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					 Municipal Contracts,
Tenders and Proposals

   Participant Guide
   Revised November 2004
Table of Contents

Course Outline ................................................................................ 6
Forward ........................................................................................... 8
Section 1 ....................................................................................... 12
  Contracting Framework, Policy and Regulations ....................... 12
    1-1 Overview .......................................................................... 12
    1-2 Objectives ........................................................................ 14
    1-3 Introduction ...................................................................... 15
      1-3.1 Types of NWT Communities...................................... 15
      1-3.2 Community Funding .................................................. 16
    1-4. Overview of Municipal Contracting Policy ....................... 21
      1-4.1 Introduction............................................................... 21
      1-4.2 Common Law ............................................................ 21
      1-4.3 Summary of “Rules” ................................................. 23
      1-4.4 Policies and Procedures Framework ......................... 24
      1-4.5 GNWT Contracting Policy.......................................... 24
    1-5. Competitive Bidding ........................................................ 28
      1-5.1 What‟s the Big Deal? ................................................. 28
      1-5.2 When is a Contract Competitive? .............................. 28
      1-5.3 Contract Regulations ................................................. 28
    1-6. Contracting Options ........................................................ 31
      1-6.1 Proposals and Tenders ............................................ 31
      1-6.2 When to Use a Proposal or a Tender ........................ 33
      1-6.3 Expressions of Interest .............................................. 33
      1-6.4 Request for Qualifications ......................................... 35
      1-6.5 Sole Sourcing ............................................................ 37
      1-6.6 Negotiated Contracts ................................................. 37
      1-6.7 Options - Public and Invitational ................................ 38
    1-7. Bid and Contract Security ............................................... 51
      1-7.1 Bid Security ............................................................... 51
      1-7.2 Contract Security ....................................................... 55
      1-7.3 Bonding Not Insurance .............................................. 58
    1-8 Business Incentive Policy ................................................ 60
    1-9 Other Considerations ....................................................... 60
      1-9.1 FOB – “Free on Board” .............................................. 60
Section 2 ....................................................................................... 62
  The Tendering Process ............................................................. 62
    2-1 Overview .......................................................................... 62
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    2-2 Objectives ........................................................................ 64
    2-3 Tendering Process ........................................................... 68
      2-3.1 Tendering Overview .................................................. 68
      2-3.2 Authority to Tender .................................................... 72
    2-4 The Tender Call and Tender Opening ............................. 73
      2-4.1 How Much Time To Allow Bidders to Submit? .......... 74
      2-4.2 Contents of Tender Documents................................. 75
      2-4.2 Types of Tenders ..................................................... 78
      2-4.3 Describing the Requirement ..................................... 78
      2-4.4 Describing the Work .................................................. 78
      2-4.5 Types of Specifications.............................................. 79
      2-4.6 Tender Deposit/Planholder‟s Log .............................. 79
      2-4.7 Amendments to Request for Tenders (Addenda) ...... 81
      2-4.8 Standardized Tender Documents. ............................ 81
      2-4.9 Receiving and Opening of Tenders ........................... 83
    2-5 Evaluation ....................................................................... 90
      2-5.1 Tender Review .......................................................... 90
      2-5.2 Administrative Review ............................................... 91
      2-5.3 Technical Review ...................................................... 92
      2-5.4 Tender Too Low ........................................................ 92
      2-5.5 Tender Too High ....................................................... 94
      2-5.6 Contractor Evaluation ................................................ 95
      2-5.7 Approval Process ...................................................... 95
      2-5.8 Contractor Approval .................................................. 97
  Section 3.................................................................................. 108
  Proposals ................................................................................. 108
    3-1 Overview ........................................................................ 108
    3-2 Objectives ...................................................................... 110
    3-3 Proposal Process ........................................................... 113
      3-3.1 Introduction.............................................................. 113
      3-3.2 Requests for Proposals (RFPS) .............................. 115
    3-4 Preparing a Request For Proposals ............................... 117
      3-4.1 What to Include ....................................................... 117
      3-4.2 What Not to Include ................................................. 118
    3-5 Developing Your RFP .................................................... 119
      3-5.1 Structure .................................................................. 119
      3-5.2 Outline ..................................................................... 121
      3-5.3 Checklist For Your RFP Process ............................. 131
    3-6 Proposal Evaluation Guidelines ..................................... 132
    3-7 Writing Successful Proposals......................................... 155
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      3-7.1 Steps for Preparing Your Request for Funds:.......... 157
      3-7.2 Writing a Winning Proposal ..................................... 157
Section 4 ..................................................................................... 162
  Contract Law ........................................................................... 162
    4-1 Overview ........................................................................ 162
Section 5 ..................................................................................... 163
  Contract Administration ........................................................... 163
    5-1 Overview ........................................................................ 163
    5-2 Objectives ...................................................................... 164
    5-3 Contract Management ................................................... 167
      5-3.1 Understanding the Contract..................................... 167
      5-3.2 Monitor Performance ............................................... 169
      5-3.4 Contract Management Activity ................................. 169
      5-3.5 Receipt and Inspection ............................................ 169
      5-3.6 Operating Manual .................................................... 171
      5-3.7 Service/Training ...................................................... 171
      5-3.8 Guarantees/Warranties ........................................... 171
      5-3.9 Dangerous Goods ................................................... 171
      5-3.10 Amendment Preparation........................................ 173
    5.4 Contract Amendment/Change Order .............................. 174
      5-4.1 Basic Principles ....................................................... 176
      5-4.2 Contemplated Change Notice ................................. 177
    5-5 Preconstruction Meeting ................................................ 186
    5-6 Project Documentation ................................................... 186
      5-6.2 Contract Documents ................................................ 187
    5-7 Evaluation of Contractor Performance ........................... 187
    5-8 Account Verification and Payment Requisition............... 188
    5-9 Retention of Contract Documents .................................. 193
      5-9.1 Contract Documentation .......................................... 193
    5-10 Progress Payments ...................................................... 193
      5-10.1 Procedures ............................................................ 193
      5-10.2 Mobilization I Demobilization ................................. 194
      5-10.3 Disputed Claims .................................................... 195
Section 6 ..................................................................................... 198
  Risk Management .................................................................... 198
    6-1 Overview ........................................................................ 198
    6-2 Objectives ...................................................................... 200
    6-3 Insurance Clauses ......................................................... 203
      6-3.1 Guidelines for Insurance Clauses ............................ 203
      6-3.2 Force Majeure Clauses ........................................... 205
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    6-4 What to Watch for in Contracts ...................................... 206
       6-4.1 Insured, Additional Insured, and Named Insured .... 206
       6-4.2 Contractor Risk Management .................................. 207
       6-4.3 Common Problems or Mistakes with Insurance ...... 208
       6-3.5 Contract Liability Requirements............................... 208
Section 7 ..................................................................................... 212
  Ethics ....................................................................................... 212
    7-1 Overview ........................................................................ 212
    7-2 Objectives ...................................................................... 213
    7-3 Ethics and Contracting ................................................... 214
    7-4 Ethical Situations ........................................................... 215
       7-4.1 Conflicts of Interest .................................................. 215




