;

(iii) for a successful bidder, if no contract security is required, immediately upon award of a

contract or, if contract security is required, once the contract security is received; and (iv) if contract security is required, the contract must be awarded before bid security lapses, if

applicable, but not before the contract security has been received. (c) Lapsing of surety bonds, or return of security deposits (government guaranteed bonds, bills of

exchange, irrevocable standby letters of credit) for construction requirements must occur as soon as practical following:

(i) the bid solicitation closing date, for those bidders submitting non-compliant bids; (ii) the administrative bid review, for those bidders submitting compliant bids ranked fourth to

last on the schedule of bids; (iii) the award of contract, for those bidders submitting the second and third ranked bids; and (iv) the receipt of contract security from the successful bidder; or (v) the cancellation of the bid solicitation, for all bidders. (vi) If one or more of the bids ranked third to first is withdrawn or rejected for whatever

reason, then Canada should reserve the right to hold the bid security of the next highest ranked compliant bid in order to retain the bid security of at least three valid and compliant bids.

(d) For construction services requirements, if contract security is required, the security must be

received within 14 days after contract award and before bid security lapses.

Supply Manual Page 8 of 11 Version 10-1 (2010-01-11)

Chapter 7 – Award of Contracts and Issuance of Standing Offers and Supply Arrangements

7.55 Industrial Security Requirements (2010-01-11) (a) The contracting officer must verify with the Canadian Industrial Security Directorate (CISD) that

the proposed contractor meets the security requirements before contract award. For more information, see 5.15.

(b) Contracting officers must include a comment on the front page of the contract, standing offer or

supply arrangement, whenever there is a security requirement, as follows:

"THIS DOCUMENT CONTAINS A SECURITY REQUIREMENT." (c) If the contract, standing offer or supply arrangement contains security requirements, the

contracting officer must forward a copy of the contract, standing offer or supply arrangement, and any amendments or revisions, to CISD within two working days of the document being issued. Contracting officers may send a PDF version of the document by e-mail to sncrcontracts@tpsgc-pwgsc.gc.ca. For procurements using the Automated Buyer Environment (ABE), a copy of the contract is automatically sent to CISD.

(d) Contracting officers must be aware of the additional measures required and manage the risks

associated with the destruction of protected and classified government materials. The Corporate Security Technical Standard defines PWGSC corporate policy and procedures relating to classified waste destruction, and should follow the interim standard, regarding classification levels of shredders, and complete the appropriate form ARC 0203, Request for Non-Accessioned Disposal, for the destruction of sensitive documents.

PWGSC threshold may be exceeded when administering destruction contracts on behalf of other client departments, based on the client’s threat risk assessment. If such is the case, the client may develop a security guide as amplifying instructions, which is to be attached to the Security Requirements Check List (SRCL). For foreign classified information, consult with CISD before undertaking destruction.

7.60 Environmental Considerations (2010-01-11) Information on environmental considerations is found in sections 3.4 Contract Award and 3.5 Contract Performance Clauses of the Guideline for Integration of Environmental Performance Considerations in Federal Government Procurement. 7.65 Proactive Disclosure (2010-01-11) Client departments are required to report on a quarterly basis on contracts awarded with a value over $10,000. Contracting officers should be providing the required information to clients in a timely manner. For further information, consult the Treasury Board of Canada Secretariat Web site on Proactive Disclosure. 7.70 Coding Procedures (2010-01-11) (a) Statistical information pertaining to PWGSC contracting activities is required to meet corporate

and parliamentary needs. Contracting officers are responsible for ensuring the complete and accurate recording of all contracts.

Supply Manual Page 9 of 11 Version 10-1 (2010-01-11)

Chapter 7 – Award of Contracts and Issuance of Standing Offers and Supply Arrangements

(b) Contracting officers must follow the coding procedures in the Contract Coding Reference Guide.

(Note: Only government employees have access to the site.)

Supply Manual Page 10 of 11 Version 10-1 (2010-01-11)

Annex 7.1 – Samples of Regret Letters

Annex 7.1: Samples of Regret Letters Appendix A: Regret Letter to Unsuccessful Bidders/Offerors/Suppliers – Responsive

Bid/Offer/Arrangement Note to Contracting Officer: Because the evaluation methodology for different procurements varies, this letter will have to be tailored to the individual requirement. This letter has been drafted assuming that this bidder/offeror/supplier, although unsuccessful, its bid/offer/arrangement was declared responsive because it has met all mandatory requirements. Contracting officers should use the other sample regret letter in Appendix B if the bid/offer/arrangement was declared non-responsive. ________ (insert date) ____________ (insert department address) Attention: ___________ (insert name of addressee) _____________ (insert supplier’s name and address) Dear Mr./Mrs. ____________ (insert the addressee’s last name): Subject: Solicitation No. ________ Thank you for your ____________ (insert “bid” or “offer” or “arrangement”) submitted in response to our request for ____________ (insert brief description of goods/services). This is to inform you that a ___________ (insert “contract” or “Standing Offer (SO)” or “Supply Arrangement (SA)”) will not be ___________ (insert “awarded” or “issued”) to you for this requirement. A __________ (insert “contract” or “SO” or “SA”) has been ____________ (insert “awarded” or “issued”) to the successful __________ (insert “bid” or “offer” or “arrangement”) submitted by ____________ (insert name of successful bidder/offeror/supplier) in response to the above-noted solicitation. The price of the awarded _________ (insert “contract” or “SO” or “SA”) is $_________ (insert value of awarded contract or issued SO or SA), excluding Goods and Services Tax/Harmonized Sales Tax, as applicable. Although your ________ (insert “bid” or “offer” or “arrangement”) was found to be responsive to the mandatory requirements of the solicitation, it did not achieve the highest-ranking under the evaluation methodology described in the solicitation. For your information and to assist you in responding to future solicitations, you are informed that your _________ (insert “bid” or “offer” or “arrangement”) was evaluated as follows in comparison to the successful ___________ (insert “bid” or “offer” or “arrangement”):

Technical Score Financial Score Successful _______ (insert “bid” or “offer” or “arrangement”)

Your _______ (insert “bid” or “offer” or “arrangement”)

Supply Manual Page 1 of 4 Version 10-1 (2010-01-11)

Annex 7.1 – Samples of Regret Letters

I would like to thank you for submitting your _________ (insert “bid” or “offer” or “arrangement”) and your interest in being a supplier to the Government of Canada. Your participation is appreciated, and I hope that you will continue to bid on procurement opportunities offered by Public Works and Government Services Canada. Should you require further information regarding the evaluation of your ___________ (insert “bid” or “offer” or “arrangement”), please do not hesitate to contact me. _________________ (insert name of contracting authority) Contracting Authority Telephone: _____-_____-______ E-mail: ________@tpsgc-pwgsc.gc.ca cc: ________ (insert any additional names of people who should receive a copy)

Supply Manual Page 2 of 4 Version 10-1 (2010-01-11)

Annex 7.1 – Samples of Regret Letters

Appendix B: Regret Letter to Unsuccessful Bidders/Offerors/Suppliers - Non-responsive Bid/Offer/Arrangement

Note to contracting officer: Because the evaluation methodology for different procurement varies, this letter will have to be tailored to the individual requirement. This letter has been drafted assuming that the bid/offer/arrangement was declared non-responsive because it has not met one or more mandatory requirements. Contracting officers should use the other sample regret letter provided in Appendix A if the bid/offer/arrangement was declared responsive but simply wasn’t the highest-ranked. ____________ (insert department address) ________ (insert date) _____________ (insert supplier’s name and address) Attention: ___________ (insert name of addressee) Dear Mr./Mrs. ____________ (insert the addressee’s last name): Subject: Solicitation No. ________ Thank you for your ____________ (insert “bid” or “offer” or “arrangement”) submitted in response to our request for ____________ (insert brief description of goods/services). This is to inform you that a _________ (insert “contract” or “Standing Offer (SO)” or “Supply Arrangement (SA)”) will not be issued to you for this requirement. A _________ (insert “contract” or “SO” or “SA”) has been awarded to the successful ________ (insert “bid” or “offer” or “arrangement”) submitted by ________ (insert name of successful bidder/offeror/supplier) in response to the above-noted solicitation. The price of the awarded/issued _________ (insert “contract” or “SO” or “SA”) is $_________ (insert value of awarded contract or SO or SA) excluding Goods and Services Tax/Harmonized Sales Tax, as applicable. As indicated in the solicitation, a ______ (insert “bid” or “offer” or “arrangement”) was required to meet each and every mandatory requirement. Unfortunately, the evaluating team determined that your ______ (insert “bid” or “offer” or “arrangement”) did not comply with all the mandatory requirements of the solicitation, including the following: __________________ (insert description of non-compliance) To provide you with information on the characteristics and relative advantages of the successful _________ (insert “bid” or “SO” or “SA”), you are informed that the successful _______ (insert “bid” or “SO” or “SA”) has satisfied all the mandatory requirements of the solicitation and scored on the technical point-rated requirements (insert table below if relevant), as follows:

Technical Score Financial Score Successful _______ (insert “bid” or “offer” or “arrangement”)

Your ______ (insert “bid” or “offer” or “arrangement”)

Instruction to contracting officer: 1. If you did not score the bid/offer because it was disqualified early in the process, add the following

Supply Manual Page 3 of 4 Version 10-1 (2010-01-11)

Annex 7.1 – Samples of Regret Letters

sentence (i.e. As a result of finding your …) and delete the second row in the above table (i.e. Your ____...).

2. If you are providing the unsuccessful bidder/offeror/supplier with its score, delete the following

sentence (i.e. As a result of finding your …). As a result of finding your ______ (insert “bid” or “offer” or “arrangement”) to be non-responsive, your ______ (insert “bid” or “offer” or “arrangement”) was disqualified and Canada did not proceed with your evaluation and did not determine a technical score for your ______ (insert “bid” or “offer” or “arrangement”). I would like to thank you for submitting your _________ (insert “bid” or “offer” or “arrangement”) and your interest in being a supplier to the Government of Canada. Your participation is appreciated, and I hope that you will continue to bid on procurement opportunities offered by Public Works and Government Services Canada. Should you require further information regarding the evaluation of your ________ (insert “bid” or “offer” or “arrangement”), please do not hesitate to contact me. ___________ (insert name of contracting authority) Contracting Authority Telephone: ____-____-______ E-mail: ________@tpsgc-pwgsc.gc.ca cc: ________ (insert any additional names of people who should receive a copy)

Supply Manual Page 4 of 4 Version 10-1 (2010-01-11)

TABLE OF CONTENTS Chapter 8 - Contract Management ............................................................................... 1 8.1 Overview ..........................................................................................................................................1 8.5 Contract Administration....................................................................................................................1 8.10 Administration of Service Contracts.................................................................................................2 8.15 Contract Performance......................................................................................................................3 8.20 Canada's Obligations .......................................................................................................................3 8.25 Contract Payments...........................................................................................................................3 8.30 Progress Payments..........................................................................................................................3 8.35 Claims for Progress Payment and Invoicing....................................................................................3 8.40 Claims for Exchange Rate Adjustment ............................................................................................4 8.45 Interest .............................................................................................................................................4 8.50 Overtime...........................................................................................................................................4 8.55 Claims for Extra Payment ................................................................................................................5 8.60 Services of Non-residents - Entry Requirements.............................................................................6 8.65 Assignment of Monies......................................................................................................................6

8.65.1 Receipt and Deposit of Monies........................................................................................6 8.65.5 Release of Contract Financial Security ...........................................................................7 8.65.10 Financial Claims by Canada ............................................................................................7 8.65.15 Financial Security Issues related to Amendments...........................................................8

8.70 Contract Administration Considerations...........................................................................................9 8.70.1 Industrial Security ............................................................................................................9 8.70.5 Amending Contracts ........................................................................................................9 8.70.10 Approval of Contract Amendments..................................................................................9 8.70.15 Exercising Options...........................................................................................................9 8.70.20 Administration of Task Authorization Contracts.............................................................10 8.70.25 Design Change or Deviation..........................................................................................10

8.70.25.1 Design Change or Deviation Procedure .................................................11 8.70.30 Loans of Department of National Defence Materiel.......................................................12 8.70.35 Return of Special Test Equipment and Special Production Tooling..............................12

8.75 Administration of Standing Offers and Supply Arrangements .......................................................12 8.75.1 Reporting for Standing Offers and Supply Arrangements .............................................12 8.75.5 Revisions to Standing Offers .........................................................................................13 8.75.10 Managing Proportional Basis of Selection.....................................................................13

8.80 Employer-employee Relationship ..................................................................................................14 8.85 Subcontracting ...............................................................................................................................14 8.90 Assignment of Contracts ................................................................................................................14 8.95 Financial Security and Contractor Difficulties ................................................................................15 8.100 Bonding Companies.......................................................................................................................15 8.105 Protecting Canada's Goods ...........................................................................................................15 8.110 Registering Notice of Interest in Goods .........................................................................................16 8.120 Bankruptcy, Receivership, Insolvency ...........................................................................................16

8.125 Goods or Services not in accordance with the Contract................................................................17 8.130 Timely Performance.......................................................................................................................17 8.135 Terminations ..................................................................................................................................17

8.135.1 Suspension of the Work - Stop Work Order ..................................................................17 8.135.5 Termination for Convenience of Canada.......................................................................18 8.135.10 Involvement of the Termination Claims Officer..............................................................18 8.135.15 Termination for Default ..................................................................................................18 8.135.20 Termination by Mutual Consent.....................................................................................18 8.135.25 Request for Termination by the Contractor ...................................................................19 8.135.30 Financial Security Issues Related to Terminations........................................................19 8.135.35 Involvement of Legal Services in Cases of Termination ...............................................19 8.135.40 Adjustment to Source Lists ............................................................................................19 8.135.45 PWGSC Offices Outside Canada..................................................................................20 8.135.50 Signing Authority............................................................................................................20

8.140 Disputes .........................................................................................................................................20 8.140.1 Contract Dispute Resolution ..........................................................................................20

8.145 Contract Settlement Board.............................................................................................................21 8.145.1 Contract Settlement Board - Procedures.......................................................................21 8.145.5 Contract Settlement Board - Meetings ..........................................................................22 8.145.10 Contract Settlement Board - Settlement Offer...............................................................22 8.145.15 Contract Settlement Board - Non-acceptance of Settlement ........................................22

8.150 Contract Dispute Advisory Board...................................................................................................22 8.150.1 Contract Dispute Advisory Board - Procedures.............................................................23 8.150.5 Contract Dispute Advisory Board - Non-acceptance of Settlement...............................23

8.155 Final Payments ..............................................................................................................................24 8.155.1 Refunds of Excess Profits..............................................................................................24

8.160 Cost Submissions Standards for Cost Reimbursable Contracts ...................................................24 8.165 Cost Audit.......................................................................................................................................24

8.165.1 Differences of Opinion or Interpretation.........................................................................25 8.175 Contract End and Contract Close Out ...........................................................................................25 8.180 Vendor Performance Policy ...........................................................................................................25

8.180.1 Introduction ....................................................................................................................25 8.180.5 Principles .......................................................................................................................25 8.180.10 Definitions ......................................................................................................................26 8.180.15 Process ..........................................................................................................................26

8.180.15.1 Monitoring ...............................................................................................26 8.180.15.5 Investigation for Vendor Performance Corrective Measures..................27 8.180.15.10 Decision on Application of Vendor Performance Corrective Measures..27 8.180.15.15 Review ....................................................................................................29 8.180.15.20 Enforcement............................................................................................29

8.180.20 Suspensions in Cases of Emergency............................................................................30 8.180.25 Exceptions .....................................................................................................................30 8.180.30 Sector or Regional Programs ........................................................................................30

Annex 8.1: Guidelines on File Organization and Make-up ..........................................................................1 Annex 8.2: Contract Management Early Warning Indicators.......................................................................1 Annex 8.3: Termination for Convenience Process ......................................................................................1 Annex 8.4: Termination for Default ..............................................................................................................1 Annex 8.5: Refunds of Excess Profits Earned on PWGSC Contracts ........................................................1

Chapter 8 – Contract Management

Chapter 8 - Contract Management 8.1 Overview (2010-01-11) (a) Contract management is the process of systematically and efficiently managing contract

development, implementation, and administration for maximizing financial and operational performance and managing inherent risk. Contract management encompasses the life cycle of a contract and involves many stakeholders including, but not limited to the contracting officer, the client department and the supplier.

(b) Contract administration is an important part of contract management, which includes those

activities performed after a contract award, to ensure files are properly maintained and that the contractor meets the requirements of the contract.

(c) Contract management is an essential element of the procurement process that protects the

interests of Canada while ensuring that suppliers are being treated fairly. Contract management can be divided into four distinct phases:

(i) pre-contractual (planning); (ii) contracting (bidding and awarding of contract); (iii) contract administration (after the contract is awarded); (iv) post-contractual (close out, warranty and audit); The pre-contractual phase is addressed in the contents of Chapter 2 and Chapter 3. The importance of early involvement by contracting officers during the pre-contractual phase cannot be overstated, as this sets the tone for the balance of the contract life cycle activities.

(d) Planning of the details of how the contract will be managed should start during the formulation of

the requirement itself, which will set the standards of what the contractor must do, how performance will be monitored and what standards will be used. These details, together with other procedures related to how the contract will be managed, should be included in the bid solicitation, to allow bidders to determine what is required of them, to plan the activities needed and to reflect the costs in their bids.

(e) The contracting phase is addressed in Chapter 4 through Chapter 7. Responsibility for the

elements of the contracting phase fall generally to the contracting officer, though client departments have lead responsibility for some elements (see Annex 1.2.)

(f) In general, the level of effort required for contract management will vary depending on the value

and complexity of the procurement. Low dollar value or simple contracts may require only minimum management, while more complex contracts will require continuous monitoring by both the client and the contracting officer. A dedicated team of clients and contracting officers may be assigned to large projects, where roles and responsibilities are defined in more detail.

8.5 Contract Administration (2010-01-11) (a) Both the client department and Public Works and Government Services Canada (PWGSC) must

administer the contracts. It is important that the client and the contracting officer understand and agree on who is responsible for managing and administering the various aspects of the contract.

(b) Contracting officers responsible for the management of contracts should be aware of any

institutional or personal sanctions. As per section 12.1.3 of the Treasury Board (TB) Contracting

Supply Manual Page 1 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

Policy, TB may require that sanctions be imposed on either the department or certain officials when contracting practices or contract administration is not acceptable.

(c) Contracting officers should set up and maintain complete and up to date documentation on every

aspect of the contract, both to provide a record of actions taken and to protect Canada’s interests under the contract. The files will provide an organizational memory of activities and events and should include, where applicable, but not be limited, to the following: (i) the procurement planning documents; (ii) the requisition and any amendments; (iii) the solicitation documents; (iv) bid evaluation plan and resulting evaluation documents; (v) professional and specialist’s advice; (vi) risk identification, assessment and mitigation; (vii) environmental considerations, impacts, and mitigation; (viii) correspondence with clients; (ix) contract conditions; (x) contract amendments; (xi) work schedule, including milestones and deliverables; (xii) payment schedules, invoices and payments; (xiii) other correspondence (written and email); (xiv) records of phone discussions; (xv) formal records of meetings, including minutes; (xvi) records of decisions; (xvii) warranties; (xviii) management reports, including audit reports, and (xix) contract closeout documents.

(d) Additional information on environmental considerations is provided in the Guideline for Integration

of Environmental Performance Considerations in Federal Government Procurement, in section 4; Contract Management, in section 5; Use, Operation and Maintenance, and in section 6; Disposal.

(e) For guidelines on file organization, see Annex 8.1. 8.10 Administration of Service Contracts (2010-01-11) (a) Section 16 of the TB Contracting Policy sets out the policy for service contracts. Article 16.11.3

states the following:

“The contracting authority should appoint a contracting officer and the technical authority should appoint a project officer (who may be the same person), to be responsible and accountable for monitoring the work through: a. regular physical progress and financial reports from the consultant or

professional; b. attending progress meetings with the consultant or professional; c. examining the work in progress to ensure conformity with contract requirements; d. monitoring time, resource, cost and quality aspects of the work against a pre-

determined and agreed work plan; e. amending the contract to reflect new requirements, work schedules and payment

provisions in response to changing circumstances; f. conducting technical and financial audits; g. accepting or approving the work at intermediate stages and at completion; h. certifying all payments and following up to ensure timely payment.

Supply Manual Page 2 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

The division of these responsibilities among authorities should be agreed to before placing the contract.”

8.15 Contract Performance (2010-01-11) (a) The management of a contract involves many activities to ensure fulfillment of that contract.

Events can sometimes alter or disrupt the performance of a contract. For example, a contractor may default on contractual obligations, disputes may arise about contract conditions, or there may be a need to make amendments to the contract after it has been awarded.

(b) Whenever the satisfactory fulfillment of a contract is jeopardized, contracting officers should take

the necessary steps to serve and protect the interests of Canada. Contract disputes should be dealt with fairly, and as promptly as possible. Contracting officers should keep procurement files complete and up to date, to provide a record of actions taken.

8.20 Canada's Obligations (2010-01-11) In managing a contract, contracting officers must ensure strict adherence to all of Canada's obligations. A breach of such obligations could nullify a surety bond. Where responsibility lies with a client department, the contracting officer should ensure the client authority is aware of the obligations. 8.25 Contract Payments (2010-01-11) Work performed or goods received under a contract must be paid for in accordance with the government's policy on the payment of accounts providing for payment within 30 days. The payment period is measured from the date that the goods or services were received, in acceptable condition, at the location(s) specified in the contract, or the date that an invoice in proper form was received, whichever is later. 8.30 Progress Payments (2010-01-11) (a) Progress payments need to be measured against milestones. A project progress monitoring

system should be in place to provide an indication of when the work has been accomplished. Progress payments must include appropriate documentation that is retained on file.

(b) When milestone progress payments are not appropriate, then payments may be made at set

times during the contract period. 8.35 Claims for Progress Payment and Invoicing (2010-01-11) (a) No payment, other than a progress payment, may be made under a contract unless a person

authorized by the appropriate minister certifies that:

(i) the work has been performed; (ii) the goods have been supplied or the services rendered as the case may be; and (iii) the price charged is according to the contract or, if not specified by the contract, is

reasonable. (b) When a payment must be made before the completion of the work, delivery of the goods or

rendering of the service, the payment must be in accordance with the contract.

Supply Manual Page 3 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

(c) Claims for progress payment are normally routed, through the contracting officer, to the client for

verification and authorization of payment. Contracting officers processing payment claims must act promptly. The standard due date for payment is 30 days, after invoicing or receipt of goods, whichever is later. Acceptable performance standards should be set by the sectors/regions to allow adequate time for the certification of the claim by an authorized representative of the client.

(d) Claims for progress payment must include the completed form PWGSC-TPSGC 1111, Claim for

Progress Payment, which requires a certification of contract expenditures. (e) The contractor normally sends invoices directly to the client. A copy must also be sent to the

contracting officer and kept on file. (f) Invoices that include billings for items not received are not considered due until all items are

received. If a contractor wishes payment for a partial shipment, a revised invoice, if permitted by the contract, must be submitted.

(g) Clients are required to notify contractors of any error or missing information in an invoice or

supporting documentation, within 15 days of receipt. Clients should return, within 15 days, any invoice not in accordance with the terms of the contract, to the contractor for resubmission.

8.40 Claims for Exchange Rate Adjustment (2010-01-11) For contracts subject to the exchange rate fluctuation adjustment provision, the Conversion Factor (Initial) shown in Column 3 of the form PWGSC-TPSGC 9411, Claim for Exchange Rate Adjustments, will establish the conversion rate against which claims for adjustment will be calculated, subject to the criteria set out in Standard Acquisition Clauses and Conditions (SACC) clauses C3015C (for payment on delivery), C3020C (for milestone payment) or C3030C (for progress payment). This conversion factor (initial) will normally be the same as the Bank of Canada rate, on the date of bid closing or any other date, as otherwise specified in the contract. (See 5.45.5.) 8.45 Interest (2010-01-11) (a) Simple interest will be paid automatically on any amounts that are overdue, provided that Canada

is responsible for the delay. The general conditions of the SACC Manual reflect this policy. The amount of interest will be shown separately on the cheque stub or accompanying remittance advice.

(b) Interest will be calculated from the day after the due date to the day before the date that the

payment is issued. However, interest will not be paid until the contract payment is made. (c) Interest is calculated according to the following formula:

Interest = Amount owed x ([that date's bank rate + 3%] x [number of days interest payable/365])

(d) The provisions for payment of interest on overdue accounts set out in the general conditions must

be strictly adhered to, except in special cases where the client requisition and appropriate provisions in the contract specifies a payment period longer than 30 days, for example when extensive product evaluation, inspection or testing requirements are involved.

8.50 Overtime (2010-01-11)

Supply Manual Page 4 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

(a) When a contractor performs overtime under a contract, added costs may be incurred by Canada

in the form of overtime premiums. Recognition of the additional cost by Canada depends upon the attendant circumstances and the cause of the overtime. Work performed under contract to Canada should not attract higher overtime charges than would apply to similar commercial work.

(b) Scheduled overtime premium costs included in a contractor's overhead account and applied to

contracts are allowed, if contracts account for a pro rata share of the overtime. (c) Unscheduled overtime premium costs to specific contracts are allowable only, if the overtime is

due to Public Works and Government Services Canada (PWGSC) or client demands for accelerated delivery, increased delivery quantities, or other reasons initiated by the client for which benefit to Canada can be demonstrated.

(d) If the need for unscheduled overtime appears likely, the contracting officer should ensure that

proper provisions concerning authorization, rates and dollar limits are included in the contract. (e) The contracting officer should consult with the cost analyst to ascertain whether the contractor's

cost system includes overtime premium costs in the overhead account or as a direct charge to the particular contract.

(f) When deciding to authorize unscheduled overtime, the contracting officer must:

(i) consult with the client and jointly determine that authorization and the need of overtime will result in benefit to Canada;

(ii) ensure that funds are available to reimburse the contractor; (iii) determine the aggregate limits of time and costs of the overtime to be authorized; (iv) determine what delegation of authority, if any, should be made to the client

representative; (v) ensure that provision for proper claiming and approval of overtime claimed, and overtime

payments to the contractor, is included in the contract, and (vi) ensure that the procurement file includes clear documentation of all elements included in

the decision to authorize overtime. 8.55 Claims for Extra Payment (2010-01-11) (a) From time to time, contractors submit claims for upward price revision of firm price contracts,

based on changes caused by Canada. A firm price contract may not be amended to provide for upward price revision, without prior approval of Treasury Board (TB), unless either the contract contains an escalation clause, covering the adjustment requested or the contract conditions allowed for the adjustment requested.

(b) The advice of Legal Services should be obtained to determine whether a proposed extra payment

is considered an amendment to the contract or an "ex gratia" payment. (c) The approval of TB is required for all extra payment claims, irrespective of the dollar amount. As

a general rule, TB will not approve claims for extra payments arising solely from the following causes:

(i) increases in labour or material costs; (ii) changes in freight rates; (iii) revisions in exchange rates; (iv) delays caused by the contractor; (v) errors on the part of the contractor; or (vi) other difficulties that the contractor overlooked, but should have foreseen.

Supply Manual Page 5 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

(d) TB has granted full authority to deputy heads to make “ex gratia” payments, and to designate

officials within the department to act on their behalf. See TB Policy on Claims and Ex gratia Payments.

8.60 Services of Non-residents - Entry Requirements (2010-01-11) (a) In the performance of a contract, a contractor may wish to use the services of a non-resident

employee on a temporary basis. The determination of eligibility to enter Canada is the responsibility of Immigration Canada.

(b) United States nationals may apply for employment authorization at the port of entry. All others

must obtain authorization before the point of entry. To obtain the correct documentation and necessary authorizations, the applicant must contact the nearest Canadian embassy or consulate.

(c) Canadian citizens residing outside Canada always have the right to work in Canada. (d) In cases of emergency service requirements, the client department (or Public Works and

Government Services Canada) must provide the contractor with written notice, including details of the emergency. In some emergencies, this information may be provided by telephone to the appropriate immigration authorities.

8.65 Assignment of Monies (2010-01-11) (a) Contracting officers may receive from contractors, banks, other financial institutions, or other

sources, statements or documents showing that persons or companies, other than the contractor, claim to be entitled to receive monies under a contract with Public Works and Government Services Canada (PWGSC) or Canadian Commercial Corporation (CCC).

(b) Payments to persons other than those named in the contract will only be made in cases of

bankruptcy, the appointment of a receiver-manager, or an assignment of debt pursuant to Part VII of the Financial Administration Act.

(c) This does not include those cases where the contractor owes a debt to Canada for tax arrears

where Canada Revenue Agency has obtained Treasury Board (TB) approval to collect taxes due or has requested a deduction for taxes due to Canada.

(d) If the claim relates to a bankruptcy or insolvency situation, see 8.120. (e) The contracting officer, immediately upon receipt of a notice of assignment of money under a

contract with a request to pay the assignee of the Crown debt, should contact the Payment Standards Division, at 819-956-9328 or via e-mail at: dlpsd.lpdnp@tpsgc-pwgsc.gc.ca to obtain information on how to process an assignment of Crown debt.

8.65.1 Receipt and Deposit of Monies (2010-01-11) (a) When contracting officers receive monies directly from contractors with respect to a particular

claim by Canada, these monies must be sent, in compliance with TB Contracting Instrument “Policy on Deposits”, to the departmental accounting unit, as soon as possible. A memorandum must accompany the monies, with copies to the client and Cost Audit Group (CAG). The memorandum should include:

Supply Manual Page 6 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

(i) a brief description explaining why monies are being remitted; (ii) the name of the client; (iii) the PWGSC file/contract serial number; and (iv) the name and telephone number of the contracting officer.

(b) In the National Capital Region (NCR), the monies are sent to:

Finance Branch Public Works and Government Services Canada Portage III, 12B1 Gatineau, Quebec K1A 0S5

(c) Outside NCR, the recipient is the appropriate PWGSC regional director's office. 8.65.5 Release of Contract Financial Security (2010-01-11) (a) Surety bonds, according to their terms, automatically expire when the contractor has fulfilled all

obligations under the contract. When the contract has been completed, surety bonds must be destroyed.

(b) Where a contract, in respect of which a security deposit (government guaranteed bonds, bills of

exchange, irrevocable standby letters of credit) was given, has been completed or terminated through no fault of the contractor, the security deposit must be returned to the contractor. The contracting officer must instruct the Finance Branch to requisition a cheque for the amount of a bill of exchange plus accumulated interest, or to request to arrange the release of bonds, letters of credit and other negotiable instruments deposited.

8.65.10 Financial Claims by Canada (2010-01-11) (a) There are two general categories of claims by Canada as a result of contracting activities:

(i) overpayments or overclaims, as may occur when reported as a result of audit, and (ii) legal disputes, for example, termination for default, bankruptcy (only when the amount

owing is actually known and final).

Note: Either instance can only be determined when a contract has been completed or terminated.

(b) Where monies may be owing to Canada as a result of contracting activity, sectors/regions are to

determine the liability and amount owing with assistance, as necessary, from Legal Services. (c) There are special procedures to be followed whenever there are suggestions of unreasonably

high profits from any contract placed pursuant to the Defence Production Act, or from any contract other than a competitive firm priced contract. See Annex 8.5 for details of these procedures.

(d) The contracting officer should liaise with the contractor to get concurrence of the final amount

owing. Once that amount has been established, the contracting officer, in accordance with TB Contracting Policy, must formally advise the client to establish an accounts receivable. The client must advise PWGSC that this has been done, and take collection action.

(e) Many organizations have roles to play relating to these claims by Canada.

Supply Manual Page 7 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

(i) The contracting officer is responsible to:

(A) review the acceptability of contractor claimed amounts; (B) respond to audit observations, as required; (C) liaise with the client department as to concurrence on the final amount, and (D) advise Contract Audit Group (CAG)of all settlements reached.

(ii) Audit Services Canada (ASC) provides audit reports on specific contracts. (iii) Legal Services is responsible to:

(A) identify the potential risks and liability faced by Canada as a result of claims against the contractor;

(B) inform the contractor, when requested by the contracting officer, of Canada’s

claim, by way of a formal legal demand; (C) initiate legal action against the contractor.

(iv) Industrial Technologies Office of Industry Canada (IC) is responsible to:

(A) follow up on the disposition of all audit qualifications and/or observations raised by ASC, except for audit issues involving interpretation of the Contract Cost Principles 1031-2, which are a responsibility of PWGSC; and

(B) resolve issues and disputes in the case of joint Canadian Commercial

Corporation and Industry Canada agreements. 8.65.15 Financial Security Issues related to Amendments (2010-01-11) (a) Before authorizing any material changes in contract conditions, contracting officers should ensure

that such changes do not invalidate security obligations by obtaining the consent of the surety company.

"Material changes" means any change to the contract, except a change which on the face of it and without further explanation or investigation, is clearly for the benefit of the surety. Examples of changes requiring the surety company's approval are: changes in the contract price; changes in the scope of the work; revision to the completion and/or delivery dates specified in the contract; and changes in the payment schedule.”

(b) When the change must be made via a contract amendment, a copy of the draft amendment

should be sent to the surety company for concurrence. When the contract contains a provision for design or engineering changes within certain limits, it is not necessary to obtain the surety company's prior consent. In this case, the company only needs to be kept informed. If the limits must be changed, the surety company's consent is required.

(c) In cases where the contract price is being increased, it may be advisable to increase the amount

of security to reflect the revised contract price. The face amount of a contract support letter of credit may be increased or reduced commensurate with the change in risk that has occurred. It may be changed by an amendment to the letter of credit. Alternatively, the letter of credit may contain an express provision for a change by a specified or determinable amount or amounts on a specified date or dates or upon presentation of the document(s) specified for this purpose, such as an interim certificate of completion. Any new letter of credit, if applicable, should be received before the contract is amended.

Supply Manual Page 8 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

(d) If a security deposit exceeds the amount required due to changes in the contract price, the

excess must be returned to the contractor (see 8.155.1.) The face amount of a contract support letter of credit may be reduced commensurate with the change in risk that has occurred. The face amount may be changed by an amendment to the letter of credit. Alternatively, the letter of credit may contain an express provision for change by a specified or determinable amount or amounts on a specified date or dates or upon presentation of the document(s) specified for this purpose, such as an interim certificate of completion.

8.70 Contract Administration Considerations 8.70.1 Industrial Security (2010-01-11) The client department must ensure that the contractor has a valid security clearance for the entire duration of the contract. It is the responsibility of the client department to ensure that all persons accessing the work site(s) have the proper security clearances. The contracting officer must ensure that the organization security status, at time of contract award, is communicated to the client department. The contracting officer must also communicate to the client department any changes in security statuses during the contract period as identified by Canadian Industrial Security Directorate (CISD). 8.70.5 Amending Contracts (2010-01-11) (a) Contract amendments are used to formally delete, modify, or introduce new conditions to the

original contract. The need for an amendment may arise from continuing negotiations, changes in requirements, or to deal with an unforeseen circumstance. When amending a contract, Canada’s best interest should be considered. Amendments are subject to agreement by both parties to the contract.

(b) The amendment format will follow the form of the original contract. The amendment should

identify, by using complete clauses, any changes, additions or deletions. (c) A single amendment may contain many individual changes. (d) To reduce administrative costs, contracting officers and client departments should combine as

many individual changes as possible into each amendment. For example, multiple design changes or deviations can be amended together.

(e) Amendments should receive the same distribution as the original contract. 8.70.10 Approval of Contract Amendments (2010-01-11) (a) Amendments, which are making a significant change, must be approved at the appropriate

authority level, except for options which are changes pre-approved or allowed for in the existing approval(s).

(b) For more information on forms of amendment requests and the appropriate approval levels, see

Chapter 6. 8.70.15 Exercising Options (2010-01-11)

Supply Manual Page 9 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

(a) Before exercising a contract option, contracting officers must first verify if the option was pre-approved. If not, the appropriate approval authority must be sought before amending the contract.

(b) Before exercising the option, the contacting officer should confirm that the prices for the option

are still fair and reasonable. It may be appropriate to negotiate a lower price when market prices for such goods or services have dropped significantly since contract award.

8.70.20 Administration of Task Authorization Contracts (2010-01-11) (a) The following paragraphs highlight some considerations regarding the administration of task

authorizations. See Annex 3.3 for the description and process of task authorization contracts. (b) A detailed and current record of all authorized tasks must be kept for each contract with a task

authorization process. The contractor or the client department is responsible to create and update this record, as established in consultation with the client department during the procurement planning stage. This record may contain but is not limited to:

(i) the task number; (ii) a title or brief description of each task; (iii) the amounts committed and expended against each task; (iv) start and completion date for each task; (v) the active status of each task; (vi) the total values committed and expended for all tasks, to date, and (vii) the limitation expenditure for all tasks, as stated in the contract.

(c) Before authorizing a task, the organization authorized to issue the task to the contractor (normally

the client) must ensure that:

(i) the task can be completed on or before the expiry date of the task authorization contract. If it cannot be, the task authorization cannot be issued until after the contracting officer amends the period of the task authorization contract, and

(ii) the task authorization will not cause the exceeding of the contract limit placed on the

cumulative value of task authorizations. (d) When a task is completed, the committed amount may be reduced to reflect the actual

expenditure, and such changes must be reflected in the record of task authorizations. 8.70.25 Design Change or Deviation (2010-01-11) (a) If there is no design change or deviation provision in the contract, the procedure may be instituted

only after an authorization document is received from the client and is incorporated in the contract. Adequate funds should be authorized and set aside for changes. If additional funds are required, a requisition amendment is required.

(b) Each design change or deviation request must have technical approval by the technical authority

or project authority and, as specified in the contract, be approved by the contracting officer. (c) Whenever possible, a design change requiring a price adjustment should be negotiated before

the change in work is made.

Supply Manual Page 10 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

(d) Design changes or deviations can result in upward, downward or nil adjustment to contract costs. After approval by the client, the contracting officer is responsible for prompt negotiation of price adjustments, and ensuring that these changes are reflected in the total contract price.

(e) The form PWGSC-TPSGC 9038, Design Change/Deviation, should support deviations and

changes. (f) Surplus materiel resulting from an authorized design change or deviation must be accounted for

and reported to the contracting officer. 8.70.25.1 Design Change or Deviation Procedure (2010-01-11) The following is an example of a design change or deviation procedure: (a) When it is necessary to depart, either temporarily or permanently, from the governing technical

data in a contract, the technical authority or project authority or the contractor may originate a request for design change or deviation.

(b) The contractor may initiate the design change or deviation process by completing section 1 of

form PWGSC-TPSGC 9038, including a ceiling price for the change, subject to negotiation, and sending three copies to the technical authority or project authority and one to the contracting officer. When required, copies of the supporting technical data should be submitted.

(c) A subcontractor must submit the form through the contractor, who will ensure that all the

information required is entered, before submission. (d) The technical authority or project authority, with the sole right to deny approval, will review the

design change or deviation request, and either approves it, and forwards it to the contracting officer, or rejects it, and returns it to the contractor.

(e) The technical authority or project authority may initiate the process by sending five copies of the

form to the contractor. After providing the contractual information required, the contractor will retain one copy, and send three copies to the technical authority or project authority and one to the contracting officer.

(f) Where equipment or stores affected by the change are being procured under more than one

contract, a separate form is required for each contract, unless the technical authority or project authority has specifically authorized the use of one form for all contracts held by a single contractor. In all cases, the form should show all contract references, including the file number and the serial number assigned by the contracting officer.

(g) The contracting officer will:

(i) negotiate a firm price, if possible, or another pricing basis that is consistent with the existing basis of payment in the contract;

(ii) provide contractual authority for the design change or deviation; and (iii) sign the form and send a copy to the contractor and the technical authority or project

authority. Upon receipt, the contractor will implement the change. (h) The contractor should direct enquiries regarding the design change or deviation procedure to the

technical authority or project authority. The contracting officer or the technical authority or project authority will provide blank forms to the contractor, who will provide them to the subcontractors.

Supply Manual Page 11 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

8.70.30 Loans of Department of National Defence Materiel (2010-01-11) (a) When a contract does not provide for the loan of the Department of National Defence (DND)

materiel, the contractor may request such a loan. (b) Such requests should be directed to DND, Director Disposal, Sales, Artefacts and Loans

(DND/DDSAL). (c) Returns must be made:

(i) when the materiel is no longer required; (ii) when repairs are beyond the capability of the contractor; (iii) when recalled by DND/DDSAL, or (iv) on completion of the contract.

(d) The contractor must return the materiel, as directed by DND/DDSAL, and should request from

DND/DDSAL, in writing, instructions for the disposition of the items to be returned. The request should include a description of the items, identification or NATO stock number, their condition, and the loan agreement number.

(e) DND/DDSAL will issue disposition instructions, and inform all concerned. The contractor must

arrange for the return of the items as directed and confirm action by returning a signed copy of the "Notice to Ship" to DND/DDSAL.

(f) At their discretion, the local Canadian Forces Quality Assurance Representative will carry out

inspection on issue and return of DND-loaned materiel. (g) The contractor must report lost, damaged or destroyed DND loaned materiel, in writing, to

DND/DDSAL, which is responsible for coming to a resolution with the contractor. 8.70.35 Return of Special Test Equipment and Special Production Tooling (2010-01-11) (a) Contractors must provide DND/DDSAL with at least 60 days written notice before the date when

the production assets will no longer be required. The notice should identify the contract or loan agreement serial number under which the production assets were held, location of the equipment, a brief but adequate description of the surplus production assets and the total estimated value, if applicable.

(b) A decision to retain production assets for future use should be supported by a cost/benefit

analysis, which provides an estimate of the storage and transportation costs involved, the duration of the storage, the refurbishing/modification costs that may be required to re-activate the assets, including installation/set-up charges, if applicable, and the remaining operational use or life of the equipment.

(c) DND/DDSAL will advise the contractor on the most appropriate method of retention and storage

of the assets. DND/DDSAL will arrange for the transfer of production assets to another contractor, or a storage facility; or will prepare the appropriate documentation, declaring the items surplus, and forward it to Crown Assets Distribution Centre.

8.75 Administration of Standing Offers and Supply Arrangements 8.75.1 Reporting for Standing Offers and Supply Arrangements (2010-01-11)

Supply Manual Page 12 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

(a) Contracting officers must ensure that the supplier fulfills all reporting requirements in the standing

offer/supply arrangement, as applicable. Typically, suppliers must report on a quarterly basis on the call-up/contract activities. Such reports may contain, but are not limited to, the following information: (i) the standing offer/supply arrangement number; (ii) the supplier name; (iii) the reporting period; (iv) the call-up/contract number for each call-up/contract, including amendments; (v) the client department; (vi) the contracting authority; (vii) the date of the call-up/contract; (viii) the call-up/contract period; (ix) the line items acquired/services provided; (x) the value of the call-up/contract, Goods or Services Tax/Harmonized Sales Tax included,

as applicable. (b) Each standing offer/supply arrangement should clearly describe the reporting requirements for

the supplier, as applicable, and must indicate the timeframe by which each report must be submitted after the reporting period. For that purpose, contracting officers must insert Standard Acquisition Clauses and Conditions Manual clauses M7010C in their standing offer and S0010C in their supply arrangement.

(c) Reporting Requirements for Client Departments

Contracting officers must ensure that client departments fulfill all reporting requirements as identified users of the standing offer/supply arrangement, as applicable, in a timely fashion. Client departments may be required to provide more detailed reports than those required of suppliers and include information regarding bid solicitation, supplier responses and selection of successful bidder(s). These reports provide contracting officers with valuable information on the effectiveness of these methods of supply.

8.75.5 Revisions to Standing Offers (2010-01-11) (a) Standing offers are not contracts so cannot be amended or assigned. An offeror may revise their

standing offer. (b) Standing offers typically have a provision that an offeror must provide 30 days written notice of its

intent to withdraw its standing offer. The contracting officer would then issue a “Revision to the Standing Offer and Call-up Authority”, to notify all the identified users and the offeror of the effective date of the withdrawal. Call-ups received by the offeror before the effective withdrawal date are legally binding and must be honoured.

8.75.10 Managing Proportional Basis of Selection (2010-01-11) (a) When proportional basis of selection is used for selecting the contractor among multiple standing

offers, the contracting officer must ensure that identified users are aware of their obligation to award call-up activities, in accordance with the predetermined work distributions stated in the standing offer.

(b) The offeror that is furthest under the ideal percentage in relation to work distributed to the other

offerors will be selected for the next call-up. The ideal percentage is stated in the standing offer.

Supply Manual Page 13 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

A spreadsheet is an acceptable method to track all call-ups and to maintain a cumulative total for each offeror.

(c) For more information on the ranking methodology for multiple standing offers, see 4.10.20.5. 8.80 Employer-employee Relationship (2010-01-11) (a) The client department is responsible for ensuring that an employer-employee relationship does

not develop during the performance of the contract. (b) The contracting officer must ensure that descriptions of the work or changes to the work will not

result in an employer-employee relationship. For more information on employer-employee relationships, see 2.55.

8.85 Subcontracting (2010-01-11) (a) As stated in certain Standard Acquisition Clauses and Conditions (SACC) Manual general

conditions (e.g. 2030) forming part of the contract, a contractor must, in this case, obtain the consent of the contracting officer before subcontracting, by using form PWGSC-TPSGC 1137, Permission to Subcontract. (NOTE: Only government employees have access to the site.) In this case, the contractor must certify that the proposed subcontract is subject to all of the same conditions as contained in the contract. The contracting officer will only consent if satisfied with the subcontractor and the proposed subcontract.

(b) Any deviations are entirely at the risk of the contractor. (c) The award of a subcontract does not relieve the contractor of any contractual obligations, or

impose any liability upon Canada in relation to the subcontractor. 8.90 Assignment of Contracts (2010-01-11) (a) When a contractor assigns a contract, the responsibility for all or part of the performance is

transferred to a third party. However, the assignment of a contract must not relieve the original contractor of any obligations under the contract or impose any liability on Canada, in relation to the assignee.

(b) In order to protect Canada’s interest, the transfer of the liabilities and rights under the original

contract to the assignee, will be done so that the original contractor is ultimately liable for the performance of the contract.

An acceptable manner of protecting Canada’s interest is to obtain the original contractor's guarantee of performance in the event that the assignee fails to perform.

(c) When the contract contains security requirements, the contracting officer, with the assistance of

the Canadian Industrial Security Directorate, must ensure that the assignee meets all security requirements specified in the contract.

(d) Under the SACC Manual general conditions, the written permission of Public Works and

Government Services Canada (PWGSC) is required before any contract assignment. All proposed assignments supported by a contracting officer must be referred to the cost analyst for review, and then, to Legal Services for drafting of the necessary legal documents.

Supply Manual Page 14 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

(e) The contracting officer will forward the assignment agreement to the appropriate PWGSC signing authority, with the reasons for the assignment, the number and value of contracts involved, and the financial condition of the assignee.

(f) In the case of Canadian Commercial Corporation (CCC) contracts, a copy of the approved

assignment should be forwarded to Cost Audit Group, in order to maintain data on supplier financial status, or to the appropriate vice-president of the CCC.

8.95 Financial Security and Contractor Difficulties (2010-01-11) If the contract contains financial security, and the contracting officer becomes aware that a contractor may have difficulty in successfully completing the contract, then the surety company should be informed immediately. 8.100 Bonding Companies (2010-01-11) Whenever a bonding company has failed to honour its undertakings, the matter must be referred to Legal Services for appropriate action, and to the Corporate Secretary who must notify Treasury Board (TB). 8.105 Protecting Canada's Goods (2010-01-11) (a) If a contractor is delinquent in discharging its accrued liabilities, subcontractors or suppliers may

attach liens to goods that Canada has taken title to through full or partial payment. Steps should be taken to protect Canada’s interests.

(b) This is not required for service contracts, and is generally not cost effective for goods contracts

under $25,000. (c) Where a contractor has given security under section 427 of the Bank Act, a waiver must be

obtained for the bank's priority over Canada’s title to the goods. The contracting officer must consult with Legal Services.

(d) If the contractor should change bank, and a new waiver is not obtained, or if the contractor fails to

disclose that security was given, Canada’s title could be affected. (e) To protect Canada’s interest with potentially insolvent or bankrupt contractors, the contracting

officer must obtain a waiver when a bank or other financial institution has a prior lien on the contractor's assets. If the waiver is unobtainable, consult with Legal Services, the cost analyst, and Cost Audit Group (CAG), to determine if the contractor's credit position warrants relieving the contractor of the contractual obligation relating to bank liens.

(f) To preclude the attachment of liens, the contracting officer should check that the contractor has

met payment obligations under the contract to its workmen, subcontractors and suppliers. (g) The contracting officer should promptly review all intimations of unpaid invoices or wages or

unreasonable delays in the payment; and carry out a cost analysis, if appropriate, in cooperation with a cost analyst.

(h) The frequency, scope and extent of checks will be determined and carried out by the contracting

officer, based on cost/benefit, and the contractor's payment record, credit rating and financial strength.

Supply Manual Page 15 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

(i) When the financial analysis indicates potentially serious financial problems, a report should be sent to CAG, who will distribute copies to all procurement sectors/regions. The sectors/regions in turn should compile lists of all open contracts with the contractor involved, including the contract values and anticipated completions dates and return these lists to CAG.

(j) CAG will then determine whether a discretionary verification should be carried out, and what

would be the scope and extent of the verification.

Sectors/regions should only enter into new contracts with the contractor with due caution and proper justification.

(k) A discretionary verification is carried out by qualified personnel and approved by CAG.

Discretionary verifications may be commissioned only by CAG, and will be performed on a timely and prompt basis, so as to lessen potential risks to Canada.

(l) If the total risk exposure is $2,000,000 or over, a discretionary verification will normally be

undertaken. A determination will be made, as to the protection provided to Canada by any security deposits (government guaranteed bonds, bills of exchange, irrevocable standby letters of credit), performance bonds, labour and material payments bonds, or registration action taken or intended.

(m) If the total risk exposure is under $2,000,000, CAG will, in consultation with the sector/region

involved, determine the need to commission a discretionary verification, after taking into account any financial security provision or registration action.

(n) When the verification points to a breach of the contractor's specific contractual obligation to effect

prompt payment to its workmen, subcontractors, or suppliers, CAG will provide written advice to the sectors/regions and senior financial officers of the client(s) holding the contracts in default.

8.110 Registering Notice of Interest in Goods (2010-01-11) (a) In provinces other than Quebec, Canada can register notice of its interest in the goods with a

view to protecting itself against the risk of liens. The registration requirements differ for each province. The contracting officer must consult with Legal Services.

(b) In practical terms, because of the complexities involved, this action is appropriate only on high

dollar value contracts. 8.120 Bankruptcy, Receivership, Insolvency (2010-01-11) (a) The contracting officer must consult Legal Services when:

(i) a contractor proposes a settlement while in an impending or actual receivership, bankruptcy or insolvency condition;

(ii) the contract is secured by surety bond guarantees or other securities; or (iii) a contractor has given security to a bank under section 427 of the Bank Act.

(b) Upon receipt of a bankruptcy, receivership or insolvency notice or when there is an indication of

such, the contracting officer must:

(i) inform the relevant director; (ii) develop a plan, in consultation with the client, for completion of the work; and (iii) advise CAG and Legal Services.

Supply Manual Page 16 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

(c) When a contractor is in formal bankruptcy, the contracting officer must, in consultation with Legal

Services, pursue the rights of Canada, including:

(i) realizing on any contractual securities; (ii) proving title to any Canada property in the contractor's possession; (iii) ensuring payment, if Canada is unsecured, in priority of other unsecured creditors; or (iv) offsetting money payable to the contractor against any amount due to Canada.

(d) After formal bankruptcy or receivership, monies due to the contractor must be sent to the trustee

in bankruptcy or the receiver-manager, as applicable. 8.125 Goods or Services not in accordance with the Contract (2010-01-11) It is the responsibility of the client to inform the contractor, as specified in the contract, if the goods or services are not in accordance with the contract. Failure to do so may prejudice any subsequent claims by Canada. 8.130 Timely Performance (2010-01-11) (a) Under SACC Manual general conditions, time is of the essence of the contract. If a contractor

fails to deliver the goods or perform the services on time, the contracting officer should ascertain, in consultation with the client and Legal Services, the facts surrounding the delay. If the delay was caused by factors beyond the control and without the fault or negligence of the contractor, the contracting officer should extend the time of performance of the contract for a period equal to the length of the delay. Excusable delays are detailed in general conditions. In all other circumstances, the contractor is responsible for the delivery default. If the contractor is in default in carrying out the delivery commitments, the contracting officer may, upon giving notice in writing to the contractor, terminate the contract fully or partially.

(b) Where the time of delivery is to be extended due to delays beyond the control of the contractor,

and if the contract is secured by surety bonds, the contracting officer must:

(i) advise the surety company and obtain its concurrence before the completion dates specified in the contract are actually extended; and

(ii) advise the surety company and obtain its concurrence before adjusting the contract price,

due to additional work requirements, if applicable. 8.135 Terminations (2010-01-11) To determine which type of termination might be involved, see 8.135.5, 8.135.15 and 8.135.20. For termination clauses, see subsection 5-J of the Standard Acquisition Clauses and Conditions (SACC) Manual. 8.135.1 Suspension of the Work - Stop Work Order (2010-01-11) When a client wishes to suspend the work under a contract rather than cancel it, SACC Manual clause J0500C or J0502C should be used. The suspension of the work allows the client to obtain a review of the contract status before deciding the type and extent of termination (including a termination for default). If a client wishes to reinstate a contract after a stop work order has been issued, the stop work order must be

Supply Manual Page 17 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

cancelled (see clause J0501C). In this event, it may be necessary to adjust the delivery terms and/or contract price. It is the responsibility of the contracting officer to determine the reasonableness of all claims for additional costs that the contractor may make. Amendments to cover payment of such costs must be approved in accordance with the contract amendment approval and signing authorities. (See Annex 8.3 for a detailed description of the termination for convenience process.) 8.135.5 Termination for Convenience of Canada (2010-01-11) (a) Occasionally, Canada may terminate a contract for convenience in accordance with the

termination for convenience provision of the general conditions applicable to the contract. See Annex 8.3 for a detailed description of the termination process. This may be due to curtailment of funds, discontinuation of a government program, or other circumstances, which make the procurement of the good or service unnecessary. To protect the integrity of the bid solicitation process, Canada may also terminate a contract for convenience, if it is determined that it has been mistakenly awarded to other than the lowest-responsive bidder. Clauses related to the termination for convenience notices are in subsection 5-J of the SACC Manual (see clauses J0001C, J0002C, J0003C, J0006C).

(b) Termination for convenience applies when:

(i) the client has requested termination; (ii) a termination for default cannot be considered because the contractor is not in default;

and (iii) a termination by mutual consent would not be more advantageous to Canada.

8.135.10 Involvement of the Termination Claims Officer (2010-01-11) The Termination Claims Officer (TCO), Policy, Risk, Integrity and Strategic Management Sector (PRISMS), should be involved immediately in the claim settlement process resulting from contracts that are partially or completely terminated for convenience. Accordingly, the contracting officer should contact the TCO, as soon as the notice of termination for convenience (see SACC Manual clauses J0001C, J0002C, J0003C, J0006C) is issued, and should provide the TCO with a copy of the notice. The TCO’s telephone number is 819-934-1382. 8.135.15 Termination for Default (2010-01-11) Termination for default applies when the contractor is in default in carrying out any of the obligations under the contract, usually through non-performance or delayed delivery. The section "Default by the Contractor" in the SACC Manual general conditions provides the basis for termination for default. For more information on termination for default, see Annex 8.4. 8.135.20 Termination by Mutual Consent (2010-01-11) (a) On rare occasions both parties may agree to termination without claims or penalties, usually

where the client has requested full or partial termination of a contract, the contractor has incurred minor or no expenses and is willing to forego a claim, and the matter may be settled at no cost to Canada.

(b) Termination by mutual consent does not apply when it is in Canada’s interest to issue a

termination for default or when the contractor claims additional costs following the reduction or cancellation of all or a portion of the contract.

Supply Manual Page 18 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

(c) On receiving the client's request for termination by mutual consent, the contracting officer should

request the contractor to confirm that no claim is involved, and should refer the matter to Legal Services in accordance with 8.135.35.

(d) Since no claim is made, the TCO is not involved in this process. 8.135.25 Request for Termination by the Contractor (2010-01-11) When a contractor requests a termination because of anticipated losses in performing the contract, consent will not be granted. Instead, the contractor should be instructed to carry out its obligations under the contract. The contractor may, on completion of the contract, request an "extra payment" for additional costs incurred or losses suffered, if some responsibility for the additional cost or for the loss can be ascribed to Canada. (See 8.135.1.) If the contractor refuses to carry out the contractual obligations, the contract must be terminated for default. 8.135.30 Financial Security Issues Related to Terminations (2010-01-11) (a) If the contract is secured by a security deposit (government guaranteed bonds, bills of exchange,

irrevocable standby letters of credit), it should not be terminated without the prior advice of Legal Services.

(b) If the contract is secured by surety bonds, it must not be terminated as this would also terminate

the existing contractual relationship with the bonding company. When a contractor fails to perform a contract, or when a claim is received for non-payment of labour or material, and a payment bond is in place, contracting officers must immediately inform the surety company in writing, requesting that corrective action be taken. Contracting officers must not enter into negotiations with the contractor or claimant.

8.135.35 Involvement of Legal Services in Cases of Termination (2010-01-11) (a) The following terminations must not be issued without a written legal opinion:

(i) all terminations for default; (ii) terminations by mutual consent, and (iii) terminations for convenience.

(b) In seeking the opinion of Legal Services, the contracting officer should submit the procurement

file with a chronological index of the documents forming the basis for the termination request, together with a short note outlining the events leading to termination. Based on this information, Legal Services will render an opinion and advise as to the appropriate method of termination.

8.135.40 Adjustment to Source Lists (2010-01-11) Terminations for convenience by Canada should not result in any adjustment of the source lists, while terminations by mutual consent may require correction of source lists. Terminations for default are usually the cause for the deletion or suspension of the contractor from the source list.

Supply Manual Page 19 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

8.135.45 PWGSC Offices Outside Canada (2010-01-11) Termination procedures for contracts awarded by Public Works and Government Services Canada (PWGSC) offices outside Canada may differ from those for contracts issued in Canada; therefore, the termination procedures serve only as a general guide. 8.135.50 Signing Authority (2010-01-11) Stop work orders and notices of termination must be approved and signed by a contracting officer with the signing authority for the total contract value at the time of the termination. 8.140 Disputes (2010-01-11) (a) Disputes must be handled expeditiously. All parties must meet their contractual obligations.

Proper record keeping is vital for clarification, audit or termination purposes. (b) Consultation with Legal Services is recommended to ensure the protection of the interests of

Canada. (c) If a contracting officer is unable to resolve a contract dispute, the matter should be brought to the

attention of the contracting officer's immediate supervisor. (d) When any dispute associated with goods and services contracts cannot be resolved expeditiously

through negotiation, the contractor should be advised, in writing, of the option to submit a formal claim to the Contracts Settlement Board. This claim must be delivered in writing to the Manager of Contract Conflict Management (CCM), within Departmental Oversight Branch.

(e) When any dispute associated with architectural and engineering, construction, building and

maintenance and leasing contracts cannot be resolved expeditiously through negotiation, the contractor or the consultant should be advised, in writing, of the option to submit a formal claim to the Contract Disputes Advisory Board. This claim is to be delivered in writing to the Manager of CCM.

8.140.1 Contract Dispute Resolution (2010-01-11) (a) All enquiries, from contractors or contracting officers concerning the options for dispute resolution

should be addressed to the Manager of CCM, Departmental Oversight Branch. (b) The CCM Office offers a range of options for managing conflict and resolving disputes, from

providing advice and coaching in managing conflict, to facilitating processes such as discussion, negotiation, and mediation. Parties are required to attempt to reach a solution through discussion and negotiation before seeking more formal options. When discussion and negotiation fail to result in satisfactory agreement, parties may agree to enter into mediation. Mediation is a voluntary process – both parties must agree to participate.

(c) Upon request, the CCM Office staff will provide advice and assistance concerning any of the

matters falling within its purview to all persons seeking it, and is available to provide brief information and training sessions on conflict/dispute resolution. The expertise associated with lessons learned derived from previous cases may provide useful information to assist in the resolution of disputes.

Supply Manual Page 20 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

(d) If the parties cannot resolve the dispute through mediation, or they determine mediation is not appropriate, the CCM Office also administers two arbitration boards, which are non-binding on the supplier:

(i) the Contracts Settlement Board, which deals with disputes relating to goods and services

contracts, and (ii) the Contract Dispute Advisory Board, which deals with disputes relating to real property

contracts. A summary of these two processes follows. 8.145 Contract Settlement Board (2010-01-11) (a) The Contract Settlement Board (CSB) is an independent process designed to provide for the

prompt resolution of disputes arising from goods and services contracts, when discussion, negotiation, or mediation is not successful or appropriate. It is a simple, non-binding arbitration dispute resolution process for contractors. It is an opportunity for the contractor and Canada to benefit from an independent review of the claim and response.

(b) Following the review process, CSB will take a decision, which is not binding on the contractor.

Accordingly, if the contractor rejects the decision of the CSB, its rights at law are not compromised.

8.145.1 Contract Settlement Board - Procedures (2010-01-11) (a) When any dispute arising from goods and services contracts cannot be resolved through

discussion, negotiation, or mediation, the contractor may request a review by CSB. This request is made, in writing, to the Manager of CCM, Departmental Oversight Branch.

(b) While the contractor may submit a claim at any time during or after the contract, normally a claim

would not be submitted to the CSB until the contract has been completed, since in most cases an audit of the total contract will be required. The extent and nature of review process by CSB is at the discretion of the chairperson, (i.e., whether to convene a full board hearing, or whether the case is straightforward enough for a secretarial board).

(c) The Contract Conflict Management (CCM) Office will inform the contractor, the contracting officer

and the Chairperson of CSB of the receipt of the claim. The contracting officer will be requested to prepare Canada’s submission to CSB.

(d) Canada’s submission, to be signed at the director level, must include a recommended settlement,

as well as confirmation that funds are available for settlement under the encumbrance. (e) The Chairperson of CSB will advise the contractor in writing of the date of receipt of the

submission from the contracting officer, and will, if necessary, arrange a meeting of the participants.

(f) Depending on the complexity of the dispute, the contractor will be given the opportunity to appear

in person, or to have selected company officials appear, and can be represented by legal counsel. The same opportunity will also be afforded to Public Works and Government Services Canada (PWGSC) and the client in relation to data or presentation against, or in support of the contractor's claim.

Supply Manual Page 21 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

8.145.5 Contract Settlement Board - Meetings (2010-01-11) (a) The Chairperson of CSB is responsible for ensuring that all participants, at any CSB meeting, are

fully aware of the role and responsibilities of CSB, and the manner in which the proceedings will be conducted. The Chairperson will also determine the time necessary to permit a full and detailed discussion of the claim.

(b) All copies of submissions to CSB, assemblies of data, memoranda and working papers of CSB,

are for the sole use of the members of CSB, the Assistant Deputy Minister (ADM) of the Department Oversight Branch, the Deputy Minister and the Minister of PWGSC.

(c) The Manager of CCM administers the CSB process on behalf of the ADM/Departmental

Oversight Branch and the Chairperson, CSB. (d) Normally, the full CSB is only convened to review complex claims in excess of $100,000. The

Chairperson of CSB, one or more private sector consultants, an independent representative from the project authority, as well as the CSB’s legal advisor, would attend such meetings. For claims with a value of $100,000 or less, the review of the contractor’s claim is normally conducted less formally and without incurring the expense of engaging any private sector consultants.

(e) When deliberations are complete, the final conclusions and recommendations for settlement will

be recorded in the minutes of proceedings. 8.145.10 Contract Settlement Board - Settlement Offer (2010-01-11) (a) When the Chairperson of CSB concludes that a settlement offer must be made, CSB will officially

advise the contractor of the recommended amount of settlement and will seek to obtain the contractor's written acceptance. A copy of CSB’s letter of offer to the contractor will be sent to the client and the sector or the region for information.

(b) If the settlement amount exceeds departmental approval authorities, the contractor will be

advised that the settlement is subject to the approval of Treasury Board (TB). The contracting officer will prepare the necessary submission, and send it the Manager of CCM, for review, before the regular routing for submission to TB.

(c) When the recommended payment is approved, the Chairperson of CSB will prepare, in

collaboration with Legal Services, a settlement and release agreement that must contain an acceptance and release clause approved by Legal Services.

(d) Copies of the settlement and release agreement must be distributed to all parties. 8.145.15 Contract Settlement Board - Non-acceptance of Settlement (2010-01-11) If the contractor does not accept CSB’s ruling, the contractor may institute legal proceedings against Canada. 8.150 Contract Dispute Advisory Board (2010-01-11) (a) The Contract Dispute Advisory Board (CDAB) is an independent process designed to provide for

the prompt resolution of disputes arising from architectural and engineering, construction, building maintenance and leasing contracts. It is used when discussion, negotiation, or mediation is not

Supply Manual Page 22 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

successful or appropriate. It is a simple, non-binding arbitration dispute resolution process for a contractor that involves the selection of a private sector arbitrator by both parties. It is an opportunity for the contractor and Canada to benefit from an independent review of the claim and response.

(b) Following the review process, CDAB will take a decision, which is not binding on the contractor.

Accordingly, if the contractor rejects the decision of CDAB, its rights at law are not compromised. 8.150.1 Contract Dispute Advisory Board - Procedures (2010-01-11) (a) When any dispute arising from architectural and engineering, construction, building maintenance

and leasing contracts cannot be resolved through discussion, negotiation, or mediation, the contractor or the contracting officer may request that a CDAB be convened. This request is made, in writing, to the Manager of Contract Conflict Management (CCM), Departmental Oversight Branch.

(b) Detailed procedures and rules for CDAB arbitration are found in subsection 5-R of the Standard

Acquisition Clauses and Conditions (SACC) Manual, and form part of real property contracts. (c) Briefly:

(i) Either party may submit a dispute to arbitration to the extent permitted under the contract, by giving notice in writing to the other party in accordance with the requirements of the contract. The notice must contain a brief description of the contract, a statement of the issue(s) in dispute, and a request that the dispute be referred to CDAB for arbitration. A copy of the notice must be given to the Manager of CCM, Departmental Oversight Branch, at the same time it is given to the other party.

(ii) The Manager of CCM, as “coordinator”, will appoint a private sector arbitrator or a

tribunal acceptable to both parties. CDAB will be composed of a person or persons who have experience in the subject matter of the dispute and are independent of either party.

