16.5.1 Market rates. Normally, the use of the competitive process will result in the establishment of appropriate market rates under a contract. Remuneration, including fees that are not established by price competition, should be negotiated on the basis of usual market rates for the type of work required. Market rates are comparable to those the contractor has charged for similar work under the same conditions in the same geographical area. Market rate may therefore be considered the same as going rate.
16.5.2 In all cases, the fees or remuneration should be in line with the contractor's established market rate.
16.5.3 When the work contains a number of related phases, separate fee arrangements may be necessary for each phase.
16.5.4 Fees for consulting and professional services. Remuneration for consulting and professional services depends on the type of service provided, its complexity and the conditions under which it is performed. The competitive process should be the norm for establishing appropriate fees. In most cases, remuneration is in two parts: the fee for the services rendered and expenses for overhead, administration, and profits. Fees may be determined on the basis of time and rates, as an agreed lump sum (firm price or ceiling price) or, in the case of architectural or engineering contracts, as a percentage of the estimated or contract cost of the work. Expenses, on the other hand, are authorized direct out-of-pocket costs incurred by the contractor in providing the required services.
16.5.5 The various standard methods for calculating fees, definitions of costs, and the more common bases of payment for consulting and professional services contracts are shown in Appendix J.
16.5.6 Fee schedules of associations. In determining the market rate of an individual or firm, fee schedules issued by professional associations may be used only as a guide. The fees suggested by professional associations may, in fact, be paid by the contracting authority only when the fee reflects the market or going rate of the individuals.
16.5.7 In rare cases, when the work requirement is unique and no comparable fee can be determined, pay scales for positions in the public service requiring similar qualifications may be used as a guide in negotiating an appropriate fee.
16.5.8 Fee thresholds. As long as the proposed contract amount is within the approval authority of the department or agency, there are no threshold restrictions on per diem or other time-rate fees in contracts for consulting and professional services selected competitively except for certain authority levels in contracts for the services of former public servants in receipt of a pension (see article 16.8.12).
16.5.9 The equivalent ceiling in time rates should be established by the contracting authority, based on the definition of a normal working day appropriate to the particular requirement.
16.5.10 Per diem rates are payable for a minimum of 6 hours' work in a 24-hour period. Less than this should result in prorating of the per diem rate.
16.5.11 As discussed in article 10.6.10, a multi-year or time-phased contract should clearly indicate in the "Terms of Payment" the cost for each phase. If this is not feasible, the contract should provide for adjustments to the contract price on the basis of an agreed rate or formula set out in the same section. Single contracts with multiple phases and established costs for each phase are preferable to separate consecutive contracts that give the previous contractor a competitive advantage. When it is impossible to establish rates for future years and/or contract phases at the time the contract is awarded, a formula should be developed that relates current prices to appropriate published data such as the price indices published by Statistics Canada. This formula should be used for negotiating any future price changes.
16.5.12 Consistent with section 12.11.10, contracts should include an appropriate penalty clause where the deliverable involves reports or studies.
16.5.13 Prospective contractors are expected to divulge whether they have previously undertaken similar or related studies at federal expense. Contracting authorities should follow up affirmative responses to ascertain whether earlier studies will satisfy all or part of the current need.
16.5.14 Honorarium payments. An honorarium payment is not one made under a contractual arrangement; rather, it is a gratuitous payment as distinguished from compensation for service or hire, and the recipient, if not paid, cannot sue in a Court of Law. Accordingly, the Contracting policy does not govern honoraria.