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Course Outline
Municipal Tenders, Contracts and Proposals


Course Descriptions:

Section 1 – Contracting Framework, Policy and Regulations
-Contracting Policies and Procedures
-Competitive Bidding
-Contracting Options
-Bid and Contract Security
-Exercises and Tests

Section 2 – The Tendering Process
-Tender Call and Tender Opening
-Preparing a Tender Call
-Receiving and Opening Tenders
-Evaluating Tenders
-Exercises and Tests

Section 3 – The Proposal Process
-Preparing an RFP
-Developing a Terms of Reference
-Evaluating a Proposal
-Exercises and Tests

Section 4 – Contract Law
-Types of Contracts
-Legal Requirements of a Contract
-Law of Competitive Bidding
-Fair and Equal Treatment
-Right to Reject Clauses
-Negotiating and Resolving Disputes
-Exercises and Tests




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Section 5 – Contract Administration
-Negotiating and Monitoring Service Contracts
-Complying with Terms, Conditions and Reporting Requirements
-Monitoring and Evaluating Contracts
-Exercises and Tests

Section 6 – Risk Management
-Guidelines for Insurance Clauses
-What to Watch for in Contracts

Section 7 - Ethics
-Ethics and Contracting
-Ethical Situations

Required Student Resources:
Student Manual - Course Specific



Date: February 2002




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Forward

This manual focuses on helping Senior Administrative
Officers function at an informed level. Once a person has
participated in actively learning the content, and practicing
the skills described in this manual they will be able to use
this manual as a resource document and for in-service
education to others at their place of work and in their
communities.

Frameworks for managing and implementing contracts at
a municipal level are discussed including guidelines
provided by the NWT government which may be adopted
as standards for each municipality.

A vigorous attempt has been made to present in simple
form many principles, standards and best practices
gleaned from extensive research and document
searches. It is recognized that the contracting process
can be complex and open to different styles according to
individual and municipal preferences. This manual is an
excellent starting point and is an effort to describe the
evolving process and to consider these essential
municipal functions in the light of changing needs and
requirements and evolving municipal responsibility.




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Exercise- Course Overview




Instructions:

1. Exercise to be completed on one‟s own.

2. Skim through of this entire manual before you start getting into
   detail. You then get the general picture-the overview. Human
   intelligence works best when moving from the general to the
   specific. Inspecting something first in its entirety, gives your
   mind a framework in which to place the details.

3. Your first task is to take an hour or so to look this handbook
   over. Start with the table of contents. Then look at each page.
   Do this fairly steadily. Read the headings, scan the materials.
   Look at the forms, check lists and diagrams.

4. As you review the material, look for ideas, information exercises
   you find interesting or that you think are valuable. When you see
   something that you like, write down the section and page
   number-with some very brief notes about why you like it or why
   it interest you in the space below. If you find 10 interesting
   things before you have completed your scanning, stop writing
   and continue on with your review without writing anything more.
   The idea is set the scene for the details. Look at every page and
   do it steadily without getting hung up on the details.




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Time: 60 minutes

Section/ Page #          Notes

1.




2.




3.




4.




5.




6.




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7.




8.




9.




10.