(iii) Specific time limitations for each step are detailed in the SACC Manual, with the goal of

reaching a timely conclusion. (iv) Communication with parties by CDAB will follow the same process and be carried out in

the same manner (verbal, in writing) for each party. (v) Each party will prepare and provide an agreed statement of facts, and will prove the facts

relied upon to support its claim or defence. All such documents provided by one party must be made available to the other party.

(vi) The SACC Manual provides rules for dealing with issues of default with regard to the

agreed rules. (vii) Unless otherwise agreed to by the parties, CDAB will make the award no later than 30

days after completion of the arbitration hearings, unless that time period is extended for an express period by CDAB on written notice to each party, due to illness or other cause beyond CDAB’s control.

8.150.5 Contract Dispute Advisory Board - Non-acceptance of Settlement (2010-01-11) If the contractor does not accept CDAB’s ruling, the contractor may institute legal proceedings against Canada.

Supply Manual Page 23 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

8.155 Final Payments (2010-01-11) (a) The total time charged under a fixed rate contract should be verified for acceptability and

accuracy of recording before the final claim is processed for payment. The findings of such verifications will be noted on the procurement file.

(b) The contracting officer, or other qualified personnel designated by the sector/region concerned,

should carry out the verification of time for acceptability. (c) Verification of time for accuracy of recording should be carried out by qualified personnel from the

financial division or section in the directorate concerned, or other suitably qualified personnel with the prior approval of the director who is also responsible for setting the standards of verification for the accuracy of recording.

8.155.1 Refunds of Excess Profits (2010-01-11) As the result of an audit, or for various other reasons, it may be determined that a contractor has realized unreasonably high profits from a contract. On such occasion, a contractor may need to return excess profits to the department. The special procedures for dealing with these situations are in Annex 8.5. 8.160 Cost Submissions Standards for Cost Reimbursable Contracts (2010-01-11) (a) The contractor will be paid, in accordance with the contract, the cost reasonably and properly

incurred in the performance of the work. Upon completion of the work, on all cost reimbursable contracts meeting the cost threshold, the contracting officer must place on the procurement file a certification to the effect that the final amount paid represents a reasonable price. This certification should be based on the findings of a cost audit, if one was done.

(b) The agreed final price, after all reconciliations, is then formalized in a contract amendment,

generally referred to as “finalization of cost amendment”, which adjusts the total contract price to reflect the final price. This amendment should also state that further claims cannot be submitted.

(c) The audit provision in contracts valued over $50,000 with Canadian contractors allows for the

determination of the actual costs incurred, to determine the final contract cost of cost reimbursable contracts and the reasonableness of the price.

(d) All cost reimbursable contracts require a cost submission upon the completion of the contract. All

multi-year cost reimbursable contracts, except for repair and overhaul (R&O) services, will include a provision for an annual cost submission, as a mandatory deliverable item.

NOTE: For R&O service contracts, an annual cost submission is at the contracting officer and the audit

agency’s discretion. 8.165 Cost Audit (2010-01-11) (a) The selection of cost reimbursable contracts for audit will be made by the contracting officer after

consultation with the Cost Audit Group (CAG) within the Policy, Risk, Integrity and Strategic Management Sector, in accordance with the following:

(i) all contracts associated with Major Crown Projects (MCPs); and

Supply Manual Page 24 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

(ii) if risks of significant overpayment are apparent. (b) For those contracts selected for audit, the sectors/regions will supply to CAG a copy of the

contract document, along with copies of all cost submissions received. (c) A copy of the audit report will be forwarded to the contracting officer, along with an audit

notification form prepared by CAG detailing overpayments and/or comments requiring approval. (d) The contracting officer will establish a final price with the contractor based on the audit findings.

Every effort will be made to do this within 90 days of the audit report being received. The contracting officer will notify CAG of the terms of the settlement and resolution of all audit issues raised in the contract audit.

(e) When the contractor has agreed to the final price, the contracting officer must certify that the price

charged is reasonable and in accordance with the contract. 8.165.1 Differences of Opinion or Interpretation (2010-01-11) On occasion, differences of opinion or interpretation may arise between the contracting officer and the auditor regarding the legitimacy of audit findings. The relevant director should resolve these differences of opinion or interpretation in concurrence with the Director, Acquisition Program Integrity Secretariat, before the Cost Audit Group will take close out action. 8.175 Contract End and Contract Close Out (2010-01-11) (a) This section provides information on the end of contract activities such as ensuring that all of the

necessary conditions are met. This should include the following activities:

(i) verify that the product or work has been completed satisfactorily; (ii) ensure that the contractor has been paid; (iii) commence administrative closure of the project; and (iv) ensure the records are retained on a project file.

(b) Contracting officers should ensure that procurement files are properly documented. 8.180 Vendor Performance Policy 8.180.1 Introduction (2010-01-11) The goal of the Vendor Performance Policy (VPP) is to improve client service, by preventing problems with vendors from arising. While it is never possible to ensure that there is no poor performance, vendors' performance can be improved by instituting the appropriate measures in the event of non-performance. 8.180.5 Principles (2010-01-11) Public Works and Government Services Canada (PWGSC) has the authority and the duty to take reasonable measures to ensure that it can rely on its contractors to perform their obligations. The Department, within the framework of its policy that procurement be open, accessible and fair, has the same right as other purchasers in the market to assess a vendor's performance, and may take action to prevent future problems, based on the vendor's past performance. The discretion to take such action

Supply Manual Page 25 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

should be exercised in a fair and reasonable manner within the policy. Any measure taken should rationally relate to the nature and severity of the problem for which it is applied. 8.180.10 Definitions (2010-01-11) (a) Poor performance: means anything less than full performance of a contract by a vendor.

While even minor instances of poor performance may be noted, action would normally only be taken against a vendor as the result of a major instance of poor performance on a contract, or a cumulative record of poor performance.

(b) Vendor: includes subcontractors, owners, directors, officers, employees, agents, parent

corporation or subsidiary of a vendor, which may be responsible for a vendor's poor performance.

While persons other than a contractor may be treated as "vendors" under the Policy, action against them can only be taken where they have been notified of the poor performance and of any proposed measures and given the same opportunity to respond that a contractor would have.

(c) Vendor Performance Corrective Measure (VPCM): means a condition or limitation placed on a

vendor's ability to contract with PWGSC on the basis of PWGSC's assessment of their reliability. A VPCM can be applied to a vendor overall or only in respect of certain goods or services. The three types of measures (Debarment, Suspension and Conditions) are defined and described in 8.180.15.10(b).

8.180.15 Process 8.180.15.1 Monitoring (2010-01-11) (a) Contracting officers should enforce the terms of contracts wherever possible. The same incident

may support both enforcement of the remedies available under the contract and a VPCM. The contracting officer will document events that may be instances of poor vendor performance in the contract file.

(b) When the terms of the contract are enforced by notice to the contractor of its poor performance,

but no further action is taken, this should be noted in the contract and vendor files, together with the facts, which justify it. The intention of the contracting officer to commence an action to impose a VPCM on the vendor is not a reason to decline to enforce the terms of the contract.

(c) The approval of the relevant director is required for noting an instance of poor performance for

the vendor on the Vendor Information Management (VIM) system. A notation of poor performance on VIM will include the contract number, the subject of the contract, the nature of the poor performance, any remedial action taken by the vendor, its effects and the status or disposition of the problem.

(d) The relevant director must inform the vendor of each instance of poor performance, the vendor

will have ten days to respond before the notation will appear on VIM. (e) A vendor, which may be someone other than the contractor, who is responsible for the

contractor's failure to fulfill the contract, should be notified each time a poor performance notation is made on VIM, and be informed that PWGSC will take past performance into account in its future dealings with vendors.

Supply Manual Page 26 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

(f) A vendor may respond to notification of the director's intention to have an instance of poor performance noted on VIM. The director will consider the input of the vendor in deciding whether to enter the information.

(g) Outstanding performance of a vendor should also be noted, as it may be useful in making an

overall assessment of a contractor's performance in the event corrective measures are required. A performance notation will generally remain on VIM for seven years. After that time, a vendor may request that it be removed. Performance, good or bad, more than seven years in the past will not ordinarily be relevant to a decision whether to impose a corrective measure.

(h) Since the VPP limits itself to consideration of poor performance, being failure to fulfill a contract,

contracting officers should make sure that their contracts cover all aspects of performance which they would want to consider in evaluating the vendor's performance on the contract.

8.180.15.5 Investigation for Vendor Performance Corrective Measures (2010-01-11) (a) Formal corrective measures should be considered when there is evidence that continued

contracting with a vendor may pose a greater risk to Canada than is acceptable. This may be as the result of a major instance of poor performance on a contract, or a cumulative record of poor performance. Sectors and regions may also set general or commodity-based standards, as the basis for consideration of Vendor Performance Corrective Measure. (See 8.180.30.)

(b) In investigating whether corrective measures should be applied, the sector or region will:

(i) ensure a full review of contract file(s), and the record of the vendor in general; (ii) notify all other sectors or regions and consult those which have a particular interest in the

matter; (iii) consult clients which have a particular interest in the matter, either as major purchasers

of the vendor's product or as the initiator of the complaint; and (iv) consult Legal Services, as to what evidence should be sought, and what process should

be used, to ensure fairness in light of all the circumstances. (c) All components of an investigation and subsequent decision should be fully documented, with the

disposition being noted on the vendor file in VIM. 8.180.15.10 Decision on Application of Vendor Performance Corrective Measures (2010-01-11) (a) A decision to apply a Vendor Performance Corrective Measure (VPCM) should be made where,

on the basis of the vendor's performance history, a prudent person acting on their own behalf would not continue to deal with the vendor, or would not continue to deal with the vendor without special conditions being attached.

(b) The three types of VPCM are defined as follows:"

(i) Debarment is the refusal by PWGSC to do business with a vendor for a specified period or for a number of relevant procurements. Debarment would be used for problems of a criminal nature, or where there is poor performance, which demonstrates a lack of good faith effort on the part of the contractor to perform its various obligations. Since the vendor has demonstrated a lack of good faith effort, it would not be realistic to allow reinstatement on the satisfaction of some requirement. The period of debarment would generally not exceed three years.

Supply Manual Page 27 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

(ii) Suspension is the refusal by PWGSC to do business with a vendor pending the outcome

of an investigation into serious or multiple instances of poor performance, or until the vendor meets conditions set for reinstatement, such as remedying a problem. Suspension would be imposed where doing business with a vendor before an investigation is complete or before the vendor has made changes would pose too great a risk that the vendor would not carry out its obligations under future contracts.

(iii) Conditions can be imposed on vendors seeking to do business with PWGSC. Conditions

would be used in the case of problems, which could be prevented by a less onerous means than a refusal to do business.

As part of a VPCM, the vendor may also be subject to probation when the measure ends. In such a case, if further instances of poor performance occur, the VPCM may be extended, or another applied.

(c) When investigating to determine if a VPCM should be imposed, consideration should be given to

the extent to which the VPCM will apply to the various elements of a vendor's organization and to related organizations. As the objective of this Policy is to prevent problems with vendors from arising, the breadth of the VPCM will depend on the nature and source of the poor performance for which the VPCM is being considered.

(d) Examples:

(i) Where the source of the poor performance is dishonesty within the highest management of a vendor, then imposing the VPCM on the vendor as a whole would likely be appropriate.

(ii) Where the poor performance relates to problems with product quality in one of the

vendor's several product lines, where there is no element of willful failure to produce a suitable product, this would likely be more appropriately dealt with by a VPCM limited to the product line with which problems have been experienced.

(iii) Where the poor performance was the result of safety problems that were the result of

policy set for the subsidiary vendor by its parent corporation, it may be appropriate, provided proper notice has been given, to impose a VPCM to the parent corporation and all its subsidiaries with which similar safety issues might arise. These examples are provided solely for illustration. Actual cases will depend on their particular situations.

(e) When, on the basis of the investigation, a director general believes that one of these measures

should be applied, the Sector or Region will notify the vendor of the VPCM imposed together with the reasons for it, and give the vendor a reasonable opportunity (including a reasonable period of time) to respond.

(f) What constitutes a "reasonable opportunity" will vary with the circumstances, and could range

from an exchange of correspondence, to formal consultations. A vendor will be given access to documents relevant to its performance on the same basis, as these would be available in a contract dispute. In determining whether to provide a particular document to the vendor, it should be kept in mind that if absence of that document means the vendor is not in a position to address the allegations made against it, this may allow successful court challenge of a subsequent decision to impose a VPCM.

(g) The file containing the decision to apply a VPCM and the notice to the vendor must both include,

in addition to the type of measure being applied, the following:

Supply Manual Page 28 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

(i) a list of the instances of poor performance, which form the basis for the proposed VPCM sufficient to identify them;

(ii) the reasons why the vendor's performance record merits the proposed VPCM; (iii) the procurements for which the vendor is declared ineligible to bid or contract, that is,

whether the VPCM will be across-the-board (affecting all aspects of the vendor's operations) or limited by product, division, geographic division, type of contract (such as urgent delivery requirement) or some other factor;

(iv) when and how the VPCM will end; (v) whether the vendor will be subject to a formal period of probation following the end of the

VPCM, and who will determine if the probation has been breached; (vi) in the case of a VPCM that can end when the vendor satisfies conditions, who will decide

if the conditions have been satisfied. (h) If, after considering the vendor's response, the director general still believes the proposed VPCM,

or some less severe measure, should be imposed, that measure will be imposed. If it is intended, after reviewing the vendor's response, to impose a more severe measure than originally proposed, the vendor should be notified, and given a reasonable opportunity to respond to that change.

8.180.15.15 Review (2010-01-11) Except where there is an approved sector program (see 8.180.30), the Assistant Deputy Minister, Acquisitions Branch (ADM/AB) will review all decisions to impose a VPCM, and any additional representations made by the vendor, and may decide to vary the decision. If the ADM/AB intends to impose a more severe VPCM, the vendor must be notified, and given a reasonable opportunity to respond to that change. 8.180.15.20 Enforcement (2010-01-11) (a) When a VPCM is imposed, the ADM/AB (or appropriate director general, where there is a sector

program) will inform the vendor of the decision. All sectors and regions, and clients who have a particular interest in the matter, will also be informed.

(b) A notice advising that a vendor is subject to a VPCM may be published on the Government

Electronic Tendering Service, together with the particulars of the measure, but not the reasons. This notice may continue to be published while the measure is in effect.

(c) A debarment or suspension renders a vendor ineligible to bid on or receive contracts related to

certain types of procurements. Where a vendor is subject to conditions and does not meet the conditions of a particular procurement, the vendor is declared ineligible.

(d) A debarred or suspended vendor will be removed from relevant source lists, automated vendor

rotation systems, and standing offers. Bids received from vendors debarred or suspended from doing any business with PWGSC will not be considered for evaluation. Bids from vendors who are debarred or suspended in part will not be considered for evaluation, if the bids pertain to procurements from which the vendor has been debarred or suspended. Where a vendor is subject to special conditions, any bid from that vendor which does not conform to the conditions will not be considered for evaluation.

Supply Manual Page 29 of 30 Version 10-1 (2010-01-11)

Chapter 8 – Contract Management

(e) A VPCM does not affect existing contracts, though it does affect amendments. If a current VPCM imposed on a vendor would have been relevant to the award of the contract had the VPCM been in effect at the time, or is relevant to the subject matter of the amendment, then the amendment requires the approval of the relevant director general as an exception to the VPCM. Information on a VPCM will only be entered into VIM by Policy, Risk, Integrity and Strategic Sector, which is responsible for maintenance of the information (including removal of notice where a VPCM has ended). This information will be accessible to anyone who has access to Automated Buyer Environment (ABE).

(f) When a measure ends, the sector or region that initiated it is responsible for promptly notifying

the vendor. 8.180.20 Suspensions in Cases of Emergency (2010-01-11) When a problem with a vendor is particularly serious (e.g., involving negligence or willful misconduct, or carrying health or safety implications), the Assistant Deputy Minister of Acquisitions Branch (ADM/AB) may apply an immediate suspension on the advice of a director general, before a complete investigation. The suspension will remain in effect until measures have been taken to remove any unacceptable risk to Canada or public. The vendor will immediately be notified, and given the same opportunity to respond as in a normal VPCM action. 8.180.25 Exceptions (2010-01-11) In cases of emergency, or great urgency in procurement, a director general may make an exception to a VPCM. In such cases, special care should be taken to protect Canada. Where an exception is made, the reason should be recorded on the contract file and the vendor file. The fact that a vendor subject to a VPCM is lowest-responsive bidder is not enough reason to make an exception. 8.180.30 Sector or Regional Programs (2010-01-11) (a) A sector or region may establish a program for evaluating vendor performance and determining

appropriate measures to apply within that sector or region. Where such a program has the approval of the ADM/AB, it is not necessary that the ADM/AB review each case. The decision can be made by the persons delegated that authority under the program.

(b) The performance standards and the measures to be imposed should be established on a

commodity basis, and other areas of the department, which may be affected by the proposed program, should be consulted. This is to prevent differing standards for the same commodities, in different sectors or regions. Once established, a program is administered by the sector or region, in accordance with the provisions of the Vendor Performance Policy.

Supply Manual Page 30 of 30 Version 10-1 (2010-01-11)

Annex 8.1 – Guidelines on File Organization and Make-up

Annex 8.1: Guidelines on File Organization and Make-up (2010-01-11) 1. Overview (a) This guideline is intended to help procurement staff in organizing their procurement files.

Consistent filing methods allow for a more organized approach to procurement and ensure that anyone reviewing the file is able to locate documents with minimal effort. The importance of proper filing techniques is more evident when, for example, information is needed quickly for audits, Access to Information requests, Canadian International Trade Tribunal complaints, or when a contracting officer takes over file responsibility and needs to determine the status of the procurement process, etc.

(b) As a general rule, documents should be filed in chronological order. A proposed format for file

organization is set out below. The list of documents is not intended to be comprehensive and is subject to the professional opinion of the contracting officers. All the documents may not be applicable in all cases. Furthermore, file organization and the required documents may vary in accordance with regional/sectoral procedures and guidelines.

2. Documents proposed for the left-hand side of the file jacket: (a) requisition and any requisition amendments; (b) final version of the statement of work, plus any documents that alter the requirement, that is,

approved design changes, etc; (c) Security Requirements Check List (SRCL); (d) Procurement Strategy Committee (PSC) - Detail Document; (e) PSC Record of Decision; (f) signed bid solicitation checklist; (g) signed original Procurement Plan; (h) signed original Contract Planning & Advance Approval (CPAA) form; (i) Notice of Proposed Procurement (NPP); (j) Advance Contract Award Notice (ACAN); (k) approved Contract Summary/Request; (l) approved Contract Amendment Summary/Request; (m) signed original Treasury Board submissions/approvals; (n) signed original contract/contract amendment document; (o) signed contract/contract acknowledgment amendment copy (as signed by contractor); (p) letters of authority; (q) Formal Legal Agreements; (r) formal notifications (that is, termination); (s) copy of any relevant acting authority memos; (t) procurement summary; (u) Record of Extract and Part Files (PWGSC TPSGC 1015) (Note: Only government employees

have access to the site.); (v) copies of extract file contracts and their contract amendments; (w) Request for Additional Funds (PWGSC TPSGC 329) (Note: Only government employees have

access to the site.). For Canadian Commercial Corporation files: CCC 747 and amendment to CCC74. 3. Documents proposed for the right-hand side of the file jacket: (a) acknowledgment of requisition; (b) request for distribution of technical data; (c) file index, if more than one volume exists;

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Annex 8.1 – Guidelines on File Organization and Make-up

(d) original solicitation document, plus document updates or amendments; (e) letters of interest; (f) minutes of bidder’s conferences; g) bidder’s questions and answers; (h) bids received (or can be put in a separate volume); (i) bid evaluation, including tabulation sheets; (j) technical evaluation report; (k) financial evaluation report; (l) price certification; (m) price support; (n) transportation analysis; (o) legal opinions; (p) policy opinions; (q) documentation on environmental considerations, impacts, and mitigation; (r) any comments provided by quality assurance reviews; (s) contract award notices; (t) supplier correspondence; (u) client department correspondence; (v) relevant e-mail messages; (w) notes to file (see below). NOTE: Procurement files should tell a story from beginning to end, and notes to file are an important part of this process. Notes to file can provide a file history; provide an explanation of problems encountered; and act as reminders to contracting officers. Notes to file should be legible, clear, complete and concise. They should state the subject matter along with what was discussed, any action taken, date, name of person, and company name or client department, phone number, and the name of the person making the note. The use of self-stick notes, phone message slips, and small scraps of paper, etc, should be avoided since they may be easily lost or overlooked.

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

Annex 8.2 - Contract Management Early Warning Indicators

Annex 8.2: Contract Management Early Warning Indicators (2010-01-11) The following factors, if present with a particular procurement, indicate there may be problems with the file. These factors should warrant further investigation and consideration and, in some cases, referral to more senior levels of authority. 1. Before Contract Award (a) Requirement early warning indicators:

(i) requisition transferred several times; (ii) receipt of a requisition for a stand alone procurement when an existing procurement

instrument (such as a standing offer) already exists; (iii) urgent requirements without adequate rationale for urgency; (iv) potential situation for employee/employer relationship; (v) sole source or no substitute requirements without adequate rationale; (vi) contracts with former public servants outside of guidelines; (vii) unclear/vague description of work/requirement; (viii) indications that the "deal is already cut"; (ix) complex or innovative requirements requiring the development of new methodology; (x) work already under way and requiring confirmation and backdating; (xi) unrealistic time frames; (xii) lack of responsiveness from contractor during negotiations; (xiii) indication of requirement splitting; (xiv) weak financial capacity of contractor.

(b) Sensitive files early warning indicators:

(i) sensitive requirements that may be of interest to various interest or stakeholder groups; (ii) highly visible requirements, especially ones of interest to the media; (iii) contentious requirements that may result in aggressive competition.

2. After Contract Award (a) Performance/management early warning indicators:

(i) unusual number and value of amendments without clear rationale; (ii) unexpected/unclear subcontracting activities; (iii) PWGSC excluded from meetings between contractor and client department; (iv) missed deadlines/reports/meetings; (v) quality of performance/deliverables below expectations; (vi) excessive warranty claim; (vii) excessive maintenance services; (viii) invoices for out of scope items; (ix) frequent and unexplained turn over of contractor staff; (x) request for amendments for out of scope work; (xi) disputes and difficulty with resolution of issues.

(b) Financial early warning indicators:

(i) contract cost not in line with forecasts; (ii) outstanding claims/invoices; (iii) poor and irregular billing/invoicing practices; (iv) reluctance to submit copies of claims/invoices;

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Annex 8.2 - Contract Management Early Warning Indicators

(v) reluctance to supply supporting financial information; (vi) difficulty conducting audits; (vii) indication that business practices are deviating from the policies.

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

Annex 8.3 - Termination for Convenience Process

Annex 8.3: Termination for Convenience Process (2010-01-11) 1. Overview (a) Policy, Risk, Integrity and Strategic Management Sector (PRISMS) was designated to provide

termination settlement services associated with goods and services contracts terminated for convenience by Canada. PRISMS sector was also designated to handle claims arising from United States and Canadian Commercial Corporation (U.S./CCC) contracts that are terminated for the convenience of the U.S. government. For terminations involving U.S./CCC contracts, the Director General (DG), PRISMS, will ensure compliance with the certification and termination settlement functions that are required to conform with the U.S. Department of Defense and Department of National Defence Letter of Agreement (see U.S. Defense Federal Acquisition Regulation Supplements 225.870-6 and 249.7000). The DG/PRISMS will also be responsive to requests by the U.S. government for arranging for audits of U.S. government contracts or subcontracts placed directly with Canadian-based suppliers that are terminated for convenience.

(b) The contracting officer and the Termination Claims Officer (TCO) are responsible for the following

termination activities:

Termination Activities Contracting Officer

Termination Claims Officer

Issue Stop Work Order and Notices of Termination X Administration of the non-terminated portion of the contract

X

Assess the contractor's request for any upward adjustment of the contract price for the non-terminated portion of the contract

X

Request claim from contractor and forward claim forms

X

Assist contractor with preparation of claim X Ensure acceptability of claim X Determine if audit is required X

Define audit requirements and arrange audit X Arrange for inventory verification and screening by client

X

Negotiate final settlement with contractor X Preparation of settlement and release document X

Disposal of surplus inventory X Forward settlement and release document to contractor for acceptance X

Obtain invoice from contractor X Process invoice through client department X Distribute settlement and release document X

(c) Occasionally, the client will require a status report before making a decision to cancel a contract.

In this event, the client will inform PWGSC of its intention to reduce or cancel a contract by issuing a "Notice of Intent to Cancel" either by telephone or in writing. The client will usually

Supply Manual Page 1 of 5 Version 10-1 (2010-01-11)

Annex 8.3 - Termination for Convenience Process

request all or part of the following contract status information before making a final decision to terminate: (i) quantity of stores produced against the contract; (ii) quantity of stores in production; (iii) value of raw materials and/or components acquired by the contractor to carry out the

specific contract; (iv) the position with respect to tooling and capital equipment, especially where the contractor

had to tool-up to carry out the contract; (v) status of subcontracts; (vi) the most economical point at which to effect termination; and (vii) the approximate amount of termination claims, if known.

(d) The contracting officer must immediately request the information from the contractor and closely

follow up to ensure that it is received as soon as possible. When the information is received, the contracting officer will forward it, together with any recommendations, to the client. Normally, the client's first request will be to cancel all or a portion of a contract, in which case the contracting officer should immediately issue a stop work order. A stop work order is a safeguard to ensure a halt in the work and remove the possibility of further expense being generated by the contractor. To terminate the contract, a stop work order must be followed by the issuance of a notice of termination.

2. Stop Work – Notice of Termination On receiving the client's initial written instructions to cancel all or part of a contract for the convenience of Canada (see 8.135.5), the contracting officer should immediately issue a stop work order to advise the contractor to "stop work" (see the Standard Acquisitions Clauses and Conditions [SACC] Manual clauses J0500C and J0502C.) The notice of termination (J0001C, J0002C, J0003C, J0006C) cannot be issued until the formal requisition amendment is received, and a legal opinion has been sought. The contracting officer should also contact and provide the Termination Claims Officer (TCO) with a copy of the stop work order and notice of termination. 3. No Claim is Involved When a contractor advises the contracting officer that a claim will not be submitted following the receipt of a notice of termination, the contracting officer must eliminate the funding for the terminated items. Since no claim is made, the TCO is not involved in this process. 4. Client's Decision (a) It is the client's responsibility to decide at what stage a full or partial termination should take

place. Formal amendments to the requisition, confirming the decision to terminate, must be provided, as quickly as possible.

(b) The contracting officer must not issue a notice of termination for convenience until an amendment

to the client's requisition has been received. (c) The contracting officer should ensure that sufficient funds remain in the amended requisition to

cover the estimated claim costs and costs resulting from post-termination activity carried out by the contractor. This includes the cost of producing the claim, segregation, packing, secured storage or residual inventory of material, parts assemblies, tools, equipment, etc., before disposal procedure.

5. Notice of Termination

Supply Manual Page 2 of 5 Version 10-1 (2010-01-11)

Annex 8.3 - Termination for Convenience Process

(a) As soon as the requisition amendment is received, the contracting officer will prepare the notice of termination or partial termination by using the clauses provided in subsection 5-J, of the SACC Manual, and on advice from Legal Services will send the notice to the contractor.

(b) After the notice of termination or partial termination is issued, the contracting officer must

immediately send one copy of the notice to the TCO.

In order to avoid further costs to Canada and hardship to the contractor, a notice of termination must be issued as promptly as possible to finalize the implications of a stop work order.

6. Adjustment of Funds The funds in the contract must not be adjusted when the notice of termination is issued. The contract funds are adjusted only after a settlement offer has been made to a contractor. The funding will be adjusted by the TCO at the time that the settlement and release document is prepared for the approval and signature of the DG/PRISMS. 7. Adjustment to the Price of the Non-terminated Portion of the Contract Whenever a contractor requests an upward adjustment to the cost or unit price of the non-terminated portion of a contract, the resulting claim for adjustment should be referred to the TCO for review, before reaching any agreement with the contractor, concerning such upward cost or price adjustment. 8. Termination File (a) For non-complex, fully terminated contracts, the contracting officer should transfer the complete

procurement file to the TCO, if a claim is involved. (b) For complex procurements or partial terminations, where the non-terminated portion of the file is

still active, the contracting officer will prepare a termination case file; including copies of the contract, amendments, specifications, pricing details, documents, correspondence and any other information relevant to the termination, and send it to the TCO.

9. Informing the Contractor (a) If a claim is involved, the contracting officer should forward two sets of PWGSC prime contractor

termination claim forms and the Procedures Manual on Termination of Contracts, to the contractor.

(b) The following claim forms may be obtained from the TCO. Each set includes:

SPMS -1 Settlement Proposal for Fixed Price Contracts

SPMS-1A Inventory Schedule A for Inventory of Metals in Mill Product Form SPMS-1B Inventory Schedule B for Inventory of Raw Materials, Finished

Product, Purchased Parts, Plant Equipment, Finished Components, etc.

SPMS-1C Inventory Schedule C for Inventory of Work in Process

SPMS-1D Inventory Schedule D for Inventory of Special Tooling and Test Equipment

SPMS -2 Schedule of Accounting Information SPMS-3 Application for Partial Payment

Supply Manual Page 3 of 5 Version 10-1 (2010-01-11)

Annex 8.3 - Termination for Convenience Process

(c) The accompanying letter to the contractor should contain the following instructions:

"In the event subcontractors are involved with this termination, please advise of the number of subcontractors who will require termination claim forms. Please arrange to complete all sections of the claim in as much detail as possible. After signature by your executive authority, return the original and one (1) copy to this office. You are hereby requested to forward your completed claim within a two-month period from the date of this letter. In order to assist you in meeting that date, we would be pleased to provide guidance and explanations necessary to ensure that your company takes proper action and that the correct information is included in the forms. Please note that all communications and documents with respect to your claim should be directed to: __________. (Insert appropriate name and address of the responsible contracting officer.)”

(d) After the termination claim forms are forwarded, the contractor should be contacted by telephone

to ensure that the forms have been received and that the necessary action is being taken on the contractor's part to submit a claim. If the contractor has any questions concerning the presentation of the claim, or the details of the termination settlement procedures, the contracting officer may advise the contractor to contact the TCO directly. When the contractor has completed the forms, the signed original and one copy are returned to the contracting officer. On receipt of the contractor's claim, one copy should be forwarded promptly to the TCO, who should then become responsible for the resolution of the claim.

10. Audit of Claims (a) Upon receipt of a claim, the TCO will determine the need for an audit. If the TCO concludes that

an audit is required, the TCO will prepare the terms of reference for the audit and arrange for its completion by Audit Services Canada.

(b) When an audit is performed, the TCO reviews the cost factors reported by the auditor, and

reconciles the contractor's claim with the auditor's report and the Inventory Verification Report form (SPMS-50). The cost implications of any inventory adjustments should be discussed with the auditor, as well as with the contractor.

11. Inventories (a) If the claim from a termination for convenience involves inventory that is rendered surplus by the

termination, the contracting officer should send copies of the termination inventory schedules to the client in order to obtain instructions as to disposition, which will be either:

(i) Arranging for the verification and shipment of all, or any part, of the inventories to a

recipient designated by the client. The costs associated with packaging, routing, shipping, etc., are a proper post termination charge to be added to the contractor's claim.

The contracting officer, with the Inspection Authority of the client, should arrange inventory verification, and a copy of the Inventory Verification Report should be provided to the TCO, so that the settlement offer may be adjusted to reflect any inventory discrepancies.

(ii) Arranging for the disposal of the residual inventory by the Crown Assets Distribution

Centre (CADC). In this case, the contracting officer should prepare the form PWGSC-TPSGC 11001, Report of Surplus (materiel and equipment). (NOTE: Only government employees have access to the site.)

Supply Manual Page 4 of 5 Version 10-1 (2010-01-11)

Annex 8.3 - Termination for Convenience Process

(b) The Report of Surplus form should be signed by the director general or director concerned, to certify that: the inventories are reasonable in relation to the requirements of the terminated portion of the relevant contract; that their use is not required for other existing PWGSC contracts, due to the nature of the goods; and consequently, that disposal is recommended. The contracting officer will forward the signed form to CADC.

(c) In due course, the contracting officer receives a Final Inventory Certificate (FIC) from CADC,

signed by the CADC inspector or assessor and the contractor.

By signing the FIC, the contractor agrees to the final quantities for disposal and, at the same time, agrees to retain and be responsible for the residual inventories for (nine days, at no cost, on behalf of CADC). At the time of receipt of the FIC, the contracting officer is relieved of the responsibility for the residual inventory. Any proceeds realized from the sale of the surplus inventory are credited, on behalf of the client, to the Consolidated Revenue Fund or to the revolving fund, as applicable.

12. Settlement Offer (a) Upon receipt of the audit report, the TCO will prepare a proposed settlement offer. This offer

informs the contractor of the amount of settlement the TCO is prepared to recommend to the Director General, Policy, Risk, Integrity and Strategic Management (DG/PRISM) Sector for approval.

(b) If the contractor accepts the proposed settlement offer, the TCO will prepare the settlement and

release form, and submit it to Legal Services for review, to the DG/PRISM for approval and signature, and then to the contractor for acceptance. When the contractor's written acknowledgement is received, the original is placed on the PRISM file, and a copy forwarded to the contracting officer for the procurement file.

(c) If the contractor rejects the proposed settlement, the TCO will advise the contractor to submit the

case directly, in writing, to the Chairman, Contract Claims Resolution Board (CCRB), so that the case may be handled in accordance with CCRB's procedures for handling disputes (see 8.170).

13. Contract Termination Claims When an interim payment or final settlement on a contract terminated or partially terminated for the convenience of Canada is approved and signed by the DG/PRISM, the TCO will place the original of the completed document on the PRISM file, and make arrangements to implement the approved settlement payment.

Supply Manual Page 5 of 5 Version 10-1 (2010-01-11)

Annex 8.4 - Termination for Default

Annex 8.4: Termination for Default (2010-01-11) (a) The decision to terminate a contract for default should be made only after all other possible

solutions have been explored. In all cases, the advice of Legal Services must be obtained at an early stage, to ensure that any proposed action will not prejudice Canada’s legal position and that the termination is legally enforceable.

(b) Failure to take action may prejudice Canada’s interests.

If a contract is secured by surety bonds, termination of the contract may change the existing contractual relationship with the bonding company.

(c) Canada has the right to terminate all or any part of the contract for default if:

(i) The contractor fails to make progress, so as to endanger performance of the contract. (A) The contracting officer may provide the contractor in writing with a reasonable

period of time, normally ten days, to rectify the situation. If this period must be longer, the contracting officer may require the contractor, within ten days, to show evidence of corrective action.

(B) If the contractor does not rectify the situation, the contracting officer may, subject

to the limitations in the default clause, initiate action to terminate the contract for default.

(ii) The contractor fails to perform any provision of the contract.

If the contractor does not rectify such a defect within ten days of receipt of a notice from the contracting officer, the contracting officer may, within the limitations set forth in the default clause, initiate action to terminate the contract in whole or in part for default.

(iii) The contractor fails to deliver the goods or perform the services within the time specified

in the contract.

(A) In the absence of excusable delays, Canada has the right to terminate the contract immediately, regardless of how slight the delay may be. This includes the right to accept or reject goods shipped, but not yet delivered. In addition, if the contractor does make timely delivery, but delivers defective goods or improperly performs services, and is unable to take corrective action within the unexpired delivery schedule period, Canada also has the right to terminate for default.

(B) Whenever a contracting officer contemplates termination of a contract for failure

to deliver on time, the contractor must be so advised, as soon as possible, after the default occurs. Failure to take such action may prejudice Canada’s position.

(C) When there is reasonable assurance that delivery will be made, even though

late, it may be desirable to discuss extension of the delivery time with the client. If the delivery date is extended, negotiation for a reduction in the contract price may be appropriate.

This situation would arise when delivery would be further delayed by terminating and placing the contract elsewhere.

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Annex 8.4 - Termination for Default

(iv) the contractor becomes bankrupt or insolvent. Upon receipt of a notice of bankruptcy or insolvency, the settlement procedure outlined in 8.155 should be followed.

Action to Recover Loss or Damage (a) After termination, the contracting officer will determine the actual amount or best estimate of loss

or damage suffered by Canada, and the distribution of the damages to be recovered from the contractor.

Estimates of loss or damage should include any amount in excess of the contract price, which Canada may be obliged to pay in procuring the goods or services elsewhere.

(b) The contracting officer must refer claims to Legal Services when a contract is secured by a

security deposit (government guaranteed bonds, bills of exchange, irrevocable standby letters of credit), or when Canada has a claim against a contractor that is related to a work package for which, the contractor has a claim against Canada.

(c) In all other cases, the contracting officer will attempt to negotiate a settlement. When a

satisfactory settlement cannot be reached, the claim will be referred to Legal Services for action. (d) When a contractor agrees with the proposed settlement, the recommendation to recover monies

will be submitted to Cost Audit Group (CAG), or, in the case of a Canadian Commercial Corporation (CCC) contract, the Director, Finance and Resources Administration (FRA). CAG or the Director, FRA, will issue an invoice to the contractor for the monetary recovery.

(e) If payment is not received within 60 days of the date of issue of the invoice, then CAG or the

Director, FRA, will advise the contracting officer to take appropriate follow-up action with the contractor. When normal follow-up procedures have not been successful, the matter must be referred to Legal Services.

(f) Claims must not be removed from departmental records until satisfied by payment or a properly

authorized deletion action. Contract Payment under Surety Bond When a surety bond is being enforced, payments will be issued as follows: (i) Performance bond: Upon completion of the contract to the satisfaction of Canada, the bonding

company may be paid all amounts to which the contractor would be entitled under the terms of the contract;

(ii) Payment bond: The bonding company must not be reimbursed for the payment of creditors from

any funds held by Canada until the work is complete, and the surety company has fully discharged its obligations under the bond.

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

Annex 8.5 - Refunds of Excess Profits Earned on PWGSC Contracts

Annex 8.5: Refunds of Excess Profits Earned on PWGSC Contracts (2010-01-11) (a) All indications from any source of unreasonably high profits realized from any contract placed

pursuant to the Defence Production Act, or from any contract other than competitive firm price awarded pursuant to the Department of Public Works and Government Services Act should be reviewed in consultation with the Director, Acquisition Program Integrity Secretariat (APIS).

(b) Negotiated Refunds:

(i) Normally, the first step in negotiating a refund is for the contracting officer and APIS to review the evidence available, and decide whether the profits realized by the contractor can be recommended for acceptance or are in excess of what is considered to be fair and reasonable. In the event that the evidence is incomplete or inconclusive, consideration should be given as to whether the contractor will be approached for a statement of its position or whether a request will be forwarded to Audit Services Canada for additional verification. When all the evidence necessary is assembled, a final review will be made to determine what, if any, amount should be refunded, and the method of payment.

(ii) In an attempt to ensure that suppliers are being treated consistently throughout Public

Works and Government Services Canada (PWGSC), the Cost Audit Group (CAG) will distribute to the members of the Contract Audit Review Committee the proposed action plan of the contracting officer in respect to a contractor's excess profit, identified through audit. Any comments or concerns with the action plan should be communicated to CAG within ten working days. CAG will consolidate the input and forward it to the lead contracting authority for consideration.

(iii) In some cases it will be in order to recover excess profits by deduction from current

claims, or a part recovery may be affected through an assignment of income tax refunds. Ordinarily, however, the contractor will be expected to remit the full amount by cheque. If it appears that this action will create an unreasonable hardship, extended terms of payment may be considered.

(iv) The agreed upon amount to be refunded and the terms of settlement will be set out in a

letter to the contractor, approved by Legal Service, and signed by the responsible officer of the sector/region. Copies of this letter are to be sent to the Director, Acquisition Program Integrity Secretariat (APIS).

(v) After settlement is completed, it may be desirable to release the contractor from further

obligation by detailing, in a formal agreement, the contract to which the settlement relates. Legal Services should draft this agreement.

(vi) Cheques forwarded by the contractor should be made payable to the Receiver General

and mailed to the contracting officer. The contracting officer will pass them to CAG who will forward them to the Chief Financial Officer of the client.

(c) Voluntary Refunds:

(i) Where a contracting officer receives notice from a contractor that they desire to return excess profits, or if a contractor voluntarily forwards a cheque in refund of such profits, the contracting officer should request a statement showing: (A) a summary of the excess profits by contracts; and

Supply Manual Page 1 of 3 Version 10-1 (2010-01-11)

Annex 8.5 - Refunds of Excess Profits Earned on PWGSC Contracts

(B) an explanation of the principal reasons, which accounts for the excess and how the amount was arrived at.

(ii) Pending an appraisal of the information given by the contractor and of the particular

circumstances of the case, any cheques received should be sent immediately to the Director, APIS, accompanied where possible, by a statement, showing the distribution of the refund over the contracts affected. The Director, APIS, will then forward the cheques to the Chief Financial Officer for the client.

(iii) In deciding how extensive a review should be carried out in each case, the determining

factors will be:

(A) the value of the contracts affected, and the total amount of the contracts let to the contractor;

(B) the explanations given by the contractor, as to the procedure followed in arriving

at the amount of the refund; (C) the capacity known to the contractor for assembly and interpretation of costs in

accordance with Contract Cost Principles 1031-2, if applicable.

(iv) If there is doubt as to the accuracy of the contractor's computations or if it appears that there may be other excess profits which have not been declared, then a full inquiry must be instituted;

(v) A final decision will be agreed upon by consultation between the sector/region concerned

and the Director, APIS, and this conclusion will be communicated to the Chief Financial Officer of the appropriate client department.

(d) Refunds from Subcontractors:

Refunds from subcontractors should be handled in accordance with the above procedures. In addition, however, it will be necessary for PWGSC to keep the prime contractor informed of its negotiations with the subcontractor, and in some cases, it will be preferable to deal with the subcontractor through the prime contractor. If the refund results from a contractual provision in effect between the prime contractor and the subcontractor, then the refund should be effected by the prime contractor. If the refund arises from circumstances not envisaged in the subcontractor's contractual arrangements with the prime contractor, then the refund should be effected by PWGSC, and should not result in a windfall being realized by the prime contractor.

(e) Assignment of Income Tax Refund:

(i) In the event that a settlement from the contractor must be financed partly from the proceeds of its income tax refund, the sector/region concerned will endeavour to obtain a voluntary assignment of the income tax refund in the following terms:

"Receiver General of Canada Ottawa, Ontario (Company) ______________ of the City of _________ in the Province of ______________ does hereby authorize and direct that any amounts presently due or accruing due to it in the future from the Canada Revenue Agency, be applied in reduction of its debt to Her Majesty the Queen in right of Canada in the amount of $ ___________ on account of ________".

Supply Manual Page 2 of 3 Version 10-1 (2010-01-11)

Annex 8.5 - Refunds of Excess Profits Earned on PWGSC Contracts

(ii) In the case of a corporation, the direction should be under the seal of the Corporation and the signature of duly authorized officers. The form, which should be a separate document and not embodied in a letter, should then be passed by the sector/region to the Director General, Finance, Corporate Services, for processing in accordance with normal government practice. Treasury Board authorization is not required.

(iii) Whether the assignment is voluntary or pursuant to section 155 (Deduction and set-off) of

the Financial Administration Act, the Finance Sector assumes the responsibility of notifying Canada Revenue Agency (CRA) of the assignment. The manner in which money is transferred from CRA to PWGSC, or to the Department of National Defence (in the case of refunds to its own votes) is a matter for decision by the Finance Sector. However, the transfer will be made either by means of a Receiver General cheque or an interdepartmental Journal Voucher. Under either method, the transfer advice will be passed to the sector/region concerned who will forward it to the Director General, Finance Sector.

Supply Manual Page 3 of 3 Version 10-1 (2010-01-11)

TABLE OF CONTENTS CHAPTER 9 - SPECIAL PROCUREMENTS.................................................................. 1 9.1 Introduction ......................................................................................................................................1 9.5 Major Crown Projects.......................................................................................................................1

9.5.1 General ............................................................................................................................1 9.5.5 Responsibilities of PWGSC in Major Crown Projects......................................................2 9.5.10 Early Involvement ............................................................................................................2 9.5.15 Memorandum of Understanding with Client Department ................................................3 9.5.20 Procurement Review .......................................................................................................4

9.5.20.1 Procurement Strategy Development ...............................................................4 9.5.20.5 Senior Project Advisory Committee.................................................................4 9.5.20.10 Membership of the Senior Project Advisory Committee..................................5

9.10 Real Property Contracting................................................................................................................5 9.10.1 Real Property Contracting Procedures............................................................................6 9.10.5 SELECT...........................................................................................................................6 9.10.10 Architectural and Engineering Services...........................................................................7 9.10.15 Construction Services......................................................................................................7 9.10.20 Elevator Maintenance Services .......................................................................................8

9.15 United States Foreign Military Sales................................................................................................9 9.15.1 Planning .........................................................................................................................10 9.15.5 Contracting Protocol ......................................................................................................11 9.15.10 Time Frames..................................................................................................................11 9.15.15 Pricing and Payment......................................................................................................11 9.15.20 Surcharges.....................................................................................................................12 9.15.25 Non-recurring Costs.......................................................................................................12 9.15.30 Release of Information...................................................................................................12 9.15.35 Processing of Documents..............................................................................................12 9.15.40 Contract Administration .................................................................................................13 9.15.45 Contract Amendments ...................................................................................................13 9.15.50 Contract Closing ............................................................................................................13

9.20 Co-Operative Logistics and Blanket Order Cases with the U.S. DoD ...........................................13 9.20.1 Requisition Receipt........................................................................................................13 9.20.5 Planning .........................................................................................................................14 9.20.10 Establishment and Renewal of a Stock Level Case (FMSO I) ......................................14 9.20.15 Establishment of a Requisitioning Case (FMSO II) .......................................................14 9.20.20 Referral Program ...........................................................................................................14 9.20.25 COLOG Termination......................................................................................................16

9.25 Use of the Defence Production Revolving Fund and Loan Account..............................................16 9.25.1 Program Description ......................................................................................................16

9.30 Purchases from CORCAN .............................................................................................................17 9.30.1 Requisition Receipt........................................................................................................17 9.30.5 Memorandum of Understanding ....................................................................................18 9.30.10 Implementation ..............................................................................................................18

9.35 Comprehensive Land Claims Agreements ....................................................................................18 9.35.1 General Information .......................................................................................................18 9.35.5 Comprehensive Land Claims Agreements in Effect ......................................................19

9.35.5.1 Quebec ..........................................................................................................20 9.35.5.5 Yukon, Northwest Territories, and Nunavut ..................................................20 9.35.5.10 British Columbia ............................................................................................21 9.35.5.15 Newfoundland and Labrador .........................................................................22

9.35.10 National Park Agreements and DND Co-operation Agreements ..................................22 9.35.15 Comprehensive Land Claims Agreements under Negotiation ......................................22 9.35.20 Applicability of Comprehensive Land Claims Agreement Contracting Obligations .......22 9.35.25 Requirements Definition ................................................................................................23 9.35.30 Access to Aboriginally-owned Lands.............................................................................23 9.35.35 Notification of Procurement ...........................................................................................24 9.35.40 Right of First Refusal .....................................................................................................24 9.35.45 Evaluation Criteria .........................................................................................................24 9.35.50 Methods of Solicitation...................................................................................................25 9.35.55 Solicitation Period ..........................................................................................................25 9.35.60 Business Directories/Lists..............................................................................................25 9.35.65 Application of CLCAs and the Procurement Strategy for Aboriginal Business .............26 9.35.70 International Trade Agreements ....................................................................................26 9.35.75 Agreement on Internal Trade.........................................................................................27 9.35.80 Notice of Proposed Procurement...................................................................................27 9.35.85 Solicitations....................................................................................................................28 9.35.90 Standing Offers and Supply Arrangements ...................................................................28 9.35.95 Procurement Reporting..................................................................................................28

9.40 Procurement Strategy for Aboriginal Business ..............................................................................28 9.40.1 Decision to Set Aside a Procurement under PSAB.......................................................29 9.40.5 Application of PSAB and CLCAs ...................................................................................29 9.40.10 PSAB and Trade Agreements .......................................................................................30 9.40.15 PSAB and Canadian Content ........................................................................................30 9.40.20 Subcontracting Plans.....................................................................................................31 9.40.25 Sound Contracting Principles ........................................................................................31 9.40.30 Notification to Indian Northern Affairs Canada ..............................................................31 9.40.35 Sourcing of Requirements under PSAB Set-asides ......................................................31 9.40.40 Legal Entity ....................................................................................................................32 9.40.45 Certification by Suppliers ...............................................................................................32 9.40.50 Audits of the Bidder/Offeror/Supplier Certification.........................................................33 9.40.55 Bid Challenge.................................................................................................................34 9.40.60 Procurement Reporting..................................................................................................34

9.45 Industrial and Regional Benefits Program .....................................................................................34 9.50 Communication Procurement ........................................................................................................35 9.55 Canadian Commercial Corporation................................................................................................35

9.55.1 General Information on CCC Contracts.........................................................................35 9.55.5 Subcontracting...............................................................................................................36 9.55.10 Memorandum of Understanding ....................................................................................36 9.55.15 Certification and Signing Authorities..............................................................................36

Annex 9.1: Memorandum of Understanding Between Public Works and Government Services Canada and CORCAN ............................................................................................................................1

Annex 9.2: Notification of Procurement to CLCA Claimant Groups ............................................................1 Annex 9.3: Comprehensive Land Claims Agreements Evaluation Criteria .................................................1 Annex 9.4: Requirements for the Set-aside Program for Aboriginal Business............................................1 Annex 9.5: Procurement Strategy for Aboriginal Business Set-aside Checklist..........................................1 Annex 9.6: Memorandum of Understanding - Canadian Commercial Corporation / Public Works and

Government Services Canada ..................................................................................................1 Annex A to MOU: Responsibility Matrix ...............................................................................10 Annex B to MOU: Canada-U.S. Defence Production Sharing Agreements.........................13 Annex C to MOU: Canada-U.S. Defence Development Sharing Agreement ......................17

Chapter 9 – Special Procurements

Supply Manual Page 1 of 36 Version 10-1 (2010-01-11)

Chapter 9 - Special Procurements 9.1 Introduction (2010-01-11) (a) This chapter is intended to present information related to procurement that is unique or specific to

a certain commodity, client or area. Therefore, this chapter contains a number of topics and each specific topic contains related subjects. These subjects follow the Supply Manual format identified in 1.5.5. For example, topics covered are Major Crown Projects, Real Property Contracting and United States Foreign Military Sales.

(b) It is recognized that all procurement scenarios such as those listed in this chapter cannot address

every possible situation that Public Works and Government Services Canada (PWGSC) may face in its common service delivery environment. However, the types selected are based on historical usage and recommendations from the contracting community.

9.5 Major Crown Projects (2010-01-11) This section describes Major Crown Projects (MCPs), the responsibilities of PWGSC in MCPs, procurement strategy development as well as other key elements related to MCPs. 9.5.1 General (2010-01-11) (a) MCPs are by their very nature large procurements. The Supply Manual applies to them as it

would to any other acquisition. What differs is the notion that participating departments must act in consort with one another in planning and overseeing the work performed by the contractor(s) in achieving the deliverables. No one department can act solely from its legislative point of view to the exclusion of the other participants.

(b) A project is deemed to be an MCP when its estimated cost will exceed $100,000,000 and the

Treasury Board (TB) would assess the project as high risk. However, TB may require any project exceeding the sponsoring minister's delegated project approval authority to be managed as an MCP. As well, provision is made in the policy for a sponsoring department to request approval from TB to manage a project exceeding $100,000,000, but of lesser risk within a tailored MCP regime or outside the MCP management framework.

(c) The additional aspects of managing MCPs include obtaining approval-in-principle from Cabinet

for an MCP having significant policy or fiscal framework implications, and the following TB mandatory requirements:

(i) that the project leader be a senior manager within the sponsoring department

accountable directly to the deputy minister; (ii) that the project leader is viewed as personally and visibly accountable for all aspects of

the project; (iii) that a Senior Project Advisory Committee (SPAC) be established with membership

consisting of senior representatives of departments participating in the project. The role of this committee is to advise the project leader on all aspects of the project and carry out the procurement review function for the project. SPAC is addressed in more details in 9.5.20;

(iv) the selection and implementation of an appropriate project performance measurement system;

(v) the submission of progress reports to TB at key events or as directed by TB;

Chapter 9 – Special Procurements

Supply Manual Page 2 of 36 Version 10-1 (2010-01-11)

(vi) the submission of a project evaluation report to TB; and (vii) that MCPs are reported to Parliament in accordance with the Guide to the Preparation of

Part III of the 2006-2007 Estimates - Reports on Plans and Priorities and Departmental Performance Reports.

9.5.5 Responsibilities of PWGSC in Major Crown Projects (2010-01-11) In respect to MCPs, the Minister of PWGSC is accountable and responsible to Cabinet for the acquisition of the MCP goods and/or services under the Department of Public Work and Government Services Act and is responsive to the project leader. The Minister of PWGSC is accountable and responsible for all aspects of the contracting process and resulting contracts, including: (a) participate in the project as a participating department as described in TB policy on Management

of Major Crown Projects; (b) manage the procurement process from solicitation through contract award to contract completion; (c) support the project in accordance with any existing legislation or general interdepartmental

arrangements; (d) provide any project-specific services such as procurement and scheduling, as described in any

agreement or Memorandum of Understanding (MOU), concluded with the sponsoring department; (e) help to define user requirements/selecting the most effective procurement approach; (f) ensure the best value for money through the optimum combination of specified quality, specified

time and lowest life-cycle cost of the acquisition; (g) include procurement issues in risk assessments and risk management plans; (h) establish project files for all procurement related documents and deliverables; (i) develop a structured approach to document requirements and deliverables, if applicable; (j) ensure the contract is carried out pursuant to the legal framework and maintain the government

standards of prudence, probity and equity, when dealing with the private sector; (k) develop, with the client, the rules of engagement pre-contract; (l) develop and release any formal and/or contractually binding communication between Canada’s

representatives and the bidder/contractor; (m) provide access and open and competitive bidding to suppliers through the Government Electronic

Tendering Service; (n) pre-qualify suppliers and build supplier working relationships; (o) manage the solicitation process and documents; (p) make submissions to the TB for authority to enter into contracts, to seek a pre-approval authority

for amounts for anticipated amendments and to amend contracts; (r) lead all negotiations with contractors that could result in contract implications; (s) develop, with the client, the rules of engagement for post contract award interaction between the

client and the contractor; (t) monitor Canada’s interactions with the contractor to maintain the integrity of the contract; and (u) manage the contract in order to maintain the integrity of the contractual agreement and

compliance with the contract requirements. 9.5.10 Early Involvement (2010-01-11) (a) One of the most important tasks for the PWGSC manager relative to a new MCP is to integrate

into the Project Team, as soon as possible, and ensure participation at all levels of the project. One of the key requirements after establishing the operational objectives of the project is the development of the procurement strategy for the equipment, parts and services that will be delivered by the project. This is also one of the key areas of interest for ministers when considering the Memorandum to Cabinet and/or the TB Submission. Therefore, the Project Team must get involved in the project, as early as possible, to ensure best value of the procurement, and that clients consider all possible strategies before committing the project to solutions, which may subsequently conflict with government procurement policies and strategic objectives.

Chapter 9 – Special Procurements

Supply Manual Page 3 of 36 Version 10-1 (2010-01-11)

Contracting officers should analyse with the client what opportunities may exist to support their obligations as well as their departmental targets related to green procurement. Successful implementation of the Policy on Green Procurement requires the identification and implementation of environmental performance opportunities at both the strategic and operational levels, taking into consideration specific departmental buying patterns, sustainable development targets and other Government of Canada priorities.

(b) Best value is not confined to the contractual process; it is equally important at the requirements

definition stage. For many acquisitions, especially for MCPs, it is at this earlier stage that best value may be achieved. Trade-offs should be made among factors such as quality, service, cost, procurability, environmental considerations and socio-economic considerations linked to a particular industry or region of the country. Quality and the desired performance level should be related to intended use. The most desirable technical quality or suitability is not necessarily the most desirable procurement because it may not be the most economical. In complex acquisitions, a cost/benefit analysis may balance technical quality against such factors as initial and operating costs, economic life, service, maintenance and repair.

9.5.15 Memorandum of Understanding with Client Department (2010-01-11) (a) A vital aspect in government contracting is the role played by PWGSC and its relationship with

client departments at all stages in the life cycle management of goods and services in a MCP. Details of the PWGSC-client relationship will normally be covered in a signed general Memorandum of Understanding (MOU) between PWGSC and its client departments. These may be adjusted to suit particular PWGSC-client agreements. Acquisitions of a special or significant nature may require specific MOUs and more detailed treatment, such as that outlined in the TB policy Management of Major Crown Projects. Client departments are generally responsible for determining what they want, where and when. PWGSC is normally responsible for determining how goods and/or services will be provided to meet the needs of clients.

(b) In terms of life cycle management, this means that:

Requirements definition is, in varying degrees, a client responsibility, depending on government policy and the type of goods and/or services. By and large, the more technically complex, special, or unique the requirement, the more it will be a client responsibility to define. Conversely, the more common an item, the less need for client input, except, for example, to specify the quantity. Acquisition is a PWGSC responsibility, use is a client responsibility, and disposal of goods is a PWGSC responsibility.

(c) This does not mean each party function in isolation. On the contrary, in the MOU it is essential

that there be well-established lines of communication at all stages in the life cycle, reflecting the PWGSC-client division of responsibilities. In assessing their role and participation in the project, PWGSC must determine the nature and degree of the effect of the proposed project on their operations, asset base or other interests, and ensure that appropriate commitments are made; for example, by means of the MOU.

(d) Unless the MOU for an MCP specifically states otherwise, the division of responsibilities between

PWGSC and the client department will be governed by the agreements contained in Annex 1.1, which provides a generic division of anticipated types of responsibilities between PWGSC and client departments or in Annex 1.2, which contains two client-specific agreements with the Department of National Defence.

(e) PWGSC’s cost of services provided to client departments in respect to a MCP is recovered

directly from the client. The services to be provided and their costs are negotiated with the client department, approved by TB as part of the Program Approval submission, and the results must be included in the MOU.

Chapter 9 – Special Procurements

Supply Manual Page 4 of 36 Version 10-1 (2010-01-11)

9.5.20 Procurement Review (2010-01-11) The role and membership of the Senior Project Advisory Committee (SPAC) as well as the responsibility of PWGSC in the development of the procurement strategy for Major Crown Projects (MCPs) are addressed below. 9.5.20.1 Procurement Strategy Development (2010-01-11) (a) PWGSC is responsible for developing and implementing procurement strategies within the

framework of its client departments' needs, its legislative mandate and government policy. Operating departments must form a SPAC before initiating discussions with potential suppliers that could raise expectations as to the government's procurement strategy.

(b) The government has confirmed that all procurements in excess of $2,000,000 must be reviewed

for potential regional and industrial benefits. To ensure that this review is carried out in an efficient and cost-effective manner, and in recognition of the diverse interests involved, TB has established an interdepartmental procurement review process applying to all such procurements. In the case of MCPs, this is carried out by the SPAC, whose role is defined in 9.5.20.10.

(c) Environmental performance is also embedded as a key consideration of the departmental

procurement review process under the Procurement Review Committee. For sources of information, environmental issues and mitigating actions via Green Procurement, consult the Environmental Awareness Tool Kit and the Guideline for Integration of Environmental Performance Considerations in Federal Government Procurement. Consider the various environmental performance considerations listed in the Green Procurement Checklist. Contracting officers may also refer to the online course entitled Introduction to Green Procurement (C215).

(d) Where the procurement strategies proposed for significant projects require Cabinet approval,

sponsoring departments must consult with the Treasury Board Secretariat (TBS) in preparing the submission to Cabinet. These consultations must include the analysis of any socio-economic initiatives, and the views of TBS must be specifically included in the submission to Cabinet.

9.5.20.5 Senior Project Advisory Committee (2010-01-11) (a) The Senior Project Advisory Committee (SPAC) provides an interdepartmental senior level forum

for orienting a project to achieve relevant national objectives, stimulating agreements between the sponsoring and participating departments, resolution of interdepartmental issues, and review and discussion of project objectives and key project instruments. SPACs do not deliberate purely departmental issues, such as the operational requirement or departmental funding.

(b) A SPAC must be established for all Major Crown Projects (MCPs) or those requirements

exceeding $100,000,000. The Project Leader of the client department chairs this committee, and membership includes representation from other government departments with an interest in the project. Committee members from other participating departments act as advisors and facilitators to ensure the views of their departments are made known at the SPAC and to ensure prompt and effective action is taken to meet the obligations of their departments to the MCP.

(c) Whenever a SPAC is convened, it also performs the function of a Procurement Review

Committee including all significant associated procurements handled through the project office. SPAC meets at the call of the chairperson.

Chapter 9 – Special Procurements

Supply Manual Page 5 of 36 Version 10-1 (2010-01-11)

9.5.20.10 Membership of the Senior Project Advisory Committee (2010-01-11) (a) The Project Leader must determine which departments are potentially affected by, or could have

program interests in the MCP. The Project Leader must ensure that these departments are notified in writing as early as possible in the life of the project, so that they may decide whether they should formally participate in the MCP. Whenever an MCP is likely to require private sector involvement, the departments notified must include appropriate contracting authorities and industrial and regional benefit authorities.

(b) The majority of MCPs will be procurement projects, which are subject to the TB Procurement

Review Policy. Sponsoring departments should refer to this policy for more guidance. Departments sponsoring procurement projects must, as a minimum, notify the following departments: Contracting authorities and service agents: (i) PWGSC; (ii) Defence Construction Canada. Industrial and regional benefit departments and agencies: (i) Industry Canada; (ii) Western Economic Diversification Canada; (iii) Atlantic Canada Opportunities Agency; (iv) Economic Development Agency of Canada for the regions of Quebec. Others: (i) Privy Council Office; (ii) Treasury Board Secretariat; (iii) Department of Finance Canada; (iv) Human Resources and Skills Development Canada. As a minimum, sponsoring departments must assess whether departments listed below should also be notified, particularly for the specific areas noted: (i) Environment Canada, for environmental assessment considerations (may be required by

statute under certain circumstances); (ii) Department of Justice Canada, to ensure timely assistance in resolving any complex

legal issues that can arise; (iii) Human Resources and Skills Development Canada, for labour pool considerations; (iv) Canadian Heritage, when remote sites or locations are involved, (v) Foreign Affairs and International Trade Canada, for international trade and export

licensing; and (vi) Indian and Northern Affairs Canada.

(c) Other departments may notify the project leader of their intent to participate in the MCP, at which

time they become participating departments. 9.10 Real Property Contracting (2010-01-11) (a) This section describes the responsibilities for real property contracting and provides some of the

related procedures and methodologies.

Chapter 9 – Special Procurements

Supply Manual Page 6 of 36 Version 10-1 (2010-01-11)

(b) Acquisitions Branch, Public Works and Government Services Canada (PWGSC), provides procurement services related to real property contracting for federal departments and agencies. Real Property Contracting (RPC), Acquisitions Branch, is responsible for contracting real property services such as architectural, engineering and facility maintenance services as well as construction services. It is separate and has different responsibilities from Real Property Branch (RPB), PWGSC, which manages a portfolio of real estate in Canada and is the Government of Canada's real property expert.

9.10.1 Real Property Contracting Procedures (2010-01-11) (a) Although most of the generic practices and policies of the department apply to real property

contracting, there are differences. Some of these differences are a result of complying with applicable legislation, or adapting to industry practices, or simply the realities of the services being procured. Many fundamental review processes and trade agreements also do not apply to real property requirements and some examples follow. The Procurement Review Committee does not apply to the acquisition, modification and routine maintenance of real property. The Expense Management Tool (EMT) Application for Registration form (PWGSC-TPSGC 514) (NOTE: Only government employees have access to this site.) does not apply to architectural and engineering nor construction requirements, and the Agreement on Internal Trade does not apply to architectural or engineering service contracts.

(b) Clauses specific for real property contracting can be found in subsection 5-R of the Standard

Acquisition Clauses and Conditions (SACC) Manual. Departmental standard procurement templates and many policies exclude some or all of real property contracting requirements and do not apply to real property requirements. SACC Manual clauses identified as mandatory may not apply to real property requirements. Standard Real Property Contracting (RPC) templates provide guidance to their contracting officers.

(c) All real property contracting work performed by Acquisitions Branch (AB) must be in accordance

with the Government Contracts Regulations. The Federal Real Property and Immovables Act applies to the sale and purchase of real property, and leases, including all work performed through a lease. Real Property Branch (RPB), not AB, is responsible for requirements carried out under the Act. In order to protect the integrity of AB’s system data, no requirements under the Act should be entered into the AB system, that is, the Automated Buyer Environment (ABE).

9.10.5 SELECT (2010-01-11) (a) SELECT is a database of pre-qualified suppliers such as architects, engineers and construction

trade contractors identified by their expertise and the services they provide. It is used by Public Works and Government Services Canada (PWGSC) to invite suppliers to bid on real property opportunities for consulting up to the North American Free Trade Agreement (NAFTA) threshold and construction up to the Agreement on Internal Trade (AIT) threshold. When there is a requirement for any of these services up to these thresholds, SELECT provides a systematic rotation functionality that matches the specifics of the requirement with suppliers having the required expertise that are within a geographic range and have the least points of opportunity. Depending on the requirement, a supplier may be given the opportunity to accept or decline the work, or multiple suppliers may be given the opportunity to compete for the requirement.

(b) For consultant services estimated at $10,000 or less, SELECT generates a short list of three

qualified suppliers. The most suitable and readily available supplier may be contacted directly. For consultant services estimated between $10,000 and the NAFTA threshold, SELECT identifies a single supplier that meets the discipline and experience profile requirements. In both of these cases, the approval authority is based on non-competitive contract entry. For consultant services

Chapter 9 – Special Procurements

Supply Manual Page 7 of 36 Version 10-1 (2010-01-11)

below the NAFTA services threshold value, the SELECT system may also be used to pre-select suppliers from which bids can be solicited.

(c) For construction services estimated at $10,000 or less, SELECT generates a short list of three

qualified suppliers. The most suitable and readily available supplier may be contacted directly. For construction services estimated between $10,000 and $100,000, SELECT generates a short list of five qualified suppliers; however, the business practice in some locations is to select five to eight qualified suppliers, all of which are issued an invitation to tender. The supplier who submits the lowest-priced responsive offer is usually awarded the contract.

9.10.10 Architectural and Engineering Services (2010-01-11) (a) When determining whether services approval authority apply also to architectural and engineering

(A&E) services, the contracting officer should determine if a professional stamp is required for the deliverables. If a professional stamp is required, Treasury Board’s approval authorities for A&E services will apply to the requirement. However, if a professional stamp is not required, then the normal service authorities will apply.

