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Ottawa backs down again on procurement

Reverse auctions gone, proposed printer buying policy confused

“The government is finally listening,” said Herman Yeh, president of Canadian Information Technology Providers Association, a group of VARs that sell to the government and several vendors.

“It’s absolutely outstanding. We’re incredibly encouraged by the minister’s willingness to communicate with the industry,” added Chris Coates, an association spokesman who heads a firm that represents several vendors in Ottawa. “Obviously this was a huge irritant, not only to our group but to firms involved in professional services, furniture and several other commodities.”

But there was also a sign that the government’s plans for procurement reform are not merely changing but in chaos. On Sept. 11 the Vancouver-based department within Public Works overseeing the controversial proposed master standing offer for printers issued a notice that it was going issue a new proposal which will expand the number of possible approved suppliers from two to four in a complicated formula.

The next day the department said that proposal was inadvertently released and should be ignored. (For details see below).

In a statement released last week Public Works Minister Michael Fortier said the government’s change of heart on reverse auctions was an effort to understand the concerns of industry, members of which said they were outraged by a plan that would do away with the multiple national master standing offers (NMSOs) that are used to designate who gets government business and issue only two per category.

Instead as part of its “The Way Forward” strategy, the department said vendors of record would be determined by the use of an electronic reverse auction, where firms would have a limited amount of time to submit the most cost-effective bid for government work. Reverse e-auctions have been used by the U.K. government among others.

“After further consideration, I have asked my officials to take off the table the use of reverse auctions as part of our procurement strategy for all categories of commonly purchased goods and services. This procurement reform can be achieved without the use of reverse auctions,” Fortier’s statement said.

Instead, Public Works has asked the Conference Board of Canada to act as a go-between with industry groups, who will be consulted prior to issuing requests for standing offers.

Procurement reform has attracted considerable lobbying from IT industry associations and resellers, who worried the Public Works plan would severely limit the opportunity for small businesses to compete on government contracts.

Bernard Courtois, president of the Information Technology Assocation of Canada (ITAC) agreed that Fortier was doing the right thing, but he warned that the issue is much broader than simply the use of reverse electronic auctions.

“As a technology industry, it’s pretty hard for us to be against using technology for procurement, but there was a communications issue, and how they would use the auctions,” he said. “Every time a buyer tries to do something to save money, if you’re a supplier it’s a change, it’s a disruption.”

Public Works is still obligated to save $2.5 billion in spending over the next five years, though it has not indicated what other methods it might use.

“They still want to reform procurement, they still want to save the money,” Coates said. “But now the message we’re offering is, work with us and we’ll get you there.”

Courtois said the government already enjoys deep volume discounts on many pieces of IT equipment, but fails to take into account the lifecycle management and cost of ownership issues.

“The Canadian government is getting truly world-beating prices on all the pieces that it buys, but if it focuses only on buying pieces instead of solutions . . . it’s not going to get the savings it wants,” he said.

In the original proposed printer procurement plan, the government suggested limiting the number of eligible suppliers to two. Approved suppliers and their resellers would be the only ones government departments could buy from.

After protests, the proposal was changed by creating two groups of printers. Group 1 would be for what was called standard printers, with four possible suppliers. Group 2 would be for specialized equipment in which there would be nine sub-categories and four suppliers within each. Only two of the suppliers would be active – that is, active for civil servants to buy from – at any time. The other two could bid on printer contracts after the first six months of the system.

The Sept.11 proposal — which was recalled the next day — suggests Group 1 printers would be divided into colour and monochrome categories, with four possible suppliers in each. Suppliers could be eligible in both categories. The number of active suppliers would go up to four, however the price of the printers they offer would have to come within 15 per cent of a value formula worked out by the government.

At the end of every month all suppliers can submit what the government calls “downward price revisions.” Those within the 15 per cent formula would be active supplies for the next month.