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Section 1
Contracting Framework, Policy and
Regulations

1-1 Overview
Currently many types of government exist at a community level in
the NWT and new forms of government are being negotiated
through self-government agreements. The role of local government
and the types of programs and services being delivered are
undergoing dramatic changes.

Traditionally, communities were expected to deliver “core” services
effectively and efficiently. This meant ensuring waste was
managed, roads were maintained and emergency services were in
place. In the late 1990‟s and early 2000‟s, legislation and funding
policies evolved to recognize greater autonomy for NWT
communities, and local government has become involved in a
much wider range of program and responsibilities.

Not only are NWT communities assuming a higher level of authority
and accountability for municipal services, but they are becoming
involved in a much wider range of programs and responsibilities,
from social and health programs to recreation and economic
development activities. This means that community governments
and their staff are being asked to undertake more complex tasks
and they are moving from simply overseeing the delivery of
programs and administration, to managing projects.




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In order to efficiently assume the responsibility of managing
programs and services, senior community staff need to further
develop the skills and knowledge required to perform contract
services. This includes:

             Preparing tender documents and requests for
              proposals;
             Invoking contribution funding and special service
              agreements where applicable;
             Negotiating and monitoring service contracts;
             Complying with terms, conditions and reporting
              requirements;
             Monitoring and evaluating contracts; and
             Preparing legal documents.

This workshop on Municipal Tenders, Contracts and Proposals
prepares community senior staff to effectively perform contract
services.




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1-2 Objectives
This section provides an introduction to municipal contracting.

By the time you completed this section on Contracting Framework,
Policy and Regulations, you will be able to:

         Demonstrate an awareness of directives on tender
          advertisements.
         Demonstrate an understanding of municipal contracting
          policy including common law, statue law, and rules which
          govern.
         Demonstrate an understanding of the general goals and
          objectives related to tendering and proposal calls and the
          general similarities and differences between tenders and
          proposals.
         Demonstrate an understanding of competitive bidding,
          contract regulations, common law principles which are
          found in the regulations, the guidelines for GNWT
          contract regulations, expressions of interest, request for
          qualifications, competitive versus non-competitive
          bidding, sole sourcing, negotiated contracts, public and
          invitational tenders and proposals, unrestricted and
          restricted invitational calls for bids, bid security, surety
          bonds, and contract security.

This section covers the following skills for the Occupation of Senior
Administrative Officer as identified in the DACUM Chart:
   - Preparing tender and proposal documents.




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1-3 Introduction

1-3.1 Types of NWT Communities
The term “municipality” refers to all local governments, as is usual
elsewhere in Canada. Under the umbrella term of “municipality”,
there are seven different types of community structures within the
Northwest Territories as follows:

Hamlets

        Aklavik                                  Fort Liard
        Fort McPherson                           Fort Providence
        Holman                                   Paulatuk
        Rae-Edzo                                 Sachs Harbour
        Tuktoyaktuk                              Tulita
        Enterprise

Charters

        Deline                                   Tsiigehtchic
        K‟asho Got‟ine (Fort Good Hope)          Wha Ti

City

        Yellowknife

Towns

        Fort Smith                               Hay River
        Inuvik                                   Norman Wells

Villages

        Fort Simpson

Settlements
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        Deninoo (Fort Resolution)

Bands

        Dechi Laot‟i (Wekweti)
        Gameti First Nation
        Jean Marie River First Nation
        Ka‟a‟gee Tu First Nation (Kakisa)
        Nahanni Butte Dene Band
        Pehdzeh Ki Dene Band (Wrigley)
        Sambaa K‟e Dene Band (Trout Lake)
        Behdzi Ahda‟ First Nation (Colville Lake)
        Yellowknife Dene First Nation (Dettah)
        K‟atlodeeche First Nation (Hay River Reserve)
        Lutsel K‟e Dene Band


1-3.2 Community Funding
There are various funding sources for NWT municipal programs
and services. Many of the core services within NWT communities
are funded through the Department of Municipal and Community
Affairs (MACA) which provides formula-based funding to support
the Council‟s management and delivery of community government
services, including:
            General operations and administration
            Sport & recreation, including planning
            Community development
            Fire Protection
            Protective and enforcement services
            Garbage
            Land development, including community land use
               planning
            Minor capital under $100K (all infrastructure projects
               except Water and Sewer projects for the taxed-based
               communities), including:
                  - Roads, sites and land development

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               -   Mobile equipment
               -   Minor projects




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MACA also provides conditional funding to support the Council‟s
management and delivery of community government services,
such as:

             Debt Recovery
             Extraordinary Assistance
             Water & Sewer Services
             Water & Sewer Infrastructure
             Major Infrastructure (over $100K and excluding land
              development projects)

Through these new policies established under the Government
Funding Policy, MACA is maximizing the authority and
accountability of the local Councils for decisions about those
services. MACA has established requirements for financial
reporting to the department and is ensuring certainty about funding
levels for the community governments. As well, MACA is reducing
the administrative burden and streamlining funding arrangements
between MACA and community governments.

Water and sewer capital projects are eligible for full funding for non-
tax based communities and 50% funding for tax-based
communities according to the Community Government
Infrastructure Contribution Policy.