(b) The contracting officer must determine the procurement strategy in consultation with the client.

The proposed construction implementation methodology should also be discussed, as this will have an impact on the services provided by the A&E team. The main method of supply is the standard contract, but RPC also uses alternative methods of supply like standing offers, supply arrangements and open agreements. An open agreement is issued to only one supplier, which is identified by the SELECT system, and thus must not exceed the NAFTA threshold. Commitments are used to obtain services covered by the open agreements.

(c) Due to the qualitative nature of the A&E industry, the submission of full design proposals

represents a large investment of time, effort, and money on the part of consulting suppliers. In order to reduce the possibility of suppliers spending large amounts of money preparing such proposals for PWGSC projects, the Department traditionally utilizes a one-stage, two-phase Request for Proposal for A&E services. This methodology allows for suppliers to be point-rated in the 'first phase', based on their previous achievements and the experience of the proposed consultant team. Based on this rating, suppliers are better positioned to make a business decision, as to whether to continue to the 'second phase' in the process and submit full proposals at their own cost.

9.10.15 Construction Services (2010-01-11) (a) There are three primary methodologies used in the procurement of construction services for

projects:

(i) Design-Bid-Build (D-B-B); (ii) Design-Build (D-B); (iii) Construction Management (CM).

(b) The roles, relationships and responsibilities of the contracting parties vary considerably for each

methodology. Choosing the optimum methodology is a key consideration for the project team. For construction services, the project team is composed of Real Property Contracting (RPC) of the Real Property Branch (RPB) and the client.

(c) Many variations exist for each approach and the selection of one methodology over another

should be carefully analyzed by all stakeholders during the development of the risk management plan, well in advance of the procurement, in order to determine the inherent risks, advantages and disadvantages associated with each methodology. The selection of a particular methodology

Chapter 9 – Special Procurements

Supply Manual Page 8 of 36 Version 10-1 (2010-01-11)

for the delivery of construction services is based upon an analysis of those risks identified in the plan that may impact the priority objectives of the project during the project's planning and implementation stages.

(d) Each methodology has advantages and disadvantages and one may be more suitable than

another for any given project. The project team must weigh both the benefits and the shortcomings of using a specific methodology on their project. Traditionally, PWGSC has accepted the D-B-B methodology as the standard delivery process for construction projects. Although it may be time consuming, D-B-B provides the project team with a better 'comfort level' concerning costs and quality. Since design is 100 percent complete before construction begins, changes should be minimal.

(e) CM and D-B have been used extensively in the private sector, but used sometimes in PWGSC.

A bid solicitation, in the form of a Request for Proposal, is used for both these methodologies in order to determine the successful supplier. Design-Build solicitations should also include an honorarium for at least three suppliers that continue to the phase two of the selection process to compensate them for work not normally required in the submission of a proposal.

(f) RPC generally uses an invitation to tender for construction contracts, with a public opening

shortly following the specified closing time. The tenders are generally evaluated on the basis of the lowest priced responsive tender. Suppliers must submit their tenders in accordance with the invitation to tender and associated specifications and drawings.

(g) Prequalification of suppliers is not normally done. If required, justification should be provided for

prequalification and the criteria established to ensure that the industry can respond appropriately. Although a two-stage prequalification process may be necessary, a two-envelope process is the preferred method in construction. Suppliers are asked to submit two sealed envelopes, where envelope “A” will include the response to the prequalification requirements (almost always a pass/fail type of criteria). If the content of envelope “A” demonstrates that the supplier is qualified, the envelope “B”, including the price and bid security, is normally opened publicly with other responsive bids.

(h) For requirements over $100,000, contracting officers must use the construction terms and

conditions imposed by Treasury Board Secretariat (see clauses in subsection 5-R of the Standard Acquisition Clauses and Conditions [SACC] Manual.). Bid security and contract security (clause R2890D) are also requirements above this threshold. Insurance requirements (clause R2910D) are included in subsection 5-R, but the client should identify if additional or specialized insurance is required.

(i) The Federal Contractors Program and the review by the Procurement Review Committee do not

apply to construction contracts. (j) The Minister of PWGSC has delegated to Real Property Branch (RPB) the ability to amend

construction and maintenance contracts awarded by Acquisitions Branch (AB). This authority must be deducted from AB authorities to ensure that PWGSC does not exceed its overall authority from Treasury Board. The RPB Project Manager will submit, with the requisition, a risk management plan that will identify items that may result during the construction project. This plan will include a suggested dollar value called the “Risk Management Contingency”. AB will review the plan and the suggested dollar value, and will establish an amount to seek approval for a Pre-approved Amount for Anticipated Amendments (PAAA).This amount will be used for subsequent amendments to the contract.

9.10.20 Elevator Maintenance Services (2010-01-11)

Chapter 9 – Special Procurements

Supply Manual Page 9 of 36 Version 10-1 (2010-01-11)

For elevator maintenance services requirements, an invitation to tender must be used for PWGSC buildings. Only bids from suppliers whose names are on all the applicable Lists of Prequalified Elevator Maintenance Contractors for the province/territory and type of equipment to be maintained can be considered. The term of the contract is generally for a period of 25 years, and the basis of payment is for a fixed monthly rate, which is adjusted on a yearly basis. The total monthly amount is composed of an amount for material, labour and travel. The adjustment for labour will be made according to the hourly total compensation package regular rate, as published each year by the National Elevator and Escalator Association; the adjustment for materials will be according to the index of Electrical Equipment Manufacturing V3822755, as published by Statistics Canada, and the adjustment for travel expenses must be made in accordance with the Consumer Price Index for Canada (V1690973), as published by Statistics Canada. 9.15 United States Foreign Military Sales (2010-01-11) This section provides details of the United States (U.S.) Foreign Military Sales (FMS) program and also describes the related responsibilities of Public Works and Government Services Canada (PWGSC) in relation to this program. (a) The Foreign Military Sales (FMS) is a Security Assistance Program which is administered by the

U.S. Department of Defense (U.S. DoD) and which allows eligible foreign governments and international agencies to purchase defence-related articles, defence services and military training from the U.S. Government (USG). The U.S. DoD serves as an intermediary, handling procurement, logistics and delivery and often providing product support and training.

(b) The FMS is a mutually beneficial government-to-government method for selling U.S defence

equipment, services, and training. Responsible arms sales further U.S. national security and foreign policy objectives by strengthening bilateral defence relations, supporting coalition building, and enhancing interoperability between U.S. forces and militaries of friends and allies. These sales also contribute to U.S. prosperity by improving the U.S. balance of trade position, sustaining highly skilled jobs in the defence industrial base, and extending production lines and lowering unit costs for key weapon systems.

For more information regarding the FMS program, contracting officers may visit the following Defense Security Cooperation Agency Web sites: Foreign Military Sales and the Security Assistance Management Material.

(c) The FMS will be considered as a method of procurement when the goods or services required

relate to military equipment of U.S. origin and when, on the basis of the information available at the time, those goods and services are available or can be made available from the U.S. DoD.

(d) When Public Works and Government Services Canada Headquarters (PWGSC [H]) determines

that a requirement will be sole sourced to the U.S., the requisition must be reallocated to PWGSC Washington (PWGSC [W]). Decisions by PWGSC (H) to sole source requirements to the U.S. FMS program must be adequately documented.

As a minimum, the following information must be provided on form PWGSC-TPSGC 1062-1, (NOTE: Only government employees have access to the site) or as an attachment to it, when allocating procurement to PWGSC (W): (i) the Goods and Services Identification Number (GSIN); (ii) the trade agreement(s) applicable to the procurement; (iii) if an Advance Contract Award Notice (ACAN) was published and its result; (iv) the sole source justification for FMS and reference to the applicable rationale from

Treasury Board regulations (see 3.15) or, if applicable, the trade agreements;

Chapter 9 – Special Procurements

Supply Manual Page 10 of 36 Version 10-1 (2010-01-11)

(v) any other pertinent information leading to the decision to sole source to FMS such as Procurement Review Committee decisions for all requirements over $2M, client’s justification, etc.

(e) PWGSC (W), in its capacity as the sole accredited Canadian procurement agency to the U.S.

DoD, will be the departmental agency responsible for dealing with the United States Government (USG) on all contractual matters directly related to FMS, and will coordinate all pertinent contract and administrative arrangements in the U.S. on behalf of PWGSC and its clients. Questions can be forwarded to the Director General, at phone number 202-682-7604.

9.15.1 Planning (2010-01-11) (a) Through its security assistance policy, the USG provides for various forms of security assistance

to other nations. The FMS program is a large and complex program, which is administered by the U.S. DoD. In Canada, PWGSC, as well as the client, plays an important role in the implementation and maintenance of this program.

(b) Transactions initiated within the FMS program are covered under basic categories of agreements

(known as cases in the U.S. military organizations). The main categories are:

(i) Defined Order Cases: Certain defence articles and services can be provided only on defined line cases, which may offer items at individually estimated prices and delivery dates. The USG, where necessary, in turn contracts for defence articles and services that are required to fulfill the Letter of Offer and Acceptance (LOA);

(ii) Blanket Order Cases (BOC) including Blanket Open End (BOE) arrangements through

the U.S. Army, and Direct Requisitioning Procedures through the U.S. Navy: most repair parts and routine services can be offered under Blanket Order LOAs, which reduce the time needed for processing orders. These LOAs are perfectly suited for addressing subsequent needs, (i.e. where the client will require additional defence articles or services on a periodic basis). These agreements are similar to standing offers, allowing clients to submit requirements directly to the identified U.S. military organization. Support equipment including assemblies, components, special tools, test equipment, training aid devices, minor modifications performed at U.S. installations and repair and return services, training, etc., are usually the subject of BOC; and

(iii) Co-Operative Logistics Supply Support Arrangements, commonly referred to as COLOG

in Canada and CLSSA in the U.S.: CLSSA is a unique arrangement whereby Canada is able to invest in the U.S. supply system and receive access to U.S. DoD stocks. This arrangement involves two separate FMS cases. The first FMS case covers Canada’s investment in specific USG supply system items; the second FMS case is used to requisition these items.

(c) PWGSC (H) will determine, before procurement through the FMS program is initiated, whether

the provisions of the North American Free Trade Agreement or the World Trade Organization Agreement on Government Procurement apply and will take action accordingly. When these provisions do not apply, PWGSC will determine whether there is an existing or potential source of supply in Canada and after consultations with the Department of National Defence (DND), or any other client, and will establish whether in the circumstances, it would be more advantageous for the Government of Canada to procure in Canada or directly from the equipment manufacturer in the U.S. or from the U.S. DoD.

(d) Quite often the weapon system can only be purchased through the FMS program. The Arms

Export Control Act gives the President discretion to designate which military end item must be sold through the FMS program exclusively. This discretion is delegated to the Secretary of

Chapter 9 – Special Procurements

Supply Manual Page 11 of 36 Version 10-1 (2010-01-11)

Defence and is executed by the Defence Security Cooperation Agency in close coordination with the Defence Technology Security Administration and the Military Department (MILDEPT) or U.S. DoD component responsible for the end item. The Department of State approves or disapproves all sales, and is responsible for the continuous supervision and general direction of all sales. Four general criteria are used to determine if a sale is required to proceed through the FMS program: legislative/presidential restrictions; DoD/MILDEPT policy, directive or regulatory requirements, e.g., the National Disclosure Policy, government-to-government requirements and interoperability/safety requirements for U.S. Forces. The PWGSC (W) office will confirm with the client when the FMS program is the only solution.

9.15.5 Contracting Protocol (2010-01-11) Contracting with the U.S. DoD for the supply of material or for the provision of services on a government-to-government basis is affected through the exchange of a Letter of Request (LOR) prepared by PWGSC (W) and of a Letter of Offer and Acceptance (LOA) prepared by the U.S. LORs are sent to the applicable military department, the U.S. Department of State and Defence Security Cooperation Agency, a defence department agency that oversees security assistance programs. 9.15.10 Time Frames (2010-01-11) (a) The standard period of time for a response from the U.S. DoD to an LOR submitted by PWGSC

(W) on behalf of Canada, is as follows:

(i) 60 days from the date of receipt of the LOR for an official price and availability; (ii) 120 days from the date of receipt of the LOR for an LOA not requiring notification to

Congress; (iii) 180 days from the date of receipt of the LOR for an LOA requiring notification to

Congress, applicable to acquisitions of major defence equipment valued at $25M or more, or if the total case value exceeds $100M;

(iv) up to nine months in the case of technical data packages due to special inquiries or studies to be carried out.

(b) It is not unusual to have LOAs and amendments exceed the projected targets based on the USG

workloads and high priority cases required to support U.S. Foreign Policy. 9.15.15 Pricing and Payment (2010-01-11) (a) An LOA is used to submit price estimates to the purchaser country, as well as include a projected

payment schedule. FMS prices may include, but are not limited to, the cost of the item; non-recurring research and development (R&D) and production costs; packing and handling plus administrative surcharges. The item price is the same price that would be charged to any other purchaser, including the U.S. Armed Forces. PWGSC (W) ensures the actual payment schedules correlates to the actual work performed.

(b) Once an LOA has been signed, the applicable MILDEPT buys the item or items from U.S.

manufacturers. This purchase normally goes through U.S. DoD procurement channels, and may not happen quickly; the time lag between an LOA and a delivery can take a year or more, particularly for complex weapons systems. The price quoted in the LOA may not match the cost of the items upon delivery, though in fact most final prices fall below the original estimate. The final price is determined from actual contract costs and other surcharges, which must be charged in accordance with U.S. laws and regulations.

Chapter 9 – Special Procurements

Supply Manual Page 12 of 36 Version 10-1 (2010-01-11)

9.15.20 Surcharges (2010-01-11) (a) The Arms Export Control Act states that the United States Government (USG) must manage the

FMS program at no cost to the USG. The Act mandates collection of a percentage-based administrative surcharge on FMS cases to recover all applicable U.S. costs to execute, manage, and oversee the FMS program. This surcharge is assessed against the value of the FMS case. The work covered includes case writing, case management/execution (cost, schedule, performance), case closure and periodic reviews.

(b) Small case management line: effective 1 August 2006, any case that would not collect at least

$15,000 in administrative surcharges will include a small case management line to charge the difference in value between the administrative surcharge amount and $15,000.

(c) FMS surcharges pay a significant amount of the salaries and operating costs of Security

Assistance Organizations and other Defence Department personnel who carry out the FMS program.

9.15.25 Non-recurring Costs (2010-01-11) When requesting a proposal, PWGSC (W) sends a Letter of Request (LOR) to the U.S. DoD requesting them to identify if non-recurring costs (NRCs) are involved in the requirement. If the ensuing proposal/Letter of Offer and Acceptance (LOA) from the U.S. DoD includes NRCs, then PWGSC (W) pursues a waiver with Defence Security Cooperation Agency, before the signing of the LOA. 9.15.30 Release of Information (2010-01-11) The USG does not compete with U.S. industry for foreign sales and does not knowingly provide other governments with “comparison pricing information” especially when it is known that a commercial contract is being negotiated. 9.15.35 Processing of Documents (2010-01-11) (a) When a decision is made to satisfy a requirement through FMS, the file is either wholly

reallocated or extracted to PWGSC (W), after the initial requisition review is carried out by the receiving PWGSC organization (headquarters or region). PWGSC (W) will prepare the Procurement Plan/Contract Planning and Advance Approval (CPAA).

(b) Material to be obtained through FMS must be identified by U.S. national stock numbers whenever

possible. The second group of digits (country designator) must be 00 or 01. The designation 21, which indicates the presence of a Canadian number, is not acceptable and its use will cause the demand to be rejected.

(c) PWGSC (W) will review each requisition to ensure the adequacy and appropriateness of the

information. If satisfactory, PWGSC (W) will prepare and submit an LOR to the applicable U.S. DoD organization.

(d) Upon receipt of the LOA, PWGSC (W) will carry out a verification to determine whether the LOA

corresponds to the LOR and, if satisfactory, will request approval/concurrence as well as funding from the client department.

Chapter 9 – Special Procurements

Supply Manual Page 13 of 36 Version 10-1 (2010-01-11)

(e) Following the acceptance of the LOA by PWGSC (W), funds are transferred from the Canadian client to the USG via a Canadian account at the Federal Reserve Bank in New York. The U.S. DoD will initiate no action until the transfer of funds has been completed.

9.15.40 Contract Administration (2010-01-11) (a) PWGSC (W) is responsible for contract administration including billing/payments and expediting

delivery, except for COLOG. (b) PWGSC (W) may arrange program management reviews and/or status review meetings to allow

clients to discuss related matters with representatives from the U.S. DoD. 9.15.45 Contract Amendments (2010-01-11) (a) PWGSC (W) will negotiate contract amendments, when required. (b) When funds in certain contracts (cases) have not been fully expended, a case amendment

extending the period of time to use up funding may be requested. This normally applies to arrangements where the scope of work is not affected.

9.15.50 Contract Closing (2010-01-11) (a) When delivery is completed and final determination of cost is made, PWGSC (W) will initiate

closing action and will seek finalization of accounts. PWGSC (W) will request a cheque payable to the Receiver General for Canada if funds are due to Canada. If funds are owed to the United States Government (USG), funds will be requested from the Canadian client.

(b) Closure of FMS contracts involving procurement from commercial suppliers may take place years

after delivery of material because of the need to audit and renegotiate certain requirements peculiar to the U.S. DoD procurement process. A minimum of two years is required to close out an FMS case after final delivery of the goods and/or services.

(c) At the time of final closure, the estimated amounts in the LOA are changed to actual costs and a

final statement of account is issued. 9.20 Co-Operative Logistics and Blanket Order Cases with the U.S. DoD (2010-01-11) (a) This section provides details of the Canada/United States (U.S.) of America Co-Operative

Logistics (COLOG) Supply Support Arrangement (CLSSA) and describes specific responsibilities of Public Works and Government Services Canada (PWGSC) in relation to this supply support arrangement.

(b) The COLOG/CLSSA was initially approved in 1965. PWGSC will make the necessary

arrangements to establish with the USG the contractual instruments such as COLOG arrangements or blanket order cases (BOC), thus allowing the Canadian Department of National Defence (DND) to obtain directly from the U.S. Department of Defense (DoD), material and services, as required.

9.20.1 Requisition Receipt (2010-01-11)

Chapter 9 – Special Procurements

Supply Manual Page 14 of 36 Version 10-1 (2010-01-11)

(a) Contracting officers should refer to 9.15 or information concerning the requisition process of the U.S. FMS program.

(b) The COLOG Operations Office in the Defence and Major Projects Sector (DMPS), Acquisitions

Branch, will review requisitions for COLOG and BOC and provide support to these activities, as detailed under the Referral Program activities (see 9.20.20), on behalf of PWGSC.

9.20.5 Planning (2010-01-11) (a) Under COLOG arrangements, a participating country is required to purchase an equity in the

supply system of the appropriate service within the U.S. DoD through a Stock Level Case, which is adjusted as required, up or down, depending on usage. Canada has purchased an equity in each of the three U.S. Forces supply systems, U.S. Army, Air Force and Navy, on an as and when required basis, and pays for only those items it actually draws out of the systems.

(b) Since U.S. law prohibits the U.S. DoD from expending its funds on speculative purchases for

other than its own Forces, there is a requirement for deposits to be made usually monthly, in advance, by participating foreign nations. The amount of the deposit should correspond to the anticipated delivery value in the succeeding quarter.

(c) A final accounting is carried out when all items have been delivered or cancelled and all

discrepancies have been resolved. This accounting results in a contract amendment requiring either a final payment by Canada or a refund to Canada.

9.20.10 Establishment and Renewal of a Stock Level Case (FMSO I) (2010-01-11) (a) It is necessary to establish a Stock Level Case, also referred to as Foreign Military Sales Order

(FMSO I), to obtain COLOG support from the U.S. DoD. When the U.S. Air Force, U.S. Army or U.S. Navy, as applicable, agrees to supply, through COLOG, spare parts to the Armed Forces of a foreign nation, the U.S. material managers involved will take action to augment the U.S. DoD supply systems to correspond to the client's anticipated requirement.

(b) Stock Level Cases are negotiated as required. 9.20.15 Establishment of a Requisitioning Case (FMSO II) (2010-01-11) (a) PWGSC establishes annually a Requisitioning Case, also known as a Foreign Military Sales

Order (FMSO) II, before Department of National Defence (DND) is allowed to draw spare parts from the U.S. DoD supply systems.

(b) PWGSC has delegated to DND the responsibility for placing orders directly with the U.S. Navy,

the U.S. Army and the U.S. Air Force, as applicable, once the appropriate Stock Level Case (FMSO I) and Requisitioning Case (FMSO II) are in place. Requisitions for COLOG eligible items are transmitted directly by DND to U.S. DoD by means of a computer terminal linked to the U.S. Defense Automatic Addressing System Center, which provides direct access to the U.S. military supply systems.

9.20.20 Referral Program (2010-01-11) (a) There are three aspects to the Referral Program:

Chapter 9 – Special Procurements

Supply Manual Page 15 of 36 Version 10-1 (2010-01-11)

(i) referral of items with an extended price of US$20,000 at the time of requisitioning; (ii) the Quarterly List of all items procured through COLOG; (iii) the Annual List of items procured through COLOG. This is not a part of the establishment of the contract but rather action that occurs after the contract is established and throughout the life of the contract as long as COLOG requisitions are submitted against the case.

(b) The following summarizes the Referral Program:

(i) When the extended price of an item is US$20,000 or more, the DND COLOG Office

responsible for submitting requisitions through COLOG on the U.S. DoD systems, will provide information on demand to the PWGSC COLOG Operations Office (Defence and Major Projects Sector [DMPS]).

(ii) The purpose of this referral is to allow DMPS to review the procurement to determine

whether procurement through Canadian and/or other sources is more advantageous to Canada.

(iii) The DMPS COLOG Operations Office coordinates the review with input from the

PWGSC product managers as required. (iv) If it is determined that the item is available from the Canadian industry, procurement

action should be completed in Canada unless it is established that such action is not justifiable from a cost standpoint or that other conditions are unacceptable, particularly as they pertain to operational requirements. Similarly, if it is determined that the item is available at less cost from any other commercial source of supply, procurement action may be completed commercially unless it is established that such action is not justifiable from a total cost standpoint or that other conditions are acceptable, particularly as they pertain to operational requirement.

(v) If the item cannot be procured through the Canadian or foreign-based companies, DND

will be advised to demand it from the U.S. DoD through COLOG. (vi) All referrals should be processed as expeditiously as possible. A full reply or at

minimum, an interim reply will be provided to DND within 30 days of receipt of the referral.

(vii) The second portion of the demand Referral Program is that the DND COLOG Office,

responsible for the COLOG program, will forward quarterly to DMPS a printout, which will list all procurement through COLOG over the last quarter, regardless of value or priority.

(viii) The third portion of the Referral Program is similar to the second portion except that it is

based on an annual list being provided by DND of all procurement through COLOG for the last fiscal year. A similar review as the one performed for the quarterly reports may be conducted.

(ix) The purpose of these reviews is to provide an overview of procurement being done

through COLOG over a period of time. This would not be visible with only a review of procurement of individual items with a value over US$20,000. This review will allow PWGSC to seek sources based on requirements demanded over time. Often supply of an individual item may not be attractive to a supplier; however, when procurement of individual items over a period of time is collectively viewed, the combined value may be very attractive to a supplier.

Chapter 9 – Special Procurements

Supply Manual Page 16 of 36 Version 10-1 (2010-01-11)

9.20.25 COLOG Termination (2010-01-11) If Canada decides to terminate COLOG arrangements, there is a process that varies with the U.S. DoD service involved, which will identify those items that Canada is liable to procure from the U.S. DoD. 9.25 Use of the Defence Production Revolving Fund and Loan Account (2010-01-11) Under section 16 of the Defence Production Act, in particular, the Minister of Public Works and Government Services Canada (PWGSC) is authorized to acquire, utilize, store, maintain, transport, sell, exchange or otherwise dispose of defence supplies, services, projects, real or personal property. The Minister is also empowered to authorize loans or advances and loan guarantees. Expenditures incurred pursuant to the above authority are to be expended from the Consolidated Revenue Fund. 9.25.1 Program Description (2010-01-11) (a) The Defence Production Loan Account (DPLA) provides PWGSC with an account to make loans

or advances to aid in defence procurement such as working capital loans or advance payments on contracts and to make payment for such.

(b) Although the Adjustment of Accounts Act of 1980 eliminated the term Defence Production

Revolving Fund (DPRF) from the Defence Production Act, PWGSC was advised by Treasury Board that it will continue to designate and operate the DPRF for other than loan transactions. Thus the DPRF provides PWGSC with a budgetary account to purchase defence supplies, to make payment for such, and to get reimbursed out of an appropriation of a client (for example, Department of National Defence) or by an agent of Canada or by an associated government. The DPRF can be used for the following purposes:

(i) finance the stockpiling of "essential" materiel or defence supplies; (ii) advance production of defence supplies/materiel to permit workload smoothing of

defence industrial facilities; and (iii) temporarily fund the acquisition of defence supplies to meet urgent requirements,

pending appropriation of funds to finance unplanned requirements. (c) As stated in the Defence Production Act, associated governments are the governments of the

British Commonwealth and of the North Atlantic Treaty Organization, or the government of any other country designated by the Governor in Council, as being a country the defence of which is vital to Canada.

(d) The DPRF was established for interim financing purposes, as it has to be reimbursed by a client

or an associated government or whoever receives the finished product. As such, the DPRF can be used to make initial payments and subsequently recover such payments from the client. It is simply a temporary accommodation, and it would be illegal and improper to use it for a permanent commitment of any kind. Although the use of the DPRF requires that money expended will be reimbursed at the time delivery is made to the client, such use does not preclude the making of progress payments to suppliers and the interim recovery of these progress payments from the client.

(d) Expenditures charged to the DPRF may be used for the following purposes:

(i) Stockpiling of materials or substances, such as steel and oil, designated by the Governor in Council, as essential to the needs of the community. In such cases:

Chapter 9 – Special Procurements

Supply Manual Page 17 of 36 Version 10-1 (2010-01-11)

(A) an order-in-council is required; (B) a client appropriation is not immediately required for stockpiling essential

materials, but the cost of materials used must be recovered from the appropriation of the client.

(ii) Stockpiling of defence supplies, which Canada deems it advisable to maintain (certain

defence supplies such as ammunition.) In such cases: (A) an order-in-council is not required; (B) although an appropriation is not immediately required for stockpiling defence

supplies, Department of National Defence (DND) must reimburse the DPRF from an appropriation when the finished goods are delivered to DND.

(C) acquisition, storage or maintenance of defence supplies. In such cases:

(I) an order-in-council is not normally required; (II) a client appropriation is required.

(e) Loans or advances charged to the Defence Production Loan Account (DPLA) may be used for

any purpose other than for capital assistance. When loans are involved:

(i) an order-in-council is not required; (ii) although an appropriation by the client is not immediately required, the liability for any

loss must ultimately be covered from the appropriation of the client. (f) Losses sustained pursuant to a loan or an advance made against the DPLA can only be credited

pursuant to an appropriation by Parliament. 9.30 Purchases from CORCAN (2010-01-11) (a) Correctional Service Canada (CSC) has sponsored a rehabilitation program within its institutions

designed to train inmates so that after their release, they have a better chance of obtaining employment, based on the experience gained while in the program. This program is known as CORCAN. CORCAN is a key rehabilitation program of CSC. It is mandated to provide employment training and employability skills to offenders in federal correctional institutions in support of the social policy of the Government of Canada. For more information including contacts, contracting officers may refer to the Treasury Board Contracting Policy Notice 1999-2.

(b) Goods and services acquired from CORCAN must be comparable in price, delivery, performance

and quality to those that PWGSC would have received from private sector suppliers had they been awarded the same business.

9.30.1 Requisition Receipt (2010-01-11) (a) In compliance with Cabinet Decision 320-74RD, dated May 16, 1974, Public Works and

Government Services Canada (PWGSC), along with other federal government departments will, whenever possible, provide CORCAN with stable market outlets for its goods and services. This policy was reviewed and confirmed by Treasury Board on July 25, 1995.

(b) Article 1018 2(d) of the North American Free Trade Agreement allows for the exemption of

procurements relating to goods or services of prison labour. See article XXIII of the World Trade Organization Agreement on Government Procurement and article 507(c) of the Agreement on Internal Trade for this exception.

Chapter 9 – Special Procurements

Supply Manual Page 18 of 36 Version 10-1 (2010-01-11)

(c) When in receipt of a requisition for which the client has specified that CORCAN is the preferred source of supply, the contracting officer will support the award of the requirement to CORCAN and issue a Stores Transfer Order. The client needs not provide justification for purchasing CORCAN goods and services.

(d) When CORCAN has not been specified as a source of supply but can meet the requirement, the

contracting officer, wherever possible and in recognition of the potential benefits to be derived, will recommend to the client that CORCAN be considered as a source of supply.

(e) There are a number of procurement methods available to access goods and services from

CORCAN. Because CORCAN is part of the federal government, an order from CORCAN is not a purchase, it's a transfer of Canada assets between departments that is completed by making a request against CORCAN's unique supply arrangement/standing offer E60PQ-050000/001/PQ.

9.30.5 Memorandum of Understanding (2010-01-11) Procurements from CORCAN must be carried out in accordance with the Memorandum of Understanding (MOU) ratified on 2 January 2001 by the Deputy Minister, PWGSC, and the Commissioner of Corrections, Correctional Services Canada. The MOU at Annex 9.1 outlines both PWGSC and CORCAN responsibilities. 9.30.10 Implementation (2010-01-11) (a) Documentation of procurements from CORCAN will take the form of "Stores Transfer Orders",

since these procurements are not contracts within the meaning of the Government Contracts Regulations (GCRs) and the Treasury Board (TB) Contracts Directive. Existing contract and amendment forms must be employed, and will be processed in the normal manner, with the following changes: (i) delete the word "CONTRACT" and substitute the words "STORES TRANSFER ORDER"; (ii) insert the following as the first item in the contract under "Description of Supplies and/or

Services"; "Stores Transfer Order. This is not a contract."

(b) Although arrangements with CORCAN are not governed by the GCRs and the TB Contracts

Directive, all existing departmental limits governing the approval of entry into and signing of contracts apply.

(c) Authority limits established by the TB Contracts Directive apply to clients purchasing directly from

CORCAN. 9.35 Comprehensive Land Claims Agreements 9.35.1 General Information (2010-01-11) (a) The federal government, represented by Indian and Northern Affairs Canada (INAC), has

negotiated a number of Comprehensive Land Claims Agreements (CLCAs) with Aboriginal peoples. CLCAs are modern treaties that are based on the concept of continued Aboriginal rights and title to lands traditionally used and occupied by an Aboriginal group, which have not been dealt with by treaty or other legal means. No two agreements are exactly the same.

Chapter 9 – Special Procurements

Supply Manual Page 19 of 36 Version 10-1 (2010-01-11)

(b) Comprehensive Land Claims Agreements (CLCAs) are law. The CLCA obligations are legally binding because they are contained in agreements signed by Canada and backed by legislation. They have also been granted quasi-constitutional status by virtue of section 35 of the Constitution Acts (1982).

(c) The procurement obligations of a specific CLCA apply to the portion of the procurement that

involves deliveries of goods and/or services and/or construction to the settlement area of that CLCA. Most CLCAs include measures dealing with procurement, and although the procurement measures are not always identical in the various agreements, they are all aimed at increasing the opportunities of the aboriginal group signing the agreement to compete successfully for contracts in their settlement areas. Because the CLCAs are not identical, it is important to review each applicable agreement to determine the contracting obligations.

(d) Procurement that is subject to CLCAs, and one or more of the trade agreements may involve

special considerations (see 9.35.70 and 9.35.75). Furthermore, procurement that is subject to CLCAs, but not to any of the international trade agreements, must adhere to all procurement policies applicable to procurement not covered by international trade agreements, e.g. the Canadian Content Policy for requirements over $25,000.

(e) For a procurement which has contracting activities that take place within Comprehensive Land

Claims Settlement Areas (CLCSAs), contracting officers should consult the Acquisition Policy and Process Directorate (APPD), at telephone number 819-956-1025 or 819-956-5024, or forward enquiries to ncracqbclcapsab.rcnapprertgsaea@pwgsc-tpsgc.gc.ca for assistance with determining how a CLCA may affect the overall procurement strategy. APPD can assist contracting officers in identifying the CLCA contracting obligations and in developing methods of meeting them on a case-by-case basis. When requesting assistance from APPD, contracting officers should provide the following information about their procurements, to expedite their requests:

(i) brief description of requirement; (ii) final delivery location(s); (iii) name of client department; (iv) will the goods/services/construction be used by an aboriginal community? (v) will the procurement be set aside under the Procurement Strategy for Aboriginal

Business (see 9.40.1)?; (vi) applicable trade agreements, and/or reasons for exclusion from any trade agreements; (vii) ype of procurement instrument, e.g. contract, standing offer, supply arrangement; (viii) solicitation method (competitive or sole source); (ix) method of advertising e.g. MERX, source list; (x) estimated dollar value; (xi) anticipated date of issuance of solicitation.

(f) An online course on Aboriginal Considerations in Procurement (#C223E) is available by visiting

the Canada School of Public Service’s Campusdirect Website. 9.35.5 Comprehensive Land Claims Agreements in Effect (2010-01-11) (a) At present, there are 23 CLCAs (including 11, which fall under the Umbrella Final Agreement –

Council for Yukon Indians) that have been given Royal Assent and are in effect. Most areas of Canada, north of the 60th parallel are covered by a CLCA, i.e. Yukon, the Northwest Territories, and Nunavut. The only areas south of the 60th parallel that are covered by CLCAs are the northern part of Quebec, the northern part of Labrador, and parts of British Columbia. There are currently no CLCAs for areas within Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia or Prince Edward Island.

Chapter 9 – Special Procurements

Supply Manual Page 20 of 36 Version 10-1 (2010-01-11)

(b) The CLCAs that are in effect are listed below along with their approximate settlement areas. Where available, a link has been provided to the associated Treasury Board Contracting Policy Notice, which includes an excerpt of the CLCA contracting provisions. Otherwise, a link has been provided to the full text of the comprehensive land claims agreement on the Indian and Northern Affairs Canada Web site, along with references to the articles regarding contracting provisions.

9.35.5.1 Quebec (2010-01-11) James Bay and Northern Quebec Agreement (JBNQA) (1975), amended to include the Northeastern Quebec Agreement (1978): from the shores of James Bay and Hudson Bay to Labrador, covering approximately 50 percent of Quebec's land mass, mainly the northern portion of the province. The JBNQA has three aboriginal signatories, representing the Cree, Inuit and Naskapi of Quebec. The JBNQA contains conditions that apply to both the Cree and Inuit, as well as conditions that apply solely to the Cree, conditions that apply solely to Inuit, and conditions that apply solely to the Naskapi. The Nations map shows which communities are inhabited by Cree, Inuit and Naskapi, and therefore which conditions would apply. For communities not detailed on this map, contact Acquisition Policy and Process Directorate, at telephone number 819-956-1025 or 819-956-5024, or by e-mail at: ncracqbclapsab.rcnapprertgsaea@tpsgc-pwgsc.gc.ca for more information on the applicable CLCAs contracting obligations. Inuit Provisions: (a) James Bay and Northern Quebec Agreement (JBNQA), section 29.0 (Inuit Economic and Social

Development); (b) Agreement Respecting the Implementation of the JBNQA, Annex A, Part II (Inuit Employment and

Contract Priority). Cree Provisions: JBNQA, section 28.10 (Cree Participation in Employment and Contracts). Naskapi Provisions: 1Northeastern Quebec Agreement, Section 18 and paragraph 20.20. 9.35.5.5 Yukon, Northwest Territories, and Nunavut (2010-01-11) (a) The Inuvialuit Final Agreement (1984): the islands and part of mainland along the Beaufort Sea

(northwest portion of the Northwest Territories, including western portion of Victoria Island, all of Banks Island, Prince Patrick Island in the northern portion, and the western portion of Melville Island). Includes (but is not limited to) Holman, Inuvik, Mould Bay and Tuktoyaktuk. The Gwich’in Comprehensive Land Claims Agreement also covers Inuvik and Aklavik.

(b) Gwich’in Comprehensive Land Claim Agreement (1992): parts of northeastern Yukon and

northwest portion of the Northwest Territories. Includes (but is not limited to) Aklavik, Fort McPherson, Inuvik and Tsiigetchic. The Inuvialuit Final Agreement also covers Inuvik and Aklavik. A Yukon Transboundary Agreement, for the Tetlit Gwich'in claimant group, exists as Appendix "C" under this final agreement. Notification of procurement opportunities for both the Gwich’in CLCA and the Yukon Transboundary Agreement must be sent to the Gwich'in Tribal Council.

(c) Nunavut Land Claims Agreement (1993): Northern Canada - includes districts of Franklin (central

Nunavut), Keewatin (south-central Nunavut, northwest coast of Hudson's Bay area), Baffin Island (southeast portion of Nunavut) and Ellesmere Island (northern portion of Nunavut). Includes (but is not limited to) Arctic Bay, Arviat, Baker Lake, Bathurst Inlet, Cambridge Bay, Cape Dorest, Chesterfield Inlet, Clyde River, Eureka, Gjoa Haven, Grise Fiord, Hall Beach, Igloolik, Iqaluit, Kimmirut, Kugluktuk, Nanisivik, Pangnirtung, Pelly Bay, Pond Inlet, Povungnituk, Qikiqtarjuaq, Rankin Inlet, Repulse Bay, Resolute, Sanikiluaq, Taloyoak, Umingmaktok and Whale Cove.

Chapter 9 – Special Procurements

Supply Manual Page 21 of 36 Version 10-1 (2010-01-11)

(d) Umbrella Final Agreement – Council for Yukon Indians (1993): The western portion of the Yukon

Territory. The territory extends from the northern border of British Columbia to the southern border of the Inuvialuit land claims area, and includes eleven separate Comprehensive Land Claims Settlement Areas (CLCSAs).

(i) First Nation of Nacho Nyak Dun Final Agreement (1995): Part of Yukon Territory covering

Mayo and Stewart Crossing. (ii) Champagne and Aishihik First Nations Final Agreement (1995): Part of Yukon Territory

covering Haines Junction, Canyon Creek and Champagne. (iii) Teslin Tlingit Council Final Agreement (1995): Part of Yukon Territory covering Teslin. (iv) Vuntut Gwich'in First Nation Final Agreement (1995): Part of Yukon Territory covering Old

Crow. (v) Selkirk First Nation Final Agreement (1997): Part of Yukon Territory covering Pelly

crossing. (vi) Little Salmon/Carmacks First Nation Final Agreement (1997): Part of Yukon Territory

covering Carmacks. (vii) Tr'ondëk Hwëch'in Final Agreement (1998): Part of Yukon Territory covering Dawson

City. (viii) Ta’an Kwach’an Council Final Agreement (2002) - see Chapter 22 of the CLCA: Part of

Yukon Territory covering Lake Laberge. (ix) Kluane First Nation Final Agreement (2004) - see Chapter 22 of the CLCA: Part of Yukon

Territory covering Burwash Landing. (x) Kwanlin Dun First Nation Final Agreement (2005) - see Chapter 22 of the CLCA : Part of

Yukon Territory covering Whitehorse. (xi) 1Carcross/Tagish First Nation Final Agreement (2005) - see Chapter 22 of the CLCA: Part

of Yukon Territory covering Carcross and Tagish. (e) Sahtu Dene and Metis Comprehensive Land Claim Agreement (1994): Northwestern part of the

District of Mackenzie, including the communities of Colville Lake, Deline, Norman Wells, Fort Good Hope, and Tulit’a.

(f) Tlicho Land Claims Agreement (2005) - Appendix B of TB CPN 2006-4: Part of the Northwest

Territories and part of Western Nunavut. Includes, but is not limited to, Yellowknife, Rae-Edzo, Rae Lakes, Wha Ti and Wekweti.

(g) Nunavik Inuit Land Claims Agreement (2008) - see Chapter 13 of the CLCA: Part of the Nunavut

Territory that is in the offshore area adjacent to, but not in, the James Bay and Northern Quebec settlement area.

9.35.5.10 British Columbia (2010-01-11) (a) Nisga’a Final Agreement (2000) - does not include any contracting obligations: Part of the mid-

western coast of British Columbia.

Chapter 9 – Special Procurements

Supply Manual Page 22 of 36 Version 10-1 (2010-01-11)

(b) Tsawwassen Final Agreement (2009) - does not include any contracting obligations: Part of the south-western coast of British Columbia.

9.35.5.15 Newfoundland and Labrador (2010-01-11) Labrador Inuit Land Claims Agreement (2005) - Appendix A of TB CPN 2006-4: Part of Northeastern Quebec and part of Northern Labrador. Includes (but is not limited to) Hopedale, Makkovik, Nain, Postville and Rigolet. 9.35.10 National Park Agreements and DND Co-operation Agreements (2010-01-11) (a) Contracting officers should also be aware that a number of National Park Agreements and DND

Co-operation Agreements have been signed between individual departments and certain aboriginal groups. These agreements, which are listed below can be found in sections 7 to 10 of TBS Contracting Policy Notice 1997-8: (i) Section 7: Agreement for the Establishment of a National Park on Banks Island (ii) Section 8: Tuktut Nogait National Park Agreement (iii) Section 9: Co-operation Agreement between the Inuvialuit Regional Corporation and the

Department of National Defence concerning the Operation and Maintenance of the North Warning System.

(iv) Section 10: Co-operation Agreement between the Inuvialuit Regional Corporation and the

Department of National Defence concerning the Restoration and Clean-up of DEW Sites within the Inuvialuit Settlement Region.

(b) When advised by the client department, PWGSC will consider these co-operation agreements in

the procurement process. 9.35.15 Comprehensive Land Claims Agreements under Negotiation (2010-01-11) There are currently several Comprehensive Land Claims Agreements (CLCAs) under negotiation. Acquisition Policy and Process Directorate will advise contracting officers when new CLCAs come into effect. 9.35.20 Applicability of Comprehensive Land Claims Agreement Contracting

Obligations (2010-01-11) (a) If a procurement, or a portion thereof, includes the final delivery of goods, services, and/or

construction, for any department, agency or Crown corporation of the federal government, to locations covered by CLCAs, then the contracting obligations of each applicable CLCA will apply to each associated portion of the procurement. The final delivery point(s), which are not necessarily the destination addresses detailed in the requisition, determine the applicability of a CLCA, not the origin of the requisition (i.e. ordering office).

(b) Dollar Thresholds – A CLCA applies to any applicable procurement, regardless of dollar value. (c) Overlaps - Some CLCAs have settlement areas that overlap with the settlement areas of other

CLCAs. In these cases, the obligations of both CLCAs will apply. For example, Inuvik, Northwest

Chapter 9 – Special Procurements

Supply Manual Page 23 of 36 Version 10-1 (2010-01-11)

Territories (NWT) is situated within the settlement areas of both the Inuvialuit Final Agreement and the Gwich’in CLCA, and so the contracting obligations of both CLCAs will apply to the portion of the procurement with deliveries to Inuvik, NWT.

(d) Urgent requirements must continue to be dealt with on a case-by-case basis, in a manner that is

consistent with the provisions of the applicable CLCA. 9.35.25 Requirements Definition (2010-01-11) (a) Under several CLCAs obligations, the requirements definition for a procurement must, whenever

it is practical and consistent with sound procurement management:

(i) avoid artificially inflated employment skills requirements (this is consistent with PWGSC’s procurement principles);

(ii) give consideration to separating requirements into commodity or geographic groupings to permit smaller and more specialized firms to submit a bid/offer/arrangement.

(b) For instance, the Nunavut Land Claims Agreement states the following:

“24.4.2 In inviting bids on government contracts in the Nunavut Settlement Area, the Government of Canada and the Territorial Government shall provide all reasonable opportunities to Inuit firms to submit competitive bids, and, in doing so, shall take, where practicable and consistent with sound procurement management, the following measures:

(a) set the date, location, and terms and conditions for bidding so that Inuit

firms may readily bid; (b) invite bids by commodity groupings to permit smaller and more

specialised firms to bid; (c) permit bids for goods and services for a specified portion of a larger

contract package to permit smaller and more specialised firms to bid; (d) design construction contracts in a way so as to increase the opportunity

for smaller and more specialised firms to bid; and (e) avoid artificially inflated employment skills requirements not essential to

the fulfilment of the contract.” (c) The following CLCAs contain wording that is almost identical:

(i) James Bay and Northern Quebec Agreement (Inuit portion); (ii) Sahtu Dene and Metis Comprehensive Land Claim Agreement (Implementation Plan); (iii) Labrador Inuit Land Claims Agreement; and (iv) Nunavik Inuit Land Claims Agreement.

9.35.30 Access to Aboriginally-owned Lands (2010-01-11) CLCAs make provisions for access to aboriginally-owned lands. Contracting officers should encourage clients to liaise with the appropriate directorate(s) within Indian and Northern Affairs Canada’s

Chapter 9 – Special Procurements

Supply Manual Page 24 of 36 Version 10-1 (2010-01-11)

Implementation Branch to determine whether the location of the contracting activity is subject to access provisions under the CLCA, and, if so, whether any access permits are required. 9.35.35 Notification of Procurement (2010-01-11) (a) The most common obligation is the notification of the procurement that must be issued to the

appropriate claimant group(s). For the procurement of goods, services and/or construction destined for locations covered by land claim agreements, a copy of a notice describing the procurement, e.g. the Notice of Proposed Procurement (NPP) or Advance Contract Award Notice (ACAN), must be faxed to all land claimant groups listed in Annex 9.2 for each of the applicable agreements, on the date of posting on the Government Electronic Tendering Service (GETS).

(b) For procurements not posted on GETS, the contracting officer should send to the applicable land

claimant groups a notice about the procurement, containing the same information that an NPP or ACAN would have contained. In such cases, contracting officers should allow the land claimant groups at least 15 calendar days to submit any enquiries before awarding a contract, although the CLCAs do not specify any waiting period.

9.35.40 Right of First Refusal (2010-01-11) (a) Dependent upon the requirement, competition for a procurement may be restricted to businesses

of the applicable CLCA. (b) For example, for the Inuit portion of the James Bay and Northern Quebec Agreement, the

Agreement Respecting the Implementation of the JBNQA, Annex A (Inuit Employment and Contract Priority), Part II states:

“8.1 Wherever practicable and consistent with sound procurement management, Canada will first solicit bids from within the Territory.”

where

“3.11 "Territory": means the area in the province of Quebec north of the 55th parallel of latitude, as delineated in the JBNQA.”

(c) Furthermore, certain agreements contain a “right of first refusal” for the provision of certain

commodities, i.e., business opportunities and ventures that are contracted out with respect to Parks and the right of first refusal to any new licenses to carry on economic activities related to wildlife and tourism.

(d) Other agreements make provisions for giving CLCA beneficiaries “first consideration or first

priority” in sourcing certain requirements, i.e., silviculture services, management of designated heritage sites, and first consideration in providing technical and support services for contracts related to surveying the land claims settlement area.

(e) Contracting officers with CLCA procurements related to archaeology, forestry, heritage, parks,

and/or surveying should consult the Acquisition Policy and Process Directorate, at telephone number 819-956-1025 or 819-956-5024, or by e-mail to: ncracqbclcapsab.rcnapprertgsaea@tpsgc-pwgsc.gc.ca for assistance.

9.35.45 Evaluation Criteria (2010-01-11)

Chapter 9 – Special Procurements

Supply Manual Page 25 of 36 Version 10-1 (2010-01-11)

(a) Several Comprehensive Land Claims Agreements (CLCAs) contain socio-economic evaluation criteria that, subject to Canada’s international trade agreements (see 9.35.70), and whenever it is practical and consistent with sound procurement management, must be included in the solicitation document to provide CLCA beneficiaries with a fair opportunity for any spin-offs associated with socio-economic development. The document excerpts in Annex 9.3 specifically detail that consideration of socio-economic evaluation criteria is required for the following CLCAs: (i) James Bay and Northern Quebec Agreement - Inuit Portion (ii) Inuvialuit Final Agreement (iii) Nunavut Land Claims Agreement (iv) Sahtu Dene and Métis Comprehensive Land Claims Agreement (v) Tlicho Land Claims Agreement (vi) Nunavik Inuit Land Claims Agreement (vii) Labrador Inuit Land Claims Agreement

In addition, solicitations subject to the Gwich’in Comprehensive Land Claims Agreement should include socio-economic evaluation criteria for the Gwich’in, whenever it is practical and consistent with sound procurement management, and subject to Canada’s international trade agreements.

(b) These evaluation criteria can be used as part of the assessment along with price, best value,

delivery etc. Proof of efforts and/or commitments made by suppliers should include, but not be limited to, the names of persons or companies contacted and the nature of the undertakings at the time of the submission and as applicable.

(c) Should the contracting officer decide that it is not practical and consistent with sound

procurement management to include the CLCA evaluation criteria in a solicitation document, the contracting officer must document the supporting factors leading to this decision on the procurement file.

(d) The CLCA evaluation criteria should also be considered in sole source negotiations in order to

maximize socio-economic opportunities for CLCA beneficiaries. 9.35.50 Methods of Solicitation (2010-01-11) Contracting officers must use the appropriate method of solicitation, i.e., the Government Electronic Tendering Service (GETS), telephone-buys, source lists, facsimile distribution, newspapers, or a combination of methods. Increased consideration should be given to advertising the procurement opportunity in local newspapers and/or other public venues due to the remoteness of some of the areas. 9.35.55 Solicitation Period (2010-01-11) A longer bidding period should be considered depending on the remoteness of some of the areas. 9.35.60 Business Directories/Lists (2010-01-11) (a) Under several CLCAs, the land claimant groups have to prepare and maintain lists of CLCA

beneficiary firms. The business directories/lists identify the types of the goods and services the firms can furnish.

(b) For procurements posted on GETS, contracting officers should notify the CLCA beneficiary firms

listed for the applicable commodities, in accordance with 4.75.35. For procurements not posted on GETS, contracting officers should use the firm lists to invite CLCA beneficiaries firms to submit

Chapter 9 – Special Procurements

Supply Manual Page 26 of 36 Version 10-1 (2010-01-11)

a bid/offer/arrangement; this must not restrict the ability of any business, not on the list, to submit a bid/ offer/arrangement.

(c) For a list of Inuit businesses for the James Bay and Northern Quebec Agreement and for the

Nunavik Inuit Land Claims Agreement, consult the Nunavik Regional and Private Business Directory.

(d) For a list of Cree businesses for the James Bay and Northern Quebec Agreement, consult the

Grand Council of the Crees telephone directory. (e) For a list of Inuvialuit businesses in the Inuvialuit Settlement Region, consult the Inuvialuit

Business List. (f) For a list of Gwich’in businesses in the Gwich’in Settlement Area, consult the Gwich’in Business

Directory. (g) For a list of Inuit businesses in the Nunavut Settlement Area, consult the Inuit Firm Registry. (h) For a list of Sahtu Dene and Metis businesses in the Sahtu Settlement Area, consult the Sahtu

Business List. (i) For more information on Tlicho businesses, visit the Tlicho Businesses Web site. (j) For a list of Inuit businesses in the Labrador Inuit Settlement Area, consult the Nunatsiavut

Government’s Inuit Business Directory. 9.35.65 Application of CLCAs and the Procurement Strategy for Aboriginal

Business (a) In certain cases, procurement subject to CLCA contracting obligations may also be subject to a

set-aside under the Procurement Strategy for Aboriginal Business (PSAB). To the extent that the application of a PSAB set-aside does not interfere with CLCA contracting obligations, then both the CLCA and PSAB procedures may be applied, but when the two are in conflict, the CLCA contracting obligations take precedence.

(b) If a procurement is subject to a CLCA, and that CLCA does not include a right of first refusal, the

procurement can be restricted to aboriginal businesses under PSAB while still addressing the CLCA contracting obligations, including any CLCA evaluation criteria. A solicitation subject to a PSAB set-aside that addresses CLCA evaluation criteria must clearly define what constitutes a “CLCA beneficiary firm” to avoid confusion with the definition of "aboriginal business" under PSAB.

(c) If, further to a right of first refusal under a CLCA, a procurement is reserved for CLCA

beneficiaries, then the procurement cannot also be subject to a set-aside under PSAB. (d) For more information on PSAB, contracting officers should consult 9.40. 9.35.70 International Trade Agreements (2010-01-11) (a) Contracting officers must determine whether a procurement subject to a CLCA is also covered by

an international trade agreement (ITA), e.g., NAFTA and/or WTO-AGP. (See 1.25.5 and 1.25.10.)

(b) All ITAs provide for set-asides for small and minority businesses, e.g. Article 1.(d) of Canada’s

General Notes of WTO-AGP and Article 1.(d) of Annex 1001.2b of NAFTA.

Chapter 9 – Special Procurements

Supply Manual Page 27 of 36 Version 10-1 (2010-01-11)

(c) When a procurement is subject to an ITA, it can only be excluded from that ITA under the

provision for "set-asides for small and minority businesses" if the procurement is completely restricted to aboriginal businesses. The procurement cannot be set-aside from the ITAs under this provision if the procurement is also open to non-aboriginal businesses. The sole fact that a procurement is subject to a CLCA does not exempt it from the ITAs.

(d) The following are the options when a procurement is subject to both a CLCA and to an ITA:

(i) If the CLCA provides the CLCA beneficiaries with a right of first refusal for the procurement, the procurement can be set-aside from the ITAs to be awarded to a CLCA beneficiary, since the right of first refusal will constitute a set-aside "for small and minority businesses" under the ITA;

OR (ii) If the CLCA does not provide the CLCA beneficiaries with a right of first refusal for the

procurement, the procurement can be subject to PSAB, and this would constitute a set-aside for small and minority businesses under the ITAs.

For option (i) or (ii), because the procurement will be set-aside from the ITAs for small and minority businesses, all CLCA contracting obligations can be addressed, including any CLCA evaluation criteria.

OR (iii) If no right of first refusal exists under the CLCA, and the procurement cannot be set-aside

under the PSAB, the requirements of the ITAs will apply to the procurement. When a contracting officer is considering addressing CLCA evaluation criteria in a procurement that is subject to an ITA, the contracting officer must consult with Acquisition Policy and Process Directorate (APPD), at phone number 819-956-1025 or 819-956-5024, or by e-mail at: ncracqbclcapsab.rcnapprertgsaea@tpsgc-pwgsc.gc.ca, who will then consult with trade policy and legal counsel as appropriate.

9.35.75 Agreement on Internal Trade (2010-01-11) Under Article 1802 of the Agreement on Internal Trade (AIT), the AIT does not apply to any measure adopted or maintained with respect to Aboriginal peoples. AIT does not apply to a procurement that is restricted to CLCA beneficiaries further to a right of first refusal under a CLCA. 9.35.80 Notice of Proposed Procurement (2010-01-11) (a) For procurements subject to one or more CLCAs, contracting officers must insert a statement at

the end of the text box in the Notice of Proposed Procurement (NPP), indicating the applicable CLCAs. For example, for a procurement that is subject to the Inuvialuit Final Agreement would read as follows:

"This procurement is subject to the Inuvialuit Final Agreement.” (b) Contracting officers must insert the following information at the beginning of the text box in the

NPP for any procurement that is set-aside from an ITA for CLCA beneficiaries, further to a right of first refusal under the CLCA.

Chapter 9 – Special Procurements

Supply Manual Page 28 of 36 Version 10-1 (2010-01-11)

“This procurement is reserved for beneficiaries of the following Comprehensive Land Claims Agreement(s) (CLCAs): _____ (insert the applicable CLCA(s)) under _____ (insert the applicable CLCA chapter, article and paragraph numbers). This procurement is set aside from the international trade agreements under the provision each has for set-asides for small and minority businesses. Further to Article 1802 of the Agreement on Internal Trade (AIT), AIT does not apply to this procurement.

9.35.85 Solicitations (2010-01-11) (a) Standard Acquisition Clauses and Conditions (SACC) Manual clauses W0001T to W0004C, have

been developed for solicitations, contracts and standing offers that involve unspecified final delivery locations within land claims settlement areas.

(b) Contracting officers must insert clause W0005T at the beginning of a solicitation when a

procurement is set-aside from the international trade agreements for CLCA beneficiaries, further to a right of first refusal under the CLCA.

(c) Although additional CLCA clauses are available in subsection 5-W of the SACC Manual,

contracting officers should contact Acquisition Policy and Process Directorate (APPD), at telephone number 819-956-1025 or 819-956-5024, or by e-mail at ncracqbclcapsab.rcnapprertgsaea@tpsgc-pwgsc.gc.ca for assistance with these clauses, and APPD will liaise with Legal Services, as appropriate.

9.35.90 Standing Offers and Supply Arrangements (2010-01-11) (a) Standing Offers (SOs) and supply arrangements (SAs) are also affected by CLCAs when any

resulting contracts may involve deliveries to a location subject to a CLCA. Therefore, contracting officers must determine, in consultation with the client departments, if deliveries to CLCAs will be allowed under the SO/SA, in which case the applicable CLCA contracting obligations will have to be met.

(b) Mandatory SOs/SAs - if a client’s requirement is subject to CLCA contracting obligations, and no

mandatory SO/SA addressing the contracting obligations of the applicable CLCA(s) exists, the client department is exempted from having to use the mandatory SO/SA.

9.35.95 Procurement Reporting (2010-01-11) As stated in 7.30, contracting officers must ensure that reporting on contracts subject to CLCAs is done accurately. All contracts subject to CLCAs must be coded as such; in the Automated Buyer Environment (ABE), this involves clicking the checkbox for CLCAs on the procurement summary. In addition, procurements restricted to CLCA beneficiaries under a right of first refusal must be coded as falling under the “Land Claims Set-aside Policy” and the "Set-asides for Small and Minority Businesses" derogation. 9.40 Procurement Strategy for Aboriginal Business (2010-01-11)

Chapter 9 – Special Procurements

Supply Manual Page 29 of 36 Version 10-1 (2010-01-11)

In accordance with the Procurement Strategy for Aboriginal Business (PSAB) announced on March 27, 1996, requirements designated by client departments as set aside under PSAB will be restricted to qualified Aboriginal businesses. 9.40.1 Decision to Set Aside a Procurement under PSAB (2010-01-11) (a) The decision to set aside a procurement under PSAB is the responsibility of the client

department. There are two types of PSAB set-asides: mandatory and voluntary. (b) Mandatory Set-Asides: Client departments must designate all procurements valued in excess of

$5,000, and destined primarily for Aboriginal populations, as being restricted exclusively to qualified Aboriginal suppliers where operational requirements, best value, prudence and probity, and sound contracting management can be assured. Under TBS Contracting Policy Notice 1996-2,

“Aboriginal Population” means a. an area, or community in which Aboriginal people make up at least 80

percent of the population; b. a group of people for whom the procurement is aimed in which Aboriginal

people make up at least 80 percent of the group.” (c) Voluntary Set-Asides: Client departments may designate any procurement as being restricted

exclusively to qualified Aboriginal suppliers. Contracting officers should assist client departments in meeting their performance objectives under the program, by drawing their attention to opportunities for voluntary PSAB set-asides, when qualified Aboriginal suppliers are known to exist in the marketplace.

(d) PWGSC will not unilaterally declare a procurement set-aside under PSAB. However, following

receipt of a requisition above $5,000, destined primarily for Aboriginal populations, but not designated as a PSAB set-aside, the contracting officer should contact the client department and draw their attention to the potential omission. If the client indicates that the procurement is not to be set aside under PSAB, the file should be annotated accordingly, and the procurement may then proceed.

9.40.5 Application of PSAB and CLCAs (2010-01-11) (a) A procurement set-aside under the Procurement Strategy for Aboriginal Business (PSAB) may

also be subject to contracting obligations of Comprehensive Land Claims Agreements (CLCAs). To the extent that the application of a PSAB set-aside does not interfere with CLCA contracting obligations, then both the CLCA and PSAB set-aside procedures may be applied, but where the two are in conflict, the CLCA contracting obligations take precedence. In some instances, the CLCA contracting obligations are limited to providing notification to the claimant groups of the upcoming procurement. In other instances, they are more extensive.

(b) If a procurement is subject to a CLCA and that CLCA does not include a right of first refusal, the

procurement can be set aside for aboriginal businesses under PSAB while still addressing the CLCA contracting obligations, including any CLCA evaluation criteria. A solicitation subject to a PSAB set-aside that addresses CLCA evaluation criteria must clearly define what constitutes a CLCA beneficiary to avoid confusion with the definition of "aboriginal business" under PSAB.

(c) If, further to a right of first refusal under a CLCA, the procurement is reserved for CLCA

beneficiaries, the procurement cannot also be subject to a PSAB set-aside.

Chapter 9 – Special Procurements

Supply Manual Page 30 of 36 Version 10-1 (2010-01-11)

(d) Contracting officers should consult with Acquisition Policy and Process Directorate, at phone

number 819-956-1025 or 819-956-5024, or by e-mail at: ncracqbclcapsab.rcnapprertgsaea@tpsgc-pwgsc.gc.ca, regarding CLCA contracting obligations. (See 9.35.15.)

9.40.10 PSAB and Trade Agreements (2010-01-11) (a) All international trade agreements provide for set-asides for small and minority businesses, e.g.

Article 1.(d) of Canada’s General Notes of the World Trade Organization Agreement on Government Procurement (WTO-AGP) and Article 1.(d) of Annex 1001.2b of the North American Free Trade Agreement (NAFTA). Therefore, a procurement set-aside under PSAB is excluded from coverage under the international trade agreements. Pursuant to Article 1802 of the Agreement on Internal Trade (AIT), the AIT does not apply to any measure adopted or maintained with respect to Aboriginal peoples. AIT does not apply to a procurement that is restricted to Aboriginal businesses under PSAB.

(c) Contracting officers must insert SACC Manual clause A3002T in bid solicitations for

procurements that have been set aside under PSAB, when the procurement would have been otherwise subject to one or more trade agreements.

(c) When a procurement is set-aside under PSAB and no aboriginal business submitted a responsive

bid/offer/arrangement, then the solicitation must be reissued, either as a set-aside once again (after the necessary adjustments to the solicitation have been made), or under the procedures for the applicable trade agreement(s), taking into account the relevant thresholds, etc., which apply to the requirement, in the absence of a set-aside. This will also apply when the contract will not be awarded to an Aboriginal business because the contract award would conflict with sound contracting principles - best value, prudence and probity, etc. (See 9.40.25.)

9.40.15 PSAB and Canadian Content (2010-01-11) (a) PSAB and the Canadian Content Policy may be applied simultaneously. (b) In applying the Canadian Content Policy under a set aside procurement, it must be recognized

that there are two levels of certification. The first level of certification will be to qualify the supplier(s) as eligible for consideration, i.e., a supplier must provide certification that it is an Aboriginal business.

(c) Having established that the procurement will be conducted as a PSAB set-aside, contracting

officers must then apply the Canadian Content Policy in the same manner as any other procurement but in the context of the Aboriginal business supplier community. Contracting officers must determine whether there are sufficient eligible firms to carry out the procurement as solely limited (i.e., three or more Aboriginal businesses are able to provide Canadian goods or services), conditionally limited (i.e., there may be three or more Aboriginal suppliers of Canadian goods or services), or open (i.e., there is an insufficient number of Aboriginal businesses able to provide Canadian goods or services; the procurement is open to all Aboriginal businesses regardless of the origin of the goods and services supplied). (See 3.130.

(d) A bid/offer/arrangement for a set aside procurement, which includes the Canadian content

provision, must be reviewed initially to determine whether the supplier has provided the necessary certificate that it is an Aboriginal business. Bids/offers/arrangements meeting this basic certification are then assessed according to the stated Canadian content criteria.

Chapter 9 – Special Procurements

Supply Manual Page 31 of 36 Version 10-1 (2010-01-11)

9.40.20 Subcontracting Plans (2010-01-11) In support of PSAB, client departments may designate that a proportion of subcontracts on projects be reserved for Aboriginal business, or that suppliers are to be encouraged through the use of incentives - e.g., additional evaluation points to hire Aboriginal businesses as subcontractors. The inclusion of Aboriginal businesses as subcontractors must be clearly identified in the solicitation as an evaluation criterion. This is not permitted for procurements subject to the international trade agreements, e.g. NAFTA (Article 1006) or WTO-AGP (Article XVI). 9.40.25 Sound Contracting Principles (2010-01-11) Fundamental to all PSAB procurements is the need to adhere to sound contracting principles. Contracting officers must always be cognizant of the principles of best value, prudence, probity, and operational requirements, in planning their procurement strategy for PSAB set-aside requirements. 9.40.30 Notification to Indian Northern Affairs Canada (2010-01-11) (a) Upon receipt and acceptance of a requisition for a PSAB set-aside procurement, contracting

officers must inform Business Partnerships Directorate, Indian and Northern Affairs Canada (INAC).

(b) Notification to INAC must be sent, by fax or e-mail, before the release of the solicitation, to:

Indian and Northern Affairs Canada Business Partnerships Directorate Telephone: 819-956-9836 or 1-800-400-7677 Fax: 819-956-9837 E-mail: saea-psab@ainc-inac.gc.ca The notification must include the following information: (i) estimated dollar value; (ii) description of goods/services/construction; (iii) solicitation number; (iv) solicitation closing date; and (v) buyer (name, and phone/fax numbers). In instances of sole source procurements, the notice to INAC must also include the name and address of the potential contractor.

(c) Within 15 working days after contract award, the contracting officer must advise the Business

Partnerships Directorate of the name of the contractor, the contract number, and the total estimated value of the contract.

9.40.35 Sourcing of Requirements under PSAB Set-asides (2010-01-11) (a) Procurements set aside under PSAB may be competitive or non-competitive according to current

established government sourcing policies (see details on competitive and non-competitive at 3.10 and 3.15. Aboriginal businesses may be invited to submit a bid/offer/arrangement in accordance with Public Works and Government Services Canada (PWGSC) policies and procedures.

Chapter 9 – Special Procurements

Supply Manual Page 32 of 36 Version 10-1 (2010-01-11)

(b) Vendor Information Management (VIM) of PWGSC and “SELECT” systems allow for the identification of suppliers that have self-declared as being Aboriginal. The information in VIM and “SELECT” collected from supplier registrations and contract awards is useful to identify potential Aboriginal businesses for sourcing purposes, and establish source lists, regardless of commodity (goods, services, or construction), which would be subject to rotation regimes such as Automated Vendor Rotation System or “SELECT”.

(c) Businesses placed on "Aboriginal" source lists must also be placed on non-Aboriginal source

lists. (d) Contracting officers may also access other sources, such as Industry Canada’s Aboriginal

Business Directory for more information on Aboriginal suppliers and to identify potential Aboriginal businesses which may be invited to submit a bid/offer /arrangement. Contracting officers may also contact Business Partnerships Directorate, INAC, directly by telephone at 819-956-9836 or 1-800-400-7677, or by e-mail at: saea-psab@ainc-inac.gc.ca.

