Doing Business in the Government Procurement Marketplace

Summary

In Canada, government procurement of goods, services and construction work totals approximately $100 billion annually.* The various levels of governmental and paragovernmental bodies account for more than 80 000 transactions each year.** This market is extremely attractive but highly complex for companies which, while monitoring bidding processes, must take into account a demanding regulatory context and compete with equally motivated businesses. A number of resources do exist, however, to facilitate companies' access to these markets. Moreover, within a structured approach, the resources invested in evaluating whether it would be worthwhile for a company to compete for government contracts can reveal substantial strategic benefits, regardless of whether the final decision is yes or no.

*Les Affaires, August 29, 1998, p. 19).
** Public Works and Government Services Canada, 1999 - Doing Business with PWGSC, p. 1.

What are government contracts?

Depending on the context, government contracts are defined differently by the level of government or body concerned. For the purposes of this presentation, we will adopt the broadest approach possible. All transactions between a government body and a private supplier, either individual or corporate (regardless of status, with the exception of non-profit organizations not stipulated in the legislation) will therefore be considered. The term "government bodies" refers to governmental and paragovernmental bodies at all levels of jurisdiction (local, municipal, regional, provincial, territorial, federal) and in all sectors (administrative, school, health, etc.) that are obliged to be publicly accountable for their administration, including Crown corporations and businesses whose main or sole shareholder is a government body (e.g., Canada Post).

What is the attraction for business?

The needs of government bodies are widely diversified: from the procurement of office supplies to the construction of hydroelectric power stations; from shoelaces to remote sensing equipment. Government buyers procure more than 17 000* different types of products. Your business must surely have a niche in this market.

* Public Works and Government Services Canada, Opportunities for Business, August 1998.

Apart from the financial benefits that can be derived, recognition of a business' status as a supplier to a government provides it with a measure of credibility and an aura of competence in its dealings with other national or international markets. In addition, the ability to manage commissions in a complex regulatory environment comprising stringent requirements with respect to deadlines and terms and conditions of delivery is a positive element attested to by a business' status as a government supplier. Other benefits may also emerge from government contract intelligence: a better appreciation of how markets evolve, identifying and qualifying the competition, identifying strategic opportunities, developing tools and models to assist in internal decision-making.

Making an informed choice

When seeking entry into the government market, and indeed all types of markets, businesses should do their homework and be well prepared. Access to government contracts must rest on a precise appreciation of the target market, a serious assessment of the business' own resources and of its strategic and competitive positioning, and on a structured plan of attack that is consistent with the prior choices made by the company and its goals. Direct procurement, the use of supplier files, grouping of purchases, publicly advertised tender calls or limited tendering, standing offers - businesses must learn to recognize all of these approaches and decide whether or not to participate in them. This decision must rest upon a serious evaluation of company resources. Human, physical and technical resources, research and development, supply and production capabilities, possibilities in terms of distribution, delivery and after-sales service will be central to the evaluation of a company's positioning with respect to government contracts. This diagnostic assessment, in conjunction with the affirmation of its strategic and competitive choices and positions, will guide the company towards its preferred targets, which have been carefully selected according to the product offering, the company's delivery capacity and development plans and the relative place that government contracts occupy in the company's corporate strategy. The plan of attack for government contracts will vary for each company: some will target direct access to national publicly advertized tender calls; others will initially approach government contracts via the local procurement route (below public advertising thresholds and via registration in vendor files). Others will monitor government procurement for strategic purposes only, that is, without seeking to access such contracts but simply to identify and keep track of the competition.

What tools are available to business?

For acquisitions of estimated amounts exceeding certain thresholds (called advertising or posting thresholds), the purchaser must necessarily advertise the request for proposals publicly. Such advertisement is done by posting on specialized electronic bulletin board services (BBS) such as MERX^TM and/or on the Web sites of the procuring body, or by publication in specialized and general newspapers. For procurement activities of an estimated value below the advertising thresholds, practices may vary from one body to the next, with vendor files remaining the most frequently used approach*.

* Info-Opportunités, Études sur les habitudes d'achats des organismes parapublics de l'Île de Montréal, April 2000.

Market intelligence on contracts can be provided internally. More and more businesses are finding that the use of an intelligence centre considerably reduces costs and significantly increases the effectiveness of the service. The use of an outside intelligence service will free resources that could then be used to respond to requests for proposals. Businesses may thus focus on their primary function while effectively relegating complementary services to intelligence specialists. Moreover, the activities of some centres of expertise in government procurement go well beyond simple intelligence work and include consulting resources with respect to regulations governing government contracts, dispute settlement, information and training on advanced subjects, documentation centres on trade treaties and agreements, support to businesses in their dealings with buyers, development of personalized strategic tools, and intelligence centres. These centres of expertise constitute a vital resource for the business community.

Glossary

Call for tenders: specific form in which the projected procurement needs and conditions of a body or company are set out.

Vendor file: a register identifying and containing various information on businesses that are qualified to perform a particular type of work or provide a given good or service. Some files rotate the names of suppliers or hide the names of those entered on the list.

Government contract: refers to a transaction for the procurement of goods, services (specialized, technical, general, etc.) or construction work by a government purchaser from a private, individual or corporate supplier.

Advertising or posting threshold: presumed amount of a transaction used to determine the administrative or regulatory terms and conditions applicable in the purchasing process.

Bid: business proposal submitted by an aspiring contractor in response to a call for tenders or request for proposals issued by a purchaser, expressing the aspiring contractor's interest and setting out the planned conditions of supply.

Intelligence: "[translation] Ongoing and largely repetitive activity aimed at actively monitoring technological, commercial, competitive or other environments in order to anticipate any changes in these environments."*  Intelligence with respect to government contracts includes monitoring of the advertising or posting done by government bodies, monitoring of the bodies themselves and of the environment (e.g., legislative and regulatory) that surrounds them.

* Association française de normalisation (AFNOR), Prestations de veille et prestations de mise en place d'un système de veille, XP X 50-053, April 1998, p.6.

*Note: "non-profit" also known as nonprofit organizations, non profit organizations, not-for-profit organizations, voluntary organizations and volunteer organizations.

Prepared by: Mr. Serge Fleury Info Opportunités, Expert Center on Public Procurement—Montreal, Quebec.
Translated by : National Secretariat, Canada Business Service Centres