Communities that are incorporated as villages, towns and the City
of Yellowknife, are structured along typical municipal lines and are
given the authority to levy and collect their own taxes, and the
power to borrow. Funding is provided specifically for water and
sanitation services, and road construction (including paving and
sidewalks). The GNWT also pays grants in lieu of taxes to taxing
authorities at the same rate as if the GNWT-owned properties were
privately held and taxed.

MACA may also provide funding to community governments to
resolve extraordinary funding requirements for unforeseen
situations which arise in the operation of community governments.


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Other Territorial departments which provide funding to NWT
municipalities include the Department of Public Works & Services
(PWS), the NWT Housing Corporation, and the Department of
Transportation (DOT).

Currently, in Settlements and designated Band Council
communities, the Department of Public Works & Services (PW&S)
covers the O&M expenses associated with mobile equipment
(i.e. fuel, maintenance and repairs).

PW&S contracts out the construction work in communities and the
Government‟s costs are partially recovered in accordance with the
GNWT‟s Land Valuation Policy, through the sale or, as is more
often the case, lease of the developed lots to individuals.

The City and the towns and villages are responsible for their own
land development projects. The GNWT shares with them the costs
of road construction and trucked water/sewer systems in accord
with prevailing program standards and criteria.

Where the municipality plays a role as the Local Housing Authority
or Association, it would operate and maintain rental units through
operating agreements and with financial contributions from the
NWT Housing Corporation.
The NWT Housing Corporation also has programs that ensure
Local Housing Authorities/Associations have the facilities
(Warehouse and Office Program) and equipment (Housing
Association/Authority Mobile Equipment Program) that they need to
administer and maintain the rental housing portfolio.
The NWT Housing Corporation has other programs available to
Local Housing Authorities/Associations (LHA) to help them in the
operation of rental units. The Modernization and Improvement
Program provides funds for major repairs. The Fire Damage Repair
and Replacement Program provides funding to assist an LHA after
a unit has suffered a fire. The Weber Retrofit Program funds
upgrading and major repairs to Weber design units, some of the
earliest public housing units for the NWT.
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The Department of Transportation (DOT) is the contract authority
for construction contracts for the transportation infrastructure in the
NWT, including community airports and docks and the highway
system.


Where to find what you need to know
Resources
See Appendix - MACA Policies
Websites: MACA – www.maca.gov.nt.ca/
NWT Housing Corporation – www.nwthc.gov.nt.ca
Department of Transportation –
www.gov.nt.ca/Transportation/index.html




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1-4. Overview of Municipal Contracting
Policy
1-4.1 Introduction
The area of contracting plays an important role in managing
projects for the municipality. Contracting in a municipal
government environment is very similar to contracting done by the
Government of the Northwest Territories (GNWT). Public funds or
taxpayers dollars are being spent and policies and procedures must
be in place to ensure these monies are spent wisely. Federal and
provincial/territorial governments have all developed policies and
procedures that deal with tendering and contract administration. In
many ways, these policies and procedures are quite similar
although differences do occur.

Principle:

                Spending public funds/taxpayers dollars, means there
                 is an obligation to obtain “best value”.

It should be stressed that although communities are not required to
follow most of the GNWT rules for contracting, they are still subject
to common law requirements. They can be sued if they contravene
common law principles. The procedures of the GNWT were written
to comply with the latest common law requirements. Communities
which follow these guidelines will usually be in conformance with
common law principles.


1-4.2 Common Law
In Canada there are two sources of law: common law and statute
law. Common law consists of rules and precedents developed by
the courts over the years both here in Canada as well as in the
United States and the United Kingdom. It is the judge made law
developed in the courts. We often refer to two unmarried people

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who live together as living in common law. This is not what we are
referring to with contracts.




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Common law is the law which governs your contract. If you get into
a dispute with contractors on whether or not they constructed your
community hall properly, the dispute will be governed by the
principles of common law. Many of the clauses which are found in
the contracts you will be using have been formulated as a result of
a court decision – a common law principle.

Statute law is law which has been legislated by governments –
federal, territorial and municipal. Some of the statute laws in the
NWT which commonly affect contracts are the Labour Standards
Act, Mechanics Lien Act, Electrical Protection Act, Arbitration Act
and the Use of Explosives Act. If you do not pay your employees
properly, this issue will be governed by the Labour Standards Act or
statue law.

Common law will be covered in greater detail in Section 3 on
Contract Law.


1-4.3 Summary of “Rules”
When contracting, in addition to abiding by common law
requirements, it is one of the Senior Administration Officer‟s (SAO)
responsibilities to ensure that the applicable requirements of related
acts, regulations, policies (if in place in the community) or
agreements have been taken into account and respected. Some of
the acts and regulations include:

Specific Legislation – Bylaws
           Cities, Towns and Villages, R.S.N.W.T. 1988, c.c-8
           Charter Communities, R.S.N.W.T. 1998, c. C-4
           Hamlets, R.S.N.W.T. 1988, c.H-1
           Health and Safety
           Environment
           Transportation of Hazardous Goods and Products
           Municipal By-Laws (if in place)


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Community Transfer Agreements
         GNWT Financial Administration Act
         GNWT Policy (BIP)
         Funding Policies – MACA


Where to find what you need to know
Resources
See Appendix – Gov. Policies, Regs, Acts
Websites: NWT Statutes and Regulations – www.lex-nt.ca/loi/



1-4.4 Policies and Procedures Framework
Most of the policies and procedures which will be presented during
this course are those of the Government of the Northwest
Territories (GNWT).