(e) When bids/offers/arrangements are solicited via the Government Electronic Tendering Service,

notices (Notice of Proposed Procurement [NPP] or Advanced Contract Award Notice [ACAN]) must contain one of the following statement, prominently positioned, i.e., one of the first statements in the notice:

"This procurement has been set aside under the federal government's Procurement Strategy for Aboriginal Business (PSAB). In order to be considered, a supplier must certify that it qualifies as an Aboriginal business as defined under PSAB and that it will comply with all requirements of PSAB." (NPP);

OR

"This procurement has been set-aside under the federal government's Procurement Strategy for Aboriginal Business (PSAB). Only Aboriginal businesses as defined under PSAB are eligible to challenge the proposed procurement strategy to award the contract to the named Aboriginal business." (ACAN)

(f) Contracting officers must ensure that for notices on GETS, the appropriate “Agreement Type” is

selected for PSAB set-asides. For example, ABE users must indicate “Set-Aside Program for Aboriginal Business (SPAB)” in the “Trade Agreement” box of the Notice of Proposed Procurement.

9.40.40 Legal Entity (2010-01-11) The description of a business as an Aboriginal business does not affect the fact that in order to create an enforceable contract with Canada, the contract must be signed between Canada and a legal entity, which has the capacity to contract. In the event any uncertainty exists concerning the legal status of an Aboriginal business, contracting officers must consult with legal counsel to ensure that the proposed contractor is capable of signing an enforceable agreement. 9.40.45 Certification by Suppliers (2010-01-11) (a) For each procurement under the PSAB, suppliers will be required to provide, with their

bid/offer/arrangement, a certification stating that they meet the definition of an Aboriginal business, according to the definition provided, on the date that the bid/offer/arrangement was

Chapter 9 – Special Procurements

Supply Manual Page 33 of 36 Version 10-1 (2010-01-11)

submitted, and an undertaking that the business will continue to meet this definition throughout the life of the contract.

(b) For a procurement subject to a PSAB set-aside, the contracting officer must insert in the

solicitation, the Standard Acquisition Clauses and Conditions (SACC) Manual clauses A3000T, M9030T or S3035T, and A3001T, M3030T or S3036T, as appropriate. These clauses reference Annex 9.4, which sets out the definitions of an “Aboriginal business” and an “Aboriginal person”.

(c) SACC Manual clauses A3000T, M9030T and S3035T contain a certification that suppliers must

complete and submit with their bid/offer/arrangement. Failure by suppliers to submit this completed certification form with their bids/offers/arrangements will render the bid/offer/arrangement non-responsive.

(d) If a bidder/offeror/supplier has indicated in its bid/offer/arrangement that the Aboriginal business

has six or more full-time employees, the contracting officer may request, during the evaluation or after, that a bidder/offeror/supplier submit an Owner/Employee Certification (detailed within SACC Manual clause A3001T or M3030T or S3036T), for each owner and/or full-time employee who is Aboriginal.

(e) It is not the responsibility of the contracting officer to verify the supplier's certifications. In

instances where the contracting officer questions the validity of a certification, the particulars must be referred to Business Partnerships Directorate, INAC, for audit by Audit Services Canada (ASC). (See 9.40.50(e).

(f) Any resulting contract awarded on the basis of the supplier being Aboriginal must include SACC

Manual clause A3000C. 9.40.50 Audits of the Bidder/Offeror/Supplier Certification (2010-01-11) (a) A bidder/offeror/supplier is required to certify in its bid/offer/arrangement that it is an Aboriginal

business, as defined under PSAB (see Annex 9.4.) The certification includes an undertaking that the business will continue to meet the criteria, which define it as Aboriginal throughout the performance of the contract. A bidder/offeror/supplier’s certification that it is Aboriginal is subject to audit, both before and after contract award.

(b) Audit Services Canada (ASC) is the auditing authority under Memorandum of Understanding with

Indians and Northern Affairs Canada (INAC) and will receive its instructions from INAC. ASC will contact the contracting officer for further information when an audit is required.

(c) A pre-award audit is mandatory for requirements valued at $2M or more. To ensure that the

mandatory requirement for pre-auditing is met, it is essential that the contracting officer properly notify INAC of such requirements, as per 9.40.30(b) above, and that the two best-assessed bids/offers/arrangements be submitted to INAC as per 9.40.50(f). The contracting officer must not award contracts of $2M or more until INAC has confirmed eligibility of the proposed contractor.

(d) Pre-award audits of suppliers' certifications will be conducted on a random basis for requirements

under $2M. INAC will advise the contracting officer whether a requirement is subject to pre-award audit no later than the date of solicitation closing (see 9.40.30(a)). Audits of suppliers' certifications are expected to require approximately 10 working days to be completed. When timing of contract award is an issue, this should be indicated in the notification to INAC, so that it may determine whether the auditing process can be expedited or the procurement excluded from the random selection.

Chapter 9 – Special Procurements

Supply Manual Page 34 of 36 Version 10-1 (2010-01-11)

(e) Pre-award audits may be requested either by the requisitioning authority, the contracting officer, or INAC, whenever there is a doubt regarding the validity of bidders/offerors/suppliers' certifications, regardless of the total estimated expenditure of the procurement.

(f) When INAC has advised that the requirement will be subject to a pre-award audit, the evaluation

of bids/offers/arrangements will continue up to the point that the two "best assessed" bids/offers/arrangements have been identified. This information must be provided to INAC, minus any pricing information that will request ASC to undertake the pre-award audit of the bidders/offerors/suppliers' certification. Upon receipt of the results of the audit, INAC will advise the contracting officer. If the audit confirms the validity of the bidders/offerors/suppliers' certifications, award of the contract may proceed. If the audit determines that one or more of the certificates are invalid, the subject bidders/offerors/supplier(s) whose certifications have been declared invalid must be declared non-responsive, and the next-ranked bidder/offeror/supplier becomes the "recommended bidder/offeror/supplier". If the audit reveals that both certifications are invalid, the next-ranked supplier's certification must be referred to INAC for audit until either a bid/offer/arrangement with a valid certificate is obtained, or no bidders/offerors/suppliers remain. In the event that all bidders/offerors/suppliers are eliminated on the basis of invalid certifications, the solicitation must be reissued, either as a set-aside once again, or not set aside, after consultation with the client department. Whether the contract should be awarded to the next-ranked bidder/offeror/supplier, or the solicitation reissued, is a decision that must be made on a case-by-case basis, in keeping with sound contracting principles.

(g) After contract award, the contractor's certification is subject to audit to confirm its status as an

Aboriginal business during the life of the contract. Audits following contract award will normally be done on a random basis, however where contracting officers believe it to be necessary, audit of the contractor's continued status as an Aboriginal business may be requested of INAC.

(h) If the Aboriginal business certificate is declared invalid, or if the contractor has not completed its

undertaking to continue to qualify as an Aboriginal business, it may be necessary to implement civil or contractual remedies. Contracting officers should consult with Legal Services and Business Partnerships Directorate, INAC, in determining the appropriate action to be taken.

9.40.55 Bid Challenge (2010-01-11) Bid challenges should be dealt with according to established internal supplier complaint response procedures for procurements not subject to trade agreements. 9.40.60 Procurement Reporting (2010-01-11) As stated in 7.30, contracting officers must ensure that reporting on procurements subject to a PSAB set-aside is done accurately. All procurements subject to PSAB must be coded as such; in the Automated Buyer Environment (ABE), this involves clicking on “Trade Agreement” and selecting “Set-Aside Program for Aboriginal Business (SPAB)”. 9.45 Industrial and Regional Benefits Program (a) Competition remains the cornerstone of the Canadian government procurement process. It is the

most efficient way of achieving both the primary and secondary goals of procurement. It gives suppliers the incentive to bring forward their best solution to the operational problem, at a competitive price, as well as to respond more effectively to requirements in support of other national objectives. Moreover, competition ensures that all qualified suppliers are afforded access to government contracts. To this end, procurement initiatives in support of regional industrial

Chapter 9 – Special Procurements

Supply Manual Page 35 of 36 Version 10-1 (2010-01-11)

development must, to the greatest extent possible, focus on assisting Canadian firms in becoming competitive in domestic and world marketplaces.

(b) The Procurement Review Committee (PRC), in accordance with the Treasury Board (TB)

Procurement Review Policy, reviews procurement strategies for goods and services over $2,000,000. For more information on the PRC and TB Procurement Review Policy, see 3.70.

(c) Collectively, Industry Canada and the regional agencies/departments are responsible for the

management of industrial and regional benefits. (d) The contracting officer is responsible for the contract in all aspects, including the contractor’s

commitments to regional and industrial benefits that form part of the contract. Industry Canada Industrial and Regional Benefits (IRB) managers are responsible for the day-to-day requirements of the program, while the contracting officer is responsible for the management of the contract. Should there be any failure to complete the work contracted under the IRB Program, it would fall to the remedies section of the contract to resolve any problems. It is through this process, even though an aspect of the contract may be managed separately, that the contracting officer must remain cognizant of the IRB requirement working with IRB managers early in the program and throughout the delivery of the contract.

9.50 Communication Procurement (2010-01-11) (a) Acquisitions Branch, Public Works and Government Services Canada (PWGSC), provides all

optional and mandatory procurement services related to communications to federal departments and agencies.

(b) Unlike other mainstream PWGSC procurement divisions, the Communication Procurement

Directorate operates on cost recovery, charging a 3 percent fee for its procurement services in the areas of printing, communications, audio-visual, media monitoring, event management and expositions. The fee is based on the value of the contract award, including the Goods and Services Tax or the Harmonized Sales Tax, as applicable, and any amendments that increase the value of the contract. The fee does not apply to procurement services for advertising and public opinion research. For more information, visit the Communication Procurement Web site.

9.55 Canadian Commercial Corporation (2010-01-11) This section provides information on the roles and responsibilities of Canadian Commercial Corporation (CCC) and PWGSC and the Memorandum of Understanding between PWGSC and CCC. 9.55.1 General Information on CCC Contracts (2010-01-11) (a) The CCC is a Crown corporation of the Government of Canada and acts as Canada's

international contracting and procurement agency. As a parent of the Crown corporation under Schedule III, Part I of the Financial Administration Act, CCC reports to Parliament through the Minister of International Trade.

(b) The CCC work mandate is to assist in the development of trade between Canada and other

countries in areas where there is a clear role for the federal government. CCC helps foreign government buyers benefit from Canada’s export capabilities through the negotiation and execution of government-to-government contracts. CCC accomplishes this by building unique

Chapter 9 – Special Procurements

Supply Manual Page 36 of 36 Version 10-1 (2010-01-11)

relationships and maintaining international contracting and procurement expertise. For more information about CCC, contracting officers may visit the CCC Web site.

(c) CCC focuses on sectors where there is a clear role for government: operating in sectors that are

sensitive or are outside of the World Trade Organizations’ disciplines, such as defence, and where foreign governments require additional capacity to undertake complex and timely procurements, namely in emerging and developing country markets.

(d) CCC offers two contracting options: by selling to foreign governments, taking on the role of prime

contractor with a Canadian-based supplier; and by buying for foreign governments, taking on the role of a procurement agent and sourcing Canadian goods and services.

(e) By agreement, the CCC is the prime contractor on all direct United States (U.S.) government

contracts (over $25,000) with Canadian-based suppliers. CCC, in turn, subcontracts with the appropriate supplier. CCC guarantees to the U.S. government all commitments, obligations and covenants of CCC in connection with any contract or order issued to them.

(f) Acquisitions Branch, PWGSC, provides contracting, contract management and other services

related to CCC requirements. The PWGSC guidelines are provided in 9.55.15 and information regarding certification and signing authorities is provided in Chapter 6.

9.55.5 Subcontracting (2010-01-11) (a) United States (U.S.) contracting officers usually rely on the prime contractor to select capable

subcontractors, Canadian or otherwise. (b) There is no agreement between Canada and the U.S. regarding placement of subcontracts in

Canada by U.S. prime contractors for the benefit of the U.S. government. Therefore, Defence Contract Management Agency Americas (Canada) (DCMAA), Ottawa, has no authority to request a Pre-Award Survey (PAS) in the subcontract situation. However, CCC and PWGSC have agreed to evaluate a Canadian subcontractor's capability to produce upon request from DCMAA (Canada).

(c) In support of a request from a Canadian-based supplier, CCC will also procure stores or services

from the U.S. government, when such stores or services are not available in Canada or at a reasonable cost from a commercial source outside Canada.

(d) Moreover, CCC also responds to other federal government departments needs for supply

arrangements in order to meet the Government of Canada’s global development assistance commitments.

9.55.10 Memorandum of Understanding (2010-01-11) CCC requirements must be carried out in accordance with the Memorandum of Understanding (MOU) of January 10, 2005, signed by PWGSC and CCC. The MOU at Annex 9.6 outlines both the responsibilities of PWGSC and CCC in relation to CCC requirements. 9.55.15 Certification and Signing Authorities (2010-01-11) Specific certification and signing authorities apply to CCC contracting documents. For more information, contracting officers should refer Annex 6.4.3 for these authorities.

Annex 9.1 – Memorandum of Understanding Between Public Works and Government Services Canada and CORCAN

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Annex 9.1: Memorandum of Understanding Between Public Works and Government Services Canada and CORCAN

(2010-01-11)

Appendix A (2002-05-24)

Memorandum of Understanding

Between

Public Works and Government Services Canada

and

CORCAN

(SOA of the Correctional Service of Canada)

This Memorandum of Understanding (MOU) supersedes the PWGSC/CSC agreement ratified on June 14, 1988. 1. Purpose The purpose of this memorandum is to record agreement between the Department of Public Works and Government Services (PWGSC) and CORCAN (SOA of Correctional Service of Canada (CSC) with respect to orders placed by PWGSC for goods and/or services from CORCAN. 2. Basis for Preferential Access (a) In May 1974, in recognition of the social value of the training and employment of federally

incarcerated offenders, Cabinet directed that, whenever possible, DSS (now part of PWGSC) and other government departments should provide correctional industries with adequate, stable and continuing market outlets for their manufactured goods.

(b) By buying manufactured goods (office furniture, workstations, filing cabinet, dormitory furniture

and furnishings) from CORCAN, the Government is lowering the cost of incarceration, and providing offenders with work related training which is essential for becoming self sufficient, law abiding citizens upon their release. For departments and agencies procuring CORCAN products, they are indeed buying truly Canadian materials and services that are backed by a sister agency, and saving a significant amount of time and energy because of a much simpler procurement process.

3. Requisites for PWGSC Business with CORCAN (a) PWGSC must maintain good customer and supplier relations. Therefore, in allocating business to

CORCAN, PWGSC will consider the impact on customer departments and on Canadian suppliers likely to be affected, particularly small business.

(b) PWGSC recognizes that CORCAN has the mandate to provide employment and training to

federal offenders in order to give offenders the skills and attitudes they will need when they return to society and become productive employees. CORCAN does this by marketing the products and services produced by federal offenders.

Annex 9.1 – Memorandum of Understanding Between Public Works and Government Services Canada and CORCAN

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

(c) PWGSC recognizes that the department should assist CORCAN with the promotion of CORCAN products.

(d) CORCAN recognizes that it is the one primarily responsible for marketing its products. (e) Once business has been accepted, CORCAN must undertake to fulfill its obligations to PWGSC. (f) For all business allocated by PWGSC to CORCAN, the quality standards and delivery

performance must be comparable to those which PWGSC would have demanded and received from private sector suppliers.

4. Pricing Policy CORCAN product prices are to be comparable to the most recent prices contracted for with private sector suppliers for like products, quality and quantity. 5. Determination of Allocation (a) On receipt of a requisition for which the client has specified that CORCAN is the preferred source

of supply, the contracting officer will support the award of all or part of a requirement to CORCAN. (b) When CORCAN has not been specified as a source of supply but can meet the requirement, the

contracting officer, wherever possible and in recognition of the potential benefits to be derived, will recommend to the client that CORCAN be considered as a source of supply.

(c) Except where a PWGSC analysis can demonstrate a prohibitive impact on a given Canadian

industry, the share assigned to CORCAN will normally be limited only by the volume, which CORCAN is willing and able to provide.

6. Review Process At the request of either party, PWGSC and CORCAN agree to conduct a review of this PWGSC/CSC Memorandum of Understanding. 7. Implementation The CEO of CORCAN and the Director General, Supply Program Management Sector, PWGSC, are responsible for the review and implementation of this memorandum. 8. Term of Agreement This Agreement is effective from date of signatures and will remain in effect until terminated by mutual agreement of both parties (see paragraph REVIEW PROCESS). 9. Signatures Signed this ___2___ day of ____January___2001__, at _Ottawa__. ______________________ Ranald A. Quail Deputy Minister, PWGSC ______________________ Lucie McClung Commissioner of the Correctional Service of Canada

Annex 9.2 - Notification of Procurement to CLCA Claimant Groups

Supply Manual Page 1 of 6 Version 10-1 (2010-01-11)

Annex 9.2: Notification of Procurement to CLCA Claimant Groups (2010-01-11) (See 9.35.35) James Bay and Northern Quebec Agreement Makivik Corporation 1111 Dr. Frederik-Philips Blvd., 3rd Floor St-Laurent, QC H4M 2X6 Telephone: 514-745-8880 Facsimile: 514-745-3700 Makivik Corporation P.O. Box 179 Kuujjuaq, QC J0M 1C0 Telephone: 819-964-2935 Facsimile: 819-964-2613 Crees of Oujé-Bougoumou 203 Opemiska Meskino, Box 1166 Oujé-Bougoumou, QC G0W 3C0 Telephone: 418-745-3931 Facsimile: 418-745-3844 Grand Council of the Crees (of Québec) 81 Metcalfe Street, suite 900 Ottawa, ON K1P 6K7 Telephone: 613-761-1655 Facsimile: 613-761-1388 Naskapi Development Corporation 120-1000 St-Jean-Baptiste Avenue P.O. Box 5023 Kawawachikamach, QC G2E 5G5 Telephone: 418-871-5100 Facsimile: 418-871-5254 Naskapi Nation of Kawawachikamach P.O. Box 5111 Kawawachikamach, QC G0G 2Z0 Telephone: 418-585-2686 Facsimile: 418-585-3130 Inuvialuit Final Agreement Inuvialuit Development Corporation P.O. Bag # 7 Inuvik, NT X0E 0T0 Telephone: 867-777-2419 Facsimile: 867-777-3256 Inuvialuit Regional Corporation P.O. Box 2120 Inuvik, NT X0E 0T0

Annex 9.2 - Notification of Procurement to CLCA Claimant Groups

Supply Manual Page 2 of 6 Version 10-1 (2010-01-11)

Telephone: 867-777-2737 Facsimile: 867-777-2135 Gwich'in Comprehensive Land Claim Agreement Gwich'in Tribal Council P.O. Box 1509 Inuvik, NT X0E 0T0 Telephone: 867-777-7900 Facsimile: 867-777-7919 Nunavut Land Claims Agreement Nunavut Tunngavik Incorporated Economic and Business Development Department P.O. Box 638 Iqaluit, NU X0A 0H0 Telephone: 1-888-646-0006 Facsimile: 867-975-4949 Qikiqtani Inuit Association P.O. Box 1340 Iqaluit, NU X0A 0H0 Telephone: 867-975-8400 or 1-800-667-2742 Facsimile: 867-979-3238 Qikiqtaaluk Corporation P.O. Box 1228 Iqaluit, NU X0A 0H0 Telephone: 867-979-8400 Facsimile: 867-979-8433 Kakivak Association P.O. Box 1419 Iqaluit, NU X0A 0H0 Telephone: 867-979-0911 or 1-800-561-0911 Facsimile: 867-979-3707 Kivalliq Inuit Association P.O. Box 340 Rankin Inlet, NU X0C 0G0 Telephone: 867-645-2800 or 1-800-220-6581 Facsimile: 867-645-2348 Sakku Investments Corporation P.O. Box 188 Rankin Inlet, NU X0C 0G0 Telephone: 867-645-2805 Facsimile: 867-645-2063 Kitikmeot Economic Development Commission P.O. Box 1330 Cambridge Bay, NU X0B 0C0 Telephone: 867-983-2095 Facsimile: 867-983-2075

Annex 9.2 - Notification of Procurement to CLCA Claimant Groups

Supply Manual Page 3 of 6 Version 10-1 (2010-01-11)

Nunasi Corporation Corporate Controller 5107 48th Street Yellowknife, NT X1A 1N5 Telephone: 867-920-4587 Facsimile: 867-920-4592 Kitikmeot Inuit Association Lands Division P.O. Box 360 Kugluktuk, NU X0B 0E0 Telephone: 867-982-3310 Facsimile: 867-982-3311 Umbrella Final Agreement of the Council for Yukon Indians Council of Yukon First Nations 2166 – 2nd Avenue Whitehorse, YT Y1A 4P1 Telephone: 867-393-9200 Facsimile: 867-668-6577 Champagne and Aishihik First Nations Final Agreement Champagne and Aishihik First Nations Box 5310 Haines Junction, YT Y0B 1L0 Telephone: 867-634-4200 Facsimile: 867-634-2108 Little Salmon/Carmacks First Nation Final Agreement Little Salmon/Carmacks First Nation P.O. Box 135 Carmacks, YT Y0B 1C0 Telephone: 867-863-5576 Facsimile: 867-863-5710 First Nation of Nacho Nyak Dun Final Agreement Nacho Nyak Dun First Nation P.O. Box 220 Mayo, YT Y0B 1M0 Telephone: 867-996-2265 Facsimile: 867-996-2107 Selkirk First Nation Final Agreement Selkirk First Nation P.O. Box 40 Pelly Crossing, YT Y0B 1P0 Telephone: 867-537-3331 Facsimile: 867-537-3902 Teslin Tlingit Council Final Agreement

Annex 9.2 - Notification of Procurement to CLCA Claimant Groups

Supply Manual Page 4 of 6 Version 10-1 (2010-01-11)

Teslin Tlingit Council Box 133 Teslin, YT Y0A 1B0 Telephone: 867-390-2532 Facsimile: 867-390-2204 Vuntut Gwichin First Nation Final Agreement Vuntut Gwichin P.O. Box 94 Old Crow, YT Y0B 1N0 Telephone: 867-966-3213 Facsimile: 867-966-3800 Tr’ondëk Hwëch’in Final Agreement Tr’ondëk Hwëch’in P.O. Box 599 Dawson City, YT Y0B 1G0 Telephone: 867-993-5385 Facsimile: 867-993-6553 Ta’an Kwach’an Council Final Agreement Mundessa Development Corporation 117 Industrial Road Whitehorse, YT Y1A 2T8 Telephone: 867-668-3613 Facsimile: 867-667-4295 Kluane First Nation Final Agreement Kluane First Nation P.O. Box 20 Burwash Landing, YT Y0B 1H0 Telephone: 867-841-4274 Facsimile: 867-841-5900 Kwanlin Dun First Nation Final Agreement Kwanlin Dun First Nation 35 McIntyre Drive Whitehorse, YT Y1A 5A5 Telephone: 867-633-7800 Facsimile: 867-668-5057 Carcross/Tagish First Nation Final Agreement Carcross/Tagish First Nation P.O. Box 130 Carcross, YT Y0B 1B0 Telephone: 867-821-4251 Facsimile: 867-821-4802 Sahtu Dene and Metis Comprehensive Land Claim Agreement

Annex 9.2 - Notification of Procurement to CLCA Claimant Groups

Supply Manual Page 5 of 6 Version 10-1 (2010-01-11)

Fort Good Hope Metis Nation Land Corporation, Local No. 54 Box 11 Fort Good Hope, NT X0E 0H0 Telephone: 867-598-2105 Facsimile: 867-598-2160 Attention: Economic/Business/Employment Officers Ayoni Keh Land Corporation c/o Colville Lake First Nation Band Box 43, Colville Lake, NT X0E 1L0 Telephone: 867-709-2700 Facsimile: 867-709-2202 Attention: Economic/Business/Employment Officers Déline Land Corporation c/o Déline Dene Band Council P.O. Box 156 Déline, NT X0E 0G0 Telephone: 867-589-8100 Facsimile: 867-589-8101 Attention: Economic/Business/Employment Officers Tulita Land Corporation c/o Fort Norman Dene Band P.O. Box 36

Tulita, NT X0E 0K0 Telephone: 867-588-4984 Facsimile: 867-588-3997 Attention: Economic/Business/Employment Officers Fort Norman Metis Land Corporation c/o Fort Norman Metis Nation, Local No. 60 General Delivery Tulita, NT X0E 0K0 Telephone: 867-588-3201 Facsimile: 867-588-3806/4908 Attention: Economic/Business/Employment Officers Yamoga Lands Corporation c/o Fort Good Hope Dene Band P.O. Box 18 Fort Good Hope, NT X0E 0H0 Telephone: 867-598-2519 Facsimile: 867-598-2437 Attention: Economic/Business/Employment Officers Ernie McDonald Land Corporation c/o Norman Wells Metis Nation, Local No. 59 P.O. Box 69 Norman Wells, NT X0E 0V0 Telephone: 867-587-2455 Facsimile: 867-587-2545 Attention: Economic/Business/Employment Officers The Sahtu Secretariat Incorporated

Annex 9.2 - Notification of Procurement to CLCA Claimant Groups

Supply Manual Page 6 of 6 Version 10-1 (2010-01-11)

P.O. Box 155 Déline, NT X0E 0G0 Telephone: 867-589-4719 Facsimile: 867-589-4908 Attention: Economic/Business/Employment Officers Sahtu Business Development Centre P.O. Box 307 Norman Wells, NT X0E 0V0 Telephone: 867-587-2016 Facsimile: 867-587-2407 Attn: Economic/Business/Employment Officer Tulita Yamoria Community Secretariat P.O. Box 144 Tulita, NT X0E 0K0 Telephone: 867-588-3116 Facsimile: 867-588-3119 Attn: Economic/Business/Employment Officer Labrador Inuit Land Claims Agreement Nunatsiavut Government 12 Sandbanks Road P.O. Box 70 Nain, NL A0P 1L0 Telephone: 709-922-2942 Facsimile: 709-922-2931 Tlicho Land Claims Agreement Tlicho Government P.O. Box 412 Rae-Edzo, NT X0E 0Y0 Telephone : 867-392-6381 Facsimile : 867-392-6389 Nunavik Inuit Land Claims Agreement Makivik Corporation 1111 Dr. Frederik-Philips Blvd., 3rd Floor St-Laurent, QC H4M 2X6 Telephone: 514-745-8880 Facsimile: 514-745-3700 Makivik Corporation P.O. Box 179 Kuujjuaq, QC J0M 1C0 Telephone: 819-964-2935 Facsimile: 819-964-2613

Annex 9.3 - Comprehensive Land Claims Agreements Evaluation Criteria

Supply Manual Page 1 of 3 Version 10-1 (2010-01-11)

Annex 9.3: Comprehensive Land Claims Agreements Evaluation Criteria (2010-01-11) (See 9.35.45) 1. James Bay and Northern Quebec Agreement (JBNQA)- Inuit Portion The Agreement Respecting the Implementation of the JBNQA, Annex A (Inuit Employment and Contract Priority), Part II, Article 7.0 states,

“Whenever practicable and consistent with sound procurement management, all of the following criteria, or as many as may be appropriate with respect to any particular government contract, shall be included in the bid evaluation criteria established by Canada for the awarding of government contracts in the Territory: (a) the contribution by Inuit in carrying out the contract, which will include, but shall

not be limited to, the employment of Inuit labour, the engagement of Inuit professional services or the use of Inuit suppliers;

(b) the existence or creation of permanent head offices, administrative offices or

other facilities in the Territory; and, (c) the undertaking of commitments, under the contract, with respect to on-the-job

training or skills development for the Inuit.” 2. Inuvialuit Final Agreement Treasury Board Contracting Policy Notice 1997-8, Section 2, paragraph 6.00 states:

“When establishing bid evaluation criteria for the awarding of government contracts, and whenever practicable and consistent with sound procurement management, contracting authorities should consider the potential contribution of the Inuvialuit in carrying out the contract. This may include, as appropriate: (a) the employment of Inuvialuit, the engagement of Inuvialuit professional services

and the use of Inuvialuit suppliers, (b) the creation of administrative offices or other facilities in the Inuvialuit Settlement

Region, (c) the undertaking of commitments, under the contract, with respect to related on-

the-job training or skills development for Inuvialuit.” 3. Nunavut Land Claims Agreement Article 24.6.1 of the Nunavut Land Claims Agreement states,

“Whenever practicable, and consistent with sound procurement management, and subject to Canada's international obligations, all of the following criteria, or as many as may be appropriate with respect to any particular contract, shall be included in the bid criteria established by the Government of Canada for the awarding of its government contracts in the Nunavut Settlement Area: (a) the existence of head offices, administrative offices or Other facilities in the

Nunavut Settlement Area;

Annex 9.3 - Comprehensive Land Claims Agreements Evaluation Criteria

Supply Manual Page 2 of 3 Version 10-1 (2010-01-11)

(b) the employment of Inuit labour, engagement of Inuit professional services, or use

of suppliers that are Inuit or Inuit firms in carrying out the contracts; or (c) the undertaking of commitments, under the contract, with respect to on-the-job

training or skills development for Inuit.” 4. Sahtu Dene and Métis Comprehensive Land Claims Agreement The Implementation Plan for the Sahtu Dene and Metis Comprehensive Land Claim Agreement, Annex A, Project 12-3 states:

“Whenever practicable and consistent with sound procurement management, and subject to Canada’s international obligations, all of the following criteria, or as many as may be appropriate with respect to any particular contract, shall be included in the bid criteria for the awarding of government contracts in the Sahtu settlement area: (a) the existence or creation of head offices, administrative offices or other facilities

in the Sahtu settlement area; (b) the employment of participants labour, engagement of participants professional

services, or use of suppliers that are participants or Sahtu Dene and Metis firms in carrying out the contract; or

(c) the undertaking of commitments, under the contract, with respect to on-the-job

training or skills development for the participants.” 5. Tlicho Land Claims Agreement The Tlicho Agreement Implementation Plan, Annex A, Sheet 26-3, Article 2, Planning Assumptions, states:

“In order to stimulate socio-economic benefits through the procurement process, and whenever practicable and consistent with sound procurement practices, and subject to Canada's international obligations, all of the following criteria, or as many as may be appropriate with respect to any particular contract, shall be included in the bid evaluation criteria for the awarding of government contracts which are wholly or partly in Môwhì Gogha Dè Nîîtåèè (NWT): (a) the inclusion of an Aboriginal Benefits Plan which will assist with socio-economic

development projects which are wholly or partly in Môwhì Gogha Dè Nîîtåèè (NWT); or

(b) the employment of Tlicho First Nation labour, engagement of Tlicho First Nation

professional services, or use of suppliers that are Tlicho which can act as sub-contractors in assisting with the carrying out of the contract; or

(c) the undertaking of commitments, under the contract, with respect to on-the-job

training or skills development for Tlicho Citizens.” 6. Nunavik Inuit Land Claims Agreement Article 13.3.4 of the Nunavik Inuit Land Claims Agreement states,

“Whenever practicable and consistent with sound procurement management, and subject to Canada’s international obligations, all of the following criteria, or as many as may be

Annex 9.3 - Comprehensive Land Claims Agreements Evaluation Criteria

Supply Manual Page 3 of 3 Version 10-1 (2010-01-11)

appropriate with respect to any particular contract, shall be included in the bid criteria established by the Government of Canada for the awarding of its government contracts for the procurement of goods and services in the Nunavik Marine Region (NMR): (a) the existence of head offices, administrative offices or other facilities in the NMR; (b) the employment of Nunavik Inuit labour, engagement of Nunavik Inuit

professional services, or use of suppliers that are Nunavik Inuit or Nunavik Inuit enterprises in carrying out the contracts; and

(c) the undertaking of commitments, under the contract, with respect to on-the-job

training or skills development for Nunavik Inuit.” 7. Labrador Inuit Land Claims Agreement Article 7.10.4 of the Labrador Inuit Land Claims Agreement states,

“Whenever practicable and consistent with sound procurement practices, and subject to Canada's international obligations, the following criteria, or as many as may be appropriate with respect to any particular contract, shall be included in the bid criteria established by the Government of Canada for the awarding of Government of Canada contracts for the procurement of goods and services in the Labrador Inuit Settlement Area: (a) the existence of the head office, administrative offices or other facilities in the

Labrador Inuit Settlement Area; (b) the employment of Inuit labour, engagement of Inuit professional services or use

of suppliers that are Inuit Businesses in carrying out the contracts; and (c) the undertaking of commitments, under the contract, with respect to on the job

training or skills development for Inuit.”

Annex 9.4 – Requirements for the Set-aside Program for Aboriginal Business

Supply Manual Page 1 of 5 Version 10-1 (2010-01-11)

Annex 9.4: Requirements for the Set-aside Program for Aboriginal Business (2010-01-11) (See 9.40.45) 1. Who is eligible? (a) An Aboriginal business, which can be:

(i) a band as defined by the Indian Act (ii) a sole proprietorship (iii) a limited company (iv) a co-operative (v) a partnership (vi) a not-for-profit organization

in which Aboriginal persons have at least 51 percent ownership and control,

OR (b) A joint venture consisting of two or more Aboriginal businesses or an Aboriginal business and a

non-Aboriginal business(es), provided that the Aboriginal business(es) has at least 51 percent ownership and control of the joint venture.

When an Aboriginal business has six or more full-time employees at the date of submitting the bid, at least thirty-three percent of them must be Aboriginal persons, and this ratio must be maintained throughout the duration of the contract. The supplier must certify in its submitted bid that it is an Aboriginal business or a joint venture constituted as described above. 2. Are there any other requirements attached to suppliers in the Set-Aside Program for

Aboriginal Business? Yes (a) In respect of a contract, (goods, service or construction), on which a supplier is making a

proposal which involves subcontracting, the supplier must certify in its bid that at least thirty-three percent of the value of the work performed under the contract will be performed by an Aboriginal business. Value of the work performed is considered to be the total value of the contract less any materials directly purchased by the contractor for the performance of the contract. Therefore, the supplier must notify and, where applicable, bind the subcontractor in writing with respect to the requirements that the Aboriginal Set-Aside Program (the Program) may impose on the subcontractor or subcontractors.

(b) The supplier’s contract with a subcontractor must also, where applicable, include a provision in

which the subcontractor agrees to provide the supplier with information, substantiating its compliance with the Program, and authorize the supplier to have an audit performed by Canada to examine the subcontractor’s records to verify the information provided. Failure by the supplier to exact or enforce such a provision will be deemed to be a breach of contract and subject to the civil consequences referred to in this document.

(c) As part of its bid, the supplier must complete the Certification of Requirements for the Set-Aside

Program for Aboriginal Business (certification) stating that it:

Annex 9.4 – Requirements for the Set-aside Program for Aboriginal Business

Supply Manual Page 2 of 5 Version 10-1 (2010-01-11)

(i) meets the requirements for the Program and will continue to do so throughout the duration of the contract;

(ii) will, upon request, provide evidence that it meets the eligibility criteria; (iii) is willing to be audited regarding the certification; and (iv) acknowledges that if it is found NOT to meet the eligibility criteria, the supplier shall be

subject to one or more of the civil consequences set out in the certification and the contract.

See Standard Acquisition Clauses and Conditions (SACC) Manual clauses A3000T, M9030T or S3035T, as appropriate.

3. How must the business prove that it meets the requirements? (a) It is not necessary to provide evidence of eligibility at the time the bid is submitted. However, the

business should have evidence of eligibility ready in case it is audited. (b) The civil consequences of making an untrue statement in the bid documents, or of not complying

with the requirements of the Program or failing to produce satisfactory evidence to Canada regarding the requirements of the Program, may include: forfeiture of the bid deposit; retention of the holdback; disqualification of the business from participating in future contracts under the program; and/or termination of the contract. In the event that the contract is terminated because of an untrue statement or non-compliance with the requirements of the Program, Canada may engage another contractor to complete the performance of the contract and any additional costs incurred by Canada shall, upon the request of Canada, be borne by the business.

4. What evidence may be required from the business? (a) Ownership and control

(i) Evidence of ownership and control of an Aboriginal business or joint venture may include incorporation documents, shareholders’ or members’ register; partnership agreements; joint venture agreements; business name registration; banking arrangements; governance documents; minutes of meetings of Board of Directors and Management Committees; or other legal documents.

(ii) Ownership of an Aboriginal business refers to “beneficial ownership” i.e., who is the real

owner of the business. Canada may consider a variety of factors to satisfy whether Aboriginal persons have true and effective control of an Aboriginal business. (See Appendix A for a list of the factors, which may be considered by Canada.)

(b) Employment and employees

(i) Where an Aboriginal business has six or more full-time employees at the date of submitting the certification and is required by Canada to substantiate that at least 33 percent of the full-time employees are Aboriginal, the business must, upon request by Canada, immediately provide a completed Owner/Employee Certification form for each full-time employee who is Aboriginal. See SACC Manual clauses A3001T, M3030T or S3036T, as appropriate.

(ii) Evidence as to whether an employee is or is not full-time and evidence as to the number

of full-time employees may include payroll records, written offers for employment, and remittance and payroll information maintained for Canada Revenue Agency purposes as well as information related to pension and other benefit plans.

Annex 9.4 – Requirements for the Set-aside Program for Aboriginal Business

Supply Manual Page 3 of 5 Version 10-1 (2010-01-11)

(iii) A full-time employee, for the purpose of this program, is one who is on the payroll, is

entitled to all benefits that other full-time employees of the business receive, such as pension plan, vacation pay and sick leave allowance, and works at least 30 hours a week. It is the number of full-time employees on the payroll of the business at the date of bid submission that determines the ratio of Aboriginal to total employees of the business for the purpose of establishing eligibility under the Program.

(iv) Owners who are Aboriginal and full-time employees who are Aboriginal must be ready to

provide evidence in support of such status. The Owner/Employee Certification to be completed by each owner and full-time employee who is Aboriginal shall state that the person meets the eligibility criteria and that the information supplied is true and complete. This certification shall provide the person’s consent to the verification of the information submitted.

5. Subcontracts (a) Evidence of the proportion of work done by subcontractors may include contracts between the

contractor and subcontractors, invoices, and paid cheques. (b) Evidence that a subcontractor is an Aboriginal business (where this is required to meet the

minimum Aboriginal content of the contract) is the same as evidence that a prime contractor is an Aboriginal business.

6. Who is an Aboriginal Person for Purposes of the Set-Aside Program for Aboriginal

Business? (a) An Aboriginal person is an Indian, Metis or Inuit who is ordinarily resident in Canada. (b) Evidence of being an Aboriginal person will consist of such proof as:

(i) Indian registration in Canada; (ii) membership in an affiliate of the Metis National Council or the Congress of Aboriginal

Peoples, or other recognized Aboriginal organizations in Canada; (iii) acceptance as an Aboriginal person by an established Aboriginal community in Canada; (iv) enrolment or entitlement to be enrolled pursuant to a comprehensive land claim

agreement; (v) membership or entitlement to membership in a group with an accepted comprehensive

claim; (vi) evidence of being resident in Canada includes a provincial or territorial driver’s licence, a

lease or other appropriate document.

Annex 9.4 – Requirements for the Set-aside Program for Aboriginal Business

Supply Manual Page 4 of 5 Version 10-1 (2010-01-11)

Appendix A Set-aside Program for Aboriginal Business (Excerpt from Treasury Board Contracting Policy Notice 1996-6, Annex A.) Factors that may be considered in determining whether Aboriginal persons have at least 51% ownership and control of an Aboriginal business include: (a) capital stock and equity accounts, i.e., preferred stock, convertible securities, classes of common

stock, warrants, options; (b) dividend policy and payments; (c) existence of stock options to employees; (d) different treatment of equity transactions for corporations, partnerships, joint ventures, community

organizations, cooperatives, etc.; (e) examination of charter documents, i.e., corporate charter, partnership agreement, financial

structure; (f) concentration of ownership or managerial control in partners, stockholders, officers trustees and

directors-based definition of duties; (g) principal occupations and employer of the officers and directors to determine who they represent,

i.e., banker, vested ownerships; (h) minutes of directors meetings and stockholders meetings for significant decisions that affect

operations and direction; (i) executive and employee compensation records for indication of level of efforts associated with

position; (j) nature of the business in comparison with the type of contract being negotiated; (k) cash management practices, i.e., payment of dividends - preferred dividends in arrears; (l) tax returns to identify ownership and business history; (m) goodwill contribution/contributed asset valuation to examine and ascertain the fair market value of

non-cash capital contributions; (n) contracts with owners, officers and employees to be fair and reasonable; (o) stockholder authority, i.e., appointments of officers, directors, auditors; (p) trust agreements made between parties to influence ownership and control decisions; (q) partnership - allocation and distribution of net income, i.e., provision for salaries, interest on

capital and distribution share ratios; (r) litigation proceedings over ownership; (s) transfer pricing from non-Aboriginal joint venture; (t) payment of management or administrative fees;

Annex 9.4 – Requirements for the Set-aside Program for Aboriginal Business

Supply Manual Page 5 of 5 Version 10-1 (2010-01-11)

(u) guarantees made by the Aboriginal business; (v) collateral agreements.

Annex 9.5 - Procurement Strategy for Aboriginal Business Set-Aside Checklist

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Annex 9.5: Procurement Strategy for Aboriginal Business Set-aside Checklist (2010-01-11) 1. Has the client indicated that the requirement has been set aside? (See 9.40.1)

(a) If no, and:

(i) The procurement is destined primarily for Aboriginal populations, and over $5,000, the contracting officer should draw the client’s attention to the potential omission;

(ii) Known qualified Aboriginal suppliers exist, the contracting officer should draw the

client’s attention to the potential for a voluntary Procurement Strategy for Aboriginal Business (PSAB) set-aside; or

(iii) Neither (i) or (ii) above apply, or the client confirms that the procurement is not to

be set-aside under PSAB, process the requirement according to standard procurement policies and procedures.

(b) If yes, see below:

2. If the procurement is subject to Comprehensive Land Claims Agreements (CLCAs), determine

the extent to which CLCAs and the PSAB set-aside conflict. In cases of conflict, CLCAs take precedence. (See 9.40.5.)

3. Has the client indicated a requirement for subcontracting to Aboriginal business? (See 9.40.25.) 4. Notify Business Partnership Directorate, Indian and Northern Affairs Canada (INAC), of receipt of

set aside requirement. (See 9.40.30(a).) 5. Solicitation includes the document Requirements for the Set-aside Program for Aboriginal

Business (Annex 9.6) and Standard Acquisition Clauses and Conditions Manual (SACC) clauses:

(a) A3002T, if applicable; (b) A3000T, M9030T or S3035T, as appropriate; and (c) A3001T, M3030T or S3036T, as appropriate. (See 9.40.10 and 9.40.45(c).)

6. Source requirement according to established policies and procedures, source list, Government

Electronic Tendering Service, etc. (See 9.40.35(b).) 7. Notice of Proposed Procurement (NPP)/Advanced Contract Award Notice (ACAN): Include a

clear statement that the procurement has been set aside and that only Aboriginal businesses will be eligible. (See 9.40.35(e).)

8. Has INAC advised that the procurement is/is not subject to pre-award audit of certifications before

solicitation closing? (See 9.40.50(f).) 9. Have all bidders/offerors/suppliers provided signed certificates of eligibility with their

bids/offers/arrangements? (See 9.40.45(d).) 10. Evaluation of bids/offers/arrangements according to established criteria. 11. Advice to INAC of two "best-assessed" responsive bidders/offerors/suppliers (without financial

information) if procurement subject to pre-award audit. (See 9.40.50(f).)

Annex 9.5 - Procurement Strategy for Aboriginal Business Set-Aside Checklist

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

12. Has INAC advised regarding results of pre-award audit of certificates of eligibility? (See 9.40.50(f).)

13. Award contract in accordance with established evaluation criteria and result of pre-award audit, if

applicable. Any resulting contract issued on the basis of the supplier being Aboriginal must include SACC Manual clause A3000C

14. Advise INAC of contract award within 15 working days. (See 9.40.30(c).) 15. Contract management including advice to INAC regarding changes in contractor's status as an

Aboriginal business, or requests to INAC to verify continued status (post-award audit). (See 9.40.50(h).)

16. The procurement reporting of the set aside under PSAB has been done accurately. (See

9.40.60.)

Annex 9.6 - Memorandum of Understanding - Canadian Commercial Corporation / Public Works and Government Services Canada

Supply Manual Page 1 of 20 Version 10-1 (2010-01-11)

Annex 9.6: Memorandum of Understanding - Canadian Commercial Corporation / Public Works and Government Services Canada

(2010-01-11) The following is a copy of the Memorandum of Understanding between Canadian Commercial Corporation and Department of Public Works Government Services. THIS MEMORANDUM OF UNDERSTANDING made in duplicate as of the 10th day of January 2005. BETWEEN: Canadian Commercial Corporation (“CCC”) as represented by the President AND: Department of Public Works Government Services (“PWGSC”) as represented by the Assistant

Deputy Minister, Acquisitions Branch WHEREAS the primary objective of CCC, as legislated by the Government of Canada, is to facilitate increased trade between Canada and other nations, which has principally been done through export contract arrangements for a broad range of goods and services at a minimum risk to both CCC and the Canadian taxpayer; WHEREAS CCC wishes to employ PWGSC to carry out services in relation to CCC’s export activities enabling CCC to fulfill CCC’s mandate and to identify, evaluate and manage CCC’s risks; WHEREAS PWGSC is willing to provide value added contracting, contract management and related services on the terms and conditions hereinafter set out. NOW THEREFORE the Parties agree as follow: 1. DEFINITIONS 1.1 Assets Management Services means the provision of property management services relating to

United States (U.S) Government property located at various plants of Canadian suppliers. 1.2 Assist Audit Services means, at the request of the U.S. Government, the conduct of a proposal

review, the carrying out a facility evaluation or the performance of an audit related to an export transaction with a Canadian supplier.

1.3 Core Business Activity means:

a) A CCC export transaction in the defence and aerospace market sectors with:

- The U.S. Department of Defense, pursuant to the U.S.-Canada Defence Production Sharing Arrangements and the U.S.-Canada Defence Development Sharing Agreement

- The National Aeronautics and Space Administration - The U.S. Coast Guard

b) A CCC export transaction in any sector and with any Customers where PWGSC

possesses the required experience and constitutes the type of transaction in which PWGSC is typically engaged.

1.4 Cost Audit Services means the auditing of the Canadian supplier’s costs to be performed by

that division of PWGSC commonly known as “Consulting and Audit Canada” (hereafter Consulting and Audit Canada).

Annex 9.6 - Memorandum of Understanding - Canadian Commercial Corporation / Public Works and Government Services Canada

Supply Manual Page 2 of 20 Version 10-1 (2010-01-11)

1.5 Customer means CCC’s international buyer. 1.6 Legal Services means the provision of professional services regarding the application of the law,

including legal advice and opinions. 1.7 Major Project means a Core Business Activity that is of significant potential value, duration or

complexity and for which CCC expressly requests to have a dedicated PWGSC team perform all or a subset of the PWGSC Services.

1.8 MOU means this Memorandum of Understanding. 1.9 NASA means the National Aeronautics and Space Administration. 1.10 PWGSC Services means the services described in Annex A, Part I that are to be performed by

PWGSC. 1.11 U.S. Department of Defence means the U.S. Department of Defence, pursuant to the U.S.-

Canada Defence Production Sharing Arrangements and the U.S.-Canada Defence Development Sharing Agreement.

2. TERM 2.1 This MOU becomes effective on the date it is signed and will automatically renew on a yearly

basis unless either party sends a six (6) month written notice to the other party terminating the MOU.

3. NATURE OF THE SERVICES 3.1 PWGSC Services for a Core Business Activity Upon receipt of a written request from CCC, PWGSC shall provide CCC with the specified subset of PWGSC Services that are requested for the Core Business Activity identified. 3.2 PWGSC Services for a Major Project Upon receipt of a written request from CCC and upon agreement on nature of work and price, PWGSC shall dedicate, at PWGSC’s discretion, a PWGSC team who will provide the specified subset of PWGSC Services that are requested for the Major Project identified. 3.3 Assist Audit Services Upon receipt of a written request to that effect from CCC and upon agreement on a price if applicable, PWGSC shall perform Assist Audit Services. 3.4 Cost Audit Services

3.4.1. For export transactions of a cost reimbursable nature where the Customer is the U.S. Department of Defence, the NASA, the Ministry of Defence of the Federal Republic of Germany or the Ministry of Defence of the United Kingdom, PWGSC shall perform or arrange for the performance of the Cost Audit Services, including discretionary audits at CCC’s discretion.

3.4.2. For any other export transactions, upon reception of a written request to that effect from

CCC and upon agreement on a price, PWGSC shall perform or arrange for the performance of the Cost Audit Services.

Annex 9.6 - Memorandum of Understanding - Canadian Commercial Corporation / Public Works and Government Services Canada

Supply Manual Page 3 of 20 Version 10-1 (2010-01-11)

3.5 Assets Management Services Upon reception of a written request to that effect from CCC together with a list of U.S. Government property located at Canadian suppliers’ facilities, PWGSC shall manage the listed U.S. Government property in accordance with the Administration of United States Government Furnished Property Policy contained in Volume 7 of the Supply Policy Manual. 3.6 Legal Services

3.6.1 The services herein described include the provision of Legal Services in a similar manner as provided to PWGSC in relation to the procurement requirements of other Government departments (SPM Section 6E), tailored for the needs of CCC’s prime contract and back-to-back contracting arrangements as described in Volume 7 of the Supply Policy Manual.

3.6.1.1 For further clarity, PWGSC and CCC personnel shall have access to PWGSC

Legal for Legal Services in relation to the services to be provided by PWGSC under this MOU. Said requests by CCC for Legal Services shall be made by CCC to PWGSC personnel who shall transmit such request to PWGSC Legal.

3.6.2 If PWGSC is of the opinion that a claim by or against CCC may result in litigation or

arbitration, upon confirmation of such risk by PWGSC Legal, PWGSC shall notify CCC in writing. PWGSC legal shall continue providing Legal Services. CCC Legal may consult with PWGSC Legal and any differences in points of view or uncertainties will be referred to the Heads of the respective units.

3.6.3 When legal proceedings are actually commenced, either by or against CCC in connection

with any contract for which PWGSC has been providing PWGSC Services, PWGSC Legal will turn over the file to CCC Legal who will be the instructing solicitor. PWGSC Legal shall assist CCC in preparing the statement of fact and law and shall render reasonable assistance to CCC and the Civil Litigation Branch of Justice or outside counsel, upon request. 3.6.3.1 For greater clarity, “legal proceedings” does not include conservatory measures

or other measures or procedures destined to protect the assets/interests of CCC such as, without limiting the generality of the foregoing, registering liens, chattel mortgage or mortgages, asserting the rights of ownership of CCC and CCC’s Customer over work in process or goods, or proof of claim in case of receivership or bankruptcy of the Canadian supplier.

3.6.4 Expenses incurred by PWGSC Legal who travel for the purpose of assisting PWGSC in

the provision of PWGSC Services outside of the Ottawa/Gatineau area are deemed included in the firm price negotiated for the PWGSC Services for Core Business Activities. CCC expects that PWGSC Legal will have full opportunity to advise PWGSC personnel outside of the Ottawa/Gatineau area.

3.6.5 The Heads of the two Legal Units shall deal, on a case-by-case basis, with situations that

do not fall within the general principles outlined herein. 3.7 Other Services

3.7.1 Upon receipt of a written request from CCC, PWGSC may perform other services for CCC upon agreement on a price.

3.7.2 However, where CCC requests the services of a PWGSC lawyer with respect to such

other services being performed by PWGSC pursuant to the preceding subsection, such

Annex 9.6 - Memorandum of Understanding - Canadian Commercial Corporation / Public Works and Government Services Canada

Supply Manual Page 4 of 20 Version 10-1 (2010-01-11)

arrangements, including the managerial and financial aspects, will be by written agreement between the Heads of the two Legal Units.

4. BASIS OF PAYMENT 4.1 PWGSC Services for Core Business Activities

4.1.1 PWGSC shall be paid the firm price negotiated between the parties for a specific fiscal year for all PWGSC Services rendered during the said fiscal year with regards to Core Business Activities, excluding Major Projects.

4.1.2 Three (3) months prior to the commencement of each fiscal year, PWGSC and CCC shall

endeavour to negotiate an agreement on (a) the anticipated volume of Core Business Activities for the following fiscal year, (b) the corresponding total level of effort required of PWGSC to carry out the PWGSC Services and (c) the firm price to be paid by CCC regarding PWGSC Services for Core Business Activities of the following fiscal year.

4.2 PWGSC Services for Major Projects

4.2.1 PWGSC shall be paid the firm price negotiated between the parties for the applicable fiscal year for all PWGSC Services rendered during the said fiscal year with regards to Major Projects.

4.2.2 If no agreement has been reached between the parties with regards to a firm price for

PWGSC Services for Major Projects for the applicable fiscal year then, upon receipt of a written request from CCC requesting PWGSC Services for a Major Project, PWGSC will submit a quotation to CCC for the PWGSC Services related to such Major Project, based upon the estimated scope, duration and complexity of the Major Project.

4.2.3 PWGSC shall be paid the firm price negotiated in accordance with the quotation

accepted by CCC, unless agreed otherwise due to the specificity of a Major Project. 4.2.4 In the event that the scope, duration, or complexity of the Major Project were to be

significantly increased or decreased, PWGSC shall notify CCC and shall submit for consideration by CCC a revised quotation. No increase in the price resulting from any modifications in the PWGSC Services to be performed will be authorized or paid to PWGSC unless CCC has approved such modifications in writing prior to their performance.

4.3 Assist Audit Services

4.3.1 Upon receipt of a written request for Assist Audit Services from CCC and copy of a document indicating that the Assist Audit Services are requested by the U.S. Department of Defence or the NASA, the price of such Assist Audit Services will be deemed included in the firm price negotiated for the PWGSC Services for Core Business Activities.

4.3.2 With respect to any other Assist Audit Services requested by CCC, PWGSC will submit,

for CCC’s consideration and acceptance, a price quotation based upon the specific scope of Assist Audit Services being requested. PWGSC shall be paid the firm price negotiated in accordance with the quotation accepted by CCC.

4.4 Cost Audit Services

4.4.1 Exclusively for export transactions of a cost reimbursable nature, where the Customer is the U.S. Department of Defence, the NASA, the Ministry of Defence of the Federal Republic of Germany or the Ministry of Defence of the United Kingdom, the price of the

Annex 9.6 - Memorandum of Understanding - Canadian Commercial Corporation / Public Works and Government Services Canada

Supply Manual Page 5 of 20 Version 10-1 (2010-01-11)

Cost Audit Services will be deemed included in the firm price negotiated for the PWGSC Services for Core Business Activities.

4.4.2 With respect to any other Cost Audit Services requested by CCC, PWGSC will submit, for

CCC’s consideration and acceptance, a price quotation based upon the specific scope of Cost Audit Services being requested. PWGSC shall be paid the firm price negotiated in accordance with the quotation accepted by CCC.

4.5 Assets Management Services

4.5.1 The price of Assets Management Services is included in the firm price negotiated for PWGSC Services for Core Business Activities.

4.6 Legal Services

4.6.1 The price for Legal Services is included in the firm price negotiated for PWGSC Services for Core Business Activities.

4.7 Other Services 4.7.1 The price of other services will be negotiated on a case-by-case basis. 5. METHOD OF PAYMENT 5.1 CCC and PWGSC shall budget and endeavour to maintain adequate funding and resource levels

to discharge the commitments contemplated under this MOU. 5.2 All payments by CCC to PWGSC shall be made in semi-annual instalments upon receipt of an

invoice from PWGSC, unless agreed otherwise in the case of a specific Assist Audit Services or Cost Audit Services.

6. SERVICE LEVELS 6.1 PWGSC undertakes to use the best possible means in order to act with prudence and diligence in

performing the services described in this MOU and in order to achieve the performance time indicated in Article 6.1.3.

6.1.1 More specifically with regards to certifications:

6.1.1.1 PWGSC shall give CCC priority treatment with regards to certifications when,

given specific circumstances where there is a need to respond on an urgent and timely basis to tender calls, requests for proposals and other forms of bid solicitation, CCC express in writing to PWGSC such a need for an urgent treatment.

6.1.1.2 PWGSC agrees to employ the appropriate level of expertise required in each

case to properly assess the capabilities of the Canadian supplier and to determine whether there are abnormal risks associated with CCC's endorsement of such Canadian supplier's offer, keeping in mind that CCC must rely solely on that Canadian supplier to discharge all of the obligations of any resultant contract.

6.1.1.3 PWGSC recognizes that CCC’s endorsement of an offer to a prospective

Customer will be based on PWGSC’s certification. CCC’s endorsement of the Canadian supplier’s offer constitutes CCC’s offer to the Customer and CCC’s commitment that the CCC will satisfy the solicitation requirements in accordance

Annex 9.6 - Memorandum of Understanding - Canadian Commercial Corporation / Public Works and Government Services Canada

Supply Manual Page 6 of 20 Version 10-1 (2010-01-11)

with the Canadian supplier’s offer. Submission of the endorsement is binding upon CCC. PWGSC further recognizes that an accepted offer will obligate CCC to perform any resultant contract.

6.1.1.4 PWGSC shall provide certification of a Canadian supplier’s offer when PWGSC

considers that both:

(a) the offer is within such Canadian supplier’s financial, technical and delivery capability. This documented assessment will require an analysis of that Canadian supplier’s financial and technical ability to perform any contract which may result from that Canadian supplier’s offer, keeping in mind that CCC must rely solely on that Canadian supplier to discharge all of the obligations of any resultant contract; and,

(b) with regards to the contract cost:

i) in the case of a request for proposal (RFP) or a request for

quotation (RFQ), the cost breakdown of the Canadian supplier’s proposed price(s) is/are fair and reasonable, in accordance with CCC Pricing Policy contained in Volume 7 of the Supply Policy Manual, and

ii) in the case of a bid, the Canadian supplier is capable of

performing the contract at the price quoted.

6.1.2 With respect to contract administration:

6.1.2.1 In exceptional cases, such as supplier bankruptcy or receivership, Show Cause Notices, Termination Notices, Stop Work Notices or other significant default or anticipatory default situations, PWGSC and CCC shall immediately take jointly the necessary actions, including the assignment of appropriate personnel from each others organizations, to ensure that the interests of CCC are fully protected.

6.1.2.2 CCC or PWGSC may identify contracts, which require special monitoring

respecting the timely fulfillment of their contract obligations. PWGSC shall suggest a list of possible monitoring actions to ensure that such Canadian supplier(s) remedy deficiencies and take corrective actions as required. Upon receipt of a written confirmation by CCC, PWGSC shall, as agent for CCC, implement the approved special monitoring actions. PWGSC agrees to provide status reports to CCC on such special monitoring concerning deliveries and the implementation of the remedy to rectify the deficiencies or of the corrective actions required.

6.1.3 And, more specifically with regards to contract award and administration:

6.1.3.1 Canadian supplier contract award notice: Shall be issued by PWGSC, as agent

for CCC, to Canadian suppliers within two (2) business days following receipt of such a notice from CCC. CCC shall be sent, by facsimile or other electronic means, an information copy of these notices.

6.1.3.2 Preparation/Execution of contracts with Canadian supplier(s) and amendments

thereto: Shall be issued by PWGSC, as agent for CCC, within twenty-one (21) calendar days following receipt of an executed Financial Authority form CCC 747 and relevant documentation from CCC.

Annex 9.6 - Memorandum of Understanding - Canadian Commercial Corporation / Public Works and Government Services Canada

Supply Manual Page 7 of 20 Version 10-1 (2010-01-11)

6.1.3.3. Approval of claims for progress payments: Shall be verified for accuracy and then sent to CCC within five (5) working days following their receipt by PWGSC.

7. PROCEDURE 7.1 In performing the services identified under Article 3 of the present MOU, PWGSC will follow the

procedures contained in Volume 7 of the Supply Policy Manual. 7.2 CCC and PWGSC hereby agree and undertake to jointly review Volume 7 during fiscal year

2005-2006 to reflect changes, which are mutually agreed by both parties. The goal of this joint review is to deploy a renewed CCC Desk Manual encompassing the current agreed to working arrangements between the parties to replace those in Volume 7.

7.3 PWGSC also agrees to incorporate CCC’s standard contract clauses and forms in the PWGSC

Standard Acquisition Clauses and Conditions (SACC) Manual. 8. AUTHORITY 8.1 CCC hereby delegates to PWGSC the necessary contractual and financial authorities to carry out

the requested PWGSC Services on behalf of and as agent for CCC, and it is understood that the Deputy Minister of Public Works and Government Services Canada shall further delegate authority to his/her officials as he/she considers appropriate to perform said PWGSC Services as agents of CCC in a efficient and effective manner.

9. ACCESS TO INFORMATION 9.1 PWGSC shall make available to CCC all past and present CCC files that are still available to

PWGSC and that are related to PWGSC Services, Assist Audit Services, Cost Audit Services and Asset Management Services provided under this MOU.

9.2 PWGSC shall provide the same access to CCC as to other PWGSC’s client departments, to any

of its information systems. CCC agrees to pay PWGSC any standard charges related to this access.

9.3 Where a request is made to CCC under the Access to Information Act or the Privacy Act that

relates, in whole or in part, to a matter in respect of which PWGSC is providing PWGSC Services, Assist Audit Services, Cost Audit Services, Asset Management Services or other services on CCC activities to CCC, PWGSC agrees to comply with the Access to Information Act or the Privacy Act in a timely manner.

9.4 Where a request is made to PWGSC under the Access to Information Act or the Privacy Act that

relates, in whole or in part, to a matter in respect of which CCC is receiving PWGSC Services, Assist Audit Services, Cost Audit Services, Asset Management Services or other services on CCC activities, CCC agrees to comply with the Access to Information Act or the Privacy Act in a timely manner.

10. CONFIDENTIALITY OF THIRD PARTY INFORMATION AND CLASSIFIED INFORMATION 10.1 To ensure the integrity of the PWGSC Services delivered under this MOU, to protect the interests

of Canadian suppliers and Customers, and to protect Canada from legal action, PWGSC and CCC agree to treat all confidential information, such as financial, commercial, scientific or technical information, supplied to PWGSC by a third party in a secure and confidential manner. Subject to the Access to Information Act, neither party shall not release or disclose outside the Government of Canada any information delivered to either party that is confidential information or information that is proprietary to the Canadian supplier of its subcontractors.

Annex 9.6 - Memorandum of Understanding - Canadian Commercial Corporation / Public Works and Government Services Canada

Supply Manual Page 8 of 20 Version 10-1 (2010-01-11)

10.2 When in receipt of protected/classified information, the respective parties shall handle such information on a need to know basis and provide security for the information to the level of classification designated in accordance with government procedures for protected/classified information.

11. AUDIT 11.1 PWGSC acknowledges that the Auditor General of Canada or his designated representative has

full authority to audit the accounts, books, records, files and all documentation maintained and kept by PWGSC with regard to the PWGSC Services, Assist Audit Services, Cost Audit Services, Asset Management Services or other services on CCC activities.

12. TRAINING 12.1 The parties agree to conduct joint and individual training sessions on the roles and

responsibilities of PWGSC and CCC to ensure that CCC and PWGSC personnel are conversant with and knowledgeable on appropriate policies and procedures. The parties will strive to sustain and improve the quality of services through appropriate training.

12.2 External training identified as being beneficial to both parties such as the U.S. Government

Contract Law, Pre-Award Contracting and Post-Award Contracting courses which are sponsored, from time to time by CCC in Canada, will be offered to PWGSC personnel without charge as part of the parties’ mutual commitment to the training and development of personnel.

12.3 The parties have agreed to make use of alternate methods of maintaining an enriched capacity to

work together at delivering quality services by establishing mutual exchanges of staff with agreed learning objectives for growth, development and diversity.

13. COMMUNICATION LINKS 13.1 The parties agree to distribute this MOU to all operating levels within each other’s organization

within fifteen (15) calendar days of the execution of this MOU or any amendment thereto, and copy respective parties on communications relating to these actions.

13.2 The parties agree to adopt and maintain between them compatible e-mail connectivity in order to

achieve effective communications concerning the U.S. Department of Defence and especially with the Defence Contract Management Command Americas. It is further agreed that PWGSC and CCC will share electronically contract information that has been identified to be mutually beneficial to both parties.

13.3 The parties agree to keep each other appraised of internal changes that may have an impact

upon the relationship and services contemplated under this MOU through the offices of those identified in Article 17.1.

14. REVIEWS 14.1 MOU Reviews

14.1.1 The signatories to this MOU, or their representatives agree to meet as required to discuss issues concerning the current or future operational matters governed by this MOU.

14.2 Service Level Reviews

Annex 9.6 - Memorandum of Understanding - Canadian Commercial Corporation / Public Works and Government Services Canada

Supply Manual Page 9 of 20 Version 10-1 (2010-01-11)

14.2.1 The parties agree to meet quarterly, commencing on April 1st, 2005, to review PWGSC’s performance against the service levels described in Article 6.1.3 as well as against the turn around time of certifications, Assist Audit Services and Cost Audit Services.

14.2.2 Following the analysis of PWGSC’s performance, the parties undertake to identify and

implement those changes in the policies, practices, procedures and other work flow arrangements between the organizations proven to be cost effective and having a demonstrated net benefit to CCC's Customers and Canadian suppliers.

15. AMENDMENTS 15.1 This MOU may be amended by written agreement between PWGSC and CCC. 16. ENTIRE AGREEMENT 16.1 This MOU constitutes the entire and sole agreement between the parties with respect to the

subject matter of the MOU and supersedes all previous negotiations, communications and other understandings, whether written or oral, relating to it. There are no terms, covenants, representations, statements or conditions binding on the parties other than those contained in the present MOU.

17. PRIORITY OF DOCUMENTS 17.1 The documents specified below form part of and are incorporated into the MOU. If there is a

discrepancy in the wording between any documents that appear on the list, the wording of the document that first appears shall prevail over the wording of any document that subsequently appears on the list.

1. This agreement 2. Annex A – Responsibility Matrix 3. Annex B – U.S.- Canada Defence Production Sharing Agreements 4. Annex C – U.S.- Canada Defence Development Sharing Agreement

18. INTERPRETATION 18.1 Issues regarding interpretation of or compliance with the terms and conditions of this MOU by

either party, shall be brought to the attention of the Vice President, Operations, CCC or the Director General, Land Aerospace and Marine Systems & Major Projects Sector, PWGSC or the person assuming these functions, for immediate resolution.

