10.5.1 Requirements should be defined and specifications and estimates established before bids are solicited and contracts let, so that all prospective contractors are treated equally. In acquiring complex capital equipment, construction or services, other procedures may help control time, cost and performance. Some of these are described below. The procurement method chosen should be indicated, with supporting justification, when contract approval is sought, whether within a department or agency or from the Treasury Board. Adequate specification details should be available to all interested or qualified firms.
10.5.1a Under the North American Free Trade Agreement and the World Trade Organization - Agreement on Government Procurement, technical specifications laying down the characteristics of the products or services to be procured, such as quality performance, safety and dimensions, symbols, terminology, packaging, marking and labelling, or the processes and methods for their production and requirements relating to conformity assessment procedures prescribed by the contracting authority, shall not be prepared, adopted or applied to create unnecessary obstacles to international trade. Technical specifications prescribed by contracting authorities shall, where appropriate:
1. be in terms of performance rather than design or descriptive characteristics; and
2. be based on international standards, where such exist; otherwise, on national technical regulations, recognized standards, or building codes.
10.5.1b Under NAFTA and WTO-AGP, there may be no requirement or reference to a particular trademark or trade name, patent, design or type, specific origin, producer or supplier, unless there is no sufficiently precise or intelligible way of describing the procurement requirements and provided that words such as "or equivalent" are included in the tender documentation.
10.5.1c As required by NAFTA and WTO-AGP, contracting authorities shall not seek or accept, in a manner which would have the effect of precluding competition, advice that may be used to prepare specifications for a procurement from a firm that may have a commercial interest in the procurement.
10.5.2 Traditional method. When a project is not complex and there is no significant interaction between the specification and the implementation phases, the design, specification, or requirement definition is completed separately, to the stage where the cost to implement can be accurately estimated. A contract may be awarded that involves only normal business risks. Departures from this traditional method may be justified if, for instance:
1. the extent to which time or other circumstances preclude defining all significant requirements before contracting;
2. the extent to which the requirement is beyond the state of the art;
3. the extent to which specifications do not represent standard commercial practice and no firms routinely provide the service; or
4. industry contributions to the requirement are needed.
10.5.3 Developer proposal. Here a contractor agrees to carry out a project jointly with the government which may contribute certain financial or technical resources. The project benefits the contractor beyond the contract price paid. This approach is warranted when the requirement can be obtained at reduced cost to the taxpayer or when benefits connected with other government socio-economic objectives are greater.
10.5.4 The following should be evaluated before proceeding:
• cost/benefit justification,
• socio-economic benefits,
• basis of selecting the contractor,
• description of the management system proposed,
• division of responsibility between department and contractor, and
• division of benefits between government and contractor.
10.5.5 Design/build or total package procurement. Here a firm-price contract is awarded based on a performance specification and the contractor is expected to complete a design, construct a facility or manufacture a product or perform a service. This method is warranted for relatively simple technical requirements where the need could respond to routine solutions and no extraordinary risk is involved in working within a firm price. Economies of price or of government effort may be possible by transferring detail specifications or design responsibilities completely to the contractor.
10.5.6 The following should be evaluated before proceeding:
• the degree of responsibility transferred to the contractor;
• the estimated cost under this approach compared to the traditional method; and
• the benefits expected from internal cost or time savings, design improvements or better performance.
10.5.7 Phased contracting. Here the overall requirement may be satisfied in stages. For example, separate production, service or construction contracts may be awarded to implement specific phases or components of a requirement. Individually, the separate contracts may be straightforward and may be handled under the traditional method. However, coordinating the contracts may involve considerable complexity. For example, system engineering techniques may be needed to ensure the individual contracts mesh properly and meet overall system performance objectives. This approach is warranted when the time that is likely to be saved has a value beyond the potential cost of the risk of beginning work before all of the requirements specifications or designs are completed.
10.5.8 The following factors should be evaluated before proceeding:
• the benefits of earlier completion or delivery;
• the related risks and contingent cost allowances; and
• the management structure proposed. For example, this may include construction management or project management.
10.5.9 Flexible price contracting. Sometimes because of unknown factors or postponed decisions, the requirements definition will remain flexible in its interpretations or details of the proposed work will be incomplete. A price basis may be formulated that caters to the unknown factors and/or the implications of the postponed decision, while ensuring that costs are controlled and value is received. Basis-of-price options are outlined in article 10.6. This method is warranted when early completion of the work or the state of the art do not permit firmer arrangements before contracting or when the phased contracting method would be impractical. This is typical of research and development, for instance, where the phases of the work are highly interdependent.
10.5.10 The following factors should be considered before proceeding:
• clear identification of the significant technical or other factors which, being unknown, constitute the basis for proceeding with this method;
• cost and time estimates for resolving the unknown factors, together with an assessed probability of their accuracy;
• likelihood of resolving unknown risks before committing major expenditures on other areas of the requirement; and
• the kinds of price formulas and management techniques that will best ensure adequate control over cost, time and performance under the specific circumstances.
10.5.11 Standing Offer. As defined in Appendix A, a standing offer is an offer from a potential supplier to supply goods, services or both, on the pricing basis and under the terms and conditions stated in the standing offer. Standing offers are established by competitive bidding or negotiation. A separate contract is entered into each time a call-up is made against a standing offer.
10.5.12 Because of the nature of a standing offer, quality specifications may be predetermined but it is usually not possible to give suppliers more than an estimate of the quantity that will ultimately be purchased under each call-up.
10.5.13 The standing offer method may be the best approach when there are many users ordering the same item or definable service across government and the goods or services are commercially available from local suppliers. The speedier procurement and the price advantages may be further enhanced by reduced administrative paperwork, and, in the case of materiel, the use of existing industry distribution facilities will eliminate the need to warehouse large inventories.
10.5.14 Standing offers are generally established by common service agencies for goods and services widely used by other government departments and agencies. However, all contracting authorities should consider the standing offer method to satisfy repetitive requirements.