Public Works and Services (PWS), Transportation (DOT) and the
NWT Housing Corporation are the primary contracting agents in the
GNWT. Although all departments do contracting to some extent,
these are the only departments which have extensive policies and
procedures in the contracting area. All three departments have
Contract Administration Manuals and to a large extent the manuals
are very similar.


1-4.5 GNWT Contracting Policy
The general goals and objectives of the GNWT related to tendering
and proposal calls are summarized below. Communities have
similar objectives:

             to complete the contract for the best value, on time
              and on budget
             to ensure that fairness is shown to all interested
              bidders

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            to support the involvement of Northern and Local
             workers and businesses.




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Exercise
Contracting Policies




Instructions:
1. Individual exercise.

2.Take five minutes to check off the correct answers below and to
write down the contracting policies your municipality uses to enter
into contracts for goods and services.

3.Share your information with the class.

Time:         10 minutes

Check all the correct answers. If a statement is incorrect underline
the section or words that make it incorrect:
 Common law and statue law is the same thing.
 Common law is the judge made law developed in the courts.
 Common law is the law that governs your contract.
 Statute law is law that has been legislated by governments –
   federal only.
 When contracting you need to ensure that the applicable
   requirements of related acts, regulations, policies or agreements
   have been taken into account and respected.




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Check all the correct answers as related to the general goals and
objectives related to tendering and proposal calls.
 To receive all bids as quickly as possible.
 To complete the contract for the best value, on time, and on
   budget.
 To support the involvement of Northern and Local workers and
   businesses.
 To except Northern and Local bids over all other bids.
 To ensure that fairness is shown to all interested bidders.
Questions:

How is the process of contracting decided in your community?




Does your community have policies in place?




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1-5. Competitive Bidding
1-5.1 What’s the Big Deal?

             It‟s the Law
             You are spending public money -- not your own
             There should be equal opportunities for all vendors
             Save your butt!
                   - Ensure transparency and fairness!
                   - Avoid political complaints


1-5.2 When is a Contract Competitive?
A contract is competitive when the process used for the solicitation
of bids:

             gives public notice in a manner that is consistent with
              generally accepted trade practice; or

             invites bids on a proposed contract from at least three
              qualified suppliers who are on a suppliers' list,


1-5.3 Contract Regulations
Contract regulations help ensure competitive bidding. Government
Contract Regulations provide the primary guidelines for tendering
and requests for proposals in the GNWT. Municipal Governments
should follow the intent of these regulations as much as is practical.

Government Contract Regulations are set out in the Financial
Administration Act.




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GNWT Contract Regulations:

   include basic definitions of contract terminology
   explain the rules for tendering and when they must be applied
   explain the paramount authority of the Cabinet
   explain the rules for calling proposals.


Common law principles which are found in the regulations and
which would apply to communities are:

   late tenders cannot be accepted
   if bid security is required, you cannot accept a tender which
    does not have the proper security
   you must award your tenders to the lowest responsible bidder
    who has submitted a responsive tender



Facts to find out




Does your community require bid security for tenders?




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There are also directives which government departments follow
when tendering projects and requesting proposals. An example is
included in Appendix- Bid Preparation:

             Directive on Tender Advertisements (when to
              advertise)

While it may not be necessary for each community to develop
formal directives in these areas, there should be some direction
given to staff on recommended approaches. At the very least,
these directives can be used as a guide until such time as the
community determines how to proceed in these areas.

Be proactive. Work with your community council to develop
directives for tenders and proposals if they are not already in place.

The GNWT has guidelines which they follow as well in order to be
consistent and fair in their processes. These guidelines are as
follows:
           applies to all contracts over $1,000
           informal bids are allowed for projects between $1,000
             and $5,000
                 - they can be verbal or written
           formal bidding is required for projects over $5,000
                 - can be in the form of a tenders or proposal
                 - they can be by invitation or publicly advertised
           no specific number of bids
           process to promote the submission of „competitive
             bids‟


Where to find what you need to know
Resources
Appendix – Gov. Policies, Regs, Acts
Appendix – Bid Preparation – Sample Ads, Directive on Tender
Advertising



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1-6. Contracting Options
The following component provides an overview of the types of
contracting options used by the GNWT. If your community does
not already have its own guidelines, you might wish to work with
council to establish policies so that guidelines are clear and staff
has clear direction on what they can and cannot do when
requesting bids on goods and services.


1-6.1 Proposals and Tenders
A proposal is different from a tender. Unlike a tender, a Request for
Proposals (RFP) is not an offer, but only contemplates an offer.
Unlike the receipt of a tender, the receipt of a proposal is not an
acceptance, and therefore does not result in a contract. For
example, a marriage proposal does not always result in an
agreement of marriage.

             An RFP is used when the purchaser is looking for the
              best value solution to resolve a problem or to deliver a
              good or service, but is not exactly sure how to
              achieve it.
             A tender is used when the purchaser knows exactly
              what good or service they want and is looking for the
              best price to deliver it.