CANADIAN COMMERCIAL CORPORATION J. Hugh O’Donnell President DEPARTMENT OF PUBLIC WORKS AND GOVERNMENT SERVICES Jane S. Billings Assistant Deputy Minister Acquisitions Branch

Annex 9.6 - Memorandum of Understanding - Canadian Commercial Corporation / Public Works and Government Services Canada

Supply Manual Page 10 of 20 Version 10-1 (2010-01-11)

Annex A to MOU: Responsibility Matrix PART I PWGSC Services Responsibilities:

Primary Secondary 1. PROJECT IDENTIFICATION PHASE Identification of: - Export market opportunities - Sourcing possibilities

CCC PWGSC

Liaison policy requirements with other department/agencies regarding CCC activities

CCC PWGSC

Evaluation of project potential (feasibility, bid time, supply availability, export permit)

CCC PWGSC

Availability of support services (training, product support, repair, overhaul) PWGSC CCC

Assessment of Customer’s risk (political/social/economic factors/financing) CCC -----

Agents/representatives, boycott, considerations CCC PWGSC

Project funding CCC PWGSC

Insurance and sureties CCC PWGSC

2. REQUIREMENT DEFINITION PHASE Clarification of Customer’s requirements CCC PWGSC

Review and assessment of specifications and technical requirements PWGSC CCC

3. BID SOLICITATION PHASE Solicitation of Canadian suppliers for bids CCC PWGSC

Definition of bid instructions (special terms, foreign laws/conditions, use of representatives, inspection, bid opening, etc.)

CCC PWGSC

Preparation and issue of tenders or bid sets CCC PWGSC

Compliance review of bids from Canadian suppliers (i.e., with delivery, shipping, forms, etc.)

CCC PWGSC

Security clearance (facility & personnel) PWGSC ----

Facility surveys, including pre-award surveys PWGSC CCC

Liaison (proposal of pre-award) with: - Canadian supplier - Customer

PWGSC

CCC

CCC

PWGSC

Certification of bid PWGSC CCC

Project funding Export Development Corporation, banks, multilateral aid, financing agencies

CCC -----

Arrangement of Bid/performance bonds, or guarantees to Customers CCC -----

Examination/endorsement CCC -----

Bid submissions to Customers CCC ------

4. NEGOTIATION/AWARD PHASE

Negotiation of contract - Canadian supplier - Customer

PWGSC

CCC

CCC

PWGSC

Annex 9.6 - Memorandum of Understanding - Canadian Commercial Corporation / Public Works and Government Services Canada

Supply Manual Page 11 of 20 Version 10-1 (2010-01-11)

Preparation of the Financial Authority 747 forms CCC PWGSC

Canadian supplier contract award notice PWGSC CCC

Preparation and arrangement of documents regarding Canadian supplier’s guarantees, parental guarantees, security deposits, etc.

PWGSC CCC

Execution of bid bonds, performance bonds, other forms of surety/guarantee as required

CCC ------

Acceptance/acknowledgement/signing of Customer contract (award) and amendment

PWGSC CCC

Preparation and signing of contract with Canadian supplier(s) and amendments PWGSC CCC

5. CONTRACT MANAGEMENT/ADMINISTRATIVE PHASE 5.1 Monitoring Delivery, Technical & Cost Performance Contract quality control in accordance with PWGSC procedure PWGSC CCC

Monitoring production and delivery - Obtaining progress reports from Canadian suppliers (as per contract deliverables) - Delivery status - Review/approve design change requests/waivers/deviations - Conduct design/technical/progress reviews meetings - Manage contract performance issues

PWGSC CCC

Monitoring Cost Performance - Cash flow and final cost monitoring - Verification of adequacy of the Canadian supplier/subcontractors accounts - Verification of special financial considerations (i.e., economic price adjustment, foreign exchange, etc.) - Management of contract financial securities

PWGSC ------

Special Monitoring (as define in Article 6.1.2.2) PWGSC CCC

5.2 Payment Authorization Approval of progress claims & invoices

- Invoices and progress claim verification - Milestone/progress/final payment authorization - Financial/time audit management (if required)

PWGSC CCC

Processing invoices, progress claims, etc. for payment to the Canadian supplier and collection from the Customer after approval where required

CCC ------

5.3 Procurement Progress Submitting special progress reports to the Customer CCC PWGSC

Contract liaison with the Customer: - U.S. - International

PWGSC

CCC

CCC

PWGSC

Technical liaison with the Customer PWGSC CCC

Management of contract funding CCC PWGSC

Inspection and acceptance arrangements PWGSC CCC

Shipping and insurance arrangements PWGSC CCC

Major disputes (contractual) CCC PWGSC

Decision regarding anticipatory default or for termination of contracts or part thereof for convenience of default

CCC PWGSC

Termination notice to the Canadian supplier PWGSC CCC

Administration of terminations PWGSC CCC

5.4 Contract Close-out Action

Annex 9.6 - Memorandum of Understanding - Canadian Commercial Corporation / Public Works and Government Services Canada

Supply Manual Page 12 of 20 Version 10-1 (2010-01-11)

Close-out of contract files: - Negotiation of final price - Disposition of surplus assets - Resolve audit enquiries - Resolution of warranty claims and contract disputes PWGSC CCC

PWGSC CCC

6. OTHER PROCUREMENT SERVICES Action on contract losses CCC PWGSC

Special facility surveys PWGSC CCC

Price analysis/verification PWGSC CCC

Annual rate negotiations with major Canadian firms PWGSC ------

7. OTHER Media relations regarding activities of CCC CCC -------

PART II OTHER RESPONSIBILITIES

Cost audits PWGSC CCC Assist audits PWGSC CCC Management of U.S. Government assets, GSM/GFE/special tooling test equipment/other

PWGSC CCC

Annex 9.6 - Memorandum of Understanding - Canadian Commercial Corporation / Public Works and Government Services Canada

Supply Manual Page 13 of 20 Version 10-1 (2010-01-11)

Annex B to MOU: Canada-U.S. Defence Production Sharing Agreements

DEFENCE PRODUCTION SHARING AGREEMENT

BETWEEN

CANADA AND

THE UNITED STATES OF AMERICA

Reproduced for presentational purposes. Not original documents.

AMENDMENT TO CANADIAN

LETTER OF AGREEMENT

Dated 27 July 1956 Change Paragraph 2. (a) of the Letter of Agreement as it appears in the Defence Acquisition Regulation (DAR) Section M Part 1406.1 (a) and substitute the following language: 2.(a) The Corporation agrees that it will cause all first-tier subcontracts, under contracts covered by this agreement to be placed in accordance with the practices, policies and procedures of the Government of Canada covering procurement for defence purposes; and agrees that if the aggregate profit realized under such subcontracts by any first-tier subcontractor exceeds that which is allowed by the Government of Canada under the above mentioned practices, policies, and procedures, the amount of such excess will be refunded by the Corporation to the Military Departments. There shall also be refunded profits on any subcontract in excess of amounts which the Minister of Defence Production (Canada) in the exercise of said practices, policies, and procedures considers to be fair and reasonable, recovered by the Minister pursuant to Section 21 of the Defence Production Act (Canada) from any individual subcontractor of any tier. It is recognized that the practices, policies, and procedures of the Government of Canada referred to above permit various rates of profit in accordance with the terms of the said practices, policies, and procedures as from time-to-time amended; however, in no case will the rate of profit be allowed to exceed any limit prescribed by statute of the Government of the United States. For the purpose of this paragraph, the Corporation will cause to be conducted such audits in accordance with the Costing Memorandum (DDP -31) of the Department of Defence Production (Canada) and such verifications of cost as are in accordance with the said practices, policies, and procedures. The Corporation will render to the Military Departments its certificate that the provisions of this paragraph have been observed. For the Government of the United States of America For the Government of Canada (signed) (signed) ___________________ _________________________ Caspar Weinberger Herb Gray Secretary of Defence Ministry of Industry, Trade and Commerce

Annex 9.6 - Memorandum of Understanding - Canadian Commercial Corporation / Public Works and Government Services Canada

Supply Manual Page 14 of 20 Version 10-1 (2010-01-11)

DEPUTY MINISTER OF DEFENCE PRODUCTION

SOUS-MINISTRE DE LA PRODUCTION DE DÉFENSE

CANADA

Text of Agreement dated 27 July 1956, as amended 17 December 1956, 31 May 1957, 6 January 1961, and 15 October 1962, between the Department of Defence Production (Canada) and the U.S. Departments of the Army, the Navy, the Air Force, and the Defence Supply Agency, sets forth policies and provides procedures with respect to all contracts for supplies and services placed with the Canadian Commercial Corporation on or after 1 October 1956. Letter of Agreement 1. This agreement applies to all contracts placed, on or after October 1, 1956, by any of the Military

Departments with the Corporation. It shall remain in force from year to year until terminated by mutual consent; however, it can be terminated on the 31st day of December or the 30th day of June in any year by either party provided that six months' notice of termination has been given in writing. In addition, this agreement provides for certain reciprocal arrangements facilitating procurement by each of the parties in the country of the other.

2. (a) The Corporation agrees that it will cause all first-tier subcontracts under contracts covered by this

agreement to be placed in accordance with the practices, policies and procedures of the Government of Canada covering procurement for defence purposes; and agrees that if the aggregate profit realized under such subcontracts by any first-tier subcontractor exceeds that which is allowed by the Government of Canada under the above-mentioned practices, policies, and procedures, the amount of such excess will be refunded by the Corporation to the Military Departments. There shall also be refunded profits on any subcontract in excess of amounts which the Minister of Defence Production (Canada) in the exercise of said practices, policies and procedures considers to be fair and reasonable, recovered by the Minister pursuant to Section 21 of the Defence Production Act (Canada) from any individual subcontractor of any tier. It is recognized that the practices, policies and procedures of the Government of Canada referred to above permit varying rates of profit not exceeding in the case of cost reimbursement type contracts 7 ½ percent of estimated cost plus, in certain cases, a bonus where cost savings have been demonstrated, and not exceeding in the case of negotiated fixed price contracts 10 percent of estimated cost. For the purpose of this paragraph, the Corporation will cause to be conducted such audits (in accordance with the Costing Memorandum DDP-31 of the Department of Defence Production (Canada)) and such verifications of cost as are in accordance with the said practices, policies and procedures. The Corporation will render to the Military Departments its certificate that the provisions of this paragraph have been observed.

(b) Contracts for communication and transportation services, and the supply of power, water, gas

and other utilities shall be excepted from the provisions of sub-paragraph (a) above, provided the rates of charges for such services or utilities are fixed by public regulatory bodies; and provided further the Military Departments are accorded any special rates that may be available to the Canadian Government with respect to such Contracts.

(c) The Canadian Government, its Departments and Agencies, including but not limited to the

Corporation, and Canadian Arsenals Limited, a Crown Company wholly owned by the Canadian Government, shall not be entitled to any profit on any contract or contracts covered by this agreement. Any profits, which may be realized shall be returned to the Military Departments except as hereinafter provided:

Before refunding profits realized from the following sources:

Annex 9.6 - Memorandum of Understanding - Canadian Commercial Corporation / Public Works and Government Services Canada

Supply Manual Page 15 of 20 Version 10-1 (2010-01-11)

(i) net profits of the Canadian Government, b Departments and Agencies as defined above, with respect to contracts and subcontracts covered by this agreement;

(ii) excess profits referred to in paragraph (a) above; and (iii) renegotiation recoveries from subcontracts of any tier under contracts covered by this

agreement, which recoveries the Military Departments would otherwise be entitled to receive in accordance with the provisions of subparagraph (a) above; the Corporation shall be entitled to deduct any losses it may sustain with respect to contracts covered by this agreement.

(d) Interim adjustments and refunds under this paragraph 2 shall be made at such time or times as

may be mutually agreed upon but at least once a year as of June 30th. Such interim adjustments shall apply only to completed contracts. The final adjustment and refund shall be made as soon as practicable after the expiration of this agreement.

(e) The profit and loss provisions of this paragraph 2 shall not apply to contracts awarded to the

Corporation as the result of formal competitive bidding (initiated by Invitation for Bids). 3. (a) All contracts placed by the Military Departments with the Corporation, except those placed as the

result of formal competitive bidding, shall provide for prices or cost reimbursement, as the case may be, in terms of Canadian currency, and for payment to be made in such currency. Therefore, quotations and invoices shall be submitted by the Corporation to the Military Departments in terms of Canadian currency, and such cost data, vouchers, etc., as the contracts require shall also be submitted in terms of Canadian currency. However, the Corporation may elect in respect of any such contracts to quote, submit the said cost data, vouchers, etc., and receive payment in United States currency, in which event such contracts shall provide for payment in United States currency and shall not be subject to adjustment for losses or gains resulting from fluctuations in exchange rates.

(b) All formal competitive bids shall be submitted by the Corporation in terms of United States

currency and contracts placed as a result of such formal competitive bidding shall not be subject to adjustment for losses or gains resulting from fluctuation in exchange rates.

4&5. The Military Departments and the Corporation shall avoid, to the extent consistent with the

declared policies of the Military Departments and the Canadian Government, the making of any surcharges covering administration costs with respect to contracts placed with the Corporation by any of the Military Departments and contracts placed by the Military Departments in the United States for the Canadian Government. To the extent that contracts placed with the Corporation by the Military Departments provide for the audit of costs and profits, such audit shaII be made without charge to the Military Departments by the Cost Inspection and Audit Division of the Treasury of Canada in accordance with Costing Memorandum Form DDP-31 of the Department of Defence Production (Canada).

6. The Canadian Government shall arrange for inspection personnel of the Department of National

Defence (Canada) to -act on behalf of the Military Departments with respect to contracts placed by the Military Departments with the Corporation and with respect to subcontracts placed in Canada by United States contractors which are performing contracts for the Military Departments and for the use of inspection facilities of the Departments of National Defence (Canada) for such purposes, such personnel and facilities to be provided without cost to the Military Departments. The Military Departments shall provide and make no charge for inspection services and inspection facilities in connection with contracts placed in the United States by the Military Departments for the Canadian Government and with respect to subcontracts placed in the United States by Canadian contractors, which are performing contracts for the Department of Defence Production (Canada). The Department of National Defence (.Canada) or any Military Department may provide liaison with the other's inspection personnel in connection with the foregoing. It is

Annex 9.6 - Memorandum of Understanding - Canadian Commercial Corporation / Public Works and Government Services Canada

Supply Manual Page 16 of 20 Version 10-1 (2010-01-11)

understood that either the Department of National Defence (Canada) or any Military Department may in appropriate cases arrange for inspection by its own inspection organization in the other's country.

7. Because of the varying arrangements made by the Canadian- Government and the Military

Departments in furnishing Government-owned facilities (including buildings and machine tools) to contractors, it is recognized that the matter of inclusion in contract prices of charges, through amortization or otherwise, for use of such facilities will be determined in the negotiation of individual contracts. However, there shall be avoided, to the extent consistent with the policies of the Canadian Government and Military Departments, any such charges for use of Government-furnished facilities.

8. (a) The Corporation agrees that the prices set out in fixed-price type contracts covered by this

agreement will not include any taxes with respect to first-tier subcontracts; nor shall prices include customs duties to the extent refundable in accordance with Canadian law, paid upon the import of any materials, parts, or components incorporated or to be incorporated in the supplies, with respect to first-tier subcontracts.

(b) The Corporation agrees that under cost-reimbursement type contracts the Corporation shall, to

the extent practicable with respect to first-tier subcontracts, exclude from its claims all taxes and to the extent refundable in accordance with Canadian law, customs duties, paid upon the import of any materials, parts of components, incorporated or to be incorporated in the supplies and that any amounts included in such claims representing such taxes and duties shall be refunded or credited to the Military Departments.

© The Corporation agrees that, to the extent that such taxes and duties can be reasonably and

economically identified, it will use best endeavors to cause such taxes and duties to be excluded from all subcontracts below the first-tier and, if found to be included, to be recovered and credited to the Military Departments.

9. The Corporation recognizes that existing law of the United, States prohibits the use of the cost-

plus-a percentage-of-cost system of contracting. 10. Each contract covered by this agreement shall be deemed to include the provisions required by:

(i) Public Law 245, 82nd Congress of the United States (65 Stat. 700; 41 USC 153© and (ii) Section 719 of Public Law 458, 83rd Congress of the United States (68 Stat. 353) or

similar provisions that may be required by subsequent legislation. The Assistant Secretary of the Army (Logistics) The Assistant Secretary of the Navy (Material) The Assistant Secretary of the Air Force (Material) The Pentagon, Washington 25, D.C. U.S.A.

Annex 9.6 - Memorandum of Understanding - Canadian Commercial Corporation / Public Works and Government Services Canada

Supply Manual Page 17 of 20 Version 10-1 (2010-01-11)

Annex C to MOU: Canada-U.S. Defence Development Sharing Agreement

Defence Development Sharing Agreement This Memorandum of Understanding complements the U.S.-Canadian Defence Production Sharing Program by establishing a cooperative agreement in defence research and development between the United States Department of Defence (DoD) and the Canadian Department of Defence Production (CDDP), called the Defence Development Sharing Program. 1. Objectives:

The principal objectives of the Defence Development Sharing Program are:

a) To assist in maintaining the Defence Production Sharing Program at a high level by making it possible for Canadian firms to perform research and development work undertaking to meet the requirements of U.S. armed forces.

b) To utilize better the industrial, scientific and technical resources of the United States and

Canada in the interest of mutual defence. c) To make possible the standardization and interchangeability of a large amount of the

equipments necessary for the defence of United States and Canada. 2. Description of the Program:

a) The Defence Development Sharing Program will consist of research and development projects (such program being here and after referred to as “projects”):

(1) which are performed by Canadian prime contractors; (2) which are designed to meet specific DoD research and development

requirements; (3) in which the Military Department of DoD which is the United States party to the

project agreement acts as the design authority; and (4) which are jointly funded by DoD and CDDP, (where DoD undertakes the

research and development of a weapons system composed of several components, work funded by CDDP on one or more of such components will be considered to be jointly funded).

b) The Defence Development Sharing Program will not include efforts referred to in

paragraph 13. 3. Funding The financial contribution of DoD in each project will not be less than 25 percent of the costs incurred subsequent to the date of the project agreement provided that in the case of work referred to in the parenthetical sentence of paragraph 2.a (iv), the financial arrangements shall be as agreed to by DoD and CDDP in the project agreement. 4. Selection of Projects

Annex 9.6 - Memorandum of Understanding - Canadian Commercial Corporation / Public Works and Government Services Canada

Supply Manual Page 18 of 20 Version 10-1 (2010-01-11)

A proposal to initiate a project may be made by CDDP to any of the Military Departments of DoD or by any of the Military Departments of DoD to CDDP. Each proposal will contain a complete and detailed description of the scope of the project and work to be performed and of the suggested cost sharing arrangement. Projects will be selected by mutual agreement of CDDP in the Military Department of DoD concerned. 5. Project Agreements: The specific terms and conditions of each project will be governed by a project agreement between the Military Department of DoD and CDDP. The project agreement will inter alia set forth the scope of the projects, the work to be performed, types of reports to be submitted, the time and funding schedules, and the cost of sharing arrangements. 6. Selection of Prime Contractors: The selection of prime contractors for work to be performed under a project shall be subject to mutual agreement. 7. Contract Clauses for Projects: The Canadian Government agencies responsible for placing and administering research and development contracts with Canadian firms, will insert suitable provisions in such contracts obtaining for DoD the same production rights, data, and information that DoD would obtain for itself if DoD were solely funding and placing the contract under its Armed Services Procurement Regulation. 8. Competitive Research and Development: DoD will not engage in research and development, which duplicate the work being carried out under any project unless DoD considers such research and development to be in the United States national interest. The appropriate DoD agency will notify CDDP before undertaking such duplicative research and development and will, if requested by CDDP, promptly enter into consultations with CDDP. 9. DoD Procurement of Researched Developed items: Procurement by DoD from Canadian firms of items developed in a project will be made under the Defence Production Sharing Program and in accordance with the DoD Armed Services Procurement Regulation. Pursuant to that Regulation, procurement of item developed by Canadian firms under the Defence Development Sharing Program will not be “set aside” for small business or for labor surplus areas. 10. Security:

a) Information and materials developed within projects will be considered to be jointly developed, and classification and declassification thereof will be determined jointly.

b) Classified information and materials exchanged in connection with or developed within

projects will be safeguarded in accordance with the United States-Canadian Security Agreement of January 30, 1962, in the United States Canadian Industry Security Agreement effected by an exchange of letters dated February 6 and march 31, 1952, as amended.

11. Disclosure of Classified Information:

a) Classified information and materials received by either Government under the Defence Development Sharing Program but not developed within a project will not be disclosed or

Annex 9.6 - Memorandum of Understanding - Canadian Commercial Corporation / Public Works and Government Services Canada

Supply Manual Page 19 of 20 Version 10-1 (2010-01-11)

transferred to third countries, or nationals of third countries, without the consent of the originating Government.

b) Jointly developed classified information materials will not be transferred or disclosed to

any third party by either Government or nationals thereof without the consent of the other Government.

12. Sales:

a) Sales or transfer to any third party of items developed in a project containing classified information or materials will be subject to the provisions of paragraph 11.

b) Sales or transfers to NATO, Commonwealth, and SEATO countries, or nationals thereof,

of jointly developed unclassified items may be made in accordance with any applicable arrangements between Canada and the United States regarding munitions control. Sales or transfers to any other third party of jointly developed unclassified items will not be made without the consent of both parties to this agreement.

c) Sales or transfers to any third party of jointly developed unclassified rights information, or

data necessary for the production of an item developed in a project will not be made without the consent of both parties to this agreement.

13. Other Research and Development Efforts not in the Defence Development Sharing

Program:

a) Consistent with normal DoD source selection procedures, Canadian firms may bid for DoD research and development contracts which are to be funded solely by the United States. DoD will evaluate proposals from qualified Canadian firms on a parity with proposals received from United States firms. CDDP undertakes to ensure that Canadian firms comply with DoD procurement procedures.

b) CDDP may award and solely fund research and development contracts to Canadian firms

for the purpose of satisfying existing or anticipated DoD requirements. DoD and its Military Departments will not act as Design Authority for such contracts. In the event that the results of any such contract become of sufficient interest to DoD to warrant joint funding, the contract work may, upon mutual agreement, be made the subject of the Defence Development Sharing Program project.

14. Canadian Access to United States Information: Subject to United States legislation and national policy, the Government of Canada will have access to information on the future requirements of DoD research and development programs and Canadian firms will have the same access to DoD research and development program information as United States firms. 15. Supersession of Prior Arrangements: This Memorandum of Understanding supercedes the memoranda between CDDP and the United States Departments of the Army, and Air Force, respectively, dated July 26, 1960 and December 22, 1961, except with respect to projects already entered into thereunder. 16. Effect and Duration: This Memorandum of Understanding will remain in force indefinitely, subject to modification or termination at any time by mutual agreement or to termination six months after receipt by either party of written notice of the intention of the other party to terminate it.

Annex 9.6 - Memorandum of Understanding - Canadian Commercial Corporation / Public Works and Government Services Canada

Supply Manual Page 20 of 20 Version 10-1 (2010-01-11)

Charles M. Drury Robert S. McNamara Minister of Defence Production Secretary of Defence Date: 21 November 1963 Date: 16 November 1963

TABLE OF CONTENTS Chapter 10 - Cost and Profit ......................................................................................... 1 10.1 General Information....................................................................................................................... 1 10.5 Establishing Costs ......................................................................................................................... 1 10.10 Travel and Living Expenses .......................................................................................................... 2 10.15 Prices for Out of Plant Services of Individuals ..............................................................................3 10.20 Surplus Materials in Cost Reimbursable Contracts.......................................................................4 10.25 Costing of Lease Transactions...................................................................................................... 5 10.30 Service Contracts .......................................................................................................................... 5 10.35 Joint Ventures................................................................................................................................ 6 10.40 Research and Development Contracts with Universities and Colleges ........................................6 10.45 Non-competitive Contracts with Non-profit Organizations, excluding Universities and Colleges .8 10.50 Non-competitive Acquisitions for Manufactured Products and Repair and Overhaul Services,

from Agency and Resale Outlets................................................................................................... 9 10.50.1 Non-competitive Requirements of Commercial Goods and/or Services.................... 9 10.50.5 Non-competitive Requirements of Non-commercial Goods and/or Services........... 10 10.50.10 Agency and Resale Outlets - Additional Requirements ........................................... 10 10.50.15 Price Analysis ...........................................................................................................11

10.55 Transfer Pricing ........................................................................................................................... 12 10.60 Special Production Tooling and Special Test Equipment ........................................................... 14 10.65 Calculation of Profit on Negotiated Contracts ............................................................................. 14

10.65.1 Return on Capital Employed ....................................................................................15 10.65.5 Return on Fixed Capital Employed (between $50,000 and $249,999) .................... 15 10.65.10 Return on Working Capital Employed (between $50,000 and $249,999)................ 16 10.65.15 Return on Fixed Capital Employed ($250,000 or more) ..........................................16 10.65.20 Return on Working Capital Employed ($250,000 or more) ......................................17 10.65.25 General Business Risk .............................................................................................18 10.65.30 Contractual Risk .......................................................................................................18 10.65.35 Total Profit ................................................................................................................20

Annex 10.1: Determination of Fixed Capital Employed Applicable to a Contract ................................... 1 Annex 10.1.1: Examples to Determine the Fixed Capital Employed............................... 1

Annex 10.2: Examples to Determine the Working Capital Employed .....................................................1 Annex 10.3: Examples of Profit Calculations ..........................................................................................1 Annex 10.4: Reasons for the non-applicability of certain costs when utilizing Contract Cost Principles

1031-2 ................................................................................................................................. 1 Annex 10.5.1: Cost Interpretation Bulletin - Number 01 ............................................................................1

Excess Facilities.................................................................................................................. 1 Annex 10.5.2: Cost Interpretation Bulletin - Number 02 ............................................................................1

Depreciation ........................................................................................................................ 1 Annex 10.5.3: Cost Interpretation Bulletin - Number 03 ............................................................................1

Lease Costs ........................................................................................................................ 1 Annex 10.5.4: Cost Interpretation Bulletin - Number 04 ............................................................................1

Travel Costs ........................................................................................................................ 1

Annex 10.5.5: Cost Interpretation Bulletin - Number 05 ............................................................................1 Head Office Expense ..........................................................................................................1

Annex 10.5.6: Cost Interpretation Bulletin - Number 06 ............................................................................1 Pension Costs ..................................................................................................................... 1

Annex 10.5.7: Cost Interpretation Bulletin - Number 07 ............................................................................1 Research and Development Expenses...............................................................................1

Annex 10.5.8: Cost Interpretation Bulletin - Number 08 ............................................................................1 Bid and Proposal Expenses................................................................................................1

Annex 10.5.9: Cost Interpretation Bulletin - Number 09 ............................................................................1 Selling and Marketing Expenses.........................................................................................1

Annex 10.5.10: Cost Interpretation Bulletin - Number 10 ............................................................................1 Severance Payments ..........................................................................................................1

Annex 10.5.11: Cost Interpretation Bulletin - Number 11 ............................................................................1 Pension Plan Refunds ........................................................................................................1

Annex 10.5.12: Cost Interpretation Bulletin - Number 12 ............................................................................1 Company Funded Costs .....................................................................................................1

Annex 10.5.13: Cost Interpretation Bulletin - Number 13 ............................................................................1 Executive Compensation ....................................................................................................1

Annex 10.5.14: Cost Interpretation Bulletin - Number 14 ............................................................................1 Mobile Repair Party Requirements .....................................................................................1

Annex 10.5.15: Cost Interpretation Bulletin - Number 15 ............................................................................1 Environmental Costs ...........................................................................................................1

Annex 10.5.16: Cost Interpretation Bulletin - Number 16 ............................................................................1 Take-out Rates.................................................................................................................... 1

Annex 10.5.17: Cost Interpretation Bulletin - Number 17 ............................................................................1 Government Supplied Materiel ...........................................................................................1

Annex 10.5.18: Cost Interpretation Bulletin - Number 18 ............................................................................1 Incentive Remuneration Profit Sharing Plans .....................................................................1

Annex 10.5.19: Cost Interpretation Bulletin - Number 19 ............................................................................1 Purchased Labour -- Personnel Procured From Outside Sources .....................................1

Annex 10.6.1: Cost Notification 01 - TPC Royalty Amount for Cost Rate Negotiations ............................ 1 Annex 10.6.2: Cost Notification 02 - Goodwill ............................................................................................1

Chapter 10 - Cost and Profit

Supply Manual Page 1 of 20 Version 10-1 (2010-01-11)

Chapter 10 - Cost and Profit 10.1 General Information (2010-01-11) (a) When a contract must be awarded on a non-competitive basis, or when, following a competitive

process, price negotiations with the successful bidder are required, contracting officers must determine the contract price based on the procedures outlined in this Chapter.

(b) The calculation of prices and costs depends on the circumstances of each contract. Before

referring to the general sections on the establishing of costs (see 10.5) and profit (see 10.65), contracting officer must determine that the following special circumstances do not apply:

(i) Travel and Living Expenses (see 10.10); (ii) Prices for Out of Plant Services of Individuals (see 10.15); (iii) Surplus Materials in Cost-Reimbursable Contracts (see 10.20); (iv) Costing of Lease Transactions (see 10.25); (v) Service Contracts (see 10.30); (vi) Joint Ventures (see 10.35); (vii) Research and Development Contracts with Universities and Colleges (see 10.40); (viii) Non-competitive Contracts with Non-profit Organizations, excluding Universities and

Colleges (see 10.45); (ix) Non-competitive Acquisitions of Manufactured Products and Repair and Overhaul

Services from Agency and Resale Outlets(see 10.50); (x) Transfer Pricing (see 10.55); (xi) Special Production Tooling and Special Test Equipment (see 10.60). Contracting officers should also refer to the requirements for audit. (See4.70.35)

10.5 Establishing Costs (2010-01-11) (a) Whenever a contract price is negotiated based on costs, the costs must be determined using

Contract Cost Principles 1031-2 of the Standard Acquisition Clauses and Conditions (SACC) Manual. In particular, for non-competitive contracts valued at $50,000 and over, with a firm price or fixed time rate basis of payment, except in cases for the acquisition of commercial goods and services, the price or rate will be negotiated based on the estimated costs computed in accordance with the Contract Cost Principles 1031-2. For non-competitive contracts valued at $50,000 or over, with a cost reimbursable basis of payment, except in cases for the acquisition of commercial goods and services, the price will be determined based on actual costs incurred computed in accordance with the Contract Cost Principles. In both of the above cases, the Contract Cost Principles will be included as a condition of the contract. Annex 10.4 explains why certain costs are considered non-applicable when utilizing Contract Cost Principles 1031-2. For determining costs in accordance with the Contract Cost Principles, the Cost Interpretations Bulletins issued by Policy, Risk, Integrity and Strategic Management Sector should be taken into consideration at the time of negotiations. There are currently Cost Interpretation Bulletins on:

Chapter 10 - Cost and Profit

Supply Manual Page 2 of 20 Version 10-1 (2010-01-11)

(i) Excess Facilities - Annex 10.5.1 (ii) Depreciation - Annex 10.5.2 (iii) Lease Costs – Annex 10.5.3 (iv) Travel Costs - Annex 10.5.4 (v) Head Office Expenses – Annex 10.5.5 (vi) Pension Costs - Annex 10.5.6 (vii) Research and Development Expenses - Annex 10.5.7 (viii) Bid and Proposal Expenses - Annex 10.5.8 (ix) Selling and Marketing Expenses - Annex 10.5.9 (x) Severance Payments - Annex 10.5.10 (xi) Pension Plan Refunds - Annex 10.5.11 (xii) Company Funded Costs - Annex 10.5.12 (xiii) Executive Compensation - Annex 10.5.13 (xiv) Mobile Repair Party Requirements - Annex 10.5.14 (xv) Environmental Costs - Annex 10.5.15 (xvi) Take Out Rates - Annex 10.5.16 (xvii) Government Supplied Materials - Annex 10.5.17 (xviii) Incentive Remuneration Profit Sharing Plans - Annex 10.5.18 (xix) Purchased Labour B Personnel Procured from Outside Sources - Annex 10.5.19.

(b) The Contract Cost Principles 1031-2 are not required for commercial goods and services, since

these are used regularly for other than government purposes, and are sold by the supplier in the course of carrying out its normal business operations; and there is a sufficient number of buyers, other than the government, to establish a going price for the good or service.

10.10 Travel and Living Expenses (2010-01-11) (a) Normally, travelling and living expenses incurred by a contractor in the ordinary course of

business must be treated as indirect costs chargeable to overhead. Contracts bear their proportionate share of such overhead, and this overhead is profit bearing. Therefore, no special provision with respect to these incidental travel and living expenses is required for such contracts.

However, some contractors consistently charge travel and living expenses directly to contracts. Where a price is negotiated with suppliers, these charges will be acceptable as direct charges against the contract if:

(i) the expenses are directly attributable to the performance of the work under the contract,

and these expenses are deducted from indirect costs; and (ii) the practice of direct charging is consistently followed by the contractor in the costing of

both government and commercial work; and (iii) the expenses referred to in (i) above are eliminated from indirect costs allocated to

contracts. (b) When travel and living expenses must be directly charged to the contract, these expenses will

attract administrative overhead either at full rates, where adequate support for the claimed general and administrative rate can be demonstrated, or at a lower negotiated rate where such substantiation cannot be provided. Alternatively, where industry practices so dictates, a contract may provide for travel and living expenses to be charged at cost with no allowance for overhead or profit.

When travel and living expenses, plus profit and/or overhead, as applicable, will be directly charged to a contract on a cost reimbursable basis, contracting officers must use Standard Acquisition Clauses and Conditions (SACC) Manual clause C4000C; when there is no allowance

Chapter 10 - Cost and Profit

Supply Manual Page 3 of 20 Version 10-1 (2010-01-11)

for profit and/or overhead, clause C4001C must be used. The Treasury Board (TB) Travel Directive applies to travel expenses incurred on contracts with persons outside the Public Service, when these expenses are a specific element of the contract. For more details, consult the TB Travel Directive and Special Travel Authorities. . The contracting officer may accept the contractor’s travel and living rates, if they are lower than the TB rates. For additional information, contracting officers should consult Annex 10.5.4.

(c) Department of National Defence (DND) service establishments may be able to provide

transportation, mess and lodging facilities to the contractor's employees performing work at or near these establishments under mobile repair party and maintenance-type contracts. The commanding officer of the establishment must, upon request, advise the contractor as to the availability of these facilities, which must reduce direct contract expenses. Any costs incurred by the contractor for the use of these facilities, plus any incidental expenses incurred, must be reimbursed under the contract, together with allowances for profit and/or administrative overhead. In order for the contractor to be reimbursed, contracting officers must use C4004C in the contract.

10.15 Prices for Out of Plant Services of Individuals (2010-01-11) (a) The following methods are applicable to all negotiated charge-out rates, irrespective of whether

any subsequent contract is fixed price, fixed unit price, cost reimbursable, etc. and covers out-of-plant services of individuals or groups of individuals, with or without equipment.

Services include field service representatives, out-of-plant technical services and mobile repair parties away from the contractor's plant.

(b) When rates have not been established commercially or when they are considered excessive, the

Contract Cost Principles 1031-2 must be used as a basis for negotiating out-of-plant charge-out rates (including applicable overhead). Profit must be negotiated in accordance with 10.65. Travel and living expenses must be determined in accordance with 10.10.

(c) Contracting officers are responsible for negotiating fair and reasonable charge-out rates which

would normally be on a fixed time rate, i.e. hourly, per diem, monthly, etc. Charge-out rates will be shown as a separate line item in the basis of payment. In determining charge-out rates, some items to be considered are: (i) normal industrial practice/commercial rates; (ii) whether the company usually provides the service; (iii) availability of the service from other sources; (iv) wages of the individuals; (v) whether the plant overhead should apply or whether a separate overhead should be

negotiated; (vi) equipment utilized; (vii) use of the facilities of Canada.

Before contract award, contracting officers are advised to seek guidance and cost interpretations from the sector/region cost analyst with respect to negotiated charge-out rates.

(d) Full plant overhead should not be applied to out-of-plant charge-out rates, unless the out of plant

Chapter 10 - Cost and Profit

Supply Manual Page 4 of 20 Version 10-1 (2010-01-11)

technical services are a relatively minor part (less than 10 percent) of the contractor's total business (volume/direct labour) in any one year.

(e) Dislocation/displacement pay allowances may be allowed provided that the amount of the

displacement pay is reasonable; the displacement pay is for justifiable purposes; and/or displacement pay is in accordance with the contractor's established practice.

For removal, living, car allowances and outside Canada expenses, contracting officers must consider the following:

(i) Only one removal from and back to the original residence will be paid for any one

representative. Where removal expenses to the site of the work have been paid by the Canada on a previous contract and the services are being extended for a further period, such contract amendment or subsequent contract should provide for reimbursement only for expenses incurred for moving the representative back to the original residence.

(ii) Removal expenses should not be paid on assignments of less than six months, and any

removal by a married employee for assignments exceeding six months must be carried out during the first 90 days, and by a single employee during the first 60 days.

(iii) Reimbursement for living expenses for a married employee on an assignment exceeding

six months should cease when the family is moved (whether or not removal expenses have been paid) to permanent quarters at the location of the work.

(iv) Reimbursement for living expenses for a single employee on an assignment exceeding

six months should cease when the employee's effects have been moved (whether or not removal expenses have been paid) to the location of the work or in any event after the first 60 days of such assignment.

(v) Reasonable car allowances in accordance with the contractor's practice may be paid for

the use of personally owned motorcars by the contractor's personnel for essential on-base travelling where local Canada transportation is not available.

(vi) Cases where the representative is required to go abroad must be dealt with individually

and considered on their merits.

For additional information, contracting officers should consult Annex 10.5.14. 10.20 Surplus Materials in Cost Reimbursable Contracts (2010-01-11) (a) Surplus materials resulting from the performance of a contract may be disposed of in several

ways:

(i) declared surplus at a Crown Assets Distribution Centre (CADC); (ii) transferred to the client, or to another contract with the same contractor, or to another

contractor; or (iii) returned to the original supplier. Each of these has implications on the terms of the contract relating to costs and profits.

(b) Costs of surplus materials are allowable costs in a production contract if the surplus is due to:

(i) normal accumulation of stores, during or on completion of a contract, and which are

Chapter 10 - Cost and Profit

Supply Manual Page 5 of 20 Version 10-1 (2010-01-11)

declared surplus to CADC, or transferred to the client or to another contract with the same or a different contractor;

(ii) major design changes or other major adjustments of a substantial nature not including

termination; (iii) minor design changes or other minor adjustments in the scope of the work provided the

contract does not specifically exclude such items. (c) When the surplus is due to excess purchasing by a contractor, the costs are not allowable in a

contract. (d) Handling costs associated with the surplus materials are allowable costs in a contract whenever

the costs of surplus materials are allowable. (e) General and administrative overhead costs associated with surplus materials are allowable costs

in a contract only when the surplus materials consist of work-in-process and finished goods resulting from design changes and minor cutbacks.

(f) Profit will be allowed on the following categories (10.20(b), 10.20(d), 10.20(e) of allowable costs,

except that:

(i) in the case of surplus materials arising from the normal accumulation of stores, during or on completion of a contract, profit will be allowed only if the inventories acquired for a contract were financed by the contractor;

(ii) in the case of surplus materials arising from major design changes, or other major

changes of a substantial nature, profit will be allowed only if the inventories were either purchased by the contractor or, if not purchased by the contractor, were manufactured by the contractor and rendered surplus as the result of the changes.

(g) For cost reimbursable with fixed fee or cost reimbursable with incentive fee contracts, and

contracts containing a ceiling price, allowable costs of surplus materials will be treated as an extra direct cost to the contract, outside the area of fixed fee, incentive fee or ceiling price considerations. It may be necessary to renegotiate the principal terms of the contract.

(h) Where incentive fee contracts require negotiation of targets, the costs of surplus materials should

be included in the revision of a target only where other reasons make it essential to re-open the calculation for the protection of either the contractor or Canada. Alternatively, when a contract so provides, these costs may be paid for as an extra to the target or other arrangements, e.g. at cost plus a fixed fee at whatever rate of profit is appropriate.

10.25 Costing of Lease Transactions (2010-01-11) (a) When a contractor proposes to include, in the cost of a contract, costs relating to the leasing by

the contractor of an asset, the amount of allowable charge depends on the type of lease. (b) The necessary information for contracting officers is in Annex 10.5.3. 10.30 Service Contracts (2010-01-11) (a) Fees for all services not established by price competition, except repair and overhaul, are

negotiated on the basis of the prevailing rates for the type of work required and recognizing the

Chapter 10 - Cost and Profit

Supply Manual Page 6 of 20 Version 10-1 (2010-01-11)

circumstances of each contract. Considerations are:

(i) requirements of the task: an assessment of skill level, expertise necessary, or complexity of the task requirements;

(ii) bidder qualifications: fees will vary in terms of factors like the calibre of proposed

personnel, knowledge or expertise, previous experience, personnel utilization rate, use of facilities, or the area of specialization;

(iii) market conditions: a determination as to whether there is a commercial or going rate for a

particular expertise or service capability in private industry should be made. If these rates cannot be determined, the fee scales recommended by provincial professional associations may be used as a reference point from which the reasonableness of a negotiated rate can be compared;

(iv) costing/fee practices: the costing structures of individuals, bidders and universities are

different and will vary significantly. Some costs that would otherwise be charged separately are sometimes charged to overhead, thus increasing the total rate.

(b) Fees should include only those elements of cost properly associated with the actual time

expended on the work. These are the direct labour costs and their fair share of overheads, general and administrative expenses and profit. Other direct costs such as charges for publication of reports, special computer or test services, travel and living, should normally be shown separately. Each case must be taken on its own merits to arrive at an assessment of which amounts are reasonable charges, either as a fee element, or as a separately charged item.

(c) In all contracts for services with a cost reimbursable or fixed time rate basis of payment, the time

rates of payment must be specified for the entire period required for performance of the contract, including all phases and specified option periods. When this is not possible, payments for each year or phase must be based on a pre-agreed rate or formula that is to be specified in the contract.

10.35 Joint Ventures (2010-01-11) (a) For non-competitive contracts intended to be awarded to a joint venture, special costs that may

be attributed to the joint venture arrangement alone, such as legal, accounting and consulting fees in connection with the setting up of the joint venture, are not acceptable charges.

(b) Ongoing operational costs related to the joint venture arrangement are acceptable to the extent

that they are considered reasonable and can be allocated to the contract using the Contract Cost Principles 1031-2.

(c) When materials, supplies or services must be transferred to the joint venture under subcontracts

issued to a representative of the joint venture, the contracting officer should negotiate acceptable subcontract costs with the representative in accordance with the establishment of costs policy stated in 10.50 to 10.50.5(b).

(d) The joint venture cannot submit a price bid based on average rates. Each joint venture member's

workload must be priced separately using appropriate costing procedures. The total of all the joint venture member prices must be the total proposed contract price.

10.40 Research and Development Contracts with Universities and Colleges (2010-01-11)

Chapter 10 - Cost and Profit

Supply Manual Page 7 of 20 Version 10-1 (2010-01-11)

(a) Research and development work carried out by universities or colleges is priced at direct costs plus a contribution to overhead. This contribution is a maximum take-out rate of 65 percent of direct payroll costs for on-campus work, and 30 percent of direct payroll costs for off-campus work. In addition, a contribution equivalent to 2 percent of applicable and acceptable travel and living expenses must be made.

(b) Contract Cost Principles 1031-2 must not be called up in the contract, and post-contract audits of

overhead charges must not be carried out. Direct costs must be subject to cost verification or audit.

(c) Allowable direct costs are:

(i) Direct Payroll Costs

(A) professional salaries (B) clerical salaries (C) technicians' wages (D) fellowships - daily rate of personnel working directly on a contract (E) fringe benefits including:

(I) unemployment Insurance (II) workers’ compensation (III) Canada or Quebec Pension Plan

(F) university pension plan (current service only) (G) university portion of medical plans (H) sick leave

Annual salaries must be prorated over annual working days, taking into account statutory holidays and annual vacation.

(ii) Materials and Supplies

(A) stationery (B) postage (C) materials issued from stores (D) materials, parts and components purchased specially for the contract at "laid-

down cost" (E) long distance telephone charges (F) telegrams and cables (G) freight and express (H) publication charges as agreed in contract

(iii) Direct expenses - those costs which can be specifically identified and measured as

having been used or to be used in the performance of the contract, and which are so identified and measured by the institution's cost accounting system. These expenses may include such items as:

(A) travel expenses (B) consultant services (C) apparatus and equipment acquisition. (This must remain Canada’s property and

be subject to Crown Assets Distribution Centre procedures.) (D) other costs as agreed and negotiated, including charges for computer time.

(d) Consultants are to be considered in three separate categories:

(i) in-house standard rate of pay: the 65 percent overhead is applicable;

Chapter 10 - Cost and Profit

Supply Manual Page 8 of 20 Version 10-1 (2010-01-11)

(ii) external type consultant, which is in-house personnel working additional hours at increased rates, but using university equipment: direct charge without overhead;

(iii) outside consultant: direct charge without overhead.

(e) Manufactured equipment is to be considered as a "make" or "buy" decision for the contracting

officer. If it is a "buy", it must be a direct charge, and be Canada’s property: a decision regarding disposal must be made later. If it is a "make", the university would be allowed the cost of parts and labour as laid out in the bid, including the 65 percent overhead, with ownership and disposal the same as for a buy. This should be a separate item under the contract.

(f) Allowable overhead costs are:

(i) maximum of 65 percent applicable to Direct Payroll Costs for on-campus work; (ii) maximum of 30 percent applied to Direct Payroll Costs for off-campus work; (iii) an administration charge of 2 percent on travel and living expenses incurred directly

against the contract is allowed. (g) Costs incurred by the university or college that have no direct bearing on the research activity are

not acceptable as direct charges against Canada research contracts. These include:

(i) university annual reports (ii) contingency reserves (iii) convention expenses - unless applicable to specific contract (iv) post service lump-sum payments (v) termination allowances not earned during the course of the contract (vi) admissions department (vii) grants - unless for services rendered for a specific contract (viii) finance charges (bank, debenture, bond interest, etc.)

(h) Additional special facility charges must not be included in the price, since these are accounted for

in the contribution to overhead. (i) Charges for use of a computer centre must be directed to a contract at a predetermined rate per

hour, including general overhead, and computed at a break-even level for the centre. These charges must be in line with normal policies of the university for internal use.

(j) Departments and agencies of the United States (U.S.) Government negotiate directly with

Canadian universities and colleges towards research and development contracts. Public Works and Government Services Canada may be asked for assistance in developing an appropriate overhead rate. These requests will be handled by the Services and Technology Acquisition Management Sector, which must develop the overhead rates from the latest certified financial statements of the university or college, with indirect costs prorated over the direct cost base in conformity with the costing principles set out in the applicable U.S. Government directive on the subject.

10.45 Non-competitive Contracts with Non-profit Organizations, excluding

Universities and Colleges (2010-01-11) (a) Non-profit organizations incur financing charges for working capital, over and above normal

operating costs as determined in accordance with the Contract Cost Principles 1031-2. They are also subject to business and contractual risk, though less than profit-oriented organizations.

(b) The price is based on costs incurred, computed using the Contract Cost Principles 1031-2 plus

Chapter 10 - Cost and Profit

Supply Manual Page 9 of 20 Version 10-1 (2010-01-11)

an allowance in lieu of profit. (c) For financing charges on working capital employed, the allowance depends on the basis of

payment:

(i) if there is a provision for progress payments or milestone payments: 1.5 percent of costs incurred;

(ii) if there is no provision for progress payments or milestone payments: 3 percent of costs incurred.

(d) For general business risk, the allowance is based on contract costs:

(i) direct materials, subcontracts and direct charges: up to 1 percent of such costs; (ii) direct labour and overhead: up to 2 percent of such costs.

(e) The allowance that may be included in recognition of contractual risk depends upon the basis of

payment selected for the contract or part thereof:

(i) firm price: up to 4 percent of costs incurred; (ii) fixed time rate with ceiling price: up to 3 percent of costs incurred; (iii) cost reimbursable with ceiling price: up to 3 percent of costs incurred; (iv) fixed time rate with no ceiling price: up to 2 percent of costs incurred; (v) cost reimbursable with no ceiling price: 0 percent.

10.50 Non-competitive Acquisitions of Manufactured Products and Repair and

Overhaul Services, from Agency and Resale Outlets (2010-01-11) (a) The procedures detailed in 10.50.1 to 10.50.15 provide for the establishment of fair and

reasonable prices, when the competitive process cannot be used for:

(i) acquisitions from Canadian agency and resale outlets, and (ii) acquisitions of manufactured products and repair and overhaul services, from Canadian

suppliers, except Canadian agency and resale outlets. (b) There are key differences between these two types of acquisitions in the determination of what

costs are allowed, and how profits are determined. The procedures also differ depending on whether the good or service is commercial or non-commercial.

10.50.1 Non-competitive Requirements of Commercial Goods and/or Services (2010-01-11) (a) The contracting officer must negotiate a fair price on the basis of at least one of the following

criteria:

(i) recent prices paid;

(ii) latest published price lists or catalogues;

(iii) prices paid by others, such as other governments, Crown corporations, hospitals, universities and large private sector corporations or companies.

(b) For requirements valued at $50,000 or less, the contracting officer may, at its discretion, request

additional price justification by way of a price certification signed by the bidder; but for

Chapter 10 - Cost and Profit

Supply Manual Page 10 of 20 Version 10-1 (2010-01-11)

requirements valued at $50,000 or more, price certifications must be obtained in all cases.

Contracting officers must include the following applicable price certification Standard Acquisition Clauses and Conditions (SACC) Manual clause in non-competitive bid solicitations:

(i) C0002T: for commercial goods and/or services, other than petroleum products with

Canadian suppliers, other than agency and resale outlets;

(ii) C0004T: for commercial goods and/or services with Canadian agency and resale outlets, including subsidiaries of foreign manufacturers;

(iii) C0006T: for petroleum products; (iv) C0600T: for commercial services (Canadian bidders). Contracting officers must include the discretionary audit clause C0100C in contracts.

10.50.5 Non-competitive Requirements of Non-commercial Goods and/or Services (2010-01-11) (a) For non-competitive requirements of non-commercial goods and/or services valued at $50,000 or

less, a fair price may be negotiated in accordance with the guidelines for commercial goods and/or services given above, provided the data required to follow this guideline is available.

For acquisitions from agency and resale outlets only, if the data is not available, then the guideline presented in 10.50.10 should be followed.

(b) The contracting officer must request the bidder to submit an itemized breakdown of the price

quoted. In the case of agency and resale outlets, the contracting officer will analyze the price breakdown in accordance with 10.50.15. The depth of the analysis required will depend on the value of the requirement and the quality and completeness of the support data provided by the bidder. The cost of performing the analysis versus the potential benefit in the form of cost savings on the requirement should be taken into account.

For more details on the bases of payment, see 4.70.20. A firm price basis of payment is generally used for contracts with agency and resale outlets.

Contracting officers must include the price certification SACC Manual clause C0003T in non-competitive bid solicitations, for non-commercial goods and/or services with Canadian suppliers; include the discretionary audit clause C0101C in contracts, and rate certification clause C0601T in non-competitive bid solicitations for fixed time rate contracts, for non-commercial services valued at $50,000 or more, submitted by a Canadian bidder.

10.50.10 Agency and Resale Outlets - Additional Requirements (2010-01-11) The two chief types of agency and resale outlets encountered when purchasing for Canada are: (a) those engaged in manufacturing, which also act as agency or resale outlets representing other

manufacturers (type 1); and (b) those not engaged in any form of manufacturing, which act solely as agents, distributors,

wholesalers, jobbers or retailers. They may conduct the functions of purchasing, receiving, storing, shipping and accounting (type 2).

Chapter 10 - Cost and Profit

Supply Manual Page 11 of 20 Version 10-1 (2010-01-11)

10.50.15 Price Analysis (2010-01-11) (a) The following should be considered when analyzing the price breakdown:

(i) Laid-down costs

Ensure that the necessary support for the price of the good/service quoted by the principal is provided by the bidder and that all trade discounts have been deducted. The applicability and amount of any added costs for transportation, foreign exchange, customs duty and brokerage should be verified. Transfer prices representing fair market value, constitute laid-down cost for the purposes of price analysis and profit calculations.

(ii) Cost of necessary services and overhead

Establishment of the cost of necessary services rendered by the bidder is dependent upon requirements, the type of organization the bidder operates, and the degree of sophistication in the bidder’s cost accounting system.

Types of services that may be considered for costing purposes:

(A) purchasing; (B) internal handling including unpacking, incoming inspection, inhibiting,

warehousing, and re-packing for delivery to one or more destinations, but excluding costs related to the bidder’s own manufacturing or other related costs;

(C) general and administrative expenses applicable to the activity required. After-sales activity, such as on-site installation and test should be taken into account in establishing the overall price structure. An examination of the overhead costs allocated to the particular buy should be made to ensure that the allocation represents a reasonable and justifiable distribution of overhead costs in accordance with the Contract Cost Principles 1031-2. If Canada’s requirements can be met by direct shipment from the principal, the bidder’s charges are normally confined to the costs of purchasing and invoicing, and in such cases, a special direct shipment rate of overhead should be developed. The negotiated rates established in accordance with the foregoing are generally applied as a percentage additive to the laid-down costs.

(iii) Profit Agency and Resale Outlet (type 1) A reasonable rate of profit is allowed on the total of laid-down costs and the cost of services required by Canada. The rate must be commensurate with the risk, the volume of resale business to Canada and other circumstances. For example, if the services required include the maintenance of an inventory, a higher rate of profit is permitted. Agency and Resale Outlet (type 2) The profit amounts should be calculated by application of the following:

Chapter 10 - Cost and Profit

Supply Manual Page 12 of 20 Version 10-1 (2010-01-11)

(A) Profit on laid-down costs:

Recognizing the cost of financing and risks associated with the maintenance of stocks, the maximum rates of profit applied to laid-down costs vary in accordance with the method of supply as follows: (I) supplied from stocks maintained and financed by the bidder: up to 4

percent. (II) supplied from stocks held by the bidder on consignment from the

principal: up to 3 percent. (III) supplied by the principal through the bidder, only when ordered by

Canada: up to 3 percent. (IV) supplied by the principal in direct shipment to Canada: up to 2 percent.

(B) Profit on cost of necessary services and overhead: Recognizing the associated general business risk, the rates of profit applied to the cost of necessary services and overhead may vary in accordance with the services provided and are: (I) where the services include those of purchasing and invoicing only: up to

7.5 percent. (II) where the services include other than purchasing and invoicing: up to

10 percent.

(iv) Price certification and discretionary audit: Subsequent to the price negotiation, the bidder should resubmit its price proposal based on the agreement reached and include a price certification. In addition, all contracts for non-competitive acquisitions from agency and resale outlets valued at $50,000 and over must contain a discretionary audit clause. (See 10.50.1(b) and 10.50.5(b).)

10.55 Transfer Pricing (2010-01-11) (a) When materials, supplies or services are transferred to a supplier to Canada from divisions,

subsidiaries or affiliates under common control, the transfer price must be established in conformity with standard criteria, to avoid the payment of a rate of profit exceeding departmental norms.

Considerations of materiality and practicality must govern in the application of these criteria. Consistency is also an objective - consistency between government and commercial work, consistency among the various kinds of firm price and cost reimbursable contracts, and consistency from one year to the next. In order to ensure consistency, personnel from all sectors/regions should consult early, in the negotiation process, a repository of applicable data maintained by the Policy, Risk, Integrity and Strategic Management Sector.

(b) The following criteria apply to the establishment of acceptable inter-company and intra-company

transfer prices on non-competitive contracts for which a price is negotiated with the bidder through a process involving analysis of costs and determination of profit.

These criteria do not apply if the transfer price can be verified to be reasonable by reference to

Chapter 10 - Cost and Profit

Supply Manual Page 13 of 20 Version 10-1 (2010-01-11)

comparable third party prices involving transactions between the Canadian subsidiary (agency or resale outlet) or its parent and a third party, or between unrelated parties.

(c) Intra-company transfer prices (that is, for transfers between divisions of the same legal or

corporate entity) must be charged under the contract at cost according to the Contract Cost Principles 1031-2 without allowances for profit or an allocation of corporate general and administrative expenses. These allowances must apply on the cost of the finished product sold to Canada.

(d) Inter-company transfer prices (that is, for transfers between a company and its subsidiary or

affiliate enjoying separate legal status but otherwise under common ownership control) charged under the contract must not be, whenever possible, greater than those which approximate fair market value. In those situations where approximate fair market value cannot be determined, inter-company transfer prices must be those that can be considered as reasonable under the circumstances if the parties to the transaction had been dealing at arm's length.

Fair Market Value means the price that would be agreed to in an open and unrestricted market between knowledgeable and willing parties dealing at arm's length who are fully informed and not under any compulsion to transact.

If the good or service has a going price at which significant quantities are known to sell in the market in arm's length transactions, such a price will represent fair market value. Examples: regulated prices, posted prices, catalogue prices and other prices actually available and given in past transactions to arm's-length parties for the size, quality, timing and location of the transaction, after all discounts have been considered. An inter-company transfer price representing fair market value will be used as "laid-down cost" for that item for the purposes of computing mark-up, profit and contract price.

In any case where the circumstances described in the last paragraph do not apply, it must be deemed that the transfer prices of the company are established at cost calculated in accordance with Contract Cost Principles 1031-2 without allowance for profit and without an allocation of corporate general and administrative expenses.

In interpreting the term "reasonable under the circumstances," the following considerations apply:

(i) If the supplier to Canada can prove that the transfer price is at cost, then a normal profit

at rates as set out in 10.65 must apply to the final product cost.

(ii) If the supplier to Canada can provide satisfactory price support for a transfer price in excess of cost, the profit element in such transfer price must be limited to a return (at a rate not exceeding the corporate bond rate periodically published by the Policy, Risk, Integrity and Strategic Management Sector), on the fixed and working capital used in the production of the goods and services. The formula for computing profit is as follows:

(R/12) x M(a x (b/c)) = P

R = corporate bond rate M = period (in months of capital use) a = fixed and working capital employed b = transfer price less profit c = total company annual cost of sales and transfers P = profit amount to include in transfer price It should be noted that satisfactory price support originating from the transferor must be capable of being verified by reference to instances of transactions in similar goods either between the Canadian subsidiary or its parent and a third party, or between unrelated

Chapter 10 - Cost and Profit

Supply Manual Page 14 of 20 Version 10-1 (2010-01-11)

parties.

(iii) In situations other than (i) and (ii) above, profit must not be allowed on the transfer price component of the total costs of the final product sold to Canada.

(e) Where necessary, common ownership control must be determined by reference to the latest

issue of appropriate trade surveys (e.g. Financial Post Survey of Industrials, Moody's Industrials, etc.), as confirmed by means of a certification from the company as to control (use SACC Manual clause A9112C for this purpose). Ownership control is presumed in cases where at least 50 percent of the voting rights are held by the affiliate.

10.60 Special Production Tooling and Special Test Equipment (2010-01-11) (a) No profit is allowed on Special Production Tooling (SPT) or Special Test Equipment (STE) which

is purchased by a contractor for use under a contract, or purchased or otherwise acquired by its subcontractors for use under approved subcontracts.

(b) When the production of the end product involves prior or concurrent expenditures for SPT or STE

under a separate agreement, or pursuant to a clause in a contract or subcontract, a profit of up to 5 percent may be allowed on all SPT fabricated in a plant owned or operated by a contractor.

No profit is allowed on the cost of purchased equipment incorporated or built into the STE.

(c) Expenditures incurred by a contractor in connection with purchased SPT or STE (other than the

cost of such tooling or equipment) are usually recovered as preproduction expenses or factory overhead.

Administrative overhead is not accepted on STE.

Purchased tooling should be included in the cost of sales base for the distribution of administrative overhead.

(d) Since the cost of SPT or STE represents part of the cost of the end product being acquired by a

client, payment is made out of the client's funds appropriated for the purchase of that end product.

(e) SPT may be acquired on a firm price or a cost reimbursable basis irrespective of the price

arrangement for the end product for which the tooling is required.

When SPT is to be provided on a cost basis:

(i) the cost of such tooling is to be in accordance with the Contract Cost Principles 1031-2;

(ii) a dollar limit is to be placed on the cost of the tooling with the provision that the cost is not to exceed this limit until further authorization is obtained.

10.65 Calculation of Profit on Negotiated Contracts (2010-01-11) (a) The policy and guidelines for the calculation of the amount of profit applicable to negotiated

contracts and parts thereof with Canadian suppliers, for both goods and services, are detailed in 10.65(b) to 10.65.35. Contracts valued under $50,000 do not require negotiation of profit under this section.

Chapter 10 - Cost and Profit

Supply Manual Page 15 of 20 Version 10-1 (2010-01-11)

There are differences in the guidelines for contracts with total costs between $50,000 and $249,999, and for contracts with total costs of $250,000 or more.

For agency and resale outlets, the procedures for profit determination in 10.50.15 apply.

(b) When for any reason it is not possible to establish an acceptable basis of price by competition or

a fair and reasonable price assessment, the price must be negotiated. The object of price negotiation is to duplicate a fair market price, while establishing a realistic division of responsibilities and risks between the contractor and Canada.

A fair market price for non-competitive contracts for the procurement of goods or services (other than commercial goods or services) must be negotiated. The object of such negotiation is to arrive at a price which is considered to be fair and reasonable in the circumstances based upon an estimate of the costs, to be incurred in the performance of the contract, computed in accordance with the Contract Cost Principles 1031-2, plus a fair profit. A fair profit is an amount no greater than that calculated under this section.

There are the following exceptions:

(i) Generally, all contracts placed on behalf of the Canadian Commercial Corporation

(CCC). However, if the ultimate client for the CCC contract is the United States Department of Defense or National Aeronautics and Space Administration (NASA) or the United Kingdom Ministry of Defence, the profit may be calculated in accordance with this section.

(ii) Contracts or parts thereof for which the price is based on catalogues, price lists or fee

schedules where only discounts are subject to negotiation. (c) Profit levels will vary:

(i) to recognize the cost of money associated with the capital employed by the contractor in performance of the contract;

(ii) to recognize the levels of general business and contractual risk assumed by the

contractor in performance of the contract.

The calculation of the amount of profit attributable to each of the above factors must normally be made in accordance with the following guidelines.

10.65.1 Return on Capital Employed (2010-01-11) The return on capital employed will be determined in two parts: (a) return on fixed capital employed, and (b) return on working capital employed. The determination is different for contracts with total costs between $50,000 and $249,999 and for contracts with total costs of $250,000 or more. (See 10.65.10.) 10.65.5 Return on Fixed Capital Employed (between $50,000 and $249,999) (2010-01-11) (a) For contracts with total costs between $50,000 and $249,999, the return on fixed capital

employed is calculated as follows:

Chapter 10 - Cost and Profit

Supply Manual Page 16 of 20 Version 10-1 (2010-01-11)

If machinery and/or equipment owned by the contractor are used on a regular basis in the manufacture of

the product(s) or provision of the service(s) being acquired under the contract, an amount equivalent to 1 percent of total allowable costs will be awarded as a return on fixed capital employed.

10.65.10 Return on Working Capital Employed (between $50,000 and $249,999) (2010-01-11) The following rates applied to the total contract costs will be used to provide for a return on working capital employed: (a) if there is no provision for progress payments, advance payments or milestone payments - 3

percent; (b) if there is a provision for progress payments or milestone payments - 1.5 percent; (c) if there is a provision for advance payments - 1.5 percent (NOTE: The profit factor of 1.5 percent

will apply only to total costs less amount of advance payments.); (d) if there is a provision for both progress payments and advance payments - 0 percent. 10.65.15 Return on Fixed Capital Employed ($250,000 or more) (2010-01-11) (a) For contracts with total costs of $250,000 or more, the return on fixed capital employed is

calculated as follows:

The provision of a return on fixed capital employed is intended not only to compensate contractors for the cost of money associated with the fixed capital employed on the contract but also to encourage investment in new capital equipment, the result of which is generally greater productivity and consequently reduced costs to Canada.

(i) For the purpose of this section, the fixed capital employed is defined as the net book

value of fixed assets, less:

(A) land and any intangible assets, (B) any fixed assets not in use such as idle plant, and (C) any surplus value arising from re-appraisal.

(ii) The determination of fixed capital employed will be as follows:

(A) Determine the percentage:

(A/B) x 100%

A = overhead recovery base allocated to the contract B = total budgeted amount of recovery base

(B) Apply the percentage in (A) to the net book value of fixed assets.

Such determination will be performed in accordance with the format set out in Annex 10.1.

(iii) The rate of return to be applied to the fixed capital employed applicable to the contract

will be 1.7 times the corporate bond rate, which will be published monthly by the Policy,

Chapter 10 - Cost and Profit

Supply Manual Page 17 of 20 Version 10-1 (2010-01-11)

Risk, Integrity and Strategic Management Sector (PRISMS). The rate used will be the latest rate published at the date that the contractor's price proposal is firmed up. In the event that the published rate at the time of contract award has changed by more than one full point, up or down, this rate will be used to recompute the return.

(iv) The rate used in the contractor's price proposal will be the latest figure published at the

time the price proposal is submitted. In order to conform to (iii) above, it is necessary that the following clause be included in the price proposal:

"The price quoted includes an amount of profit using a corporate bond rate of ____ percent. In the event that the corporate bond rate, as published by the Policy, Risk, Integrity and Strategic Management Sector, at the time of contract award, has changed by more than one full point, up or down from this rate, the price will be adjusted to reflect such rate."

10.65.20 Return on Working Capital Employed ($250,000 or more) (2010-01-11) (a) The amount of working capital employed applicable to a particular contract is defined as all

allowable contract costs (exclusive of depreciation where considered significant) less contract revenue (exclusive of profit).

For contracts with total costs of $250,000 or more, the return on working capital employed is calculated as follows:

(i) During negotiations, a schedule of the estimated net working capital for the contract, as

defined above, on a month-by-month basis, will be determined and agreed to between the contracting officer and the contractor.

(ii) The rate of return to be applied to the cumulative monthly amounts of working capital is

defined below. However, as this is an annual rate of return, one-twelfth only of the rate is applicable to each monthly amount. For ease of calculation, the equivalent formula, to be used for determining the return on working capital employed on a particular contract, is as follows:

(A/12) x B A = sum of the cumulative monthly working capital amounts B = prescribed rate

(iii) The rate of return to be applied to working capital employed applicable to the contract will

be the chartered bank prime rate. PRISMS will publish this rate weekly. The rate used will be the latest rate published at the date that the contractor's price proposal is firmed up. In the event that the published rate at the time of contract award has changed by more than one full point, up or down, this rate will be used to recompute the return.

