Contracting Policy

Consultants and professionals can be chosen using competitive bidding in several ways. This Appendix outlines a number of selection methods, allowing for varying cost considerations, that are considered appropriate for the circumstances indicated. Contracting authorities are responsible for choosing the method most appropriate to each procurement.

Consultants and professionals can be evaluated against one or more of the following criteria:

1. qualifications to do the work,
2. the proposed approach,
3. the pricing and terms offered.

1.3 The qualifications of the consultant or professional must always be a factor in deciding who will do the work. Provided the technical evaluation of the consultant or professional is valid, the proposed approach, including price and terms offered, must be acceptable before a contract can be awarded.

1.4 A degree of competition among contractors is possible even when the selection cannot be based on price alone, by using the competitive proposals method (see article 10.7.11 of the Contracting Policy Guidelines). It is sometimes more appropriate in engineering, research and development, and consulting services, to base selection on the level of performance offered rather than on price alone. Proposal competitions may take one of several forms, including design competition, as outlined in article 10.7.16 of the Contracting Policy Guidelines. Because these proposals would not contain a firm price, the definition of valid bid cannot apply and consequently the lower non-competitive contracting dollar limits is applicable.

1.5 When the expense of a proposal competition is not warranted, as when the contract is less than $25,000, a consultant or professional can be chosen based entirely on qualifications. This form is preferable to any method which does not compare a number of qualified firms. Although this too does not qualify as a competitive contract, it can be applied in a manner similar to an employment competition.

1.6 In some circumstances, it may be appropriate to direct a contract to a particular firm without any competition as permitted by section 6 of the Government Contracts Regulations. Contracting authorities shall fully document the circumstances in each case which justify using this selection method.

1.7 Depending on the level of detail required, a proposal may cost a substantial amount compared to the value of the work proposed. If a large number of costly proposals are submitted in response to each proposal call, the increase in overhead costs to the industry will ultimately accrue to clients. In addition, evaluating these proposals will take longer. Proposals should not be solicited from a large number of consultants or professionals. Screening a preliminary list, based on inventory data or information from consultants or professionals, should establish a short list of enough of them to produce competition.

1.8 Selection of a short list. In developing a short list of consultants or professionals, the available information should be assessed against the following factors:

• experience in the fields required,
• availability of qualified personnel,
• access to supporting resources,
• capacity to complete work within the required time,
• past performance on federal government contracts,
• location of the office of the consultant or professional with respect to work area,
• sensitivity of work,
• security level required.

1.9 A reasonable number of possible contractors should then be selected for a short list using the available data outlined above. Competitive proposals could then be invited from the consultants or professionals on this short list who are interested in the work.

When it is not possible or feasible to calculate the basis of payment as a fixed price that must be specified in the contract, payment may be calculated, using one of the following methods:

1. Per diem. A fixed daily rate, including payroll and overhead costs and profit, based on the level of experience and expertise required and the length of the normal working day as defined in the contract. Generally used for short term, intermittent or other assignments when the scope of the work cannot be accurately determined.
2. Payroll cost multiplied by a factor. The multiplying factor compensates the consultant or professional for overhead costs, interest on invested capital, responsibility and profit. It varies with the type of service performed, the geographic location and the length of the assignment. This method, based on the direct costs to the consultant or professional, is suitable when the scope of the work and the services required are extensive; when it is not possible to determine accurately the scope of the services to be provided; or when a percentage fee does not adequately reflect the cost to the firm. It may be desirable to place a limit or ceiling price on the total payable under this method. The consultant or professional must maintain detailed time records and accounting procedures to substantiate all costs, and all records must be available for audit by the contracting authority.
3. Payroll and overhead costs plus a fixed fee. This is a variant of (b) above. The consultant or professional is paid actual payroll and overhead costs, together with a fixed fee, negotiated to cover interest on invested capital, responsibility, and profit. It is used for the same type of work as the preceding method and also for the management of construction projects. The fixed fee portion is calculated as a percentage of the estimated capital cost for construction projects and as a percentage of the estimated cost of payroll plus overhead for other types of work.
4. Percentage of the cost of construction. This method has two main shortcomings: the fee does not adequately reflect the cost of performing the service and it penalizes the consultant or professional for economical design. Care should be taken to stipulate a budget ceiling and to verify that the estimated fee will be in line with the estimated cost to the consultant or professional. This method has been used when the principal responsibility is design, preparing of contract documents and the providing of non-resident supervision during construction. It is expressed as a percentage of the cost of the project and the fee is translated into a fixed amount, which is calculated on:
   • the construction contract award price, or
   • the pre-tender estimate approved by the contracting authority,
   • whichever is less.
5. Percentage of approved estimate. Sometimes, fees based on the construction contract award price may result in inequities to either the consultant/professional or the Crown, usually because the construction market or tendering situation is not predictable enough to be used as a basis for the fee of the consultant or professional. In this event, a fixed fee may be negotiated for the design portion of the work based on a depart-mentally-approved estimate made before working drawings are begun. The fee applicable to the construction supervision phase should be based on the construction contract price.
6. Retainer. A stipulated amount is paid at regular intervals. This method is used when the services will be required at intervals over a period of time, such as during prolonged litigation and other special advisory services. The retainer is merely to ensure that the services will be available on demand. The fee for the actual services is based on one of the methods described above.

Overtime will not apply to consultants and professionals paid per diem, unless the contract provides it and it is specifically authorized by the contracting authority. Compensation for actual overtime worked by the staff of the consultant or professional, as authorized by the contracting authority, must be based on payroll costs for normal working hours plus the applicable overtime premium. The multiplying factor for overhead must not be applied to the overtime premium.

Normally the consultant or professional is reimbursed for the actual cost of direct out-of-pocket expenses or disbursements incurred during the course of work as stipulated in the contract and subject to the prior approval of the contracting authority.