The difference between a tender and a proposal is well explained
in a recent NWT court judgment:

“When the Government knows what it wants and how it should be
done (such as a construction project), it will already have its
plans and specifications and is looking simply for the best price.

On the other hand, when the Government knows what it wants
done, but not how to go about doing it, it seeks proposals on
methods, ability, and price. Then it can negotiate on the best
method to achieve the best value.” (1) Socanav Inc and the
Municipal Tenders, Contracts and Proposals
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GNWT et al., SCNT, Vertes, Aug 5, 1993




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1-6.2 When to Use a Proposal or a Tender
To determine whether to use an RFP or a tender, consider the
following:

Tender - Know What And How

Use a tender if you know what you want done and how it should
be done, that is:
           if the good or service is clearly defined; or
           if there is a detailed methodology, procedure, or
              material and performance specification

Proposals - Know What, But Not How

Use an RFP if you know what you want done, but you do not
know how it should be done, that is:
          if the good or service is not clearly defined; or
          if there is no detailed material or performance
             specification; or
          if you are looking for a general solution to a problem;
             or
          if the proponent‟s solutions are expected to be quite
             varied and/or difficult to evaluate.


1-6.3 Expressions of Interest
An Expressions of Interest process is used when you may have a
requirement for a sophisticated, multi-skilled team or specialized
knowledge and very few companies seem to possess the
necessary skills or experience. This approach is sometimes used to
find other contractors with the “right stuff” and get them interested
in the project.


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Generally you do not use an Expression of Interest to disqualify
potential contractors, or to create a short list for an invitational RFP.




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What to Include in an Expression of Interest Document?

The Expression of Interest document should:
          clearly define the opportunity and the project;
          provide a solid plan with time lines;
          clearly state your priorities;
          include a general outline of the evaluation criteria for
            the subsequent RFP selection, or for any intervening
            stages;
          address potential questions and invite those who are
            interested to respond;
          May include qualifications offered.

Instructions to the potential respondents may also include
submission length and required content, such as:
            team/corporate partners;
            key personnel;
            financial and surety information (if applicable);
            project experience, and
            approach to the project.


1-6.4 Request for Qualifications
A Request for Qualifications is a process that will enable you to pre-
qualify proponents for a particular requirement and avoid having to
struggle with a large number of lengthy proposals. This process is
useful when you anticipate a great deal of interest, and need to
screen many contractors so you can move quickly to a short list of
qualified proponents for a full RFP process. It also limits the
number of potential bidders who will be required to go to the
expense of preparing a detailed proposal.




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What to Include in a Request for Qualifications Document?

A Request for Qualifications document should:
         describe the project;
         provide a project plan with time lines;
         clearly present your priorities;
         suggest a submission length, and
         ask for the same basic contractor information as an
             Expression of Interest.

This process also needs to:
           identify the minimum requirements or pass/fail tests
             that each contractor must satisfy in order to be invited
             to participate in the RFP;
           set out the criteria that would otherwise appear as
             “mandatory” in the RFP.

There are several benefits in using this process:
           unqualified or inexperienced contractors are removed
             from the selection process;
           it is less costly to the proponents;
           you will likely receive better proposals from
             proponents who feel they have a good chance of
             winning;
           fewer proposals will reduce the evaluation burden.

Important Note

Often Expressions of Interest and Requests for Qualification are
combined under the “Expressions” banner. Separating these may
be more formal but allows you to focus on the real intent of the
process.




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1-6.5 Sole Sourcing
Sole sourcing is the practice by which a manager sets aside the
competitive bidding process and awards or directs the contract to
one firm or individual. There are three situations in which a sole
source award is allowed by the GNWT:

             the contract is worth less than $1,000; or
             the work is an emergency and a delay would be
              injurious to the public interest; or
             there is clearly only one qualified firm available when
              all factors and pertinent policies are taken into
              account.

When exercising this exemption, managers should be able to write
a solid rationale that they would be prepared to defend before the
Minister or the dissenting companies, should the need arise. Sole
source contracts can become political issues.


1-6.6 Negotiated Contracts
For various reasons a community may wish to give a particular
contractor work without going to tender. This would be classified as
a negotiated contract. Generally in a negotiated contract there is
more than one firm available to do the work and one of the three
factors for sole sourcing will apply.

The Department of Transportation has a policy on Negotiated
contracts. The usual reasons for negotiated contracts are to
increase the use of local labour, or to help a new construction
company get started in business. For obvious reasons, negotiated
contracts should be kept to an absolute minimum. It is very difficult
to determine if you are getting a fair price if you do not tender the
work.



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Where to find what you need to know

Resource
Appendix – Gov. Policies, Regs, Acts - Negotiated Transportation
Contracts
www. pws.gov.nt.ca/ Procurement Guidelines – Public Works and
Services



1-6.7 Options - Public and Invitational
Tenders and proposals are generally requested in one of two ways:

             Public
             Invitational

Public

In public sector contracting, there is a professional and legal
obligation to obtain the best possible price or value. The most
visible method to meet this objective is through public advertising or
contractual requirements. However, this is expensive. Depending
on the requirement or situation, it is recommended that a method of
public advertisement be utilized when the value of the contract will
exceed $30,000, or in the case of construction projects, $100,000.
The figure of $30,000 is purely arbitrary; the community may set
this limit at whatever it feels is most appropriate.