(iv) The rate used in the contractor's price proposal will be the latest figure published at the

time the price proposal is submitted. The following clause must be included in the price proposal:

"The price quoted includes an amount of profit using the chartered bank prime rate of _____ percent. In the event that the chartered bank prime rate, as published by the Policy, Risk, Integrity and Strategic Management Sector, at the time of contract award, has changed by more than one full point, up or down from this rate, the price will be adjusted to reflect such rate."

Chapter 10 - Cost and Profit

Supply Manual Page 18 of 20 Version 10-1 (2010-01-11)

(b) Specific guidelines in regard to the cost base for purposes of all profit calculations are as follows:

(i) Direct material costs should include the costs of all materials purchased specifically for the contract together with the costs of any other materials issued specifically for the contract from the contractor's own inventories except Accountable Advance (AA) spares embodied. Direct materials must not include the value of Government Furnished (GF) nor Contract Issue (CI) materials. However, direct labour and overhead costs associated with the acquisition, stocking and handling of GF and CI materials and AA spares embodied may be included under the appropriate cost element for profit purposes.

(ii) Overhead in this context includes not only plant or factory overhead, but engineering,

material handling, general and administrative or any other overheads as appropriate to and allowable on the contract.

(iii) All other allowable costs are those costs not considered to be direct material, direct

labour or overhead but nevertheless are an appropriate and allowable direct charge to the contract. Royalty payments and the goods and services tax or the harmonized sales tax, although they may be an appropriate and allowable direct charge to the contract, must not be included for the purpose of profit calculation.

For more information, contracting officers should consult Annex 10.2.

10.65.25 General Business Risk (2010-01-11) (a) The award of profit under this factor is intended to recognize the level of effort a contractor makes

in the management of all the resources required to perform the contract in an efficient and economical manner.

(b) The level of effort is considered to vary according to the elements of cost and is reflected in the

following rates of profit to be applied to the costs in each element:

(i) direct Materials: 1.5 percent (ii) subcontracts: 2 percent (iii) accountable advance spares embodied: 2 percent (iv) direct labour: 4 percent (v) overhead: 4 percent (vi) all other allowable costs: 1.5 percent

10.65.30 Contractual Risk (2010-01-11) (a) The rates of profit to be paid for contractual risk will depend upon the basis of payment selected

for each individual line item of the contract, or part thereof, and the cost base associated with each distinct basis of payment.

(b) The basis of payment determines the maximum level of profit, and requires the following

consideration of different factors in arriving at the appropriate profit level.

(i) firm price and firm base price with economic price adjustments (7 percent maximum) - consider:

(A) the ability of Canada to state its requirements in the form of a well-defined

specification;

(B) the ability of the contractor to convert Canada’s specification into a

Chapter 10 - Cost and Profit

Supply Manual Page 19 of 20 Version 10-1 (2010-01-11)

comprehensive statement of work;

(C) the ability of Canada and the contractor to precost the statement of work;

(D) the duration of the contract and its effect on the predictability of labour and material costs and overhead distribution, taking into account whether protection in this regard is provided to the contractor by the inclusion in the contract of a provision for economic price adjustment (firm base price with economic price adjustments basis of payment);

(E) whether the final determination of the firm price takes place before or after a

portion of the contract period has elapsed.

(ii) fixed time rate with ceiling price (4.5 percent maximum) and without ceiling price (3.5 percent maximum) - consider:

(A) the duration of the contract and its effect on the predictability of the labour and

overhead rates;

(B) if a ceiling price is included, the familiarity of the contractor with the work being performed under the contract resulting from the previous manufacture of the same or similar products, or the provision of the same or similar services;

(C) whether the final determination of the fixed time rates takes place before or after

a portion of the contract period has elapsed.

(iii) cost reimbursable with incentive fee (4.5 percent maximum) - consider:

(A) the degree to which the difference between the target fee and the maximum fee will provide an incentive for more effective cost control and contract performance by the contractor;

(B) whether the agreement on target costs and target fee was reached before or

after a portion of the contract period has elapsed.

To calculate the bonus on target incentive fee contracts: the maximum fee for cost reimbursable with incentive fee contracts must consist of the target fee plus an added amount which brings the total profit for the General Business Risk and Contractual Risks Factors to a maximum of 10 percent of target costs.

(iv) cost reimbursable with fixed fee with ceiling price (4.5 percent maximum) and without

ceiling price (1 percent maximum) - consider:

(A) the reliability of the cost estimate used for determining the fixed fee, taking into account the duration of the contract and its effect on the predictability of costs, and provided that no "swing points" at which the fixed fee will be renegotiated are included in the contract;

(B) if a ceiling price is included, the familiarity of the contractor with the work being

performed under the contract resulting from the previous manufacture of the same or similar products, or the provision of the same or similar services;

(C) whether the fixed fee was determined before or after a portion of the contract

period has elapsed.

(v) cost reimbursable with no fixed fee and no ceiling price (0 percent): there is no business

Chapter 10 - Cost and Profit

Supply Manual Page 20 of 20 Version 10-1 (2010-01-11)

or contractual risk. 10.65.35 Total Profit (2010-01-11) (a) The total amount of profit awarded under all factors must in no event exceed 20 percent of the

total contract costs. (b) The amount of profit for all factors should be calculated separately and included in the price of

each line item with a distinct basis of payment in the contract (see examples in Annex 10.1.1 and Annex 10.3).

Annex 10.1 - Determination of Fixed Capital Employed Applicable to a Contract

Supply Manual Page 1 of 2 Version10-1 (2010-01-11)

Annex 10.1: Determination of Fixed Capital Employed Applicable to a Contract (2010-01-11) Contracts of $250,000 and more

LineNo.

Details A B C D E F TOTAL

1. Amounts for depreciation.

2. Net Book Value of Fixed Assets as at beginning of fiscal year. $

3. Re-allocation of cost centres to other cost centres as required by the entrepreneur's cost accounting system. $

4. Adjusted Net Book Value of Fixed Assets by cost centres. $

5. Bases used for recovery of overhead.

6. Total amount of each overhead recovery base for the fiscal year.

7. Amount of each overhead recovery base allocated to this contract.

8. Percentage of Line 7 to Line 6. %

9. Net Book Value of Fixed Assets applicable to the contract. Line 8 by Line 4. $

Notes: Line 1 Amounts for depreciation taken from the contractor's overhead budget in total or by cost centre

as agreed during negotiations. Line 2 Total amount of the Net Book Value of Fixed Assets (excluding land, and any intangible assets)

as found in the contractor's balance sheet as at the end of the fiscal year previous to that being negotiated. If this balance sheet is not available at the time of negotiations, the amount may be estimated. Subsequently, the amount is allocated to cost centres either in accordance with the contractor's records or, if not recorded, in accordance with the depreciation amounts at Line 1 (allocation required only in the event that depreciation by cost centre was agreed during negotiations).

Line 3 The necessary re-allocation of the amounts at Line 2 if required by the contractor's cost

accounting system. Line 4 The amounts for Net Book Value of Fixed Assets at Line 2 as adjusted by Line 3. Line 5 The base for recovery of overhead costs in total or for each cost centre as per the contractor's

cost accounting system. Line 6 The total amount of each overhead recovery base included in the contractor's budget for the

fiscal year as agreed during negotiation. Line 7 The amount for each overhead recovery base allocated to the particular contract as agreed

Annex 10.1 - Determination of Fixed Capital Employed Applicable to a Contract

Supply Manual Page 2 of 2 Version10-1 (2010-01-11)

during negotiations. Line 8 The percentage of Line 7 to Line 8. Line 9 The amounts determined by applying the percentages at Line 8 to the amount for the Net Book

Value of Fixed Assets at Line 4. The total amount on this line is the equivalent of the Fixed Capital Employed Applicable to the contract in the particular fiscal year.

If the contract period extends over more than one of the contractor's fiscal years, the calculation will have to be made for each fiscal year involved, and the sum of the Fixed Capital Employed Applicable to the contract determined for each fiscal year will be the equivalent of the Total Fixed Capital Employed Applicable to the particular contract. If a contractor does not accumulate overhead by cost centre, the above calculation should be done in total only. Two examples of the calculation could be found in Annex 10.1.1.

Annex 10.1.1 - Examples to Determine the Fixed Capital Employed

Supply Manual Page 1 of 12 Version 10-1 (2010-01-11)

Annex 10.1.1: Examples to Determine the Fixed Capital Employed (2010-01-11) (Contracts of $ 250,000 and more) Examples of Calculation Example 1 - Assumptions: 1. The period of contract performance is from April 1, 1982 to March 31, 1983. 2. The contractor's fiscal year ends on March 31. 3. The contractor accumulates costs in 5 cost centres and the amount of depreciation included in

the agreed budget in the first year 1982/83 are as follows:

Cost Centre Amount of Depreciation Repair and Overhaul $28,500 Material Handling $500 G & A $1,000 Engineering $3,000 Occupancy $7,000

4. The costs accumulated in the Occupancy cost centre are subsequently re-allocated to all other

cost centres on the basis of area occupied which is as follows:

Cost Centre Re-allocated Percentage

Repair and Overhaul 65%

Material Handling 15%

G & A 10%

Engineering 10%

Occupancy 100%

5. The costs accumulated in the Engineering cost centre are subsequently re-allocated to the Repair

and Overhaul cost centre. 6. The Net Book Value of Fixed Assets (excluding land and any intangible assets) appearing in the

contractor's balance sheet as at March 31, 1982 is $285,000. 7. The recovery base in each cost centre and the amounts thereof for fiscal year 1982/83 are as

follows:

Cost Centre Recovery Base

Repair and Overhaul - Direct Labour Costs

$600,000

Material Handling - Total Material Costs

$1,500,000

Annex 10.1.1 - Examples to Determine the Fixed Capital Employed

Supply Manual Page 2 of 12 Version 10-1 (2010-01-11)

G & A - Costs of Production $3,500,000

8. The amounts of each recovery base allocated to this contract are:

Cost Centre Recovery Base

Repair and Overhaul $272,700

Material Handling $750,000

G & A $1,602,900

Example 1

Cost Centres Details F/Y 1982/83

Repair Overhaul

$

Material Handling

$ G & A

$ Engineering

$ Occupanc

y $

Total $

1. Amounts for depreciation by Cost Centre.

28,500 500 1,000 3,000 7,000 40,000

2. Net Book Value of Fixed Assets as at March 31, 1982

203,063 3,562 7,125 21,375 49,875 285,000

3. Re-allocation of cost centres

Occupancy 32,419 7,481 4,988 4,987 (49,875) --

Engineering 26,362 -- -- (26,362) -- --

4. Adjusted Net Book Value of Fixed Assets by cost centres.

261,844 11,043 12,113 -- -- 285,000

5. Bases for recovery of overhead

Direct Labour Costs

Total Material Costs

Costs of Production

6. Total amount of each overhead recovery base for Fiscal Year 1982/83

600,000 1,500,000 3,500,000

7. Amount of each overhead recovery base for Fiscal Year 1982/83 allocated to this contract.

272,700 750,000 1,602,000

8. Percentage of Line 7 to Line 6. 45.5% 50.0% 45.8%

9. Net Book Value of Fixed Assets Applicable to the contract Line 8 x

119,139 5,522 5,548 130,209

Annex 10.1.1 - Examples to Determine the Fixed Capital Employed

Supply Manual Page 3 of 12 Version 10-1 (2010-01-11)

Line 4.

FIXED CAPITAL EMPLOYED APPLICABLE TO CONTRACT $130,209

Example 2 - Assumptions: 1. The period of contract performance is from July 1, 1982 to December 31, 1983. 2. The contractor's fiscal year ends on December 31. 3. The contractor accumulates costs in 6 cost centres and the amounts for depreciation included in

the agreed budget for each fiscal year are:

F/Y 1982$ F/Y 1983$

Manufacturing 30,000 35,000

Engineering 6,000 5,900

Material Handling 5,000 4,500

G & A 3,500 4,000

Inspection 1,000 900

Occupancy 10,000 9,500

Total 55,500 59,800

4. The costs accumulated in the Occupancy cost centre are subsequently re-allocated to all other

cost centres on the basis of area occupied which is as follows:

Cost Centre Re-Allocated Percentage

Manufacturing 50%

Engineering 15%

Material Handling 15%

G & A 10%

Inspection 10%

Total 100%

5. The costs accumulated in the Inspection cost centre are subsequently re-allocated to the

Manufacturing cost centre. 6. The Net Book Value of Fixed Assets (excluding land and any intangible assets) appearing on the

contractor's balance sheet as at December 31, 1981 is $400,000, and estimated for the year ending December 31, 1982 is $405,000.

7. The recovery base for overhead in each cost centre and the amount thereof for each fiscal year

are as follows:

F/Y 1982 F/Y 1983

Annex 10.1.1 - Examples to Determine the Fixed Capital Employed

Supply Manual Page 4 of 12 Version 10-1 (2010-01-11)

Manufacturing - Direct Labour Costs $300,000 $440,000

Engineering - Direct Labour Hours 100,000 hours 100,000 hours

Material Handling - Total Material Costs $700,000 $650,000

G & A - Costs of Production $3,500,000 $3,700,000

8. The amounts of each recovery base allocated to this contract in each fiscal year are:

F/Y 1982 F/Y 1983

Manufacturing $65,000 $110,000

Engineering 6,000 hours 600 hours

Material Handling $75,000 $125,000

G & A $350,000 $484,000

Fiscal Year Ending December 31, 1982 (1st Year) Example 2 (cont’d...)

Cost Centres Details F/Y 1982/83

Manufacturing $

Engineering $

Material Handling

$

G & A $

Inspection$

Occupancy$

Total $

1. Amounts for depreciation by Cost Centre.

30,000 6,000 5,000 3,500 1,000 10,000 55,500

2. Net Book Value of Fixed Assets as at March 31, 1981

216,218 43,244 36,036 25,225 7,207 72,070 400,000

3. Re-allocation of cost centres

Occupancy 36,035 10,810 10,811 7,207 7,207 (72,070) --

Inspection 14,414 -- -- -- (14,414) -- --

4. Adjusted Net Book Value of Fixed Assets by cost centres.

266,667 54,054 46,847 32,432 -- -- 400,000

5. Bases for recovery of overhead.

Direct Labour Costs

Direct Labour Hours

Total Material Costs

Cost of Produc

tion

6. Total Amount of each overhead recovery basis for Fiscal Year 1982.

300,000 100,000 hours

700,000 3,500,000

7. Amount of each overhead recovery base for Fiscal Year 1982 allocated to this

65,000 6,000 hours 75,000 350,000

Annex 10.1.1 - Examples to Determine the Fixed Capital Employed

Supply Manual Page 5 of 12 Version 10-1 (2010-01-11)

contract

8. Percentage of Line 7 to Line 6.

21.7% 6.0% 10.7% 10.0%

9. Net Book Value of Fixed Assets Applicable to this contract in Fiscal Year 1982. Line 8 x Line 4.

57,867 3,243 5,013 3,243 69,366

FIXED CAPITAL EMPLOYED APPLICABLE TO THIS CONTRACT $69,366

Fiscal Year Ending December 31, 1983 (2nd Year) Example 2 (cont’d...)

Cost Centres Details F/Y 1983

Manufac-turing

$

Engineer-ing$

Material Handling

$

G & A $

Inspection$

Occupancy$

Total $

1. Amounts for depreciation by Cost Centre.

35,000 5,900 4,500 4,000 900 9,500 59,800

2. Net Book Value of Fixed Assets as at March 31, 1982

237,041 39,958 30,476 27,091 6,095 64,339 405,000

3. Re-allocation of cost centres

Occupancy 32,169 9,651 9,651 6,434 6,434 (64,339)

Inspection 12,529 -- -- -- (12,529) -- --

4. Adjusted Net Book Value of Fixed Assets by cost centres.

281,739 49,609 40,127 33,525 -- -- 405,000

5. Bases for recovery of overhead.

Direct Labour Costs

Direct Labour Hours

Total Material Costs

Cost of production

6. Total Amount of each overhead recovery base for Fiscal Year 1983.

440,000 100,000 hours

650,000 3,700,000

7. Amount of each overhead recovery base for Fiscal Year 1983 allocated to this contract.

110,000 600 hours 125,000 484,000

8. Percentage of Line 7 to Line 6.

25.0% 0.6% 19.2% 13.1%

9. Net Book Value of Fixed Assets Applicable to this contract in Fiscal Year 1983. Line 8 x Line 4.

70,435 298 7,704 4,392 82,829

Annex 10.1.1 - Examples to Determine the Fixed Capital Employed

Supply Manual Page 6 of 12 Version 10-1 (2010-01-11)

FIXED CAPITAL EMPLOYED APPLICABLE TO THIS CONTRACT 82,829

Summary

Fixed Capital Employed Amount

Fixed Capital Employed Applicable to this Contract - F/Y 1982 $69,366

Fixed Capital Employed Applicable to this Contract - F/Y 1983 $82,829

Total $152,195

Example 3 - Assumptions: 1. Contract is for Repair and Overhaul in Plant and by Mobile Repair Party (MRP) 2. Bases of Payment are:

Cost Centre Basis of Payment

Repair and Overhaul in Plan - Fixed Time Rate

Mobile Repair Party - Fixed Time Rate

Company Furnished Materials - Actual Costs plus Mark Up

Accountable Advances (AA)

Spares Embodied - Mark Up only

3. Contract Period is 12 months. 4. Total Negotiated Contract Costs are:

Cost Centre Labour Cost Negotiated Contract Cost

Company Furnished Materials $300,000

AA Spares Embodied (450,000)

In-Plant Repair and Overhaul:

Direct Labour 30,000 hours @ $ 9 per h 270,000

Overhead 30,000 hours @ $18 per h 540,000

Mobile Repair Party

Direct Labour 300 hours @ $ 9 per h 2,700

Overhead 300 hours @ $ 9 per h 2,700

Material Handling

On Company Furnished Materials $300,000 @ 5% 15,000

On AA Spares Embodied $450,000 @ 5% 22,500

G & A

On Company Furnished Materials $300,000 @ 10% 30,000

Annex 10.1.1 - Examples to Determine the Fixed Capital Employed

Supply Manual Page 7 of 12 Version 10-1 (2010-01-11)

On AA Spares Embodied $450,000 @ 10% 45,000

On In-Plant Repair and Overhaul $810,000 @ 10% 81,000

On MRP $5,400 @ 10% 540

On Material Handling Costs $37,500 @ 10% 3,750

Total Contract Costs $1,313,190

5. Summary of Contract Costs $ $

(a) Company Furnished Materials

Laid Down Costs 300,000

Plus 5% Material Handling 15,000

315,000

Plus 10% G & A 31,500 346,500

(b) Accountable Advance Spares Embodied:

Laid Down Costs (450,000)

Plus 5% Material Handling 22,500

472,500

Plus 10% G & A 47,250 69,750

(c) Repair and Overhaul:

Labour 30,000 hours @ $27.00 per hour 810,000

Plus 10% G & A 2.70 81,000 891,000

Costing Rate 29.70

(d) Mobile Repaid Party:

Labour 300 hours @ $18.00 per hour 5,400

Plus 10% G & A 1.80 540 5,940

Costing Rate 19.80 Total 1,313,190

Company Furnished Materials 300,000

Direct Labour 272,700

Plant Overhead 542,700

Material Handling Overhead 37,500

1,152,900

G & A 160,290

Total 1,313,190

6. Fixed Capital Employed applicable to the contract is $130,209 (see Example 1 in this Annex)

broken down as follows:

Cost Centre Amount Percentage Fixed Capital Employed

Annex 10.1.1 - Examples to Determine the Fixed Capital Employed

Supply Manual Page 8 of 12 Version 10-1 (2010-01-11)

Company Furnished Materials $346,500 27.8% $36,198

Repair and Overhaul 891,000 71.7% 93,360

Mobile Repair Party 5,940 0.5% 651

Total $1,243,440 100.0% $130,209

7. Latest Bond Rate published by the Director, Acquisition Program Integrity Secretariat (APIS), is

10%. 8. Working Capital Employed applicable to the contract is $290,376 (see Example 1 in Annex 10.2),

broken down as follows:

Cost Centre Amount Percentage Working Capital

Employed

Company Furnished Materials $346,500 27.8% $80,724

Repair and Overhaul 891,000 71.7% 208,200

Mobile Repair Party 5,940 0.5% 1,452

Total $1,243,440 100.0% $290,376

9. Latest Chartered Bank Prime Rate published by the Director, APIS, is 11%. 10. The contractor has been performing this or similar Repair and Overhaul work for a number of

years, and the contract price was negotiated and agreed to prior to work commencing. As a result, the rate for contractual risk on the fixed time rate work is assessed at 3%.

Profit on Company Furnished Materials

Profit Factor Measurement Base

Details Amount $

Profit Rate

%

Profit Amount

$

Fixed Capital Employed 36,198 1.7 x 10% 6,154

Working Capital Employed Applicable to Contract

80,724 11 8,880

Return on Capital Employed

Total 116,922 15,034

Direct Materials 300,000 1.5 4,500

Material Handling Overhead 15,000 4 600

G & A 31,500 4 1,260

General Business Risk

Total Costs 346,500 6,360

Cost Reimbursable - No Ceiling 300,00 0 --

Material Handling Overhead and G & A - Fixed Rates

46,500 3 1,395

Contractual Risk

Total Costs 346,500 1,395

Annex 10.1.1 - Examples to Determine the Fixed Capital Employed

Supply Manual Page 9 of 12 Version 10-1 (2010-01-11)

Total Profit = 6.6% of Total Costs $22,834

Mark Up for Company Furnished Materials

Laid Down Cost $100.00

Material Handling @ 5% 5.00

105.00

G & A @ 10% 10.50

115.50

Profit @ 6.6% 7.62

Mark Up 23.12% $123.12

Profit on Accountable Advance Spares Embodied

Factor de Profit Measurement Base

Details Amount $

Profit Rate %

Profit $

Return on Capital Employed

N/A -- -- --

General AA Spares 450,000 2 9,000

Material Handling Overhead 22,500 4 900

G & A 47,250 4 1,890

General Business Risk

Total Costs 519,750 11,790

Contractual Risk Cost Reimbursable - No Ceiling Risk Price Basis of Payment

519,750 0 --

Total Profit = 2.3 % Total Costs $11,790

Mark Up for AA Spares Embodied

Laid Down Costs $100.00

Material Handling @ 5% 5.00

105.00

G & A @ 10% 10.50

115.50

Profit @ 2.3% 2.66

Mark Up 18.25% $118.16

Profit on Repair and Overhaul

Profit Factor Measurement Base

Details Amount$ Profit Rate

%

Profit Amount $

Annex 10.1.1 - Examples to Determine the Fixed Capital Employed

Supply Manual Page 10 of 12 Version 10-1 (2010-01-11)

Fixed Capital Employed Applicable to Contract

93,360 1.7 x 10% 15,871

Working Capital Employed Applicable to Contract

208,200 11 22,902

Return on Capital Employed

Total Capital Employed 301,560 38,773

Direct Labour 270,000 4 10,800

Plan Overhead 540,000 4 21,600

G & A 81,500 4 3,240

General Business Risk

Total Costs 891,000 35,640

Contractual Risk Fixed Time Rate Basis of Payment

891,000 3 26,730

Total Profit = 11.4 % of Total Costs $101,143

Fixed Time Rate for Repair and Overhaul

Direct Labour $9.00 per hour

Plant Overhead 18.00 per hour

27.00 per hour

G & A @ 10% 2.70 per hour

29.70 per hour

Profit @ 11.4% 3.39 per hour

Selling Price $33.09 per hour

Profit on Mobile Repair Party

Profit Factor Measurement Base

Details Amount $

Profit Rate

%

Profit Amount

$

Fixed Capital Employed Applicable to Contract

651 1.7 x 10% 111

Working Capital Employed Applicable to Contract

1,452 11 160

Return on Capital Employed

Total Capital Employed 2,103 271

Direct Labour 2,700 4 108

Plan Overhead 2,700 4 108

G & A 540 4 22

General Business Risk

Total Costs 5,940 238

Contractual Risks Fixed Time Rate Basis of Payment

5,940 3 178

Total Profit = 11.6 % of Total Costs $687

Annex 10.1.1 - Examples to Determine the Fixed Capital Employed

Supply Manual Page 11 of 12 Version 10-1 (2010-01-11)

Fixed Time Rate for Mobile Repair Party

Direct Labour $9.00 per hour

Plant Overhead 9.00 per hour

18.00 per hour

G & A @ 10% 1.80 per hour

Costing Rate 19.80 per hour

Profit @ 11.6% 2.30 per hour

Selling Price $22.10 per hour

Profit Summary

Company

Furnished Material

$

AA Spares Embodied

$

Repair and Overhaul

$

Mobile Repair Party

$

Total$

Total Costs 346,500 69,750 891,000 5,940 1,313,190

Return on Capital Employed % of Total Costs

15,034 4.3%

---- 38,773 4.4%

271 4.6%

54,078 4.1%

General Business Risk % of Total Costs

6,360 1.8%

11,790 16.6%

35,640 4.0%

238 4.0%

54,028 4.1%

Contractual Risk % of Total Costs

1,395 0.4%

---- 26,730 3.0%

178 3.0%

28,303 2.2%

Total/All Factors % of Total Costs

22,789 6.6%

11,790 16.6%

101,143 11.4%

687 11.6%

136,409 10.4%

Example 4 - Assumptions: 1. The contract is for the design, manufacture and supply of 24 widgets. 2. The basis of payment is a firm unit price per widget. 3. The contract performance period is 18 months. 4. Total negotiated Contract Costs are:

Cost Centre Negotiated Contract Cost

Direct Materials $200,000

Subcontracts 40,000

Direct Labour 254,000

Overhead 340,000

G & A Overhead 116,000

Royalties 10,000

Annex 10.1.1 - Examples to Determine the Fixed Capital Employed

Supply Manual Page 12 of 12 Version 10-1 (2010-01-11)

Total $960,000

5. Fixed Capital Employed applicable to the contract is $152,195 (see Example 2 in this Annex). 6. The latest Bond Rate published by the Director, Acquisition Program Integrity Secretariat (APIS),

is 10%. 7. Working Capital Employed applicable to the contract is $298,667 (see Example 2 in Annex 10.2). 8. The latest Chartered Bank Prime Rate published by the Director, APIS, is 11%. 9. The widgets are of a completely new design, as requested by the government, and the contractor

is assuming maximum risk in agreeing to a firm price. However, the price was only reached 3 months after the commencement of work. Therefore, the rate of profit for contractual risk was assessed at 6.5%.

10. The G & A overhead contains an amount of $20,000 for allowable Research and General

Development.

Profit Factor Measurement Base

Details Amount $

Profit Rate

%

Profit Amount

$

Fixed Capital Employed Applicable to Contract

152,195 1.7 x 10% 25,873

Working Capital Employed Applicable to Contract

298,667 11 32,852

Return on Capital Employed

Total Capital Employed 450,862 58,726

Direct Materials 200,000 1.5 3,000

Subcontracts 40,000 2 800

Direct Labour 254,000 4 10,160

Overhead 456,000 4 18,240

Other Allowable Costs (Royalties) 10,000 -- --

General Business Risk

Total Allowable Costs 960,000 32,200

Contractual Risk Total Allowable Costs less Royalties

950,000 6.5 61,750

Total Profit = 15.9% of Total Costs $152,676

Total Cost $960,000

Profit 152,676

Total $1,112,676

= $ 46,361.50 per widget

Annex 10.2 - Examples to Determine the Working Capital Employed

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Annex 10.2: Examples to Determine the Working Capital Employed (2010-01-11) Contracts of $250,000 and more

Examples of Calculation Example 1 - Assumptions: 1. The contract period is 12 months. 2. Total contract costs are $1,313,190 of which $26,500 is for depreciation. 3. Costs incurred are on an even basis month by month. 4. Progress payments at 85% are paid monthly. 5. The time between forwarding the invoice and receipt of payment is 1 month.

Month Allowable Contract Cost excluding Depreciation

$

Contract Revenue Less Profit

$

Monthly Working Capital Employed

$

Cumulative Monthly Working Capital

Employed $

1 107,224 -- 107,224 107,224

2 107,224 -- 107,224 214,448

3 107,224 93,017 14,207 228,655

4 107,224 93,018 14,206 242,861

5 107,224 93,017 14,207 257,068

6 107,224 93,018 14,206 271,274

7 107,224 93,017 14,207 285,481

8 107,224 93,018 14,206 299,687

9 107,224 93,017 14,207 313,894

10 107,224 93,018 14,206 328,100

11 107,224 93,017 14,207 342,307

12 107,206 93,018 14,208 356,515

13 -- 93,017 (93,017) 263,498

14 -- 289,998 (289,998) (26,500)

1,286,690 1,313,190 (26,500) 3,484,512

Working Capital Employed Applicable to the Contract for profit purposes =

$3,484,512 12

$290,376

Example 2 - Assumptions: 1. Contract period is 18 months. 2. Contract is for the design, manufacture and supply of 24 widgets at a cost per widget of $40,000

Annex 10.2 - Examples to Determine the Working Capital Employed

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

for total costs of $960,000. 3. The total costs include an amount of $84,000 for depreciation. 4. Costs are incurred on a month by month basis as shown in the attached schedule. 5. Invoices are made on delivery and the delivery schedule is as follows:

1 widget in each of the 8th, 9th and 10th months. 2 widgets in each of the 11th and 12th months. 3 widgets in each of the 13th through 17th months inclusive. 2 widgets in the 18th month.

6. The time between forwarding the invoice and receipt of payment is 1 month.

Month Allowable Contract Cost excluding Depreciation

$

Contract Revenue Less Profit

$

Monthly Working Capital Employed

$

Cumulative Monthly Working Capital Employed

$

1 24,000 -- 24,000 24,000

2 24,000 -- 24,000 48,000

3 30,000 -- 30,000 78,000

4 30,000 -- 30,000 108,000

5 40,000 -- 40,000 148,000

6 40,000 -- 40,000 188,000

7 60,000 -- 60,000 248,000

8 60,000 -- 60,000 308,000

9 60,000 40,000 20,000 328,000

10 60,000 40,000 20,000 348,000

11 70,000 40,000 30,000 378,000

12 70,000 80,000 (10,000) 368,000

13 60,000 80,000 (20,000) 348,000

14 60,000 120,000 (60,000) 288,000

15 60,000 120,000 (60,000) 228,000

16 50,000 120,000 (70,000) 158,000

17 40,000 120,000 (80,000) 78,000

18 38,000 120,000 (82,000) (4,000)

19 -- 80,000 (80,000) (84,000)

876,000 960,000 (84,000) 3,584,000

Working Capital Employed Applicable to the Contract for profit purposes =

$3,584,000 12

$298,667

Annex 10.3 - Examples of Profit Calculations

Supply Manual Page 1 of 7 Version 10-1 (2010-01-11)

Annex 10.3: Examples of Profit Calculations (2010-01-11) Negotiated Contracts with total costs between $50,000 and $249,999 Example 1 - Assumptions: 1. The contract is for the investigation of certain phenomena and the preparation and delivery of a

report. 2. The basis of payment is cost reimbursable with a fixed fee. 3. The contractor performance period is 10 months. 4. The Estimated Contract Costs are:

Cost Centre Contract Cost

Direct Materials $500

Subcontracts $20,000

Direct Labour $40,000

Overhead $40,000

Total $100,500

5. No machinery or equipment owned by the contractor is used in performance of the contract. 6. No advance, progress or milestone payments are to be made to the contractor. 7. The contractor has little familiarity with the work to be performed from past experience and the

fixed fee was agreed before the work on the contract commenced, therefore the maximum of 1% for Contractual Risk has been given.

8. No research and general development nor product development costs are applicable and

allowable to the contract.

Profit Factor Measurement Base

Details Amount $

Profit Rate %

Profit $

Fixed Capital Employed N/A -- Return on Capital Employed

Working Capital Employed (No advance, progress or milestone payments)

100,500 3 3,015

Direct Materials 500 1.5 8

Subcontracts 20,000 2 400

Direct Labour 40,000 4 1,600

General Business Risk

Overhead 40,000 4 1,600

Annex 10.3 - Examples of Profit Calculations

Supply Manual Page 2 of 7 Version 10-1 (2010-01-11)

Total Allowable Costs 100,500 3,608

Contractual Risk Total Allowable Costs 100,500 1 1,005

Total Profit = 7.6% of Total Costs $7,628

Amount of Fixed Fee $7,628

Example 2 - Assumptions: 1. Contract is for Repair and Overhaul in Plant. 2. Basis of Payment are:

Cost Centre Basis of Payment

Repair and Overhaul in Plant - Fixed Time Rate

Company Furnished Materials - Actual Costs plus Mark Up

Accountable Advance Spares Embodied - Mark Up Only

3. Contract Period is 12 months. 4. Total Negotiated Contract Costs are:

Centre Cost Labour Cost Negotiated Contract Cost

Company Furnished Materials $50,000

A.A. Spares Embodied $100,000

In Plant Repair and Overhaul:

Direct Labour 5,000 hours @ $8 per hour 40,000

Overhead 5,000 hours @ $16 per hour 80,000

Material Handling

On Company Furnished Materials $50,000 @ 6% 3,000

On A.A. Spares Embodied $100,000 @ 6% 6,000

G & A

On Company Furnished Materials $50,000 @ 9% 4,500

On A.A. Spares Embodied $100,000 @ 9% 9,000

On In Plant Repair and Overhaul $120,000 @ 9% 10,800

On Material Handling Costs $9,000 @ 9% 810

Total Contract Costs $204,110

Summary of Contract Costs: $ $ $

(a) Company Furnished Materials:

Laid Down Costs 50,000

5.

Plus 6% Material Handling 3,000

Annex 10.3 - Examples of Profit Calculations

Supply Manual Page 3 of 7 Version 10-1 (2010-01-11)

53,000

Plus 9% G & A 4,770 57,770

(b) Accountable Advance Spares Embodied:

Laid Down Costs (LDC) 100,000

Plus 6% Material Handling (MH) on LDC 6,000

Plus 9% G & A on LDC plus MH 9,540 15,540

(c) Repair and Overhaul:

Labour 5,000 hours @ $24 per hour 120,000

Plus 9% G & A 10,800 130,800

Total 204,110

Company Furnished Materials 50,000

Direct Labour 40,000

Plant Overhead 80,000

Material Handling Overhead 9,000

179,000

G & A 25,110

Total 204,110

6. Machinery and equipment owned by the contractor is used in performance of the contract. 7. Progress payments are to be made on the contract. 8. The duration of the contract is twelve months and no difficulty has been experienced in predicting

labour and overhead rates. Furthermore, the fixed time rate was only negotiated and agreed two months after work commenced. Therefore the rate of profit for Contractual Risk is assessed at 22%.

9. No research and development costs are applicable and allowable on the contract.

Profit Factor Measurement Base

Details Amount $

Profit Rate%

Profit$

Fixed Capital Employed 57,770 1 578

Working Capital Employed (Progress Payments to be made)

57,770 1.5 867

Return on Capital Employed

Total 1,445

Direct Materials 50,000 1.5 750

Material Handling Overhead 3,000 4 120

G & A 4,770 4 191

General Business Risk

Total Allowable Costs 57,770 1,061

Annex 10.3 - Examples of Profit Calculations

Supply Manual Page 4 of 7 Version 10-1 (2010-01-11)

Profit Factor Measurement Base

Material ─ Cost Reimbursable No Ceiling

50,000 0 --

Material Handling Overhead and G & A ─ Fixed Rates

7,770 2.5 194

Contractual Risk

Total Costs 57,770 194

Total Profit= 4.7% of Total Costs $2,700

Mark Up to CF Materials

Laid Down Cost $100.00

Material Handling @ 6% 6.00

106.00

G & A @ 9% 9.54

115.54

Profit @ 4.7% 5.43

Mark Up 21% $120.97

Profit on A.A. Spares Embodied

Profit Factor Measurement Base

Details Amount $

Profit Rate

%

Profit Amount $

Fixed Capital Employed N\A -- -- Return on Capital Employed

Working Capital Employed N\A -- --

A.A. Spares 100,000 2 2,000

Material Handling Overhead 6,000 4 240

G & A 9,540 4 382

General Business Risk

Total Allowable Costs 115,540 -- 2,622

Contractual Risk Cost Reimbursable - No Ceiling Basis of Payment

-- -- --

Total Profit= 2.3% of Total Costs $2,622

Mark Up for A.A. Spares Embodied

Laid Down Cost $100.00

Material Handling @ 6% 6.00

106.00

G & A @ 9% 9.54

115.54

Annex 10.3 - Examples of Profit Calculations

Supply Manual Page 5 of 7 Version 10-1 (2010-01-11)

Profit @ 2.3% 2.66

Mark Up 18.2% $118.20

Profit on Repair and Overhaul

Profit Factor Measurement base

Details Amount$ Profit Rate

%

Profit Amount

$

Fixed Capital Employed 130,800 1 1,308

Working Capital Employed (Progress Payments to be made)

130,800 1.5 1,962

Return on Capital Employed

Total 3,270

Direct Labour 40,000 4 1,600

Plant Overhead 80,000 4 3,200

G & A 10,800 4 432

General Business Risk

Total Costs 130,800 5,232

Contractual Risk Fixed Time Rate Basis of Payment 130,800 2.5 3,270

Total Profit = 9.0 % of Total Costs $11,772

Fixed Time Rate for Repair and Overhaul

Direct Labour $8.00 per hour

Plant Overhead 16.00 per hour

24.00 per hour

G & A @ 9 % 2.16 per hour

Costing Rate 26.16 per hour

Profit @ 9.0 % 2.35 per hour

Selling Rate $28.51 per hour

Profit Summary

Company

Furnished Material$

AA Spares Embodied

$

Repair and Overhaul

$

Total$

Total Costs 57,770 15,540 130,800 204,110

Return on Capital Employed 1,445 ─ 3,270 4,715

% of Total Costs 2.5% ─ 2.5% 2.3%

General Business Risk 1,061 2,622 5,232 8,915

% of Total Costs 1.8% 16.9% 4.0% 4.4%

Contractual Risk 194 ─ 3,270 3,464

Annex 10.3 - Examples of Profit Calculations

Supply Manual Page 6 of 7 Version 10-1 (2010-01-11)

% of Total Costs 3.4% ─ 2.5% 1.7%

Total all Factors 2,700 2,622 11,772 17,094

% of Total Costs 4.7% 16.9% 9.0% 8.4%

Example 3 - Assumptions: 1. The contract is for the manufacture and supply of 180 widgets. 2. The basis of payment is a firm unit price per widget. 3. The contract performance period is 9 months. 4. The Negotiated Contracts Costs are:

Cost Centre Negotiated Contract Cost

Direct Materials $15,000

Direct Labour 20,000

Overhead 45,000

G & A 10,000

Subtotal 90,000

Royalties 3,000

Total $93,000

5. Machinery and equipment owned by the contractor is used in performance of the contract. 6. No advance, progress or milestone payments are to be made to the contractor. 7. The contractor has manufactured these particular widgets, which are to his own specifications, for

a number of years. As a result a reasonable rate contractual risk is considered to be 5.5%.

Profit Factor Measurement Base

Details Amount$ Profit Rate

%

Profit$

Fixed Capital Employed 90,000 1 900

Working Capital Employed (No advance, progress or milestone payments)

90,000 3 2,700

Return on Capital Employed

Total 3,600

Direct Materials 15,000 1.5 225

Direct Labour 20,000 4 800

Overhead 45,000 4 1,800

G & A 10,000 4 400

Royalties 3,000 -- --

General Business Risk

Total Costs 93,000 3,225

Contractual Risk Total Allowable Costs less Royalties 90,000 5.5 4,950

Total Profit = 12.7% of Total Costs $11,775

Annex 10.3 - Examples of Profit Calculations

Supply Manual Page 7 of 7 Version 10-1 (2010-01-11)

Total Cost $93,000

Profit 11,775

$104,775

= $582.08 per widget

Annex 10.4 - Reasons for the non-applicability of certain costs when utilizing Contract Cost Principles 1031-2

Supply Manual Page1 of 4 Version 10-1 (2010-01-11)

Annex 10.4: Reasons for the non-applicability of certain costs when utilizing Contract Cost Principles 1031-2

(2010-01-11) The following costs are considered non-applicable to government contracts when utilizing contract cost principles 1031-2 for the reasons given. (a) Allowances for interest on invested capital, bonds, debentures, bank or other loans together with

related bond discounts and finance charges.

Interest on borrowing, however represented, is not an acceptable cost. There are several reasons for this. In the first place, it is impossible to know how much of a contractor's capital should be properly provided by equity capital and how much by borrowed capital. If it were fair to allow interest on the borrowed capital (the financial reward to the lender), it would also seem fair to allow dividends (the financial reward to the investor). As dividends are recognized as a distribution of profits and therefore not an item of cost, so too with interest. Another consideration is the determination of what a contractor's capital properly should be, regardless of what it may actually happen to be. If interest were to be an acceptable cost, then a contractor financed by bonds, debentures or long term loans would be in an advantageous position compared to a contractor financed by the sale of equity. The government recognizes the cost-of-money (interest) associated with capital employed, however financed, as a factor in the calculation of profit.

(b) Legal, accounting and consulting fees in connection with financial re-organization, security issues, capital stock issues, obtaining of patents and licences and prosecution of claims against Canada.

A distinction should be drawn between the occasional expenses in relation to the raising of capital referred to here, which are not an acceptable cost, and the normal recurring expenses associated with the day-to-day management and recording of capital transactions, which are an acceptable cost. The latter expenses include those arising from the registry and transfer of share capital when they form part of the activity of the company secretary, costs of share holders' meetings, normal proxy solicitations, reports to shareholders, submission of required reports to government agencies, reasonable directors' fees and incidental expenses of directors and for committee meetings.

(c) Losses on investments, bad debts and expenses for the collection thereof

Since interest on capital invested in a contractor's business is not considered a business operating cost, neither is interest received by a contractor from funds invested outside the business considered a necessary credit against business operating costs. However, it also follows that any losses sustained by a contractor from these outside investments are not considered to be a business operating cost and thus are not acceptable on government contracts. Since the government as a debtor always pays its just debts, while it is only the commercial customers who have bad debts on a contractor's books, the losses due to bad debts and the expenses of collection thereof are not an acceptable cost to government contracts.

(d) Losses on other contracts

An excess of costs over income on a contract is not acceptable as a cost to any other contract. This principle also applies to application by a contractor of preferred overhead rates to certain contracts. Where this occurs, the excess of actual overhead over the preferred overhead amount will not be absorbed by government contracts.

(e) Federal and provincial income taxes, excess profit taxes or surtaxes and/or special expenses in

Annex 10.4 - Reasons for the non-applicability of certain costs when utilizing Contract Cost Principles 1031-2

Supply Manual Page2 of 4 Version 10-1 (2010-01-11)

connection therewith

In general, taxes which a contractor is required to pay and which are computed in accordance with sound accounting principles are acceptable costs, except for those included under this heading and/or other taxes in connection with financing, refinancing or re-organizing. On the other hand, all tax refunds, federal or provincial, are not required to be applied to reduce any related expenses.

(f) Provisions for contingencies

A contingency liability is a liability, which could arise on the happening of some event which may or may not occur. The initial provision or increase of funding for a contingent liability is considered to be a setting aside of earned profits to meet possible liabilities against future profits and not a business operating cost and therefore not an acceptable cost to government contracts. There is one exception to the above and that is in respect of the acceptability of costs for the provision of warranties. In any firm price contract, a contractor may include as a cost a reasonable amount to be set aside as a provision for the absorption of expenses associated with warranties given under the terms of the contract. In determining a reasonable amount, the following factors should be taken into account: (1) the amounts provided for warranty expenses should be separate for each distinctive

product or family of products; (2) the amounts provided should reflect, where available, the previous performance of the

product(s) in regard to warranty, using an average of three to five years; (3) the cost of any provision for warranty charged to a specific contract should reflect any

difference in the warranty period from that normally granted by a contractor on the product(s); and

(4) the costs should be net of any warranty contract sales to other customers.

(g) Premiums for life insurance on the lives of officers and/or directors where proceeds accrue to the contractor.

Similarly, proceeds from such life insurance need not be applied to reduce any cost to the contractor. Premiums on this type of insurance are not acceptable in government contracts since Canada does not derive any benefit therefrom.

(h) Amortization of unrealized appreciation of assets.

See Annex 10.5.2, "Depreciation". (i) Depreciation of assets paid for by Canada.

See Annex 10.5.2, "Depreciation". (j) Fines and penalties.

The amounts of fines and penalties imposed by federal, provincial or local authorities are not an acceptable cost to government contracts, for to accept such amounts would be tantamount to the government's supporting financially the offense which gives rise to the imposition of a fine or

Annex 10.4 - Reasons for the non-applicability of certain costs when utilizing Contract Cost Principles 1031-2

Supply Manual Page3 of 4 Version 10-1 (2010-01-11)

penalty.

(k) Expenses and depreciation of excess/idle facilities.

For this purpose, excess/idle facilities means the sum of all fixed assets appearing in a contractor's books of account which are not in use or for which no use is anticipated within a reasonable period. The expenses associated with the maintenance and/or the amounts of depreciation attributable to such fixed assets are not acceptable costs to government contracts. The expenses and/or depreciation of excess/idle facilities, as defined above, which the government has ordered retained for defence purpose, should be charged to a separate contract set up for that purpose.

(l) Unreasonable compensation for officers and employees.

The extra costs associated with the above are not an acceptable charge to government contracts. (m) Product development or improvement expenses not associated with the product being acquired

under the contract.

See Annex 10.5.7, "Research and Development Expenses". (n) Advertising, except reasonable advertising of an industrial or institutional character placed in

trade, technical or professional journals for the dissemination of information for the industry or institution.

(1) Assuming that a contractor's employees enhance their knowledge by reading trade,

technical or professional journals, and, in turn, government contracts benefit from this increased knowledge by way of increased efficiency and productivity, and that the advertising supports these publications, the expenses of advertising in this manner are an acceptable cost to government contracts, provided:

- it is in the nature of institutional or support advertising only, and not in the form of

display advertising; - it does not advertise a particular product or service of a contractor; - it is placed in trade, technical or institutional journals (financial publications are

primarily for investors, not for an industry or trade; and so do not qualify); and - the cost is reasonable.

(2) Expenses associated with the help wanted advertisements are an acceptable cost, provided they are reasonable and only for the purpose of recruiting personnel.

(3) The expenses associated with advertising through any media for other than (1) and (2)

above, are not an acceptable cost to government contracts. For this purpose, advertising media are: magazines, newspapers, television and radio programs or "commercials", brochures, direct mail, outdoor advertising, conventions, exhibits, free goods and samples.

(o) Entertainment expenses.

Although expenses for amusement, diversion, social activities and incidentals relating thereto are not acceptable, the expenses associated with meetings and conferences, when called for the dissemination of technical information or discussion of production problems and the like, are

Annex 10.4 - Reasons for the non-applicability of certain costs when utilizing Contract Cost Principles 1031-2

Supply Manual Page4 of 4 Version 10-1 (2010-01-11)

acceptable. These latter expenses may include those for meals, transportation, rental of meeting places and other incidentals provided they are reasonable.

(p) Donations, except those to charities registered under the Income Tax Act.

Donations, except those to political parties, are an acceptable cost provided they comply with the Income Tax regulations and are taken into overhead in the period they are paid rather than pledged.

(q) Dues and other memberships other than regular trade and professional associations.

The expenses associated with membership, either of the company as a whole or individual officers or employees in associations whose prime purpose is to provide entertainment or recreation, are not an acceptable cost to government contracts.

(r) Fees, extraordinary or abnormal, for professional advice in regard to technical, administrative or

accounting matters, unless approval from the Contracting Authority is obtained.

The fees associated with obtaining this assistance are not an acceptable cost, unless a contractor demonstrates, to the satisfaction of the contracting officer, the circumstances giving rise to the need for this assistance.

Annex 10.5.1 - Cost Interpretation Bulletin - Number 01

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Annex 10.5.1: Cost Interpretation Bulletin - Number 01 (2010-01-11) Excess Facilities Section 07 (k) of Contract Cost Principles 1031-2 provides that the expenses and depreciation of excess facilities shall be considered non-applicable costs to the contract. This Bulletin explains the costs that should be considered for the purpose of the application of the above section. Definition For the purpose of this Bulletin: "Facilities" in this context means plant or any portion thereof (including land integral to the operation), equipment individually or collectively, or any other tangible capital asset, wherever located, and whether owned or leased by the contractor. Interpretation The costs that are associated with facilities that are excess to the contractor's current needs should be examined to determine if these costs are non-applicable. In examining these costs, the following factors should also be considered: (a) Vacant, or largely vacant space; (b) Inactive or unused equipment; (c) Idle capacity required for stand-by purposes; (d) Indirect supporting staff no longer required either in full or part; (e) Other costs such as maintenance, repair, rent, property taxes, insurance, depreciation, etc.; (f) Management costs that should be reduced because of the reduction in active facilities.

Annex 10.5.2 - Cost Interpretation Bulletin - Number 02

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Annex 10.5.2: Cost Interpretation Bulletin - Number 02 (2010-01-11) Depreciation Section 04 (2) (e) of Contract Cost Principles 1031-2 provides that Indirect Costs (Overhead) may include a reasonable provision for depreciation. This Bulletin explains what is meant by a reasonable provision for depreciation for the purpose of the application of the above section. Definitions For the purpose of this Bulletin: "Depreciation" is the gradual exhaustion of the service capacity of fixed assets which is not restored by maintenance practices. It is the consequence of such factors as use, obsolescence, inadequacy, and decay. "Depreciation Base" is the asset laid down cost less estimated residual value, if any, plus applicable costs of installation and preparation for use. "Depreciation Accounting" is an accounting procedure in which the cost of a fixed asset less the estimated residual value, if any, is distributed over its estimated useful life in a systematic and rational manner. "Renewal (Replacement) Accounting" is the accounting procedure in which no charge for expense is made for a fixed asset until replacement occurs; the cost of the replacement rather than the cost of the original asset is then charged to expense. "Retirement Accounting" is an accounting procedure in which no charge to expense is made for a fixed asset until it is removed from service; the original cost is charged to overhead in the year the asset is retired. "Capital Cost Allowance" is a deduction, akin to depreciation, allowed in computing income for tax purposes. "Straight Line Depreciation" is the depreciation amount computed by dividing the depreciation base by the estimated number of periods of service life. "Diminishing, Declining or Reducing Balance Depreciation" is the depreciation amount computed by a constant fraction of the depreciated cost so that the depreciation base is written off by the estimated date of retirement. "Production Depreciation" is the depreciation amount computed by that portion of the depreciation base that the production, or use during the period, bears to the total estimated production or use to be obtained from the asset. "Sum-of-the years'-digits Depreciation" is the depreciation amount whereby the depreciation base is allocated to the individual years on a reducing basis, by multiplying it by a fraction in which the numerator is the number of years + 1 of estimated life remaining, and the denominator is the sum of the series of numbers representing the years in the total estimated life. "Asset Laid Down Cost" is the cost incurred by a contractor to acquire an asset. This includes the supplier's invoice price (less trade discount) plus any applicable charges for transportation, exchange,

Annex 10.5.2 - Cost Interpretation Bulletin - Number 02

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

customs duties, brokerage duties and applicable taxes. Interpretation To be considered reasonable any provision for depreciation should be determined in accordance with the following. 1. The amount should be calculated using one of the following methods on a consistent basis:

(a) Capital Cost Allowance; (b) Straight Line; (c) Diminishing, Declining or Reducing Balance; (d) Production; (e) Sum-of-the-years' digits. but for this purpose the following two methods are not acceptable: (f) Renewal (Replacement) Accounting; and (g) Retirement Accounting.

2. The amount calculated using Capital Cost Allowance (CCA) rates should be no higher than the basic CCA rates published by Canada Revenue Agency (CRA) for income tax purposes. From time to time, CRA permits the use of accelerated CCA rates for income tax purposes, but they are not permitted for 1031-2 purposes.

3. The total amount of depreciation for any one asset should not exceed 100 percent of that asset's

original cost. 4. In general, depreciation should be calculated and included in the cost of production only for

accounting periods subsequent to the asset being put into use. During the first year of use, the depreciation amount may be based on the exact fraction of the fiscal year, or by using the half-year convention, if that is the contractors practice. This latter method assumes that all capital acquisitions take place at mid-year.

5. Assets purchased specifically for use on contracts should be capitalized and depreciated using

the contractor's normal method, unless title is taken by Canada, or Canada pays for the asset under an Assistance Program.

6. Canada’s funding in any form, including direct or indirect benefits such as the investment tax

credits and contribution for capital assistance, should be accounted for using the cost reduction approach. The amount of all such funds received by, or credited to the contractor's account should be deducted from the related purchase price of the assets, with any depreciation or amortization calculated on the net amount.

7. Leasehold improvement costs are similar to capital additions and for depreciation purposes

should be amortized over the lesser of the expected useful life of the leasehold improvement or the non-renewable term of the lease.

Annex 10.5.3 - Cost Interpretation Bulletin - Number 03

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Annex 10.5.3: Cost Interpretation Bulletin - Number 03 (2010-01-11) Lease Costs Under the terms of Contract Cost Principles 1031-2 lease costs are applicable costs for inclusion in a contractor's overhead or as direct charge to the contract, if they are reasonable. This Bulletin explains what is meant by reasonable lease costs. Definitions For the purpose of this Bulletin: "Lease" is the conveyance by a lessor to a lessee of the right to use a tangible asset usually for a specific period of time in return for rent. "Operating Lease" is a lease in which the lessor does not transfer substantially all the benefits and risks incident to the ownership of the property. "Capital Lease" is a lease that transfers substantially all the benefits and risks incident to ownership from the lessor to the lessee. "Executory Costs" are costs related to the operation of the leased property (e.g. insurance premiums, maintenance costs, and property taxes). "Interest Rate Implicit in the Lease" is the discount rate that, at the inception of the lease, causes the aggregate present value of:

- the minimum lease payments excluding that portion of the payments representing executory costs to be paid by the lessor and any profit on such costs; and

- the unguaranteed residual value accruing to the benefit of the lessor, to be equal to the

fair value of the leased property to the lessor at the inception of the lease. "Rate for incremental borrowing" is the interest rate that, at the inception of the lease, the lessee would have incurred to borrow, over a similar term and with similar security for the borrowing, the funds necessary to purchase the leased asset. "Unguaranteed Residual Value" is that portion of the residual value of leased property which is not guaranteed or is solely guaranteed by a related party to the lessor. Interpretation To be considered reasonable any lease cost should be determined in accordance with the following. 1. The type of lease must be correctly identified as either an operating lease or a capital lease. In

the case of an operating lease, the actual rental cost paid is considered to be a reasonable cost. In the case of a capital lease, the depreciation amount calculated on the capitalized value of the asset in the lease over the lease term or economic life of the asset, is considered to be a reasonable cost.

2. A lease should be classified as a capital lease if one of the following criteria are met:

(a) the lease specifies the transfer of the property to the lessee by the end of the lease term;

Annex 10.5.3 - Cost Interpretation Bulletin - Number 03

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

or (b) the lease contains a bargain purchase option; or (c) the lease term is such that the lessee will receive substantially all of the economic

benefits from the use of the leased property over its life span, which will normally occur if the lease term covers 75% or more of the economic life of the leased property; or

(d) the present value of the minimum lease payments, excluding any executory costs, is

equal to substantially all (usually 90% or more) of the fair value of the leased property at the inception of the lease; the discount rate to be used in determining the present value of the minimum lease payments for this purpose should be the lower of the lessee's rate for incremental borrowing and the interest rate used in the lease, if known.

3. For a capital lease, the value at which it will be capitalized should be the lower of the present

value of the minimum lease payments as described in 2 d) or the fair value of the asset (usually this is the purchase value of the asset).

Annex 10.5.4 - Cost Interpretation Bulletin - Number 04

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Annex 10.5.4: Cost Interpretation Bulletin - Number 04 (2010-01-11) Travel Costs Under the terms of Contract Cost Principles 1031-2 reasonable travel costs are applicable costs for inclusion in a contractor's overhead or as a direct charge to contract. This Bulletin explains the conditions to be met before any specific travel costs are charged directly to the contract. DEFINITION For the purpose of this Bulletin: "Travel Costs" are the costs for transportation, lodging, meals and incidental expenses incurred by a contractor's personnel on official company business. Costs for transportation may be based on mileage rates, actual costs incurred, or on a combination thereof, provided the method used results in a reasonable charge. Costs for lodging, meals and incidental expenses may be based on per diem, actual expenses, or a combination thereof, provided the method used results in a reasonable charge. Interpretation 1. In order for travel costs to be acceptable as direct costs to a contract, the following conditions

must be met:

(a) such costs are directly attributable to the performance of the work under the contract; (b) the practice of charging travel costs to a contract is consistently followed in the costing of

both government and non-government work; and (c) all directly charged travel costs are eliminated from indirect costs allocated to government

contracts.

2. A reasonable amount/percentage may be added to travel costs allocated directly to a contract to cover applicable G&A costs, provided it is the contractor's usual and consistent practice to do so.

Annex 10.5.5 - Cost Interpretation Bulletin - Number 05

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Annex 10.5.5: Cost Interpretation Bulletin - Number 05 (2010-01-11) Head Office Expense Under the terms of Contract Cost Principles 1031-2 expenses allocated to a contractor which is a segment of an organization by the Head Office of that organization are applicable costs for inclusion in the contractor's overhead provided that the amount allocated is reasonable. This Bulletin explains the method to be used in the allocation of Head Office expenses in order for the amount allocated to be considered reasonable. Definitions For the purpose of this Bulletin: "Head Office" is an office responsible for the policy direction and management of two or more, but not necessary all, segments of an organization. "Segment" is one of two or more branches, divisions, product departments, plants, or other subdivisions of an organization reporting directly to a parent/head office, usually identified with responsibility for profit and/or producing a product or service. Interpretation 1. For the allocation of any expenses to be acceptable, a Head Office/Segment relationship must

exist, generally with company policies describing the basis of allocation for these expenses. 2. For the allocation of the expenses to be considered reasonable all, or any combination of the

following three methods should be used.

(a) Directly Chargeable - Those expenses included within the Head Office expense pool to be allocated which can be identified as having been incurred specifically and totally for one particular segment. Such expenses should be allocated directly to the particular segment, to the extent practicable.

(b) Separately Allocated - Those individual, or groups of expenses which are allocated only

to a limited group of corporate segments. Such expenses are not usually incurred for specific segments but possess objective, measurable relationships to the segments and should be grouped in homogeneous pools for subsequent allocation on a basis which represents these objective, measurable relationships.

(c) Residual - These represent the remaining expenses which are allocated to all, or most

corporate segments on an overall basis. These expenses should be allocated to segments using a base or bases which represent the total activity of the segments (see 3. below).

A three part exercise for allocation, as described above, would only be necessary where the dollars concerned were material. In less significant situations, a combination of the Directly Chargeable and the Residual methods might suffice. In low-dollar value situations, the Residual method alone might be appropriate.

3. There are many and varied bases which might be used to allocate residual expenses. However,

to be accepted and considered reasonable, the base(s) selected must be representative and consistently applied to all segments of the organization. The following are examples of bases for

Annex 10.5.5 - Cost Interpretation Bulletin - Number 05

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

allocation which are often used:

(a) Number of personnel in each segment of the organization. (b) Dollar value of production in each segment of the organization. (c) Cost of goods sold in each segment of the organization. (d) Total sales in each segment of the organization.

4. Allocations derived from an arbitrary forecasted distribution base are not considered acceptable. Historical and present cost data used to derive the allocation base, along with future economic conditions should be considered and documented.

Annex 10.5.6 - Cost Interpretation Bulletin - Number 06

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Annex 10.5.6: Cost Interpretation Bulletin - Number 06 (2010-01-11) Pension Costs Section 04(2)(c) of Contract Cost Principles 1031-2 states in part, that "indirect costs may include such items as fringe benefits (the contractor's contribution only)" in overhead pools. Pension costs are normally included as a fringe benefit in a contractor's overhead pools. This interpretation explains the determination and measurement of pension costs. Definitions For the purposes of this Bulletin: "Actuarial Assumptions" are presumptions about future events that will affect pension costs and obligations. These include theories concerning mortality, withdrawal, disability, retirement, changes in compensation, interest on accrued pension benefits, investment earnings, and asset appreciation or depreciation. "Actuarial Cost Methods" are methods used to determine the cost of providing pension plan benefits and to allocate that cost to specific time periods. "Current Service Cost" is the cost of anticipated future retirement benefits accrued during any year usually determined on an actuarial basis; it represents the aggregate estimated cost for one year's service by each employee who is a member of the plan. "Defined Benefit Pension Plan" specifies either the benefits to be received by employees after retirement or the method for determining those benefits. "Defined Contribution Pension Plan" is one in which the employer's contributions are fixed, usually as a percentage of compensation, and allocated to specific individuals. The pension benefit for each employee is the amount that can be provided at retirement based on the accumulated contributions made on that individual's behalf and investment earnings on those contributions. "Experience Gain or Loss" is the measure of the difference between the expected and actual experience of the plan. "Past Service Cost" is the estimated cost of future retirement benefits accrued in the years prior to the adoption of a pension plan; these costs are normally charged to operations over a reasonable period of years. "Pension Plan" is any arrangement (contractual or otherwise) by which a program is established to provide retirement income to employees. Interpretation The reasonableness of these proposed pension cost amounts should be determined in accordance with the following: 1. The terms and conditions of the plan are determinant factors in measuring the obligations. 2. The amount of pension cost for a cost accounting period is periodically determined by use of an

actuarial cost method which measures separately each of the components of pension costs.

Annex 10.5.6 - Cost Interpretation Bulletin - Number 06

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

3. Each Actuarial Assumption used to measure pension cost must be separately identified and represent the contractor's best estimates of anticipated experience under the plan, taking into account past experience and reasonable expectations.

4. Either Defined Contribution Pension Plans or Defined Benefit Pension Plans are acceptable in the

calculation of pension costs in accordance with Government Contract Cost Principles 1031-2.

Under Defined Contribution Pension Plans the employer's responsibility is simply to make a contribution each year based on the formula established in the plan. The pension cost for a cost accounting period will normally be the current and past service cost. Accounting for Defined Benefit Pension Plans is quite complex, because the benefits are defined in terms of uncertain future variables, an appropriate funding pattern must be established to assure that enough funds will be available at retirement to meet the benefits promised. The pension cost for a cost accounting period will normally be the aggregate of current service, plus past service, plus interest, minus expected return on plan assets, plus or minus experience gains/losses.

Annex 10.5.7 - Cost Interpretation Bulletin - Number 07

Supply Manual Page 1 of 3 Version 10-1 (2010-01-11)

Annex 10.5.7: Cost Interpretation Bulletin - Number 07 (2010-01-11) Research and Development Expenses Paragraph 04 (02) (h) of Contract Cost Principles 1031-2 states that: “general research and development expenses as considered applicable by Canada” may be included in Indirect Costs (Overhead). Paragraph 7 (m) of Contract Cost Principles 1031-2 states that: product development or improvement expenses not associated with the product being acquired under the Contract” are considered non-applicable costs to the contract. This Bulletin explains the difference between General Research and Development Expenses and Product Development or Improvement expenses in the light of these two sections of Contract Cost Principles 1031-2. It also explains the treatment required for each of the different type of expenses in a contractor's cost accounting practices for acceptability in contracts. Definitions For the purpose of this Bulletin: "General Research and Development" is a planned investigation undertaken with the hope of gaining new scientific or technical knowledge and understanding. Such investigation may, or may not be directed towards a specific practical aim or application. "Product Development and/or Improvement" is a systematic program of work, going beyond basic and applied research which is directed towards the creation of a new or improved product, system, component or material, substantially in a marketable form, but excluding any manufacture beyond completion of the new and improved product's prototype. Interpretation 1. Company funded research and development should be divided into two distinct expenditure

categories:

(a) General Research and Development; and (b) Specific Product Development and/or Product Improvement.

2. General Research and Development

(a) The expenditures relating to general research and development should be included in overhead and allocated to the contractor's total business activity which would exclude those items such as resale activity, warranty, etc., within the current fiscal year.

3. Specific Product - Product Development/Product Improvement

(a) The Costs within these categories of research should not be included in overhead at the time it is incurred. Proper treatment of these expenditures would be to extract them from overhead pools and segregate these costs for later recovery against product sales.

(b) Negotiators should consider, as an aspect of their negotiations, overhead applications to

these product development costs. In the case of G & A overhead, either the costs are applied at the time that the Product Development Costs are incurred, or at the time the Product Development Costs are recovered against product sales. For guidance on the timing of application of G & A overhead costs, negotiators may look at other G & A

Annex 10.5.7 - Cost Interpretation Bulletin - Number 07

Supply Manual Page 2 of 3 Version 10-1 (2010-01-11)

recovery applications made to Product Development by the company. (c) The recovery of the contractor's product development costs should, in the majority cases,

be accomplished through the amortization of these product development costs against the sales of the family of products to which the product development pertained.

(d) The contractor may recover these expenses on the relevant product sales, including

government sales, even if the related expenditures have been written off to the profit and loss account in the year originally incurred. However, in this case the contractor must maintain sufficient records to demonstrate the costs to be recovered and also to substantiate that these costs had not already been recovered in overhead.

4. The following are examples of activities that typically would be excluded from any general

research and development and product development project:

(a) engineering follow-through in an early production phase; (b) quality control during commercial production, including routine product testing; (c) trouble-shooting in connection with breakdowns during production; (d) routine, or periodic alterations to existing products, production lines, manufacturing

processes, and other ongoing operations, even though such alterations may represent improvement;

(e) adoption of an existing capability to a particular requirement, or customer's need, as part

of a continuing commercial activity; (f) routine tools, jigs, mould, and dies design; (g) activity, including design and construction engineering, related to the construction,

relocation, rearrangement, or facilities start-up, or equipment, whose sole use is for a particular R&D project, unless specifically approved by the technical authority;

(h) all market research activities, including those directed at market development,

verification, identification, demonstration, preference, and customer acceptance development;

(i) pre-production and proposal costs; (j) cost overruns on previous firm price development contracts.

5. General Research and Development (R&D) - Other Factors

(a) Costs acceptable as general research and development must relate to projects classified as basic research, or applied research. Costs applicable to Product Development projects partially funded by Canada are not acceptable as general research and development costs. Product Development is not considered an overhead item and is recovered by a separate product development expenditure recuperation rate.

(b) In those instances where the general research and development expenditures are the

majority of the total G & A cost pool, this fact must be highlighted in the cost rate negotiation report, or a separate general research and development overhead rate developed.

(c) Significant differences between the negotiated and actual costs incurred must be taken

Annex 10.5.7 - Cost Interpretation Bulletin - Number 07

Supply Manual Page 3 of 3 Version 10-1 (2010-01-11)

into consideration when reviewing audited costs, or negotiating future years general research and development costs.