Public tenders or RFPs are open to the general public; anyone may
bid. When publicly advertising, the community should consider
using the following:

             Media advertising (newspapers)
             Public notices
             Internet web page tender information


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Media Advertising – depending upon the value of the contract,
and/or other political or market factors, advertisements should be
placed in News North, local newspapers, or a combination. The
advertisement should clearly state the:

             Description of the requirement
             Closing time and location
             Date and
             Where the tender/RFP documents may be obtained.

A good rule of thumb to follow is that if the estimated value of the
contract is less than $100,000, it is usually sufficient to place the
advertisement in selected northern newspapers once. Where
contracts will exceed $100,000, then the advertisement should be
placed at least twice.

Public Notices – in addition to media advertising, the community
should post public notices of advertised tenders and RFPs,
regardless of the value of the contract, in all Regional offices, and
the Hamlet or Settlement office where the work will be done.

Electronic Information – the community should place calls to tender
and RFP requests on their community or regional website.




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Test
Competitive Bidding




Instructions:
1.    Individual exercise.
2.    Take five minutes to check off the correct answers below.
3.    Share your information with the class.

Time: 5 minutes


Check all the correct answers.


A contract is competitive when the process used for solicitation of
bids:
 Gives public notice in a manner that is consistent with generally
   accepted trade practice.
 Invites bids from at least three Northern and Local businesses.
 Invites bids on a proposed contract from at least three qualified
   suppliers who are on the suppliers‟ list.
 Advertises locally in the local paper and on local businesses.




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Common law principles which are found in the regulations and
which would apply to communities are:
 Late tenders cannot be accepted.
 Late tenders can be accepted if faxed.
 If bid security is required, you cannot accept a tender that does
   not have the proper security.
 You never request bid security for a tender.
 You must award your tenders to the lowest responsible bidder
   who has submitted a responsive tender.
 You can award your tender to the bid that seems the most
   appealing to you.

Guidelines for GNWT Contract Regulations include:
 Applies to all contracts under $1000.
 Informal bids are allowed between $1000 and $5000.
 Informal bids can be verbal or written.
 Formal bidding over $10 000.
 For formal bidding you may ask for tenders or proposals.
 For formal bidding you may seek tenders or proposals through
   invitation or advertising.
 There is no limit on the specific number of bids.
 The process to promote the submission of „competitive bids‟ is
   used.




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Invitational

Invitational tenders and RFPs are calls in which only certain firms
are invited to bid. The invited bidders are contracted by direct
written invitation; public notices and newspaper ads are not used.
A bid notice will not be posted in the community. The information
normally given in an invitational tender or RFP is similar to the
information given in a public call. Only the method of handling the
request for tenders or RFPs differs.

It is acceptable to allow bids to be obtained by invitation rather than
public advertising for contracts valued at less than $30,000. Again,
this is an arbitrary figure and communities can set their own limits
on invitational bids.

When inviting tenders or proposals, the community should ensure
that all qualified firms that are in a position to undertake the work
are provided with an opportunity to bid.

It is important to establish policies at a council level. You will want
to consider whether for low value contracts (under $5,000),
soliciting bids verbally is acceptable or not. This is practiced by
the GNWT on occasion. However, restrict this practice wherever
possible to those situations where time is a restricting factor.

If over 50% of the community project is funded by the GNWT, then
the Business Incentive Policy restrictions with Invitational bids will
apply:
        Less than $1,000 – one northern business
        Less than $30,000 – 2 or more northern businesses

Unrestricted Invitational

Invitational bids may be issued on an unrestricted basis. This
means that although bid documents are sent only to selected
contractors or suppliers, any other contractor or supplier is free to
request the documents and submit a bid.


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Restricted Invitational

In this case, bid documents are sent only to contractors or suppliers
specifically selected to submit bids. Bid documents will not be sent
nor will bids be accepted from bidders who have not been invited.

In this case, you should not post the competition on the
Tender/Contract Notice Board if you have one in your community or
on your website.

There could be political and business related issues arising from a
restricted invitational process.

NWT Construction Association

It is recommended that for construction projects, a copy of any
tender advertisement and one set of tender documents are sent to
the NWT Construction Association. For contracts that will exceed
$100,000, the GNWT sends the tender documents to the Edmonton
and Grande Prairie Construction Associations.

The NWT Construction Association makes available the required
tender documents for construction projects such as bid bonds, and
performance bonds, etc. for a nominal fee for its members.

Interprovincial Trade Considerations

You should be aware that the Agreement on Interprovincial Trade
requires that tenders and proposals for goods and services valued
in excess of $25,000 be made available to any interested party,
without restriction.

It is recommended that tender documents be sent to southern
bidders only when specifically requested and only when the
contract value exceeds this threshold amount ($25,000).

The Department of Resources, Wildlife and Economic Development
is responsible for matters arising from this agreement.

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Where to find what you need to know
Resources
See Appendix – Gov. Policies, Regs, Acts
Websites: Canadian Construction Association www.cca-
acc.com/documents/documents.html
Department of Resources, Wildlife and Economic Development
www.rwed.gov.nt.ca




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Exercise
Contracting Options




Instructions:

1.Individual exercise.