6. Product Development (PD) - Other Factors

(a) Company funded product development will inevitably produce non-marketable products which would not allow these costs to be recovered on related product sales. However, there may be marketable by-products or product advances made.

7. Product Development Amortization

(a) Contractors proposing to amortize PD costs of the product developed against future sales to Canada, must submit an annual cost schedule to the responsible Directorate.

Annex 10.5.8 - Cost Interpretation Bulletin - Number 08

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Annex 10.5.8: Cost Interpretation Bulletin - Number 08 (2010-01-11) Bid and Proposal Expenses Under paragraph 04 (02) (g) of Contract Cost Principles1031-2, selling and marketing expenses which could be considered to include amongst other things, Bid and Proposal Expenses, are listed as one of the items generally considered to be indirect costs. However, in some instances contractors follow a consistent practice of charging Bid and Proposal Expenses of a successful Bid or Proposal direct to the resulting contract. This Bulletin explains the criteria under which the direct charging of Bid and Proposal Expenses to resulting contracts is acceptable to PWGSC. Definition For the purpose of this Bulletin: "Bid and Proposal Expenses" are the costs incurred in preparing, submitting, and supporting bids and proposals, (whether or not solicited), on potential contracts, including: (a) direct administrative effort, for the physical preparation of the technical proposal documents, and

also the technical and non-technical effort for the preparation and publication of cost data, and other administrative data necessary to support the contractor's bids and proposals;

(b) technical effort, incurred to specifically support a contractor's bid, or proposal, including the

system and concept formulation studies, and the development of engineering and production data; and,

(c) purchased services and supplies incurred to specifically support a bid or proposal. Interpretation Bid and Proposal Expenses are acceptable to PWGSC as a direct charge to resulting contracts in cases of proposals resulting in subsequent contract negotiations, provided that the bid and proposal expenses are clearly denoted in the proposal and contract documents as forming part of the agreed contract price.

Annex 10.5.9 - Cost Interpretation Bulletin - Number 09

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Annex 10.5.9: Cost Interpretation Bulletin - Number 09 (2010-01-11) Selling and Marketing Expenses Paragraph 04 (02) (g) of Contract Cost Principles 1031-2 permits selling and marketing expenses associated with the product or service being acquired under a PWGSC contract, providing they are reasonably and properly incurred, to be an acceptable cost to the contract. This Bulletin explains what constitutes reasonable selling and marketing expenses and how an appropriate share of these expenses for allocation to an PWGSC contract is to be determined. Interpretation 1. In determining the reasonableness of selling and marketing expenses, consideration shall be

given to:

(a) the nature and amount of these expenses in the light of the expenses which a prudent individual would incur in the conduct of a competitive business;

(b) the proportionate amounts expended as between government and commercial business; (c) the trend and comparability of the contractor's current period cost in relation with prior

periods; (d) the general level of such costs within a contractor's industrial sector; (e) the nature and extent of the sales effort in relation to the cost thereof and to the contract

value. 2. Selling and Marketing Expenses may include reasonable product demonstration expenses

incurred for attendance at trade shows and fairs. However, the following expenses are considered non-applicable:

(a) Entertainment Expenses, i.e. expenses for amusement, diversion, social activities and

incidentals relating thereto. However, expenses associated with meetings and conferences, when called for the dissemination of technical information or discussion of production problems and the like, including the reasonable cost of meals, transportation, rental of meeting places and other incidentals, are acceptable.

(b) Advertising Expenses, except for expenses referred to in 1031-2 as being acceptable, i.e.

those expenses associated with reasonable advertising of an industrial or institutional character placed in trade, technical or professional journals for the dissemination of information for the industry or institution.

(c) Costs of retained lobbyists, as described in the Appendix M, Lobbyists and Contracting,

of the Treasury Board Contracting Policy, who are paid on a contingency fees basis. (d) Unreasonable Commissions to Selling Agents. (e) Unspecified Payments to a Third Party. (f) Depreciation or Write-off Costs of Demonstration Equipment.

3. Allocation to Contracts

Annex 10.5.9 - Cost Interpretation Bulletin - Number 09

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

To enable a reasonable and justifiable share of selling and marketing expenses to be charged against PWGSC contracts, the following practice should generally be adopted: (a) selling and marketing expenses should be clearly identified by a contractor as distinct

from other indirect costs to the extent, where warranted, of creating a separate cost pool for these expenses;

(b) where a contractor manufactures more than one particular product or provides more than

one particular service, the selling and marketing expenses specifically identifiable with each particular product or service should be allocated directly thereto with any general expenses being prorated equitably across all products or services; and then

(c) a pro-rata share of the selling and marketing expenses allocated in accordance with b)

above to the particular products or services or family of products or services being acquired under the PWGSC contract included in the applicable overhead costs of the contract.

Annex 10.5.10 - Cost Interpretation Bulletin - Number 10

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Annex 10.5.10: Cost Interpretation Bulletin - Number 10 (2010-01-11) Severance Payments Contract Cost Principles 1031-2 state that: “The total cost of the Contract must be the sum of the applicable direct and indirect costs which are, or must be reasonably and properly incurred and/or allocated, in the performance of the Contract, less any applicable credits.” Such costs may include severance payments to employees. This Bulletin explains which severance payments and the amount there of that may be an acceptable cost to the contract. Definition For the purpose of this Bulletin: "Severance Pay" means a cash settlement or paid leave granted to employees upon termination of employment for various reasons, or upon retirement. Remuneration for earned vacation credits or compensation for unused sick leave credits is not considered as severance pay. Other payments excluded from severance pay are return of contributions made to pension plans or retirement savings programs. Interpretation 1. Severance payments should be calculated using one of the following criteria in order to be

considered as an allowable cost:

(a) in accordance with an employment contract, collective agreement or enacted legislation; or

(b) according to an established company policy; or (c) based on the merits of a particular case.

2. In order for the allowable severance payment to be deemed reasonable any amount associated

with the following should not be included:

(a) profit sharing; (b) commissions; (c) patent or other rights.

Annex 10.5.11 - Cost Interpretation Bulletin - Number 11

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Annex 10.5.11: Cost Interpretation Bulletin - Number 11 (2010-01-11) Pension Plan Refunds On occasion, there exist credits due to refunds to contractors from companies handling their pension plans. This situation could be as a result of large lay offs of employees, plan terminations and related interest on funds invested. The accounting issue that arises from these terminations is whether a gain should be recognized when these assets revert back to the company. Definitions For the purpose of this Bulletin: "Pension Plan Settlement" occurs when an employer legally discharges the obligation for accrued pension benefits either by transferring assets directly to plan participants in exchange for their rights to pension benefits or by purchasing annuity contracts in which a third party unconditionally undertakes to pay all accrued pension benefits. "Pension Plan Curtailment" occurs when the expected years of future service to be rendered by the existing employee group is reduced significantly or when benefits will not be earned by employees for some or all future periods. Interpretation 1. The pension refund amounts to be deducted from overhead expenditures used to determine

costing rates should be the contractor's share of the expected pension credits. 2. Upon a pension plan settlement or curtailment, the employer may have eliminated obligations

with respect to the plan, any gains or losses on the transaction, including any unauthorized amounts related to previous plan amendments.

Changes in assumption and experience gains and losses, should be recognized immediately.

3. On the other hand, if an employer settles only a part of the accrued pension benefits, a portion of

any gains or losses including any unamortized amounts should be recognized immediately.

Annex 10.5.12 - Cost Interpretation Bulletin - Number 12

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Annex 10.5.12: Cost Interpretation Bulletin - Number 12 (2010-01-11) Company Funded Costs Contract Cost Principles 1031-2 refer to "costs which are, or must be reasonably and properly incurred and/or allocated, in the performance of the contract, less any applicable credits." This bulletin explains the establishment of costs when government assistance has been provided related to costs of fixed assets, research, and product development. Definitions For the purpose of this Bulletin: "Company Funded Costs" are expenditures made from funds over which the enterprise has spending power and which were not provided to the company through the terms of a related agreement or understanding. "Grant" is an unconditional payment made to a recipient, usually for a specific purpose, for which the donor will not receive any royalties, goods, or services. "Contribution" is a conditional transfer payment under an auditable agreement for which the donor will not receive any royalties, goods, or services. "Contribution Arrangement" is an undertaking between a donor department or agency and a prospective recipient of a contribution, describing the obligations of each, and the terms and conditions of payments and which contain conditions for royalties from resulting sales. The arrangement may be as informal as an exchange of letters. Interpretation The Company Funded Costs that shall be considered applicable for contracts negotiated in accordance with 1031-2 are: Fixed Assets Government Assistance towards the acquisition of fixed assets shall be deducted from the fixed asset acquisition cost and the relevant depreciation thereof calculated on the net asset amount. Depreciation on the net amount may be included in the applicable overhead for cost recovery on contracts. Research and Development Government Assistance in the form of Investment Tax Credits shall not be deducted from the related research and development expenditures when determining the applicable costs. Product Development Government Assistance, as well as third party funded assistance, towards a specific product development shall be netted against the relevant product development costs to arrive at the portion to be recovered over the sale of that product or family of products.

Annex 10.5.13 - Cost Interpretation Bulletin - Number 13

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Annex 10.5.13: Cost Interpretation Bulletin - Number 13 (2010-01-11) Executive Compensation Paragraph 04 (2) (f) of Contract Cost Principles 1031-2 states that indirect costs may include: "general and administration expenses: including remuneration of executive and corporate officers...". However, section 07 (l) identifies "unreasonable compensation for officers and employees" as a non-applicable cost. There are many different considerations that may affect the amount a particular individual may be receiving. This cost interpretation provides guidelines on the determination and allowability of executive compensation expenses that are included in a contractor's overhead expenditures. Interpretation 1. Items included in a total compensation plan for any executive, not necessarily all allowable costs,

usually consist of four basis elements, these are:

(a) Salary: reflects the extent of experience and sustained level of performance for a job, or position.

(b) Benefits: deals with the provision of time off with pay, employee services, health care

services, allowable insurance protection and retirement incentives. (c) Performance Incentives: rewards the extent of accomplishment agreement targets. (d) Perquisites: benefits which are designed only to apply to executives, such as housing

loans; these are in addition to benefits offered to other employees. 2. Guidelines for considering what is reasonable executive compensation are:

(a) compensation paid to executives in similar positions, compared to related executive pay scales surveys;

(b) the executive's previous experience, experience in other positions within the company

and similar appointments in other companies; (c) comparison of the compensation paid for the nature and scope of the work, or service, as

defined in the contract of service and/or the position description; (d) the size and complexity and the corporate management structure; (e) the company's general salary policy should be reviewed to ascertain the compensation is

uniformly paid, according to set criteria; (f) in the case of smaller contractors with a limited number of officers, the amount of

compensation paid to executives in the previous year should be reviewed, as a substantial increase over the prior year tends to indicate compensation may be excessive, further investigation should be made to determine whether the executives' salaries are for services rendered, rather than a re-distribution of the business's profits;

(g) compensation paid to executives through related party transactions.

Annex 10.5.14 - Cost Interpretation Bulletin - Number 14

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Annex 10.5.14: Cost Interpretation Bulletin - Number 14 (2010-01-11) Mobile Repair Party Requirements Section 5 of Contract Cost Principles 1031-2 recognizes that indirect costs should be accumulated and allocated based on a principle of similarity of costs in the pool and a causal relationship to the contracts to which the costs are allocated. Repair work is normally carried out in a contractor's plant but, on occasion, it is necessary in meeting the requirements of a customer department, to have repair work performed at other locations. This cost interpretation provides guidelines on the determination of overhead expenses applicable to Mobile Repair Party requirements. Definition For the purpose of this Bulletin: "Mobile Repair Party" is the individual, or group of individuals, performing work away from the contractor's plant. Interpretation The overhead rate on Mobile Repair Party work normally will be at the full plant rate, however, it should be noted that under the three conditions below, the overhead rate could be different: (a) where the estimated hours to be expended for Mobile Repair Party work exceed 5% of the

estimated total direct labour hours for both commercial and defence repair and overhaul work during the contract period; or

(b) where the estimated hours to be expended for Mobile Repair Party work are less than 5%, but the

contracting officer considers that a significant number of direct labour employees are hired for Mobile Repair Party work only; or

(c) where the contractor maintains adequate cost records to permit the calculation and negotiation of

a separate Mobile Repair Party rate. In the circumstances contemplated under alternatives a) and b) above, an overhead rate should be negotiated to reflect the reduced costs applicable to Mobile Repair Party work. Notwithstanding the Cost Interpretation on Travel Costs, all travel costs for direct personnel for Mobile Repair Party requirements, should be charged to the contract directly and not included in any overhead pool.

Annex 10.5.15 - Cost Interpretation Bulletin - Number 15

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Annex 10.5.15: Cost Interpretation Bulletin - Number 15 (2010-01-11) Environmental Costs According to Section 04 of Contract Cost Principles 1031-2 "Indirect Costs" are:” those costs which, though necessarily having been incurred during the performance of the Contract for the conduct of the Contractor's business in general, cannot be identified and measured as directly applicable to the performance of the Contract.” An element that is becoming a more significant portion of indirect costs is environmental costs. This cost interpretation provides guidelines on applicable environmental costs included in a Contractor's indirect costs. Definition For the purposes of this Bulletin: "Environmental costs" are the costs incurred by an entity to prevent, abate , or remediate damage to the environment or to deal with the conservation of renewable and non-renewable resources. Interpretation 1. Any direct or indirect benefits, for example, tax credits, insurance benefits, or government

assistance, should be accounted for using the cost reduction approach. The amount of all such benefits received by or credited to the contractor's account should be deducted from the related environmental cost and any amortization of the cost should be calculated on the net amount.

2. Notwithstanding the other sections of this bulletin, no fines, or penalties, or any other non

applicable cost as determined under Section 07 of Contract Cost Principles 1031-2 are allowable. 3. Environmental costs can be grouped according to the periods when the cost is incurred and the

periods that the cost relates to.

(a) Current period operations. An example of this type of cost is the disposal of waste from current period operations. These costs should be allowed and allocated on the appropriate base in the current period. (b) Current period past operations. An example is clean up costs for activities that occurred previously. Any current period cost that is a material amount should be deferred and amortized over a reasonable number of future periods. (c) Current period future operations. An example is depreciable equipment purchased to control hazardous emissions. These costs should be amortized over the periods for which benefits are expected from the costs incurred.

Annex 10.5.16 - Cost Interpretation Bulletin - Number 16

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Annex 10.5.16: Cost Interpretation Bulletin - Number 16 (2010-01-11) Take-out Rates Section 05 of Contract Cost Principles 1031-2 states: “Indirect costs must be accumulated in appropriate indirect cost pools, reflecting a contractor's organizational or operational lines and these pools subsequently allocated to contracts in accordance with the following two principles: (a) the costs included in a particular indirect cost pool should have a similarity of relationship with

each contract to which that indirect cost pool is subsequently distributed; further, the costs included in an indirect cost pool should be similar enough in their relationship to each other that the allocation of the total costs in the pool provides a result which would be similar to that achieved if each cost within that pool were separately distributed;

(b) the allocation basis for each indirect cost pool should reflect, as far as possible, the causal

relationship of the pooled costs to the contracts to which these costs are distributed”. This bulletin provides interpretation on how take out rates reflect the allocation of specific cost from indirect cost pools to suit the related costs and circumstances of the contracts. However, a fair level of overhead, or G&A costs must be charged to the particular products or services in question. Definition For the purpose of this Bulletin: "Take-Out Rate" is the negotiated rate applied for the recovery of overhead costs on goods and services which do not form the major portion of the company's business but are in themselves significant relative to a government contract. The resulting rate, in most cases, should be somewhat less than that which applies to other work processed through the company's facilities. Interpretation 1. Take-out rates may be established to apportion overhead expenses on a reasonable and

justifiable basis on goods and services, which requires less overhead effort than the company's regular activity.

2. The task of identifying where and when a take-out rate is applicable is left to the discretion of the

negotiators, who are in the best position to establish the need, based on the information available at the time.

3. Some of the areas for applications of take-out rates are:

(a) Subcontracts; (b) Drop shipments, other resale and high value purchases; (c) Mobile repair party and field services; (d) Other specialized applications such as for travel and living that are charged directly to a

contract. 4. The purpose of a take out rate is to allocate costs to a contract. Other overhead recovery rates

must not include any of the costs of any contracts that are subject to take out rates. This means that take out rates that are established without taking into account the full costs of specific situations may result in unrecovered overhead as this overhead cannot be recovered on other

Annex 10.5.16 - Cost Interpretation Bulletin - Number 16

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

contracts. As an example; this situation can arise if a contract is established using a take out rate that is set to limit the total price of the contract and the rate is not sufficient to allow full cost recovery.

Annex 10.5.17 - Cost Interpretation Bulletin - Number 17

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Annex 10.5.17: Cost Interpretation Bulletin - Number 17 (2010-01-11) Government Supplied Materiel Paragraph 05 (a) of Contract Cost Principles 1031-2 deals with the allocation of indirect costs according to the principles of "similarity of relationship" and the "causal relationship of pooled costs". Applying these principles requires consideration of both the nature of activities giving rise to the costs and when different activities occur. The purpose of this cost interpretation is to provide guidance in determining when material handling and general and administrative costs relating to government supplied material are allowable items for cost reimbursement. Definitions For the purpose of this Bulletin: "Accountable Advance Spares" are non-catalogued materiel owned by the government and manufactured or purchased by contractors in accordance with agreements between contractors and the government. Accountable Advance Spares are used in the repair and overhaul of government equipment. "Laid-Down Cost" is the cost incurred by a contractor to acquire a specific product. This includes the invoice price (less trade discounts) charged to the contractor plus any applicable charges for transportation, exchange, custom duties, and brokerage charges. "Government-Supplied Materiel" (GSM): Material supplied to a contractor by a government department or agency for incorporation into the end product. Interpretation (a) Material handling costs related to the storing and transferring out of storage are allocated to the

GSM when they are embodied. (b) General and Administrative (G&A) overhead expenses and material handling costs that are

applicable should be allocated as a cost associated with the embodiment of government supplied material in the year when the materials are embodied. When transfers of GSM, for example from accountable advance spares inventory, are made to Canada for asset disposal, the general and administrative overhead expenses and material handling costs that are applicable are allocated at the time of transfer.

(c) When the contractor stores GSM for Canada, the cost of the items being stored would normally

include the laid-down cost of the purchased GSM; or the applicable direct material, direct labour, factory overhead and G&A applicable to the manufacturing operation of the manufactured GSM.

Annex 10.5.18 - Cost Interpretation Bulletin - Number 18

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Annex 10.5.18: Cost Interpretation Bulletin - Number 18 (2010-01-11) Incentive Remuneration Profit Sharing Plans Section 04 of Contract Cost Principles 1031-2 explains indirect costs. This section's paragraph 2. (c) indicates that fringe benefits (the contractor's contribution only) are to be included as indirect costs (overhead). A fringe benefit type that may not be an overhead cost for 1031-2 purposes is amounts paid under Incentive Remuneration Profit Sharing Plans. The reason these amounts are not considered costs is that normally these plans are considered as a distribution of a portion of earnings to employees. Earnings that are profits or a distribution of retained earnings are not costs. However, since the purpose of these plans is to remunerate employees, it is often argued that payments under these plans should be considered costs. This cost interpretation is to determine the features of Incentive Remuneration-Profit Sharing Plans that may be considered as allowable cost items in accordance with 1031-2. Definition Incentive Remuneration Profit Sharing are plans designed to link the performance of employees to the achievement or organizational objectives, through the provision of additional compensation from the distribution of a defined share of the organization's net profit. Interpretation Incentive Remuneration Profit Sharing Plans may be considered as an allowable cost element providing: (a) The plan includes a documented sharing arrangement, with all employees, and the incentive

amounts payable by the employer must be computed with reference to earned profits. (b) The company pays employees directly or provides the funds for the employee profit sharing plan

to a trustee in trust for the benefit of the employees who are members of the plan. (c) The amount of cost will not exceed the amount of payment made to the employees or the plan

trustee. (d) The cost is recognized only in the year the employee provides services to earn benefits under the

plan. (e) The entire amount recognized as cost must be disbursed to employees (or paid to the trustee) in

the fiscal year when the benefits were earned or shortly after the end of the fiscal year (within a few months, but well before the end of the fiscal year following the one for which plan benefits were based).

(f) Any funds payable by the trustee to the employer for over contributions or funds that the plan may

earn; shall be used to reduce the current year cost unless these earned funds or over contributions are paid directly by the employer to the employees within that current fiscal year. (see Annex 10.5.11).

(g) Compensation to owners of closely held corporations, partners, sole proprietors, or members of

their immediate families should be in accordance with the personal service rendered rather than a distribution of profits. (see Annex 10.5.13).

Annex 10.5.19 - Cost Interpretation Bulletin - Number 19

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Annex 10.5.19: Cost Interpretation Bulletin - Number 19 (2010-01-11) Purchased Labour -- Personnel Procured From Outside Sources In accordance with sections 03, 04 and 05 of Contract Cost Principles 1031-2, Purchased Labour Costs are considered either as Direct Costs or may be viewed as Direct Labour Costs. Definitions For the purpose of this Bulletin: "Purchased Labour Costs" are the costs incurred by a contractor/ entity for temporary personnel procured from the outside for skills such as engineers, technical writers, technicians, craftsmen. Purchased Labour normally attract different indirect costs. Care must be taken to ensure that they are not accounted for as the contractor’s employees. Interpretation 1. Contractors' cost accounting method for purchased labour and overhead allocation thereon varies

depending on the circumstances under which purchased labour costs are incurred.

For example,

(a) some contractors classify purchased labour as direct labour costs when the work is performed in the contractor's facilities under their supervision and otherwise meets section 03(b) of 1031-2 definition of direct labour costs. These contractors cost direct labour using either the purchased labour rate or average labour rate incurred by their own employees for comparable work. However differences between the average labour rate incurred by the contractor’s own employees and purchased labour prices are treated as overhead costs and are allocated accordingly.

(b) other contractors classify purchased labour as subcontract costs.

2. Purchased labour must share in an allocation of certain indirect expenses where there is a causal

or beneficial relationship, and the allocation method must be consistent with the contractor's disclosed cost accounting practices.

3. The accounting treatment for purchased labour must be evaluated on a case-by-case basis with

consideration given to the materiality of costs involved and the overall effect of the accounting treatment on final cost objectives. Acceptance or rejection of the contractor's treatment of purchased labour must be based upon

(a) the causal and beneficial relationship of indirect expenses and purchased labour, and (b) the nature of the employer/consultant relationship.

4. The preferred cost accounting method for purchased labour is to have a separate direct cost for

this activity with an appropriate allocation of applicable overhead. Other methods devised are acceptable providing the accounting method is considered reasonable and justifiable and meets the relevant Contract Cost Principles 1031-2.

Annex 10.6.1 - Cost Notification 01 - TPC Royalty Amount for Cost Rate Negotiations

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Annex 10.6.1: Cost Notification 01 - TPC Royalty Amount for Cost Rate Negotiations (2010-01-11) Background Technology Partnership Canada (TPC) has contributed sums per TPC Project Agreements which carry provisions for the possible repayment of these contributions per Royalty repayment terms in these accords. In most cases, these royalty repayment terms are tied to the sale of the potential product/project that TPC contributed the funds for. The term and repayment percentage varies per the understanding. Issue In the agreements that were reviewed, the royalty payments to TPC to be made by the firm, in most instances, exceed the original contribution amount providing that the project has viable sales of the development project. The annual rate negotiation with a firm will be faced with a potential royalty repayment cost in the overhead rate calculation in the year that the repayment is required and made to TPC. Cost Recovery Position For Annual Rate Negotiation Negotiations For annual rate negotiation purposes, the recovery amount allowed on contracts shall be limited to the original TPC contribution per the agreement. The amount in excess of the original contribution shall be considered a separate element outside the rate negotiations and will not be an allowable contract cost. The amount of the recovery shall be determined by the original TPC agreement. For contributions that are product specific, a product development recovery rate will be established. For non-product specific agreements, the recovery will be made through a General and Administrative Overhead and shall be recovered over a reasonable amount of time. References Treasury Board Accounting Standard 3.2 - Transfer Payments (Grants and Contributions) 1031-2, Contract Cost Principles, of the Standard Acquisition Clauses and Conditions Manual Annex 10.4: Reasons for the Non-applicability of Certain Cost when Utilizing Contract Cost Principles

1031-2. Annex 10.5.7: Research and Development Expenses - Number 07 Annex 10.5.12: Company Funded Costs - Number 12 CICA 3290 Contingencies

Annex 10.6.2 - Cost Notification 02 - Goodwill

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Annex 10.6.2: Cost Notification 02 - Goodwill (2010-01-11) Definitions For the purpose of this Notification: Goodwill is the excess of the cost of an acquired enterprise over the net of the amounts assigned to assets acquired and liabilities assumed. This is an unidentifiable intangible asset, which originates under the purchase method of accounting for a business combination when the price paid by the acquiring company exceeds the sum of the identifiable individual assets acquired less liabilities assumed, based upon their fair values. Notification: Goodwill represents the value paid by a contractor on a business enterprise purchase in excess of the fair value of the acquired firm's assets less the assumed liabilities. This amount is based on the anticipated growth and earnings of the newly acquired company and thus is an intangible asset. Any cost for amortization, expensing, write-off, or write-down of this intangible asset called goodwill (however represented) is unallowable. References 1031-2, Contract Cost Principles, of the Standard Acquisition Clauses and Conditions Manual Annex 10.2: Reasons for the non-applicability of certain cost when utilizing Contract Cost Principles

1031-2 CICA 3062 Goodwill FAR 31.205-49 Goodwill

GLOSSARY

TABLE OF CONTENTS

A...................................................................................................................................... 1 B...................................................................................................................................... 1 C...................................................................................................................................... 1 D...................................................................................................................................... 1 E...................................................................................................................................... 1 F...................................................................................................................................... 1 G ..................................................................................................................................... 1 H...................................................................................................................................... 1 I ....................................................................................................................................... 1 J ...................................................................................................................................... 1 L...................................................................................................................................... 1 M ..................................................................................................................................... 1 N...................................................................................................................................... 1 O ..................................................................................................................................... 1 P...................................................................................................................................... 1 Q ..................................................................................................................................... 1 R...................................................................................................................................... 1 S...................................................................................................................................... 1 T...................................................................................................................................... 1 U...................................................................................................................................... 1 U

V...................................................................................................................................... 1 W..................................................................................................................................... 1

Glossary

A acceptance 1. A deliberate and intentional agreement or consent to accept goods and services rated as

acceptable. 2. Receipt by the consignee for a shipment, thus terminating the common carrier liability subject to

claim for shortages or damages if such exist. (2010-01-11) (acceptation) account 1. A formal record of a particular type of transaction such as an asset, liability, proprietorship,

revenue or expense, expressed in money or other unit of measurement and kept in a ledger. 2. The bookkeeping records of any organization, including journals, ledgers, vouchers and other

supporting papers. 3. Defence Production Act. Means the Defence Production Loan Account. (See 9.25.1.) 4. Canadian Institute of Chartered Accountants (CICA). Collective term for the whole set of financial

statements of an organization. 5. Records of the cost to the contractor of the work performed under a Public Works and

Government Services Canada contract and of all expenditures and commitments made by the contractor in connection with the contract and invoices, receipts and vouchers relating to it. (2010-01-11) (compte)

accountable advance 1. Funds provided to a contractor to purchase spare parts, which are not an item of supply in the

supply system, and that will be used in the repair and overhaul of government equipment. 2. Advance funds provided for a specific purpose, and chargeable to the appropriation for the

service in respect of why the advance was made. 3. Accountable Advance Regulations. A sum of money advanced from and temporarily charged to

an appropriation; for example, a revolving fund, working capital advance, special account. (2010-01-11) (avance à justifier)

adjustment 1. The amount of variation permitted by an adjustment clause in the contract, which generally

permits a change upward or downward in the price or obligations, in case certain events transpire.

2. Refer to economic price adjustment. (2010-01-11) (rajustement) Advance Contract Award Notice (ACAN) A notice posted on MERX advising suppliers in advance that a contract will be awarded to a particular supplier and to invite them to submit a statement of capabilities if they think that they meet the requirements set out in the ACAN. (2010-01-11) (Préavis d’adjudication de contrat [PAC]) advance payment A payment made in advance, by or on behalf of Canada, under the contract, and before the good is delivered or the service rendered. (2010-01-11) (paiement anticipé) after-imposed duties All duties that the contractor has to pay that were not applicable on the contract date. (2010-01-11) (droits imposés ultérieurement) after-imposed taxes All applicable Goods and Services Tax/Harmonized Sales Tax exempted or excluded on the reference date but for which exemption was later removed or reduced such that the contractor is required to pay or bear additional taxes as a result of legislative, judicial or administrative action, taking effect after the reference date. This also includes increases announced after the reference date affecting the rate of tax, whether specific or percentage. (2010-01-11) (taxes imposées ultérieurement)

Supply Manual Page 1 of 3 Version 10-1 (2010-01-11)

Glossary

after-relieved duties All duties that were applicable on the contract date but were no longer applicable at the time of delivery. (2010-01-11) (droits dégrevés ultérieurement) after-relieved taxes All applicable Goods and Services Tax/Harmonized Sales Tax that would have been payable on the transaction or property covered by contract, but which the contractor is not required to pay or bear, or for which the contractor obtains a refund or drawback, as a result of legislative, judicial or administrative action taking effect after the reference date. (2010-01-11) (taxes dégrevées ultérieurement) agency A relationship between two persons, by agreement or otherwise, where one (the agent) may act on behalf of the other (the principal) and bind the principal by words and actions. (2010-01-11) (agence) agent Person who acts on behalf of another person (the principal) in dealings with third parties. (2010-01-11) (agent) agreement A consensus of two or more persons in respect of anything done or to be done. Although used as synonymous with “contract”, agreement may have a broader meaning. (2010-01-11) (accord) Agreement on Internal Trade (AIT) An intergovernmental trade agreement signed by Canadian First Ministers that came into force in 1995. Its purpose is to reduce and eliminate, to the extent possible, barriers to the free movement of labour, goods, services, and investment within Canada and to establish an open, efficient, and stable domestic market. (2010-01-11) (Accord sur le commerce intérieur [ACI]) amendment An agreed addition to, deletion from, correction or modification of a contract. (2010-01-11) (modification) appropriate minister 1. With respect to a department named in Schedule I of the Financial Administration Act (FAA) the

minister presiding over the department. 2. With respect to a division or branch of the public service of Canada set out in column I of

Schedule I.1 of the FAA, the minister set out in column II of that Schedule. 3 With respect to a commission under the Inquiries Act, the minister designated by order of the

Governor in Council. 4. With respect to the Senate, the Speaker; with respect to the House of Commons, the Board of

Internal Economy, and with respect to the Library of Parliament, the Speakers of the Senate and the House of Commons.

5. With respect to a departmental corporation, the minister designated by order of the Governor in Council.

6. With respect to a Crown corporation, the appropriate minister as defined in subsection 83(1) of the FAA. (2010-01-11) (ministre compétent)

architectural and engineering service contractor A contract for the provision of services in respect of the planning, design, preparation, or supervision of the construction, repair, renovation or restoration of a work. (2010-01-11) (marché de services d’architecture et de génie) assets Any owned physical object (tangible) or right (intangible) having economic value to its owner. See production assets. (2010-01-11) (actif)

Supply Manual Page 2 of 3 Version 10-1 (2010-01-11)

Glossary

assignment 1. A transfer of a right from either party to the other, as mutually agreed upon. 2. Lease. In this context, the entire unexpired residue of the lease is transferred. 3. For the benefit of creditors. Regulated by the Bankruptcy and Insolvency Act, it is an assignment

made in favour of the trustee in bankruptcy who takes it in trust for the general body of creditors of the insolvent assignor for realization and distribution in accordance with the statute.

4. Book debts. Right to collect and receive all accounts receivable, present and future, of the borrower. This right is exercised by the lender, which signifies to the debtors of the borrower that the lender requires them to pay the outstanding balance on their account. (2010-01-11) (cession)

assignment of contract The transfer by the contractor of responsibility for performance of all or part of the contract to a third party. (2010-01-11) (cession d'un contrat) associated government Government of United Kingdom, any other government of the Commonwealth of Nations, the government of a country that is a member of the North Atlantic Treaty Organization (NATO) or the government of any other country designated by the Governor in Council, as being a country in defence of Canada. (2010-01-11) (gouvernement associé) audit 1. General. An examination, full scrutiny and verification of accounting records, usually by a third

person. 2. An examination of all elements of actual costs incurred by the contractor and the determination of

actual profit realized. See discretionary audit. (2010-01-11) (vérification) authority 1. The right to perform certain acts, or prescribe rules governing the conduct of others. 2. Generally, under balanced schemes of management, administrative authority represents the

activation of corporate policy and is coupled with responsibility and accountability. 3. A person commonly regarded as possessing an extensive knowledge in any given field. (2010-

01-11) (pouvoir) Automated Vendor Rotation System (AVRS) A system that maintains a record of bid opportunities for the suppliers from each source list. AVRS records are only maintained on regional type satellites. (2010-01-11) (Système automatisé de rotation des fournisseurs [SARF]) award The notification to a bidder or tenderer of acceptance of a bid or tender, which brings a contract into existence. (2010-01-11) (attribution)

Supply Manual Page 3 of 3 Version 10-1 (2010-01-11)

Glossary

B bankruptcy 1. A condition where an insolvent company or person either voluntarily institutes bankruptcy

proceedings by applying to have a licensed trustee in bankruptcy appointed or where the company's or person’s creditors are successful in petitioning the court to issue a receiving order, the effect of which is to authorize transfer of all assets of the bankrupt debtor to a licensed trustee in bankruptcy for realization or distribution to the creditors.

2. The state or condition of one who is bankrupt, whereby the property of a person or company, being legally declared unable to meet debts, is vested in an official trustee for distribution among creditors. (2010-01-11) (faillite)

best value The combination of price, technical merit, and quality, as determined by the contracting authority before the solicitation and set out in the evaluation criteria, and which forms the basis of evaluation and negotiation between buyers and sellers to arrive at an acceptable basis for a purchase and sale. (2010-01-11) (meilleur rapport qualité-prix) bid An offer to provide services or supply goods as a result of a solicitation. (2010-01-11) (soumission) bid bond 1. A bond given to guarantee entry into a contract. This bond is given to indemnify Canada against

increased costs if the bidder does not carry out the specified undertaking to enter into a contract. A bond given by a person to guarantee entry into a contract if the contract is awarded to that person.

2. See security deposit, government guaranteed bond and surety bond. (2010-01-11) (cautionnement de soumission)

bid security A bid bond or a security deposit given by a person to Canada to guarantee entry into a contract if the contract is awarded to that person. (2010-01-11) (garantie de soumission) bid solicitation An invitation, verbal or written, to suppliers to submit a bid, quotation or offer. (2010-01-11) (demande de soumissions) bidder Person or entity (or, in the case of a joint venture, the persons or entities) submitting a bid to perform a contract for goods, services or both. It does not include the parent, subsidiaries or other affiliates of the bidder, or its subcontractors. (2010-01-11) (soumissionnaire) bidders’ conference A meeting chaired by Public Works and Government Services Canada to discuss with potential bidders, technical, operational and performance specifications, and/or the full extent of financial, security and other contractual obligations related to a solicitation. (2010-01-11) (conférence des soumissionnaires) bill of exchange This includes certified cheques, bank drafts and money orders, and are defined in the Bills of Exchange Act as "an unconditional order in writing, addressed by one person to another, signed by the person presenting it, requiring the person to whom it is addressed to pay, on demand or at a fixed or determinable future time, a sum of money to or to the order of a specified person or to the bearer”. (2010-01-11) (lettre de change) bill of sale

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Glossary

An instrument in writing under which the title to personal chattel is transferred. A mere receipt for payment is not a bill of sale. The instrument must actually signify a transfer of title of the goods to the buyer. (2010-01-11) (contrat de vente) blanket order case Supply arrangement that is negotiated with the United States Government under the auspices of Foreign Military Sales (FMS). It allows clients to submit detailed requirements directly to the identified U.S. military organization. This arrangement, which is similar in nature to the standing offer method of procurement, is normally utilized when there is no definite listing of items or of quantities required. This category of FMS cases (contracts) does not necessitate the purchase of equity. See 9.20. (2010-01-11) (dossier de commandes - cadres)

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

Glossary

C Call-up Against a Standing Offer An order issued under the authority of a duly authorized user against a particular standing offer. Communication of a call-up against a standing offer to the offeror constitutes acceptance of the standing offer to the extent of the goods, services, or both, being ordered and causes a contract to come into effect. The parties to the contract that comes into effect when a call-up against a standing offer is made are Canada, as represented by the Minister of Public Works and Government Services and the offeror. (2010-01-11) (commande subséquente à une offre à commandes) Canadian General Standards Board (CGSB) A part of Public Works and Government Services Canada accredited by the Standards Council of Canada as a standard development organization and an ISO 9000 registrar. CGSB is mandated to provide a range of standardization and conformity assessment services in support of government procurement and other government requirements, such as: 1. development of standards, specifications, manuals and guides; 2. listings of pre-qualified products and services; and 3. Quality Systems Division. (2010-01-11) (Office des normes générales du Canada [ONGC]) Canadian goods 1. For the purposes of the Canadian Content Policy. Generally, with the exception of goods

covered by the International Trade Agreements, Canadian goods are those wholly manufactured or that originate in Canada or they are products containing imported components that have undergone sufficient change in Canada to be considered Canadian.

2. For the purposes of Taxes and Duties. Goods that are the growth, produce or manufacture of Canada or that are of foreign origin but are duty and tax paid and have thus been entered for consumption into Canada.

3. Addition to Canadian Goods Abroad. Goods that are exported from Canada for the purpose of being incorporated with foreign articles abroad.

4. Processing of Canadian Goods Abroad. This refers to goods that are exported for a phase of production, which cannot be completed in Canada. (2010-01-11) (marchandises canadiennes)

Canadian industry All commercial enterprises resident and operating in Canada and incorporated, registered, or recognized as such, under federal or provincial legislation and that carry on activities in Canada. This includes industrial research institutes jointly operated by groups of such commercial enterprises. (2010-01-11) (industrie canadienne) Canadian International Trade Tribunal (CITT) An administrative tribunal operating within Canada's trade remedies system. It is an independent quasi-judicial body that carries out its statutory responsibilities in an autonomous and impartial manner and reports to Parliament through the Minister of Finance. (2010-01-11) (Tribunal canadien du commerce extérieur) Canadian services Services provided by Canadian-based personnel. (2010-01-11) (services canadiens) capital cost allowance Depreciation of fixed assets over a number of accounting periods. (2010-01-11) (déduction pour amortissement) capital lease A lease that, from the point of view of the lessee, transfers substantially all the benefit and risk incidents to ownership of the property to the lessee. (2010-01-11) (bail de location-acquisition)

Supply Manual Page 1 of 8 Version 10-1 (2010-01-11)

Glossary

carrier Any person who, in a contract of carriage, undertakes to perform or to procure the performance of transport by rail, road, air, sea, inland waterway or by a combination of such modes. (2010-01-11) (transporteur) cash flow A tracing, in successive steps, of individual items or aggregates of income or expenditure from their first recognition in the accounts to their final disposition or loss of identity. (2010-01-11) (mouvement de trésorerie) ceiling price The maximum price to be paid to the contractor as established in the contract and beyond for which the contractor will not receive additional compensation for the defined work. As provided in the contract, the ceiling price may be subject to downward revision based on a pre-established payment formula. (2010-01-11) (prix plafond) Certificate of Commitment A written statement from suppliers committing them to the implementation of employment equity. These certificates are available from the offices of Human Resources and Skills Development Canada. (2010-01-11) (attestation d'engagement) Certified Products List (CPL) The CPL is identical to the Qualified Products List (QPL) except that there are more frequent audits and tests. This higher level of product assurance permits the qualifying authority, as a certification agency, to enter into a licensing agreement with supplier(s), allowing them to use a registered certification mark on their products and promotional literature. (2010-01-11) (liste des produits certifiés [LPC]) classified information Information related to the national interest that may qualify for an exemption or exclusion under the Access to Information Act or Privacy Act and the compromise of which would reasonably be expected to cause injury to the national interest. (2010-01-11) (information classifiée) client A department, agency, branch, division, Crown corporation or other entity for whom PWGSC procures goods and services. (2010-01-11) (client) collusion A secret understanding between two or more persons to take advantage of another with the object of depriving him or her of a right or property. It implies the existence of fraud of some kind, the employment of fraudulent means, or of lawful means for the accomplishment of an unlawful purpose. (2010-01-11) (collusion) Co-operative Logistics (COLOG) A supply arrangement, which is negotiated with the United States Government under the auspices of Foreign Military Sales (FMS). It enables the Canadian Department of National Defence to obtain directly from the supply systems operated by the United States Department of Defence, spare parts and accessories needed for Crown-owned military equipment of U.S. origin. This category of FMS cases (contracts) necessitates the purchase of equity in the supply system of the appropriate military organization. See 9.15 (FMS) and 9.20 (COLOG). (2010-01-11) (COLOG) commercial practice Custom or usage of the particular trade in which usage or custom is ordinary and reasonable. Evidence of a trade usage may be given in aid of interpreting a contract. (2010-01-11) (pratique commerciale) commercial products Products of a class or kind that are used regularly for other than government purposes and are sold by

Supply Manual Page 2 of 8 Version 10-1 (2010-01-11)

Glossary

the contractor in the course of carrying out normal business operations, which are regularly sold by the contractor to clients other than the government in sufficient quantities to constitute a real commercial market, and for which there is sufficient number of buyers, other than the government, of establishing a going-price for the products. (2010-01-11) (produits commerciaux) commercial services Services of a class or kind that are used regularly for other than government purposes and are sold by the contractor in the course of carrying out normal business operations, which are customarily provided by the contractor with personnel regularly employed and equipment, if necessary, and regularly maintained for the purpose of supplying such services, and for which there is a sufficient number of buyers, other than the government, to establish a going-price for the services. (2010-01-11) (services commerciaux) commodity Raw material, perishable goods, fabricated article or item of production or supply utilized in everyday endeavours and which is identified by contents, physical nature or characteristics. (2010-01-11) (produit) common carrier Any person who undertakes and is authorized to transport persons or goods as a regular business. (2010-01-11) (transporteur public) common ownership control The assets of an enterprise or other organisation are held indivisibly rather than in the names of the individual members. Consequently, rather than being “owners” of the enterprise, its members are held to be trustees of it and its assets for future generations. Common ownership is a way of “neutralising” capital, and vesting control of an enterprise by virtue of participation in it, rather than by the injection of capital. (2010-01-11) (contrôle collectif) Common Service Agency 1. An agency whose activities are directed mainly toward serving other departments and agencies. 2. Public Works and Government Services Canada is a common service agency. (2010-01-11)

(organisme de services communs) company See corporation. (2010-01-11) (compagnie) competitive bid solicitation Solicitation of bids from two or more sources. (2010-01-11) (demande de soumissions concurrentielle) competitive bidding A process that requires that all bidders be placed on an equal footing, and that they bid under the same terms and conditions. (2010-01-11) (soumission concurrentielle) competitive contract A contract where the process used for the solicitation of bids enhances access, competition and fairness and assures that a reasonable and representative number of suppliers are given an opportunity to bid. (2010-01-11) (contrat concurrentiel) compliance review This refers to a compliance review of a representative selection of contractors that will be conducted periodically by Human Resources and Skills Development Canada to assess compliance with the employment equity program criteria and the results obtained. (2010-01-11) (vérification de conformité) Comprehensive Land Claims Agreements

Supply Manual Page 3 of 8 Version 10-1 (2010-01-11)

Glossary

1. Comprehensive Land Claims Agreements (CLCAs) are negotiated in areas of the country where Aboriginal rights and title have not been addressed by treaty or through other legal means. These agreements are modern-day treaties between Aboriginal claimant groups, Canada and the relevant province or territory. While each one is unique, these agreements usually include such things as land ownership, money, wildlife harvesting rights, participation in land, resource, water, wildlife and environmental management as well as measures to promote economic development and protect Aboriginal culture. Many agreements also include provisions relating to Aboriginal self-government.

2. A key part of most CLCAs is economic development. 3. CLCAs are constitutionally protected and as such enjoy a status greater than international trade

agreements and government policies. (2010-01-11) (ententes sur les revendications territoriales globales)

For a complete list of existing CLCA’s, visit the Treasury Board Contracting Policy Notice 1997-8 Web site.

COMSEC Cryptographic, transmission and emission security measures applied to information stored, processed or transmitted electronically; a subset of information technology security. (2010-01-11) (COMSEC) condition 1. Contract law.

(a) A term or an obligation in the contract that goes directly to the substance of the contract or is essential to its very nature that its non-performance may be fairly considered by the other party as a substantial failure to perform the contract at all.

(b) A provision making an obligation subordinate or contingent upon a future and uncertain event.

2. Implied condition. One created by law without any words used by the parties, whether the parties

had it in their minds at the time or not. (2010-01-11) (condition) confidential Level of classification that applies to information and assets whose compromise could reasonably be expected to cause injury to the national interest. (2010-01-11) (confidentiel) consignee The person to whom goods are shipped. (2010-01-11) (destinataire) consignment Goods shipped for future sale or other purposes. The ownership of the goods (title) remains with the shipper (consignor). The receiver (consignee) is accountable for the goods after accepting them. Consigned goods are a part of the consignor's inventory until sold. The consignee may be the eventual purchaser, may act as the agent through whom the sale is effected, or may otherwise dispose of the goods in accordance with its agreement with the consignor. (2010-01-11) (expédition) construction contract 1. Includes an agreement for the supply and erection of a prefabricated structure. The mere

purchase of a prefabricated structure would be a "goods contract." However, a subsequent erection contract would be a "construction contract”.

2. A contract entered into for the construction, repair, renovation or restoration of any work except a vessel and includes: a contract for the supply and erection of a prefabricated structure; a contract for dredging; a contract for demolition; or a contract for the hire of equipment to be used in or incidentally to the execution of any contract referred to in this definition. (2010-01-11) (contrat de construction)

consultant

Supply Manual Page 4 of 8 Version 10-1 (2010-01-11)

Glossary

An individual or entity that provides advice or other professional services to Canada. A consultant serves in an outside independent advisory capacity to an officer or department, as distinguished from one who serves as an employee in performance of a department's duties and responsibilities. A consultant expresses views or gives opinions on problems or questions as requested, but does not perform, supervise, nor take responsibility for the performance of operating functions. Ordinarily, consultants are experts in a particular field in which advice is given. A consultant need not be a specialist; the expertise may consist of broad administrative, professional or technical experience, indicating ability and knowledge, which will make the advice a distinctive value to the client. The work performed under the contract is the provision of advice. (2010-01-11) (expert-conseil) contingent liability A legal or financial obligation that may arise as a result of a future and uncertain event. A liability which is not now fixed and absolute, but which will become so in case of the occurrence of some future and uncertain event. A potential liability, e.g. pending lawsuit, disputed claim. (2010-01-11) (dette éventuelle) contract 1. An agreement between two or more persons, which creates an obligation to do or not to do a

particular thing. Its essentials are competent parties, subject matter, a legal consideration, mutuality of agreement and mutuality of obligation.

2. Under the Government Contracts Regulations, a contract means a construction contract, a goods contractor and a service contract entered into on behalf of Canada by a contracting authority. (2010-01-11) (contrat)

contract approval authority The authority delegated by the Minister of PWGSC to the person designated to occupy a position, that is, the incumbent of a position, to approve on his/her behalf submissions to enter into contracts, to amend contracts or to issue standing offers up to specified dollar limits. See contract signing authority. (2010-01-11) (pouvoir d'approbation des contrats) Contract Claims Resolution Board (CCRB) CCRB resolves claims resulting from contract disputes in a more economical, quicker and less formal process. This Board takes a common sense alternative dispute resolution approach to problems and seeks to reach settlements that are acceptable to all parties. A summary of the dispute resolution processes of the Contract Settlement Board and the Contract Dispute Advisory Board is set forth in 8.145 and 8.150 respectively. (2010-01-11) (Conseil de règlement des différends contractuels) contract date The effective date of the contract. (2010-01-11) (date du contrat) contract dispute Matter of dispute in respect of a contract that cannot be resolved between the contractor or its authorized representative and the contracting officer designated in the said contract. (2010-01-11) (différend contractuel) contract for service 1. A contract in which one party (the contractor) agrees to provide services to another with no day-

to-day supervision or control. It normally implies the accomplishment of a specified job or task to achieve a prescribed objective.

2. An employer-employee relationship does not exist in contracts for services. (2010-01-11) (contrat de services)

contract price 1. General. The price or price formula stipulated in a contract of purchase or sale. It is also referred

to as firm price, target price, cost price, etc. 2. PWGSC contract. The amount expressed in the contract to be payable to the contractor for the

Supply Manual Page 5 of 8 Version 10-1 (2010-01-11)

Glossary

work. (2010-01-11) (prix contractuel) contract security A payment bond or a performance bond given on behalf of a person to Canada, to make good on any default by that person under the contract by compensating Canada, or completing the performance of the contract to the extent required by the terms and conditions of the payment bond or performance bond, or a security deposit given by the person to Canada to secure the performance of the contract to the extent required by the terms and conditions of the contract. (2010-01-11) (garantie contractuelle) contract signing authority The authority delegated by the minister of PWGSC to the person designated to occupy a position, that is, the incumbent of a position, to sign on his/her behalf contract, contract amendment or standing offer documents after ascertaining that the approval authority has been duly granted and ensuring that the terms and conditions written in the documents reflect those approved by the contract approval authority. See contract approval authority. (2010-01-11) (pouvoir de signature des contrats) contracting authority 1. The appropriate minister, as defined in paragraph (a) or (b) of the definition ''appropriate Minister''

in section 2 of the Financial Administration Act. 2. A corporation named in Schedule II of the Financial Administration Act. 3. Defence Construction (1951) Limited, the National Capital Commission or the National

Battlefields Commission. See also contract approval authority and appropriate minister. 4. The person authorized to enter into a contract on behalf of Canada. (2010-01-11) (autorité

contractante) contractor 1. General. This refers to any one of the parties to a contract. 2. One who contracts to perform work or furnish materiels in accordance with a contract. (2010-01-

11) (entrepreneur) control The process by which the activities of a project or organization conform to a desired plan of action. Examples of control elements are: authority and capacity for its exercise, common understanding of purpose, objectives, plan of organization and action, assumption of responsibility by organizational units, policies governing courses of action, standards of performance appraisals and monitoring of performance, and ability to convert or modify performance. (2010-01-11) (contrôle) controlled goods Controlled goods are defined under the schedule to the Defence Production Act. The goods listed in the schedule to the Export Control List made under section 3 of the Export and Import Permits Act are controlled goods. (2010-01-11) (marchandises contrôlées) conversion factor See exchange rate factor. (2010-01-11) (facteur de conversion) copyright 1. An exclusive statutory right of those such as authors, publishers, composers, etc., to control the

publication/dispositions of their works of art, literature, music, films, pictures, etc., which is protected by the Copyright Act of Canada. Under the Geneva Convention of 1952 to which Canada became a party in 1962, international copyright is obtained without any formalities by placing on the work the symbol 8, identifying the name of the copyright holder in the year of the first publication.

2. The exclusive right of printing or otherwise multiplying copies of information and data. 3. For a more comprehensive definition, see section 3 of the Copyright Act. (2010-01-11) (droit

d'auteur)

Supply Manual Page 6 of 8 Version 10-1 (2010-01-11)

Glossary

CORCAN CORCAN includes the Correctional Services Canada (CSC) Industries, and the Automated Document Processing and Agribusiness programs. Purchases by PWGSC, on behalf of clients, from CSC will be conducted through CORCAN. See 9.30. (2010-01-11) (CORCAN) corporation An artificial person or legal entity created by or under the authority of the federal or provincial laws. The law treats the corporation itself as a person, which can sue and be sued. The corporation is distinct from the individuals who comprise it (shareholders). (2010-01-11) (société) cost 1. General. The price paid for anything, outlay and expense. When a contract refers to actual cost,

the term means the amount, not including any profit, which was in fact paid out for materials and for labour.

2. PWGSC contract. Costs determined in accordance with Contract Cost Principles 1031-2. 3. Considered as total price in contract proposals for approval authority. (2010-01-11) (coût) cost accounting The classification, recording, analysis, reporting and interpretation of expenditures associated with the production and distribution of goods and services. (2010-01-11) (comptabilité du prix de revient) cost analysis 1. An examination or review of cost data to determine if costs are charged in accordance with

prescribed criteria or regulations, for example the Contract Cost Principles 1031-2. 2. A study of cost data for the purpose of identifying the causes of inefficiency or the improvement

desirable in cost recording, supervision or management. 3. The estimation of production costs by the bidder. 4. The examination, before price negotiation, of the cost estimates presented by a potential supplier.

Such analysis is for the purpose of checking that only permitted types of cost are included, that no significant cost category has been omitted, and that time, labour rates and other details are reasonable. (2010-01-11) (analyse des coûts)

cost centre An administrative unit selected within an organization for the purpose of accumulating and controlling costs. It usually consists of a natural grouping of machines, methods, processes or operations; is identified with single management responsibility; and is made up of elements, which have common cost characteristics. (2010-01-11) (centre de coûts) cost control Employment of management devices in the performance of any necessary operation so that pre-established objectives of quality, quantity and time may be attained at the lowest possible outlay or cost for goods and services. Such devices include a bill of material, instructions, performance standards, competent supervision, cost limits on items and operations, and studies, interim reports and decisions based on these reports. (2010-01-11) (contrôle des coûts) cost of goods Stocked Item Supply. The price FOB supplier plus inbound transportation. (2010-01-11) (coût des biens) cost of service Stocked Item Supply. This refers to all expenses (other than cost of goods) incurred by PWGSC in providing the Stocked Item Supply service. (2010-01-11) (coût du service) cost plus fixed fee A basis of price in which the contractor is paid costs reasonably and properly incurred, as determined by audit together with an agreed upon fixed fee (or a percentage of cost) by way of profit. (2010-01-11)

Supply Manual Page 7 of 8 Version 10-1 (2010-01-11)

Glossary

(coût plus honoraires fixes) cost reimbursable If the contracted work is not performed in an acceptable manner, the contract is declared in default and the work is terminated. The contractor need only incur allowable and billable costs and submit them to the government to generate a legal receivable. (2010-01-11) (frais remboursables) costs incurred Costs allowed under the Contract Cost Principles 1031-2 applicable to a particular contract. See also cost. (2010-01-11) (frais engagés) counter offer An offer to enter into a transaction on terms differing from those first proposed. A statement by the offeree which has the legal effect of rejecting the offer and of proposing a new offer to the offeror. (2010-01-11) (contre-offre) country of origin A country in which the product is mined, produced or manufactured. A product of domestic origin is a product mined, produced, or manufactured in Canada. (2010-01-11) (pays d'origine) customs Duties charged on commodities on their import into or export from a country by a governmental authority. (2010-01-11) (douane) customs duty - defence Tariff Code 9982.00.00 of the Schedule to the Customs Tariff provides for the remission of customs duty on all defence supplies imported under contracts of $250,000 or more, by the Department of National Defence and Public Works and Government Services Canada (PWGSC), as well as the private sector provided that the person claiming remission provides certification by the minister of PWGSC that the goods supplied under the contract are defence supplies. (2010-01-11) (droit de douane - défense) customs tariff A schedule of charges assessed by the government on imported goods. (2010-01-11) (tarif des douanes)

Supply Manual Page 8 of 8 Version 10-1 (2010-01-11)

Glossary

D damages 1. Compensation, usually in money, for injury to persons, or damage to goods or property. 2. General damages are such as the law will presume to be direct, natural and probable

consequences of the act in question. 3. Special damages are such as the law will presume to be exceptional in character. 4. See also liquidated damages. (2010-01-11) (dommages-intérêts) defect 1. General. A lack, want, deficiency or absence of something necessary for completeness,

perfection or adequacy in form or function. 2. An imperfection, fault or error in manufactured materiel and service. 3. Critical defect. A defect that judgment and experience indicate is likely to result in hazardous or

unsafe conditions for individuals depending on, using or maintaining the product. 4. Major defect. Other than critical defect that is likely to result in failure, or to reduce materially the

usability of the unit product for its intended purpose. 5. Minor defect. A defect that is not likely to reduce materially the usability of a unit product for its

intended purpose, or is a departure from established standards having little bearing on the effective use or operation of the unit.

6. Latent defect. This refers to a hidden or concealed defect, one, which could not be discovered by reasonable and customary inspection; one not apparent on the face of goods, product or a document. (2010-01-11) (défaut)

defence contract A contract or subcontract with Canada or an agent of Canada, or with an associated government, that in any way relates to defence supplies or to defence projects or to the designing, manufacturing, producing, constructing, finishing, assembling, transporting, repairing, maintaining or servicing, or storing of, or dealing in, defence supplies or defence projects. (2010-01-11) (contrat de défense) Defence Production Act An act that gives to the minister of PWGSC "exclusive authority to buy or otherwise acquire defence supplies". The provisions of the Defence Production Act govern all PWGSC contracts for defence supplies or projects. (2010-01-11) (Loi sur la production de défense) Defence Production Loan Account An account, which may be used to make loans or advances to aid in defence procurement, such as working capital loans or advance payments on contracts and to make payment for such. See 9.25. (2010-01-11) (compte de prêts de la production de défense) Defence Production Revolving Fund An account in the Consolidated Revenue Fund, which may be used by PWGSC to designate and operate the DPRF for other than loan transactions. The DPRF provides PWGSC with a budgetary account to purchase defence supplies, to make payment for such, and to get reimbursed out of an appropriation of a client (for example, DND), or by an agent of Canada, or by an associated government. See 9.25.1. (2010-01-11) (Fonds renouvelable de la production de défense) defence projects Buildings, aerodromes, airports, dockyards, roads, defence fortifications or other military works, or works required for the production, maintenance or storage of defence supplies. (2010-01-11) (entreprises de défense) defence supplies This has the same meaning as in the Defence Production Act and covers: 1. Arms, ammunition, implements of war, vehicles, mechanical and other equipment, watercraft,

Supply Manual Page 1 of 4 Version 10-1 (2010-01-11)

Glossary

amphibious craft, aircraft, animals, articles, materiels, substances and things required or used for the purposes of the defence of Canada or for cooperative efforts for defence being carried on by Canada and an associated government.

2. Ships of all kinds. 3. Articles, materials, substances and things of all kinds used for the production or supply of

anything mentioned in 1. or 2. above or for the construction of defence projects. 4. Requirements necessary or appropriate to promote national defence, which means programs for

military and atomic energy production or construction, military assistance and directly related activities. (2010-01-11) (matériel de défense)

delayed bid A bid delivered to the specified bid receiving area after the closing date and time but before the contract award date may be considered, provided the delay can be proven to have been due solely to a delay in delivery that can be attributed to the Canada Post Corporation (CPC) (or national equivalent of a foreign country) or to incorrect handling by PWGSC. The only pieces of evidence relating to a delay in the CPC system that are acceptable are: a CPC cancellation date stamp; a CPC Priority Courier Bill of Lading, and a CPC Xpresspost Label, which clearly indicates that the bid was mailed before the bid closing date. (2010-01-11) (soumission retardée) delivery 1. Actual. The transfer of possessions. 2. Sale of goods. Delivery takes place when the goods are placed under the control of the person

who has to receive them. Alternatively, the presence of the goods at the seller's place of business, ready to be delivered, and the purchaser notified, may be termed a delivery.

3. Shipping. Occurs when lading is surrendered and title to goods passes to the receiver or consignee. (2010-01-11) (livraison)

department 1. The same meaning as in the Financial Administration Act (FAA) and includes any of the

departments named in Schedule I and any corporation in Schedule II of the FAA, the staffs of the Senate, the House of Commons, and the Library of Parliament. It includes further any division or branch of the public service of Canada, including a commission appointed under the Inquiries Act, designated by the Governor in Council as a department for the purposes of the FAA.

2. Department of Public Works and Government Services. (2010-01-11) (ministère) Departmental Individual Standing Offer (DISO) Used by PWGSC as a method of supply to: analyze customer demand, determine quantities and quality, standardize products used by government, manage complex requirements and satisfy requirements for data collection for reports to Treasury Board and the Auditor General's Office. Only PWGSC may issue call-ups against a DISO upon receipt of a funded requisition from a customer department. (2010-01-11) (offre à commandes individuelle et ministérielle [OCIM]) depreciation 1. Decrease in value, particularly the deterioration or the loss in value arising from age and use of a

property. 2. The gradual exhaustion of the service capacity of fixed assets, which is not restored by

maintenance practices. It is the consequence of such factors as use, obsolescence, inadequacy and decay.

3. A proportionate charge as an expense for a period based on the cost or other recorded value of fixed assets. (2010-01-11) (amortissement)

design authority The component of the client or its delegated agency responsible for determination of design parameters. (2010-01-11) (responsable de la conception) design change

Supply Manual Page 2 of 4 Version 10-1 (2010-01-11)

Glossary

A permanent change or modification to the governing technical data. (2010-01-11) (modification de conception) design deviation A temporary departure from governing technical data. (2010-01-11) (altération de conception) direct cost Any item of cost, or the total of such items, which can be directly related to a particular product, service, program, function or project; usually, but not necessarily limited to items of material and labour and direct overhead. (2010-01-11) (coût direct) direct labour The labour applied to the material that will form an integral part of the final product in a manufacturing process. (2010-01-11) (main-d'œuvre directe) direct labour costs The approved direct labour costs applicable to the estimated costs of a negotiated contract. Negotiated labour costs for a lengthy contract may include predicted increases in labour rates. (2010-01-11) (frais de main-d'œuvre directe) direct material The material that will form an integral part of the final product in a manufacturing process. (2010-01-11) (matières directes) discount 1. A reduction from a list price or a stated amount offered by the seller to the buyer. 2. A cash discount is an allowance extended to encourage payment of invoice on or before a stated

date, which is earlier than the net date. The percent of discount allowed is agreed upon between buyer and seller and is often established by industry or trade custom.

3. To compute the present value of a future sum. (2010-01-11) (escompte) discretionary audit 1. Verification done on a discretionary basis by the government of profit on a contract or a series of

contracts. 2. Verification that Canada is not being charged in excess of the lowest price charged anyone else.

This verification is employed in conjunction with a price certification on negotiated firm price contracts. (2010-01-11) (vérification discrétionnaire des comptes)

discretionary verification An independent verification by Audit Services Bureau or other qualified personnel as approved by Acquisition Program Integrity Secretariat, to supplement the checks and verifications carried out by the contracting officers and/or cost analysts, to ensure the timeliness of payments by contractors to workmen, subcontractors and suppliers. (2010-01-11) (vérification discrétionnaire) disposal The removal of materiel from a supply system by sale, trade-in or destruction. Within the federal government, disposal is normally arranged through the PWGSC Crown Assets Distribution Directorate/Centre. (2010-01-11) (aliénation) distributor A supplier who acquires goods for resale to a wholesaler, retailer or ultimate consumer. A distributor may sell goods from their own inventory, from a consignment inventory, or directly from the manufacturer's stock. (2010-01-11) (distributeur) duty 1. General. A tax levied by a government on the importation, exportation, or use and consumption

Supply Manual Page 3 of 4 Version 10-1 (2010-01-11)

Glossary

of goods. 2. Any duties or taxes levied on imported goods under the Customs Tariff, the Excise Tax Act, the

Excise Act, the Special Import Measures Act, or any other law relating to customs. 3. All applicable duties. All duties in effect on the contract date imposed and collected by the taxing

authority on the transaction or property covered by the contract. (2010-01-11) (droit)

Supply Manual Page 4 of 4 Version 10-1 (2010-01-11)

Glossary

E economic price adjustment Price adjustments, both upward and downward, which are necessary either to protect Canada and the contractor against significant economic fluctuations in labour and material costs, including services and supplies, or in the event of changes in the contractor's established prices attributable to industry-wide economic factors. (2010-01-11) (indexation des prix) effectiveness 1. Auditor General. The extent to which a program achieves its goals or other intended effects. For

example: to increase income in a particular area, a program might be devised to create jobs. The jobs created would be program output. This contributes to the desired program effect of increased income, which can be measured to assess program effectiveness. Of course, not all programs are equally evaluated. Also, management procedures for measuring and reporting effectiveness will differ between programs.

2. General. The measure of how well a group, person, function or program reaches its objectives or achieves results. (2010-01-11) (efficacité)

efficiency 1. Auditor General. The relationship between goods or services produced, and resources used to

produce them. An efficient operation produces the maximum output for any given set of resource inputs, or it has minimum inputs for any given quantity and quality of service provided.

2. General. A measure of how well a person, group, function or program uses its time and resources to achieve certain results, that is, total resources consumed. (2010-01-11) (efficience)

electrical equipment Any apparatus, appliance, device, instrument, fitting, fixture, machinery, material or thing used in or for, or capable of being used in or for, the generation, transformation, transmission, distribution, supply or utilization of electrical power or energy, and without restricting the generality of the foregoing, including any assemblage or combination of materials or things, which are used or are capable of being used or adapted, to serve or perform any particular purpose or function when connected to an electrical installation, notwithstanding that any of such materials or things may be mechanical, metallic or non-electric in origin. (2010-01-11) (matériel électrique) electronic bidding A method of procurement that promotes suppliers' access to, and transparency in, the procurement process and facilitates Canada's receipt of best value, by using: 1. public notice by means of an approved electronic information service of procurement

opportunities (e.g., MERX); 2. public notice by means of an electronic information service of proposed directed procurements by

means of an Advance Contract Award Notice; 3. such other procurement methods as may be approved by the Treasury Board. (2010-01-11)

(invitation électronique à soumissionner) employment equity A concept that encourages the removal of employment barriers; identifies and removes discriminatory policies and practices; seeks the goal of fair representation for all Canadians, in particular women, Aboriginal people, disabled persons and visible minorities; and promotes economic development through the full utilization of the talents of all Canadians. (2010-01-11) (équité en matière d'emploi) Engineering Change Proposal Design change procedure used in aircraft procurement. The ECP form provides the data concerning a proposed change and, when signed by design and procurement authorities, becomes a change order. (2010-01-11) (proposition de modification technique)

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Glossary

equipment Major items of materiel that are not expendable except through depreciation or wear and tear and which, although they may be fixed or positioned in prescribed places, do not lose their identity or become integral parts of other equipment and installations. Items in this category are normally susceptible to running maintenance. Equipment items are usually procured, issued and replaced on the basis of planned departmental capital acquisition programs, for example, aircraft vehicles, vessels, boats, workshop machinery, electronics systems. (2010-01-11) (équipement) escalation See economic price adjustment or adjustment. (2010-01-11) (indexation) estimated cost The estimated cost to be used as the basis for the sourcing decision is that cost determined, through consultation between PWGSC and the client, as being representative of all known work and expected unscheduled work, arising out of the requirement, that is, the total estimated contract value. (2010-01-11) (coût estimatif) exchange rate factor The exchange rate applied to the foreign currency component (FCC) to arrive at the value of the FCC in Canadian funds. (2010-01-11) (facteur de conversion) executory costs Costs related to the operation of the leased property (for example, insurance, maintenance cost and property taxes). (2010-01-11) (coûts exécutoires) ex gratia payment A payment made pursuant to the Treasury Board Policy on Claims and Ex gratia Payments: “a benevolent payment made by Canada under the authority of the Governor in Council. The payment is made to anyone in the public interest for loss or expenditure incurred for which there is no legal liability on the part of the Crown. An ex gratia payment is an exceptional vehicle used only when there is no statutory, regulatory or policy vehicle to make the payment.” (2010-01-11) (paiement à titre gracieux) export permit A permit issued on application, by Industry Canada, to a resident of Canada for the export of certain goods covered by the Export Permit Regulations. (2010-01-11) (permis d'exportation) extra payment claim Claims made by a contractor against Canada in respect of firm or ceiling price contracts where a legal liability does not exist or where there is uncertainty that a legal liability exists under the contract. (2010-01-11) (demande d'indemnisation) extract file A file created when a requisition is formally subdivided and involves procurement action by a contracting officer other than the main file holder. (2010-01-11) (dossier d'extraits)

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

Glossary

F facility 1. A physical plant or installation; for example, base, arsenal or building, used to make the

performance of a function easier. 2. The materiel resources needed to facilitate any action or operation. (2010-01-11) (installation) facility evaluation A survey/examination of any or all of the capabilities of a supplier that pertain to competence as a source of supply or recipient of aid. Pre-award surveys are made in cases of doubt regarding productive capability, quality control or financial strength. (2010-01-11) (évaluation des installations) facility security clearance A determination by the Canadian Industrial Security Directorate that, from a security viewpoint, an organization is eligible for access to Canadian and foreign government information or assets, which are “classified” or “protected” at the same level as the clearance being granted or to a lower level. (2010-01-11) (attestation de sécurité d'installation) fair market value 1. The price that would be agreed to in an open and unrestricted market between knowledgeable

and willing parties, dealing at arm's length, who are fully informed and not under any compulsion to transact.

2. The word “fair” implies a concept of a market, which is not disturbed by unpredictable economic factors; for example, boom or depression. (2010-01-11) (juste valeur marchande)

FAS Free Alongside Ship (...named port of shipment) The book containing the International Chamber of Commerce (ICC) official rules for the interpretation of trade terms is entitled "Incoterms 2000", and the location of a summary for the description of FAS. The responsible obligations of the buyer and seller cannot be found on the ICC Web site; that information may only be found in the Incoterms 2000 book. (2010-01-11) (FAS franco le long du navire [...port d’embarquement convenu]) FCA Free Carrier (...named place) The book containing the International Chamber of Commerce (ICC) official rules for the interpretation of trade terms is entitled "Incoterms 2000", and the location of a summary for the description of FCA. The responsible obligations of the buyer and seller cannot be found on the ICC Web site that information may only be found in the Incoterms 2000 book. (2010-01-11) (FCA franco transporteur [... lieu convenu]) Federal Supply Classification PWGSC uses the U.S. Federal Supply Classification (FSC) system as the basis for assigning commodity procurement responsibilities, and the Goods and Services Identification Number (GSIN) system permits the definitive assignment of responsibilities for item groupings within FSC. (2010-01-11) (classification fédérale des approvisionnements) final payment Payment made in satisfaction of a final invoice. This refers to a payment, which completes the monetary settlement in accordance with the conditions of the contract. (2010-01-11) (paiement final) financial analysis The process of selecting relevant financial information about the supplier, developing significant relationships (ratios), studying these relationships and interpreting the results. (2010-01-11) (analyse financière) firm base price or firm base price elements The otherwise firm price or firm price elements identified within the contract basis of payment from which

Supply Manual Page 1 of 3 Version 10-1 (2010-01-11)

Glossary

economic price adjustments will be made on the occurrence of certain specified contingencies. (2010-01-11) (prix de base ferme ou éléments de prix de base ferme) firm price A method of pricing in which the total amount payable is a fixed lump sum, or is an amount determinable in accordance with fixed unit prices. (2010-01-11) (prix ferme) firm price contract A contract that sets the total amount payable, or pursuant to which the total amount payable is the product obtained, by multiplying the number of identical units of work performed or identical items delivered by a predetermined fixed price for each unit or item. (2010-01-11) (contrat à prix ferme) fixed time rate A method of pricing in which the amount payable is determined in accordance with the combined cost of labour, overhead and profit, as expressed by a fixed amount by time period. (2010-01-11) (taux fixe basé sur le temps) fixed unit price A method of pricing in which the total amount payable is the product of the number of identical units of work performed or identical items delivered, multiplied by a predetermined fixed price for each unit or item. (2010-01-11) (prix unitaire fixe) FOB (Free on Board) A mercantile term used extensively in both domestic and international trade. 1. As a domestic trade term, used in both Canada and the United States, FOB ordinarily determines

the place where the seller effects delivery of the goods, where title and risk of loss will pass, and whether the seller or the buyer is required to pay freight charges (for example, FOB New York), unless otherwise specified in the contract. Specific application of the term FOB either with reference to transfer of title, risk, or burden of freight charges, may vary according to applicable law, custom and usage or agreement of the parties concerned.

2. As an Incoterm, FOB is defined by the International Chamber of Commerce and can only be used for shipments by seagoing vessels. (Note: There are 13 Incoterms, 6 of which can only be used for shipments by seagoing vessel.) The contractual rights and obligations of this and similar mercantile terms are used in international commerce. (2010-01-11) (FAB franco à bord)

foreground information All intellectual property first conceived, developed, produced or reduced to practice as part of the work under the contract. (2010-01-11) (renseignements originaux) Foreign Currency Component (FCC) The element of the price that will be directly affected by exchange rate fluctuations. It could include the net price FOB foreign manufacturer's plant, costs associated with applicable duty, excise and goods and services tax/harmonized sales tax, entry fees, transportation costs or delivery charges payable in a foreign currency, and any other charges associated with being the importer of records if they originated from and are required to be paid in a foreign currency. It does not, however, include profit, customs brokerage fees, material handling, outgoing transportation charges or costs associated with a Canadian-based company's factory overhead, general and administrative expenses. (2010-01-11) (montant en monnaie étrangère) Foreign Military Sales (FMS) A Security Assistance Program, which is administered by the United States Department of Defence, and allows eligible foreign governments and international agencies to purchase defence-related articles and services from the United States Government. See 9.15. (2010-01-11) (ventes de matériel militaire à l'étranger [FMS]) Foreign Ownership, Control or Influence (FOCI)

Supply Manual Page 2 of 3 Version 10-1 (2010-01-11)

Glossary

Assessments are designed to ensure that no third party, individual, firm, or government is assumed to possess dominance of, or authority over, a Canadian facility to such a degree that it could gain unauthorized access to INFOSEC information. (2010-01-11) (participation, contrôle et influence étrangers [PCEI]) formal agreement An agreement executed under seal by the parties and signed by the Corporate Secretary, the person responsible for affixing the seal for Canada. (2010-01-11) (accord officiel) former public servant An individual who has been employed in the Public Service and whose pensionable employment was with an organization listed in the schedules of the Financial Administration Act, branches designated as departments by the Governor in Council, departmental corporations, and those Crown corporations not included in the schedules, and whose pension or annual allowance is paid under the Public Service Superannuation Act (PSSA) and the Supplementary Retirement Benefits Act, as it affects the PSSA. (2010-01-11) (ancien fonctionnaire)

Supply Manual Page 3 of 3 Version 10-1 (2010-01-11)

Glossary

G general and administrative rate Estimated general and administrative expenses are a percentage of material, labour and overhead costs. (2010-01-11) (coefficient de dépenses générales et administratives) Goods and Services Identification Number (GSIN) A system of material and services categorization used within PWGSC. The system is used in conjunction with the Federal Supply Classification (FSC) code. (2010-01-11) (numéro d’identification des biens et services [NIBS]) goods contract An agreement for the purchase of articles, commodities, equipment, goods, materials or supplies and includes: printing or the reproduction of printed matter and the construction or repair of a vessel. (2010-01-11) (contrat de biens) Government Electronic Tendering Service (GETS) The service used by the federal government to post notices (for example, Notices of Proposed Procurement, Advance Contract Award Notices and Contract Award Notices) and to distribute solicitation documents. This service is provided through MERX. For information about MERX, call 1-800-964-MERX (6379) or visit its Web site. (2010-01-11) (Service électronique d'appels d'offres du gouvernement [SEAOG]) government furnished equipment Equipment supplied by Canada to be used in the production process; for example, tooling, jigs, dies, production equipment. See special production tooling, special test equipment and production assets. (2010-01-11) (équipement fourni par le gouvernement) government guaranteed bond A bond of the Government of Canada or a bond unconditionally guaranteed as to the principal and interest by the Government of Canada that is: 1. Payable to the bearer. 2. Accompanied by a duly executed instrument of transfer of the bond to the Receiver General in

the form prescribed by the Domestic Bonds of Canada Regulations. 3. Registered in the name of the Receiver General. (2010-01-11) (obligation garantie par le

gouvernement) government issue 1. Defence Production Act. Means machinery, machine tools, equipment or defence supplies

furnished, acquired or purchased by or on behalf of the government or associated government with funds provided by the government or associated government.

2. PWGSC contracts. All materials, parts, components, equipment, specifications, articles and things, which may be supplied to a contractor by the government for performance of the (contract) work. (2010-01-11) (fournitures d'État)

Government Property Anything supplied to the contractor by or on behalf of Canada for the purposes of performing the contract, and anything acquired by the contractor in any manner in connection with the work, the cost of which is paid by Canada under the contract. (2010-01-11) (biens de l’État) Government Quality Assurance (GQA) at Source The activity of the inspection authority or the GQA authority in monitoring or observing at the contractor's plant, before delivery, to verify whether a product, service and/or quality system complies with the technical requirements stipulated in the contract. (2010-01-11) (assurance officielle de la qualité [AOQ] à la source)

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Glossary

government-supplied materiel (GSM) Any item of materiel acquired by the government of Canada and provided on a "free issue" basis to contractors for embodiment in materiel under production or for incorporation into Crown-owned equipment undergoing modification, repair or overhaul. (2010-01-11) (matériel fourni par le gouvernement) grant An unconditional transfer payment made to a recipient, for which Canada will not receive any goods or services. (2010-01-11) (subvention) green procurement The integration of environmental considerations, along with quality, performance, price and availability into the procurement process, from planning to final disposal. Green procurement means that environmental impacts of the goods we procure, which have been appropriately considered in value for money decisions. (2010-01-11) (achat écologique)

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

Glossary

H holdback This refers to an amount withheld under a contract, to ensure the performance of the contract, and also to avoid overpayments in relation to progress of work. (2010-01-11) (retenue) hypothecated bond To pledge as collateral, such as personal property, as security for a debt without transfer of possession. This is used in relation to bid/security deposits and performance bonds. (2010-01-11) (obligation cautionnée)

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Glossary

I importer A contractor, subcontractor or a supplier who actually imported the goods or materiel. (2010-01-11) (importateur) importer of record The consignee or importer shown on the import entry form and on the Canada Customs Invoice or commercial invoices who is responsible for customs clearance and payment of the Goods and Services Tax or Harmonized Sales Tax. (2010-01-11) (importateur officiel) inbound logistics The definition of “inbound logistic” is a matter of perspective. Shipments to Canadian Forces from repair and overhaul facilities and shipments off new acquisitions are considered inbound. Inbound logistics does not have an agreed-upon definition in the industry. A shipment is inbound to the receiver; conversely, shipments that are sent out B, as a raw materiel supplier, manufacturer or vendor might do B, are outbound from the sender. For inbound logistics planning, the focus of transportation management is on planning the receipt of the shipment. The definition of inbound logistics is related not only to the controller of the shipment process, but also who takes ownership of the goods shipped. (2010-01-11) (logistique interne) income The return in money from one's business, labour or capital invested; gains, profits or private revenue. The excess of revenues over expenses for a period is usually referred to as net income. (2010-01-11) (revenu) Incoterms Incoterms are standard trade definitions most commonly used in international sales contracts. They are protected by the International Chamber of Commerce copyright. They are part of the sales contract and not of the contract of carriage. (2010-01-11) (Incoterms) indemnify 1. To compensate against loss or damage incurred by another; to reimburse another for such loss

or damage. 2. The word “indemnify” may mean either to prevent loss so that it does not occur, or to make

reimbursement or compensation after the loss has occurred. (2010-01-11) (indemniser) indirect cost An item of cost that cannot be reasonably identified with a specific unit of product or with a specific operation or other cost centre. An indirect cost is usually allocated to several cost objectives. (2010-01-11) (coût indirect) industrial security Covers all that relates to security requirements under the terms of a contract, subcontract, standing offer, agreements, which will demand that identified private sector suppliers and their personnel be security screened and, if required, that the physical premises of the proposed contractor be inspected and approved to safeguard, produce or process “Protected” or “Classified” information, assets or data, prior to gaining access to such information or assets. (2010-01-11) (sécurité industrielle) INFOSEC All Communications-Electronic Security (COMSEC) information and material entrusted to or developed/evaluated by or for the Communications Security Establishment. (2010-01-11) (INFOSEC) insolvency A condition where a supplier, although not bankrupt, is either unable to meet its obligations, as they

Supply Manual Page 1 of 3 Version 10-1 (2010-01-11)

Glossary

generally become due, or has ceased paying current obligations in the ordinary course of business, or whose assets have a realizable value insufficient to pay all its obligations. (2010-01-11) (insolvabilité) inspection 1. General. A close scrutiny or an examination. The process of determining conformance of a

product to the applicable requirements. 2. 100 percent. The inspection of each unit of product or the whole material, as opposed to any

form of sampling inspection. 3. Final. The last of several inspections at successive stages of manufacture, repair, modification,

etc. 4. Normal. The inspection that is used when there is no statistically significant evidence that the

quality of the product being submitted is higher or lower than the specified quality level. 5. Original. The first inspection of a particular quantity of product, as distinguished from inspection

of a product that is resubmitted after prior rejection. 6. Receiving. Inspection by a client of materials and manufactured products, as delivered. 7. Reduced. Provision in a sampling procedure for switching to a less severe sampling plan when

there is evidence that the submitted quality level is higher than the specified quality level. 8. Source. The inspection of supplies or services at the point of manufacture or point of shipment. 9. Activities such as measuring, examining, testing, gauging one or more characteristics of a

product or service and comparing these with specified requirements to determine conformity. 10. The activity of monitoring or observing, before delivery, to verify whether a product, service and/or

quality system complies with the technical requirements stipulated in the contract. (2010-01-11) (inspection)

inspection at source Refer to Government Quality Assurance (GQA) at Source. (2010-01-11) (inspection à la source) inspection authority The person designated as such in the contract. This includes any person acting, on behalf of Canada or the Minister, as the inspection authority in relation to the contract. For purposes of contracts for the Department of National Defence, inspection authority includes quality assurance authority. (2010-01-11) (responsable de l'inspection) insurance A contract of indemnity whereby one party (the insurer) undertakes to indemnify the other (the insured) against damage or loss, on a specified subject by specified perils in consideration of a payment received (a premium). The instrument by which the contract is entered into is called the policy. (2010-01-11) (assurance) intellectual property Any information or knowledge of an industrial, scientific, technical, commercial, literary, dramatic, artistic or otherwise creative nature relating to the work, whether oral or recorded in any form or medium and whether or not subject to copyright; this includes but is not limited to any inventions, designs, methods, processes, techniques, know-how, show-how, models, prototypes, patterns, samples, schematics, experimental or test data,reports, drawings, plans, specifications, photographs, manuals and any other documents, software, and firmware. (2010-01-11) (propriété intellectuelle) interest The compensation allowed by law, or fixed by the parties, for the use or retention by one party of a sum of money or other property belonging to another. It may take the form of a lump sum payment or periodical payments at a rate percent. (2010-01-11) (intérêt) interest rate implicit in the lease The discount rate that, at the inception of the lease, causes the aggregate present value of: the minimum lease payments, excluding that portion of the payments representing executory costs to be paid by the lessor, and any profit on such costs, and the unguaranteed residual value accruing to the benefit of the

Supply Manual Page 2 of 3 Version 10-1 (2010-01-11)

Glossary

lessor, to be equal to the fair value of the leased property to the lessor at the inception of the lease. (2010-01-11) (taux d'intérêt implicite du bail) interim standard A standard published to satisfy a clear and urgent need without passing through all the procedural and review processes required for Canadian General Standards Board standards or National Standards of Canada. (2010-01-11) (norme provisoire) international contract Canadian Commercial Corporation (CCC). The contract between CCC and the foreign government, their agencies or international organizations. (2010-01-11) (contrat international) invention Patent law. The creation of something that did not exist before, by the exercise of a creative mind, possessing elements of novelty and utility and measure different from anything that preceded the same. (2010-01-11) (invention) inventory This refers to an itemized list of goods, showing the number and usually the value of the goods. (2010-01-11) (stock) invitation for bids See bid solicitation. (2010-01-11) (demande de soumissions) invitation to tender (ITT) A bid solicitation document used by PWGSC when the estimated value of the requirement exceeds $25,000; two or more sources are considered capable of supplying the requirement; the requirement is adequately defined in all respects to permit the evaluation of tenders against clearly stated criteria; tenders can be submitted on a common pricing basis; and it is intended to accept the lowest-priced responsive tender without negotiations. (2010-01-11) (appel d'offres) invoice A billing document prepared by the seller setting out the details of goods sold or services rendered to the purchaser including quantity, price, terms of payment, etc. (2010-01-11) (facture) item description The data necessary to establish the identity of an item of supply for materiel management purposes. (2010-01-11) (description d'un article)

Supply Manual Page 3 of 3 Version 10-1 (2010-01-11)

Glossary

J jobber This refers to a middleman or dealer who purchases goods from manufacturers or importers for resale to retailers. They are also called dealer or wholesale merchant. (2010-01-11) (revendeur) joint venture Association of two or more parties who combine their money, property, knowledge, expertise or other resources in a single joint business enterprise, sometimes referred as a consortium, to bid together on a requirement. (2010-01-11) (coentreprise)

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Glossary

L laid-down cost The cost incurred by a supplier to acquire a specific product or service for resale to the government. This includes the supplier's invoice price (less trade discounts), plus any applicable charges for incoming transportation, foreign exchange, customs duty and brokerage, but excludes the Goods and Services Tax and the Harmonized Sales Tax. (2010-01-11) (prix de revient) late bid A bid delivered to the specified bid receiving unit after the closing date and time stipulated in the bid solicitation. (2010-01-11) (soumission en retard) lease 1. Government Contracts Regulations. An agreement whereby Canada acquires a leasehold

interest in real property situated in or outside Canada and includes a tenancy agreement and a licence in respect of real property.

2. The Canadian Institute of Chartered Accountants (CICA). This refers to the conveyance, by a lessor to a lessee, of the right to use a tangible asset, usually for a specified period of time in return for rent.

3. Capital lease. A lease that, from the point of view of the lessee, transfers substantially all the benefits and risks incident to ownership of the property to the lessee.

4. Operating lease. This refers to a lease in which the lessor does not transfer substantially all the benefits and risks incident to ownership of property. (2010-01-11) (bail)

letter of intent A commitment to award a contract to a designated contractor. It may be used to authorize commencement of the work before the award of a contract, in those cases where the contract provisions require time-consuming negotiations, and the timely delivery of goods or services would be jeopardized by waiting for the award of the contract. A letter of intent is issued subsequent to approval of those terms and conditions, which have been already agreed to between Canada and the contractor, but before obtaining approval of all the terms and conditions of the proposed contract. (2010-01-11) (lettre d'intention) Letter of Interest A letter of interest or Request for Information is used when the buyer is interested in receiving feedback from suppliers and may re-open or re-issue an opportunity as an open tender at a later day. (2010-01-11) (lettre d’intérêt) liability 1. A broad legal term. In general, a debt owed. The condition of being actually or potentially subject

to an obligation; a condition of being responsible for a possible or actual loss, penalty, evil, expense or burden; a condition that creates a duty to perform an act immediately or in the future.

2. Primary liability. This refers to a liability for which a person is directly responsible. 3. Secondary liability. This refers to a liability of a contingent nature such as the liability of a

guarantor. A guarantor's liability does not arise until the principal debtor has failed to pay the creditor. (2010-01-11) (responsabilité)

license A grant of permission – a power or authority given to another to do some lawful act. (2010-01-11) (licence) license agreement A contract by which permission is given by the owner of a right to another, for the use of that right, free from legal recourse. (2010-01-11) (contrat de licence)

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Glossary

lien A claim, encumbrance, or charge on property for payment of some debt, obligation or duty. Qualified right of property which a creditor (like a bank) has in or over specific property of his debtor, as security for the debt or charge or for performance of some act. (2010-01-11) (privilège) liquidated damages A specific sum of money expressly stipulated by the parties in a contract as the amount of damages to be recovered by either party for a breach of the agreement by the other. It must be a genuine pre-estimate of the loss that will be caused to one party if another party breaks the contract. It constitutes the amount, no more and no less, that the plaintiff is entitled to recover in the event of breach without being required to prove actual damages. (2010-01-11) (dommages-intérêts fixés en argent) listing program The entire process by which a specific product/service/supplier is designated as conforming to the requirements of standards or specifications, including those for quality assurance, and identified for subsequent procurement on a qualified products list. See Qualified Products List, Certified Products List. (2010-01-11) (programme de listage) loan Anything lent or given to another on condition that it be returned or repaid, either with or without interest. (2010-01-11) (prêt) loan agreement An agreement pursuant to which some Department of National Defence equipment is loaned by PWGSC to a contractor. (2010-01-11) (convention de prêt) low dollar value Requirements that are generally less complex and a low risk, with an estimated total value below $25,000, including all applicable taxes. (2010-01-11) (faible valeur) lump sum payment The price agreed upon between the vendor and the purchaser for a group of items without breakdown of individual values; a lot price. (2010-01-11) (paiement forfaitaire)

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

Glossary

M machine tool This refers to a class of production tools basic to many manufacturing industries; power-driven, precision metal-working machines, which remove metal in the form of chips by cutting or grinding, such as lathes, drill presses, boring mills, planers, milling machines, shapers and grinders. (2010-01-11) (machine-outil) maintenance 1. Materiel. All action to retain materiel in a serviceable condition or to restore it to serviceable

conditions. It includes inspection, testing, servicing, classification, as to serviceability, repairs, rebuilding and reclamation.

2. The cost of keeping a property in efficient working condition. (2010-01-11) (maintenance) mandatory standing offers If PWGSC has issued a standing offer that covers the client's specific requirement, departments must use that standing offer for its acquisition. For a complete list of existing standing offers, consult the Standing Offer Index. (2010-01-11) (offres à commandes obligatoires) manufacturing The production of articles for use from raw or prepared materials by giving to these materials new form, qualities and properties or combinations thereof whether by hand or machinery. (2010-01-11) (fabrication) market price 1. The price at which a seller is ready and willing to sell and a buyer is ready and willing to buy in

the ordinary course of trade. It is the actual price at which a given commodity is currently sold or has recently been sold in the open market, that is, not a forced sale. See fair market value and market value.

2. Accounting. The prevailing or last quoted price under conditions applicable in the circumstances. Net realizable value. (2010-01-11) (prix du marché)

market value The price, which a product or property might be expected to bring, if offered for sale in a fair market; that is, a market that is not temporarily prone to fluctuations. It is the price that would be fixed by negotiation and mutual agreement between a willing buyer and a supplier who is willing but not compelled to sell. (2010-01-11) (valeur marchande) mark-up 1. Defence Production Act. The amount added to cost in determining the selling price to cover

overhead and profit. 2. The difference between the contractor's laid-down cost for a product and its resale price to

Canada, Goods and Services Tax and/or the Harmonized Sales Tax excluded. Mark-up includes applicable purchasing expense, internal handling and general and administrative expenses, plus profit.

3. The amount added to the cost of merchandise to arrive at the price at which it will be offered for sale. This refers to an addition to a previously established selling price of goods for sale. (2010-01-11) (majoration)

materiel and services to military specifications 1. Includes all materiel and services, including repair and overhaul, as well as research and

development, for which a military or other Department of National Defence (DND) specification or requirement is included in procurement documentation. Also included in this category are materiel and services that are not covered by DND or military specifications, but are of a significant concern to DND as to the allocation of responsibilities annotated under this heading.

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Glossary

2. Includes the range of items covered by commercial or the Canadian General Standards Board standards and specifications. It also includes those items or services, which are not specifically identified by DND, in its procurement documentation, as requiring special military or other DND specifications or requirements. (2010-01-11) (matériel et services assujettis aux spécifications militaires)

material and services to non-military specifications Includes the range of items covered by commercial or Canadian General Standards Boardstandards and specifications. It also includes those items or services, which are not specifically identified by Department of National Defence (DND), in its procurement documentation, as requiring special military or other DND specifications or requirements. (2010-01-11) (matériel et services assujettis aux spécifications non militaires) milestone payment A method of making a progress payment, which relates to a measurable and/or defined item or work package for which a price can be assigned with a good probability that such assigned price will turn out to be within reasonable limits of predictive accuracy for the value of the work. (2010-01-11) (paiement d'étape) Minister The Minister of Public Works and Government Services. (2010-01-11) (Ministre) misrepresentation Any manifestation by words or other conduct by one person to another that, under the circumstances, amounts to an assertion not in accordance with the facts. An untrue statement of fact, an incorrect or false representation. It can be either fraudulent or innocent. It is fraudulent when it is made knowing that the same is false or without belief in its truth. A party induced by fraudulent misrepresentation to enter into a contract may repudiate the contract. Where a misrepresentation is an innocent one, it may be a ground for refusing specific performance to the party who made the misrepresentation and may also be a ground for rescission of the contract. The misrepresentation should, however, be a material one on which the other party relied. (2010-01-11) (fausse déclaration) mobile repair party An individual or group of individuals who perform repair work away from a contractor's plant, generally at client locations. (2010-01-11) (service mobile de réparation) modification Equipment. An engineered alteration to an item of supply, which changes the design characteristics or capabilities of the end item, major or subassembly component part, or accessory. Normally a modification is made after an item of equipment is delivered, whereas a design change is made, before delivery during production. (2010-01-11) (modification) monopoly The ownership or control of so large a part of the market supply or output of a given commodity as to unduly prevent or lessen competition in that commodity. (2010-01-11) (monopole) mutual consent A meeting of the minds on a specific subject, and a manifestation of intent of the parties to do or refrain from doing some specific act or acts. (2010-01-11) (consentement mutuel)

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

Glossary

N National Individual Standing Offer (NISO) A standing offer issued for the use of a specific department or agency throughout Canada. NISOs are arranged by PWGSC on receipt of a funded requisition. (2010-01-11) (offre à commandes individuelle et nationale [OCIN]) National Master Standing Offer (NMSO) A standing offer issued for the use of many departments or agencies throughout Canada. NMSOs are arranged by PWGSC without any requisitions from customer departments or agencies. (2010-01-11) (offre à commandes principale et nationale [OCPN]) NATO Stock Number (NSN) A 13-digit number; for example, 5305-21-111-3333 broken down as follows: 1. Digits 1-4; for example, 5305, the NATO supply classification, consisting of Group 53, which

covers all items of hardware, followed by the class within the group 05 (screws), 06 (bolts), etc., the whole being known as the supply class.

2. Digits 5-6; for example, -21-, the NATO code for the National Codification Bureau that assigned the stock number; for example, 00 U.S.A., 21 Canada, 14 France, 99 U.K., etc.

3. Digits 7-13; for example, 111-3333, the National Item Identification Number; non-significant, but sequentially assigned by each National Codification Bureau to a unique item of supply.

4. Digits 5-13; for example, 21-111-3333, the NATO Item Identification Number, including both the NATO code of the National Codification Bureau and its item identification number. The last 9 digits of the number remain with the item throughout its life, even though the NATO supply classification may change as a result of reclassification and consequent conversion of stock numbers; for example, 5305-21-111-2222 converted to 2805-21-111-2222. (2010-01-11) (numéro de nomenclature de l'OTAN)

need-to-know The need for someone to access and know information in order to perform his/her duties. (2010-01-11) (besoin de connaître) negotiation The process of reaching agreement between two or more parties on the terms and conditions of a contract. (2010-01-11) (négociation) non-compliance Failure to comply with a requirement. (2010-01-11) (non-conformité) no substitute Description of a product by brand name or model number or by using a restrictive specification, with the provision that a substitute product is not acceptable. (2010-01-11) (aucun produit de remplacement) non-resident contractor An individual not engaged in regular and continuous employment in Canada and who does not maintain a permanent residence or office in Canada. This also refers to a partnership or a corporation not maintaining a permanent office in Canada. (2010-01-11) (entrepreneur non résident) Notice of Proposed Procurement A notice of an opportunity to participate in procurement. The NPP is published on the Government Electronic Tendering Service (see MERX) and includes general information, such as a description of the requirement, and how solicitation documents can be obtained. (2010-01-11) (avis de projet de marché [APM])

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Glossary

O offer A proposal made by one party to another to do something, usually accompanied by an expected acceptance, counter-offer, return promise or act. The offer creates a power of acceptance permitting the offeree by accepting the offer to transform the offeror’s promise into a contractual obligation. An offer is an essential ingredient for the formation of a contract. (2010-01-11) (offre) offeror The party that makes the offer. (2010-01-11) (offrant) Office of Greening Government Operations (OGGO) The Office of Greening Government Operations (OGGO) was created in April 2005, within Public Works and Government Services Canada (PWGSC). OGGO's mandate is to accelerate the greening of the government's operations by working closely with other federal departments, particularly Treasury Board Secretariat and Environment Canada. (2010-01-11) (Bureau de l’écologisation des opérations gouvernementales {BEOG}) Office of Small and Medium Enterprises (OSME) As part of the government of Canada, supports the government agenda to provide best value for Canadians by: (a) encouraging and assisting small and medium enterprises to participate in the federal government

procurement process; (b) improving the links between supply and demand and influencing changes in government

acquisitions; and (c) conducting economic analysis of Government of Canada procurement and the private sector.

(2010-01-11) (Bureau des petites et moyennes enterprises [BPME]) operating cost The cost of operating, maintaining and repairing a product throughout its useful life, less its estimated residual value at the time of retirement. (2010-01-11) (coût d'exploitation) operating lease A lease in which the lessor does not transfer substantially all the benefits and risks incident to ownership of property. (2010-01-11) (bail d’exploitation) order Defence Production Act. A general or specific order, requirement, direction or prescription in writing made or issued under this Act or a Regulation. (2010-01-11) (arrêté) order-in-council A decision, instruction, order, proclamation, etc. issued under the authority of the Governor in Council. (2010-01-11) (décret) organization From a security perspective, an organization is any institution, other than a Canadian government department, agency or crown corporation, holding or referring to a security clearance. The majority are commercial corporations, but other institutions are also included, such as university faculties, partnerships, consultants, and other levels of government and their agencies. (2010-01-11) (organisation) overclaim A claim by the supplier for costs and profits in excess of the audited final amount, as determined by Audit and Services Canada and/or sector/region verification. (2010-01-11) (réclamation en trop)

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Glossary

overhead costs 1. Indirect expenses or burden; one of many terms given to expenses, which are incurred in the

production of a commodity or the rendering of a service, but which cannot conveniently be measured by unit of production or service. These expenses are sometimes classified as manufacturing overhead, selling and distributive overhead, and general and administrative overhead.

2. Service contracts. Indirect costs associated with the operation of the contractor's business and includes, unless otherwise stated, in a percentage factor that is applied to payroll cost. Salary bonuses may be included as overhead costs, unless they are paid under profit-sharing schemes, in which case they will be treated as a distribution of profit. (2010-01-11) (frais généraux)

overpayment A payment by Canada in excess of the audited final amount as determined by Audit Services Canada and/or sector/region verification. (2010-01-11) (paiement en trop) overtime Time worked by a contractor's employee in excess of the employee's normal working day or working week. (2010-01-11) (heures supplémentaires) overtime premium The difference between the employee's regular rate of pay and the higher rate paid for overtime. (2010-01-11) (prime d'heures supplémentaires) overtime premium costs The amount of overtime premium and any profit thereon. (2010-01-11) (frais de rémunération des heures supplémentaires)

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

Glossary

P part file A main or extract file is subdivided into part files when more than one solicitation is issued, resulting in separate contracts. Each part file may only have one active solicitation in progress. Part files must be created when more than one solicitation is required under a main or extract file. (2010-01-11) (dossier partiel) patent A grant of right to exclude others from making, using or selling one’s invention and includes the right to license others to make, use or sell it. A grant from the government conveying and securing for an inventor the exclusive right to make, use and sell an invention for a specific number of years. (2010-01-11) (brevet) payment bond 1. A bond given by a contractor to guarantee the payment for labour to be provided or materials to

be supplied in connection with a contract awarded to that contractor. 2. A bond given to ensure that the subcontractor, providing labour or supplying materials to a

contractor, will be paid their proper charges up to the value of the bond. 3. A type of surety bond. (2010-01-11) (cautionnement de paiement) payroll costs Direct salaries paid plus costs associated with direct salaries; for example, provision for statutory holidays, vacations with pay, the contractor's contribution for unemployment insurance and workmen's compensation, health and medical insurance, group life insurance and pension. (2010-01-11) (coût de rémunération) per diem rates 1. A latin phrase meaning “by the day”. 2. Service contracts. A time rate whereby the contractor is paid a fixed rate inclusive of payroll and

overhead costs and profit, for each normal working day as defined in the contract. (2010-01-11) (honoraires quotidiens)

performance bond Bond given to guarantee the performance or completion of a contract in accordance with its terms and conditions. (2010-01-11) (cautionnement d'exécution) performance (in the context of a contract) The fulfillment or accomplishment of that which is required by a contract or under a condition. (2010-01-11) (exécution [dans le cadre d'un contrat]) performance (in the context of advance payments) The funds received will be used solely for the purpose of the contract; 1. The amount of the payment is ascertained or ascertainable under the contract; 2. The contractor is not in default of its obligations under the contract; and 3. The payment is related to an identifiable part of the contractual undertakings. (2010-01-11)

(exécution [dans le cadre de paiements anticipés]) performance (in the context of progress payments) 1. All authorizations required under the contract have been obtained; the claim is consistent with the

progress of the work and is in accordance with the contract. 2. Indirect costs have been paid for or accrued in the accounts. 3. Direct materials and work under subcontract have been received, accepted and either paid for or

accrued in the accounts, following receipt of invoice from the contractor/subcontractor, and have been or will be used exclusively for the purpose of the contract.

Supply Manual Page 1 of 5 Version 10-1 (2010-01-11)

Glossary

4. All direct labour costs have been paid for or accrued in the accounts and all such costs were incurred exclusively for the purpose of the contract.

5. All other direct costs have been paid for or accrued in the accounts, following receipt of applicable invoice or expense voucher and that all such costs were incurred exclusively for the purpose of the contract.

6. No liens, encumbrances, charges or other claims exist against the work, except those which may arise by operation of law, such as a lien in the nature of an unpaid contractor's lien and in respect of which an progress payment and/or advance payment has been or will be made by Canada. (2010-01-11) (exécution [dans le cadre de paiements progressifs])

personnel security clearance The security screening of persons who are likely to have access, on a need-to-know basis, to classified information, assets or controlled areas in order to provide a clearance for undertaking the work. (2010-01-11) (attestation de sécurité) personnel security screening The administrative process used to examine a personnel security screening, that has been granted by another government organization, in order to determine its applicability and acceptance for the purpose of approval by the Canadian Industrial Security Directorate, for access to classified and/or protected information and assets provided to or produced by private organizations under contract to the Government of Canada. (2010-01-11) (enquête de sécurité sur le personnel) physical security The use of physical safeguards to prevent and delay unauthorized access to assets, detect attempted and actual unauthorized access and activate appropriate responses. (2010-01-11) (sécurité physique) point rating An evaluation procedure using values assigned to criteria to rate suppliers. (2010-01-11) (cotation numérique) Policy on Green Procurement A policy designed to ensure that the government cost effectively procures, operates and disposes of its assets in a manner that protects the environment and supports sustainable development objectives. (2010-01-11) (Politique d'achats écologiques) price 1. The consideration given in exchange or sale of anything. 2. Defence Production Act. Includes rate or charge for any service. (2010-01-11) (prix) price and availability (P&A) enquiry A request to the trade for information, which is needed by PWGSC or a client for program planning or budgetary purposes. P&A enquiries must clearly indicate that the request is not a bid solicitation. (2010-01-11) (demande de prix et disponibilité) procurement The process of obtaining goods and services that includes the determination of requirements and acquisition from a supply system or by purchase from the trade. The procurement process has four phases: (a) Pre-contractual phase. Includes activities related to requirement definition and procurement

planning. (b) Contracting phase. Includes all activities from bid solicitation to contract award. (c) Contract administration phase. Includes activities such as progress monitoring, delivery follow-

up, payment action, etc. (d) Post-contractual phase. Includes file final action (for example, client satisfaction, contractor

agreement to final claim, final contract amendment, completion of financial audits, proof of delivery, return of performance bonds) and close out (for example, completeness and accuracy of

Supply Manual Page 2 of 5 Version 10-1 (2010-01-11)

Glossary

file documentation and adherence to file presentation standards). (2010-01-11) (approvisionnement)

A unique identifier that is assigned to each supplier when they register in the Business Access Canada Supplier Registration Information System. It is based on the nine-digit Canada Revenue Agency’s Business Number assigned to a supplier for the Agency's tax programs. (2010-01-11) (numéro d’entreprise - approvisionnement) Procurement Business Number (PBN) A unique identifier that is assigned to each supplier when they register in the Business Access Canada Supplier Registration Information System. It is based on the nine-digit Canada Revenu Agency’s Business Number assigned to supplier for the Agency’s tax programs. (2010-01-11( (numéro d’entreprise – approvisionnement) Procurement Ombudsman An independent organization with a government-wide mandate, which is defined in the Federal Accountability Act. Its overall objective is to ensure the fairness, openness and transparency of government procurement. (2010-01-11) (ombudsman de l'approvisionnement) Procurement Review Committee (PRC) The PRC carries out a detailed review of procurements strategies for goods and services valued between $2,000,000 and $100,000,000 for potential socio-economic benefits. The reviews are conducted within parameters that are fully consistent with the Treasury Board Policy on procurement review and subject to Canada's national commitments under the Agreement on Internal Trade, plus the international commitments under the World Trade Organization Agreement on Government Procurement and the North American Free Trade Agreement, and other international trade rights and obligations. While the membership may vary slightly, there is core representation from the client department, the contracting authority, Treasury Board Secretariat, National Research Council, Industry Canada, Atlantic Canada Opportunities Agency, Western Economic Diversification Canada, Canada Economic Development (for Quebec Regions), Department of Indian and Northern Affairs, Environment Canada, Department of National Defence, International Trade Canada, and Transport Canada. (2010-01-11) (Comité d'examen des acquisitions [CEA]) Procurement Strategy for Aboriginal Business (PSAB) Consists of measures intended to increase the number of Aboriginal firms competing for and winning federal contracts. Particularly, if it includes measures to better inform Aboriginal businesses about government procurement needs and to better inform government procurement officers about the capacity of Aboriginal businesses. The strategy is consistent with the government's general policy on procurement, which emphasizes competition and value for money. (2010-01-11) (Stratégie d'approvisionnement auprès des entreprises autochtones [SAEA]) product quality management Process applied to ensure the required quality of goods and services. The product quality management (PQM) refers to all considerations, which are undertaken within the procurement process, to provide clients with quality goods and services that conform to the stated requirements. Inherent to PQM are such actions as proper requirements definition; judicious sourcing, as applicable; thorough supplier evaluation; and the inclusion of proper quality related bid solicitation and contract clauses. The concept of PQM embodies quality assurance, quality control and inspection. See quality assurance, quality control, inspection, and quality. (2010-01-11) (gestion de la qualité du produit) production See manufacturing. (2010-01-11) (production) production assets Covers special production tooling, special test equipment, Department of National Defence-loaned equipment, United States government property, and any other government property for which Public

Supply Manual Page 3 of 5 Version 10-1 (2010-01-11)

Glossary

Works and Government Services Canada has been specifically or directly charged with assets management responsibility. (2010-01-11) (biens de production) productivity The ratio of some output to some input. A measure of how well resources are combined and utilized to achieve a particular desirable result. Productivity ratios may be measured in one of the following three ways: (a) Total Output. Total Input. (b) Total Results Achieved. Total Resources Consumed. (c) Effectiveness. Efficiency. The concept of productivity recognizes the interplay between various factors in the workplace. The output or results achieved may be related to different inputs or resources in the form of various productivity ratios; for example, output per labour hour, output per unit of material (as in kilometres driven per litre of gas) or output per unit of capital. Each of these productivity ratios may be influenced by a combination of factors, such as quality and availability of materials, scale of operations, rate of capacity utilization, availability and throughput capacity of capital equipment, attitude and skill level of the work force, motivation and effectiveness of the management. The manner in which these factors interrelate will have a bearing on the resulting productivity ratio. Productivity improvements or gains are generally realized in terms of increased revenue or profit, better quality or performance, or lower prices. (2010-01-11) (productivité) Product, Resource, Operating and Contingency (PROC) The cost factors associated with the total product life cycle: 1. Product costs. Costs paid for the supply of goods to a specified delivery point. 2. Resource costs. The total government resource cost of acquiring, distributing and accounting for

the goods. 3. Operating costs. The costs of operating, maintaining and repairing the goods and the

depreciation incurred. 4. Contingency costs. Those costs incurred by not having the goods available when they are

required. PROC analysis is used when best value for the money spent on the acquisition over its useful life is required. (2010-01-11) (coût du PREI [produit, des ressources, d’exploitation et des imprévus])

profit 1. General. The benefit or advantage in money or in money's worth. 2. Income tax law. The surplus in the taxation period by which the receipts from a trade or

business exceed the expenditures necessary for the purpose of earning those receipts. 3. A general term for the excess of revenue, proceeds or selling price over related costs. 4. Net income. (2010-01-11) (profit) progress payment A payment made by or on behalf of Canada under the contract after the performance of the part of the contract in respect of which the payment is made but before the performance of the whole contract. (2010-01-11) (paiement progressif) proposal An offer, submitted in response to a request from a contracting authority, which constitutes a solution to the problem, requirement or objective in the request. (2010-01-11) (proposition) proprietary 1. Noun: a proprietor or owner, one who has the exclusive title to a thing; one who possesses or

holds the title to a thing in his own right. 2. Adjective: belonging to ownership; owned by a particular person; belonging or pertaining to a

proprietor; relating to a certain owner or proprietor. (2010-01-11) (propriétaire)

Supply Manual Page 4 of 5 Version 10-1 (2010-01-11)

Glossary

protected information Information related to other than the national interest that may qualify for an exemption or exclusion under the Access to Information Act or Privacy Act. (2010-01-11) (renseignements de nature protégée) prototype Includes any item designated as such in the contract, including models, patterns and samples. (2010-01-11) (prototype) public notice An announcement on an approved electronic information service, in one or more newspapers, or by means of some other accepted media. (2010-01-11) (avis public) public property Financial Administration Act. All property, other than money, belonging to Her Majesty in right of Canada. (2010-01-11) (biens publics) purchase description A statement of requirements to identify and describe a particular product or service, but which may be less detailed than a specification. The description includes sufficient data to enable the supply and evaluation of the item either by means of reference to a specification or standard, or by the inclusion of critical performance data. (2010-01-11) (description d'achat) purchase order A purchaser's written offer to a supplier, formally stating all terms and conditions of a proposed transaction. (2010-01-11) (bon de commande) purchasing The buying process within the procurement cycle. (2010-01-11) (achat)

Supply Manual Page 5 of 5 Version 10-1 (2010-01-11)

Glossary

Q qualification program The entire process by which products are obtained from suppliers, examined and tested and then identified on a qualified products list. The qualification process includes an evaluation of the manufacturer's facilities and capabilities to meet requirements on a continuing basis. (2010-01-11) (programme d'homologation) qualified product A product manufactured under controlled and substantially unchanged conditions, meeting the requirements and procedures to enable that product to be listed in the applicable qualified products list. (2010-01-11) (produit homologué) Qualified Products List (QPL) A listing of products qualified as conforming to the requirements of standards or specifications by the appropriate panel. A QPL identifies the qualifying authority and includes the appropriate product identification and reference data together with the name of the supplier of the qualified product. (2010-01-11) (liste des produits homologués [LPH]) qualifying authority The agency or organization responsible for the maintenance of a listing program, including the development and implementation of policies and procedures, and is responsible for the accuracy and integrity of listings. (2010-01-11) (autorité d'homologation) quality The totality of features and characteristics of a product or service that bear on its ability to satisfy a given need. (2010-01-11) (qualité) quality assurance A system of activities whose purpose is to provide assurance that the quality control is in fact being done effectively. For a specific product or service, this involves verification, audits and the evaluation of the quality factors that affect the specification, production, inspection and distribution. See government quality assurance. (2010-01-11) (assurance de la qualité) quality audit The monitoring of quality levels at any stage to provide information for management. (2010-01-11) (vérification de la qualité) quality control This refers to a range of activities, to ensure and verify that the specific quality of the product or service has been met. (2010-01-11) (contrôle de la qualité) quality of design The value inherent in the design; a measure of the excellence of the design in relation to the client's requirements. (2010-01-11) (qualité technique) quotation A bid submitted in response to a Request for Quotation from a contracting authority. (2010-01-11) (présentation de prix)

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Glossary

R reasonable What is fair, just, suitable and proper in the given circumstances of a case, that which is fit and appropriate to the end in view, and that which is according to reason, not immoderate or excessive. (2010-01-11) (raisonnable) receiver manager See trustee in bankruptcy. (2010-01-11) (séquestre-gérant) receivership Legal or equitable proceeding in which a receiver is appointed for an insolvent corporation, partnership or individual. The state or condition of a corporation, partnership or individual over whom a receiver has been appointed for protection of its assets and for ultimate sale and distribution to creditors. (2010-01-11) (mise sous séquestre) Regional Individual Standing Offer (RISO) A standing offer issued for the use of a specific department or agency within a specific geographic area. RISOs are arranged by PWGSC on receipt of a funded requisition. (2010-01-11) (offre à commandes individuelle et régionale [OCIR]) Regional Master Standing Offer (RMSO) A standing offer issued for the use of many departments or agencies within a specific geographic area. RMSOs are arranged by PWGSC without any requisitions from customer departments or agencies. (2010-01-11) (offre à commandes principale et régionale [OCPR]) Registered Quality Systems List Listing of suppliers that have had their quality system audited by an approved auditor, against the appropriate quality standard, are found to meet all of the criteria of the standard and are registered by the applicable certifying agency. (2010-01-11) (liste des systèmes d'assurance de la qualité inscrits) reliability The measures expressed of the ability of a product to function successfully when required, for the period required, in the specified environment. (2010-01-11) (fiabilité) reliability status Indicates successful completion of a reliability check; allows regular access to government assets and, with a need-to-know, to protected information. ( 2010-01-11) (cote de fiabilité) remedy A right given to a party by law or by contract which that may exercise upon a default by the other contracting party, or upon the commission of a wrong by another party. It means any remedial right to which an aggrieved party is entitled with or without resort to a tribunal. (2010-01-11) (recours) remission 1. Exemption from payment of customs duties and excise taxes, which are ordinarily payable on

goods or materiel imported into Canada. 2. A partial or total refund or the non-payment of taxes, which otherwise would be payable and

authorized by order-in-council. (2010-01-11) (remise) renegotiation A re-determination of agreed contract or pricing terms, due to changed requirements or conditions, or in accordance with a previous agreement. Some contracts provide for renegotiation at a stated time or under stated conditions. (2010-01-11) (révision du contrat)

Supply Manual Page 1 of 3 Version 10-1 (2010-01-11)

Glossary

repair To restore (something damaged or broken) to good condition or working order. (2010-01-11) (réparation) repair and overhaul The repair of an item of equipment to return it to serviceable condition; overhaul may or may not be coincident with repair. Repair normally involves the correction of specific defects only, whereas overhaul will entail replacement of either worn and damaged parts, or parts for which service life has expired. Overhaul is normally affected only after expiry of service life due to hours of use or elapsed time. (2010-01-11) (réparation et révision) representation 1. General. A statement made expressly or by implication such as by conduct. 2. Contract. In the law of contracts, it is a statement made by one of the parties of the contract to

the other, before or at the time of entering into the contract, or of some matter relating to the contract. (2010-01-11) (présentation)

Request for Information (RFI) An RFI or Letter of Interest is not open for bidding. The buyer is interested in receiving feedback from suppliers and may re-open or re-issue an opportunity as an open tender at a later day. RFIs may include attached documents. (2010-01-11) (demande de renseignements) Request for Proposal (RFP) A form of bid solicitation used for complex requirements, where the selection of a supplier cannot be made solely on the basis of the lowest price. An RFP is used to procure the most cost-effective solution based upon evaluation criteria identified in the RFP. See 4.10.15. (2010-01-11) (demande de propositions) Request for Quotation (RFQ) Solicitation document used to solicit bids for low dollar value requirements below $25,000.00, including all applicable taxes, from one or more suppliers. It is a request to bidders, which is evaluated with the objective of accepting the lowest-priced responsive quotation. See 4.10.1. (2010-01-11) (demande de prix) Request for a Standing Offer (RFSO) A solicitation document used to solicit standing offers. It must clearly state the requirement, the evaluation method and selection criteria, the call-up procedures, the ranking methodologies, whenever applicable, to be used for making call-ups against the authorized standing offer(s), and all terms and conditions applicable to the contract that is brought into effect, as a result of any call-up. (2010-01-11) (demande d’offres à commandes [DOC]) requisition A request to obtain materiel or services and authority to commit funds to cover the purchase. (2010-01-11) (demande) rescission Contract. To abrogate, annul, void or cancel a contract. The right of rescission is the right to cancel (rescind) a contract upon the occurrence of certain kinds of default by the other contracting party (like misrepresentation, duress, undue influence). To declare a contract void in its inception and to put an end to it as though it never were. It is limited to contracts where it is possible to rescind the contract and substantially to restore all parties to their respective positions before the contract was entered into. (2010-01-11) (annulation) responsibility The state of being answerable for an obligation and includes judgment, skill, ability and capacity. The obligation to answer for an act done, and to repair or otherwise make restitution for any injury it may have

Supply Manual Page 2 of 3 Version 10-1 (2010-01-11)

Glossary

caused. (2010-01-11) (responsabilité) responsive bid 1. A bid, tender, proposal or quotation that meets all the mandatory requirements stipulated in the

solicitation document. 2. Synonymous with valid bid. (2010-01-11) (soumission recevable) royalties Usage-based payments made by one party (the licensee) to another (the licensor) for ongoing use of an asset, for example an intellectual property right. (2010-01-11) (redevances)

Supply Manual Page 3 of 3 Version 10-1 (2010-01-11)

Glossary

S sale 1. A transfer of a property from one person to another for a price in money. A sale of goods is

different from an exchange or barter where no funds are involved. In order to determine at what point property in the goods sold rests in the purchaser, the terms of the contract have to be considered to ascertain in whom the property is vested. The property may pass at once or at a future time contingent on the fulfillment of some condition.

2. Includes consignment or other disposition of materials and the supplying of any service. (2010-01-11) (vente)

salvage Accounting. That portion of the residual value of an asset representing the value of parts reclaimed for future use after retirement of the asset. (2010-01-11) (récupération) sample 1. General. A relatively small quantity of material, or an individual object, where the quantity of the

mass, group, bulk, etc. that it represents, may be inferred. A small quantity presented or sold to buyers as a specimen of goods offered for sale.

2. When goods are sold by sample, three conditions are implied in the sale: (a) the bulk must correspond with the sample in quality; (b) the buyer must have a reasonable opportunity of comparing the bulk with the sample; (c) the goods must be free from any defect rendering them unmerchantable, which would not

be apparent on reasonable examination of the sample. (2010-01-11) (échantillon) scheduled overtime Overtime experienced by a contractor through their usual business operations. Any resulting overtime premium costs are usually included in the contractor's overhead account. (2010-01-11) (heures supplémentaires prévues) seal See under seal. (2010-01-11) (sceau) secret The level of classification that applies to information or assets when compromise could reasonably be expected to cause serious injury to the national interest. (2010-01-11) (secret) security deposit The deposit by the bidder/contractor of securities, including government guaranteed bonds, bills of exchange and irrevocable standby letters of credit, which the contracting authority may convert to complete the bidder's/contractor's obligations. (2010-01-11) (dépôt de garantie) Security Requirements Checklist (SRCL) A form used to identify security requirements associated with a contract, which contains protected or classified security requirements. (2010-01-11) (Liste de vérification des exigences relatives à la sécurité [LVERS]) SELECT A procurement tool used to identify qualified firms and individuals for low dollar value construction, maintenance and real property consulting (architectural and engineering services). (2010-01-11) (SELECT) selling price This is the net selling price to the buyer after all discounts. It includes all applicable provincial sales taxes, Goods and Services Tax/Harmonized Sales Tax, excise taxes and tariffs. (2010-01-11) (prix de

Supply Manual Page 1 of 4 Version 10-1 (2010-01-11)

Glossary

vente) Set-Aside Program for Aboriginal Business Establishes two types of set-asides: mandatory and voluntary. Mandatory set-asides apply to procurements over $5,000 for which Aboriginal populations are the primary recipients of the goods, services, or construction to be contracted. Voluntary set-asides apply to all other procurements designated by client departments as reserved for Aboriginal business. (2010-01-11) (Programme des marchés réservés aux enterprises autochtones) site visit A meeting held on site and conducted by either PWGSC or the client to provide suppliers with an opportunity to view and assess aspects of the work that cannot be adequately described in performance specifications or the statement of work. (2010-01-11) (visite des lieux) sole source The supply of a good or service that is available from only one supplier. A sole source contract implies that there is only one supplier that can fulfill the requirement and that any attempt to obtain bids would only result in one supplier being able to meet the need. (2010-01-11) (fournisseur unique) special production tooling Tools such as jigs, dies, fixtures, moulds, patterns, taps, gauges and other like items, which are of such a specialized nature that, without substantial modification or alteration, their use is peculiar to the production of supplies or the parts thereof, which are required by Canada. (2010-01-11) (outillage spécial de production) special test equipment Either single or multipurpose integrated test units engineered, designed, fabricated or modified to meet the test requirements of the specifications peculiar to the end items of equipment, which are required by Canada. Also included are associated computer software programs. The term "Special Test Equipment" does not include: special production tooling; buildings and non-severable structures (except foundations and similar improvements necessary for the installation of special test equipment); and test equipment loaned from a client's inventory. (2010-01-11) (matériel spécial d'essai) specification A statement of requirements to be satisfied for materiel, a product or service, including the identification of test methods, or the procedures that will determine whether the requirements have been met. (2010-01-11) (spécification) split contract The practice of unnecessarily dividing an aggregate requirement into a number of smaller contracts, to avoid controls or contract approval authorities. (2010-01-11) (fractionnement d'un contrat) standard 1. A formal specification, for recurring major interests, utilizing the consensus process, and

published by a recognized standards-issuing agency. In particular, a Canadian General Standards Board (CGSB) standard is one developed in accordance with the procedures set out in the CGSB manual, Policy and Procedures Preparation of Standards.

2. A formal statement of requirements established by authority, custom or general consent of those affected, and intended for general recurrent use. Normally, a standard is developed through a consensus process by a committee widely representative of major interests and is published by an accredited standards-writing agency, as determined by the Standards Council of Canada or recognized standards-issuing agency. (2010-01-11) (norme)

standing offer An offer from a supplier to provide goods and/or services to clients at prearranged prices or pricing basis and under set terms and conditions for a specified period on an as-and-when requested basis. A

Supply Manual Page 2 of 4 Version 10-1 (2010-01-11)

Glossary

separate contract is entered into each time a call-up is made against a standing offer. When a call-up is made, the terms and conditions are already in place and acceptance by Canada if the supplier’s offer is unconditional. Canada’s liability is limited to the actual value of the call-ups made within the period specified in the standing offer. (2010-01-11) (offre à commandes) Standing Offer and Call-up Authority (SOCA) A document issued by the standing offer authority that serves two primary purposes: (a) notification to the offeror, that authority to call-up against a standing offer has been given to

specific authorized users in respect of its standing offer; and (b) notification to clients, that, in respect to a specific standing offer, authority to call-up against the

said standing offer has been granted to them as provided in the standing offer. (2010-01-11) (autorisation de passer des commandes subséquentes à une offre à commandes [APCSOC])

Standing Offer Authority Means the person designated as such in the standing offer, or by notice to the offeror, to act as the representative of Canada in the management of the standing offer. The Standing Offer Authority will issue a document called "Standing Offer and Call-up Authority" to authorize identified users to make call-ups against the standing offer and to notify the offeror that authority to make call-ups against the standing offer has been given to identified users. (2010-01-11) (responsable de l’offre à commandes) storage A function of warehousing which involves the receipt of an item, putting it away for safekeeping and subsequent retrieval, when required for use, sale or disposal. (2010-01-11) (entreposage) subcontractor One who takes portion of a contract from principal contractor or another subcontractor. One who takes from the principal or prime contractor a specific part of the work undertaken by the principal or prime contractor. (2010-01-11) (sous-traitant) supply The operations normally involved in furnishing, providing, affording or distributing items of supply to a user to satisfy stated requirements. The function includes all actions from the initial determination of requirements, as to kind and quality through testing, standardization, adoption, modification, procurement, acceptance, receipt, storage, issue, maintenance, distribution, salvage, reissue, disposal, accountability, responsibility and stock control. (2010-01-11) (approvisionnement) supply arrangement A non-binding agreement between PWGSC and a supplier who is pre-qualified to provide goods or services to the Government of Canada. (2010-01-11) (arrangement en matière d´approvisionnement) supply arrangement authority Person designated as such in the supply arrangement, or by notice to the supplier, to act as the representative of Canada in the management of the supply arrangement. (2010-01-11) (responsable de l’arrangement en matière d´approvisionnement) Supply Transfer Order A document, which is used when goods and services are to be provided by a provincial government. (2010-01-11) (demande de transfert de biens et de services) surety bond A contractual arrangement between the surety, the principal (contractor) and the obligee (Canada) whereby the surety agrees to protect the obligee if the principal defaults in performing the principal’s contractual obligations. The bond is the instrument that binds the surety. (2010-01-11) (cautionnement)

Supply Manual Page 3 of 4 Version 10-1 (2010-01-11)

Glossary

surplus material 1. Materials, including raw materials, parts and equipment, purchased or manufactured by a

contractor specifically for a contract, but which remain unused after completion of the contract. 2. Materials purchased or manufactured by the contractor specifically for a Crown contract, but not

used and left over after completion of the contract. (2010-01-11) (matériel excédentaire)

Supply Manual Page 4 of 4 Version 10-1 (2010-01-11)

Glossary

T take-out rate The negotiated rate applied to laid-down cost for the recovery of overhead costs applicable to resale business, when the resale business does not account for all functions of the particular cost centre. The resulting rate will be somewhat less than that, which applies to other work, using the cost centre facilities. A take-out rate is normally used only as an expedient, when the contractor does not have sufficient resale business to warrant a separate burden or cost centre. (2010-01-11) (taux de recouvrement) target incentive fee Contract. A contract where a bonus is paid on the basis of agreed sharing of savings relative to the target price. This may also provide for reduction in profits where target cost is exceeded. (2010-01-11) (tarif cible avec prime d'encouragement target price Fixed fee and incentive fee formula. A method of pricing in which the contractor is paid costs reasonably and properly incurred, as determined by audit, together with an agreed upon fixed fee, as profit supplemented by an incentive fee, which will be paid to the contractor on any savings achieved between a prescribed target cost and the actual cost, as established by audit. A target price contract may also include a provision for a ceiling price. (2010-01-11) (prix visé) tariff A published schedule showing the rates, charges, classification, rules, regulations and other provisions applicable to transportation and incidental services. (2010-01-11) (tarif) task authorization A structured administrative process, enabling the client to authorize work by a contractor on an "as and when requested" basis, in accordance with the terms and conditions of an existing contract. (2010-01-11) (autorisation de tâches) task authorization contracts Contracts that provide for the use of task authorizations. Task authorization contracts are used in service contracting situations where a definite need for a category of service exists, but the precise nature and timing of the need cannot be set out in advance. The use of task authorizations must be specifically provided for in the contract. When the client requires the services, a task authorization is issued to instruct the contractor to carry out the specified work. (2010-01-11) (contrats d’autorisation de tâches) technical authority The individual responsible for providing information, guidance and advice on the technical aspect of a product. (2010-01-11) (responsable technique) telephone buy A purchase whereby the telephone is used to solicit bids for requirements valued up to $25,000, including all applicable taxes, and whereby a contract is entered into over the telephone and confirmed in writing. (2010-01-11) (achat par téléphone) temporary help services Services provided under contract to the government for assignments in which employees of a supplier work under the direction of public servants. (2010-01-11) (services d’aide temporaire) tender A proposal, bid or offer that is submitted in response to an Invitation to Tender, Request for Proposal, or Request for Quotation from a contracting authority. (2010-01-11) (offre) term

Supply Manual Page 1 of 2 Version 10-1 (2010-01-11)

Glossary

1. Contract. Word, phrase or condition in a contract which relates to a particular matter. 2. A fixed and definite period, a prescribed duration. (2010-01-11) (condition) termination for default Termination of a contract or part of a contract as a result of a breach of an obligation. (2010-01-11) (résiliation pour manquement) testing An element of inspection. Generally denotes the determination by technical means of the properties or elements of supplies or components thereof, and involves the application of established scientific principles and procedures. (2010-01-11) (essai) test methods Detailed technical descriptions of procedures, according to which conformance to the requirements stated in specifications and standards, is determined. (2010-01-11) (méthodes d'essai) third party liability Insurance. That type of insurance protection that indemnifies one from liability to third persons, as opposed to insurance coverage for losses sustained by the insured. (2010-01-11) (responsabilité civile) time payment 1. A method of making progress payments that provides for specified payments to become due at

the times specified in the contract, subject to certification by the inspection and contracting authorities that progress of the work conforms to schedule.

2. The method of making progress payments based on physical progress of the work on a monthly basis, as determined by the inspection and contracting authorities without any set monthly goals. (2010-01-11) (paiement à terme)

title The formal right of ownership of property, including right of possession. (2010-01-11) (titre) top secret The level of classification that applies to information or assets when compromise could reasonably be expected to cause exceptionally grave injury to the national interest. (2010-01-11) (très secret) trademark A distinctive mark of authenticity, through which the products of a particular manufacturer may be distinguished from those of others. A distinctive mark, motto, device, or emblem which a manufacturer stamps, prints, or otherwise affixes to the goods he produces, so that they may be identified in the market, and their origin be vouched for. (2010-01-11) (marque déposée) transfer price The price charged to a seller to Canada by another division, subsidiary or affiliate of the seller under common ownership control, or otherwise not dealing at arm's length with the seller to Canada. (2010-01-11) (prix de transfert) trustee in bankruptcy A person licensed under the terms of the Bankruptcy Act appointed by court to take possession of the assets of a bankrupt debtor. A trustee becomes in effect a temporary manager of a business who may carry on the business, or alternatively sell the assets. In managing the business, a trustee may be referred to as the receiver manager. (2010-01-11) (syndic de faillite)

Supply Manual Page 2 of 2 Version 10-1 (2010-01-11)

Glossary

U under seal Authenticated by a seal; executed by the affixing of a seal. (2010-01-11) (scellé) unscheduled overtime Any unexpected additional overtime experienced on Crown contracts. Payment for unscheduled overtime requires an amendment to the contract, as it is not included in the overhead rate, but is usually directly charged after the contract has been signed. (2010-01-11) (heures supplémentaires imprévues) U.S. Defence Priorities and Allocations System (DPAS) A system in existence in the United States to ensure the timely flow of goods, materials and services and the prompt delivery of defence and defence-related needs. (2010-01-11) (Système américain régissant les priorités et les attributions en matière de défense [DPAS])

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Glossary

V value for duty 1. Customs. The price in Canadian currency on which the appropriate rate of customs duty is

applicable for goods imported into Canada. 2. Customs Act. The value of the article, as it would be determined for the purpose of calculating an

ad valorem duty upon the importation of such article into Canada, under the laws relating to the customs and the customs tariff, whether such article is in fact subject to ad valorem or other duty or not. (2010-01-11) (valeur imposable)

verification of time for acceptability An examination of the contractor's records to: determine the actual time charged for carrying out the work in accordance with the terms of the contract; ensure that the amount of time thus determined was required in the performance of the work under the contract; and ascertain that the time charged reflects the performance of the work under the contract in an efficient and economical manner. (2010-01-11) (contrôle du temps en vue de l'acceptation)

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)

Glossary

W warehousing The performance of those physical and administrative functions incidental to and required in the conduct of the storage activity, that is, receipt, sorting, identification, inspection, preservation, putting away, safekeeping, retrieval for issue and preparation for shipment of materiel. (2010-01-11) (entreposage) warranty 1. A statement or representation made by seller of goods as part of a contract of sale, having

reference to character, quality, or title of goods, and by which seller promises or undertakes to insure that certain facts are as he represents them.

2. Express warranty. The seller has made an express warranty when making some specific statement concerning the nature, quality, character, use or purpose of the goods, which induces the buyer to make its purchase of them, and the seller intends to the buyer to rely on its statement.

3. Implied warranty. A promise arising by operation of law that something that is sold will be merchantable, and fit for the purpose for which the seller knows that it is required. A contract to do certain work, such as a building contract, contains within itself an implied warranty that the work shall be done in a workman-like manner.

4. Breach of warranty. The consequences that flow from a breach of warranty entitle the innocent party to damages, while a breach of a condition may entitle the innocent party to rescind the contract.

5. Full warranty. A warranty, which covers full performance, generally both labour and materials. Under a full warranty, the warrantor must remedy the product within a reasonable time, and without charge, after notice of a defect or malfunction.

6. Limited warranty. A written warranty, which fails to meet one or more of the minimum standards for a full warranty. (2010-01-11) (garantie)

wholesaler This is a merchant middleman who sells chiefly to retailers or industrial, institutional and commercial buyers for their resale or business use. (2010-01-11) (grossiste)

Supply Manual Page 1 of 1 Version 10-1 (2010-01-11)