2.Take 10 minutes to complete the chart and answers the following
questions.

3.Share your information with the class.

Time:         10 minutes




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Complete the following chart, listing the unique characteristics and
purposes of tenders and proposals under their individual headings.

TENDERS                            PROPOSALS




Check all the correct answers.




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An expressions of interest process is used:
 To create a short list for an invitational RFP.
 To disqualify potential contractors.
 You have a requirement for specialized knowledge and very few
   companies seem to possess the necessary skills or experience.
 You want to find other contractors with the “right stuff” and get
   them interested in the project.

Indicate whether the Expression of Interest document should or
may include each of the following:
 Financial and surety information.
 Approach to the project.
 Clearly state your priorities.
 Provide a solid plan with time lines.
 Clearly define the opportunity and the project.
 Team/corporate partners.
 Include a general outline of the evaluation criteria for the
   subsequent RFP selection, or for any intervening stages.
 Qualifications offered.
 Address potential questions and invite those who are interested
   to respond.
 Key personnel.
Indicate if the following statements are true or false in regards to
Request for Qualifications:
 A Request for Qualifications is useful when you anticipate a low
   level of interest, and need to attract many contractors so you
   can move quickly to a short list of qualified proponents for a full
   RFP process.
 A Request for Qualifications is a process that will enable you to
   pre-qualify proponents for a particular requirement.


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 A Request for Qualifications helps you avoid having to struggle
    with a large number of lengthy proposals.
   A Request for Qualifications saves unqualified potential bidders
    the expense of preparing a detailed proposal.

A request for Qualifications should:
 Not disclose your priorities.
 Suggest a submission length.
 Describe the project.
 Ask for the same basic contractor information as an Expression
   of Interest.
 Ask for a project plan with time lines.
 Identify the minimum requirement or pass/fail tests that each
   contractor must satisfy in order to be invited to participate in the
   RFP.
 Set out the criteria that would otherwise appear as “mandatory”
   in the RFP.

Sole sourcing is only allowed in the following situations:
 The contract is worth less than $10 000.
 The work is an emergency and a delay would be injurious to the
   public interest.
 There are too many qualified firms available and you need to
   pick one quickly.

Negotiated Contracts are:
 Tendered contracts.
 Used when there is more than one firm available to do the work
  and one of the factors for sole sourcing apply.
 Used when you want to increase the use of local labour.
 Used when you want to help a new company get started in
  business.
 Recommend to be used all the time.

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Tenders and proposals are generally requested in the following
ways:
 Invitational
 Negotiated
 Public

Public Tenders and RFPs are:
 Open to the public.
 Can be publicly advertised through Media advertising, public
  notices, and Internet web page tender information.
 Not advertised at all.
Invitational tenders and RFPs:
 Are calls in which only certain firms are invited to bid.
 The invited bidders are contacted through public advertising.
 Can be used if the value of the contract is less then $30 000.
 Should be sent to all qualified firms that are in a position to
    undertake the work.
 For low value contracts soliciting bids verbally is acceptable.
 Unrestricted invitational bids allow any other contractor or
    supplier, even if they didn‟t receive an invitation, to request the
    documents and submit a bid.
 Restricted invitational bids documents will be sent to other
    businesses upon request, but no bids will be accepted from
    them




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Exercise
Contract Regulations




Instructions:

1. Exercise to be completed in pairs.
2. Discuss with your partner and answer the following questions.
3. Be prepared to discuss your answers with the class.

Time: 20 minutes

Questions and Answers

1. Tender or bid mean the same thing?

2. Does a municipality have the authority to accept a late bid?

3. If you submit a bid on a project, are you allowed to go to the
tender opening?

4. Subcontract prices are announced at the tender opening?

5. A sole source contract enables you to hire someone you like
and trust?

6. Can a negotiated contract be entered into at any time, for any
type of project?

7. How does common law apply to a negotiated contract?


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8. If a tender requires a bid security, and you neglect to submit the
security, will your bid be rejected?

1-7. Bid and Contract Security
1-7.1 Bid Security

For most public sector construction contracts in the NWT, tender
and contract security is required on all contracts valued at $100,000
or more. Contracts under $100,000 generally do not require any
type of security. However, bid security may be required for projects
under $100,000 if the municipality feels it is necessary to ensure
that bidders will honour their bid. Private sector requirements vary
with each project; there are no policies.

When security is specified in the contract documents, the three
common types of security required are:

              Bid Security;
              Performance Security;
              Payment Security.

Bid security is usually used in construction contracts to certify that
the lowest acceptable bidder will:

              sign the contract documents;
              provide the required contract security within the time
               specified in the contract (usually 14 days after the
               bidder receives notice of the acceptance of the bid).

The following are guidelines used by the GNWT which you might
want to adapt for your community.

Bid security is usually required for:
           large construction contracts of $100,000 or more;
           tenders for services which are estimated at less than
               $100,000;

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             tenders for goods which are estimated at over
              $100,000.




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Forms of bid security:
          Security Deposit – minimum 5%;
          Bid Bond – minimum 10%;
          Performance bond --equal to 50% of contract value,
             guarantees completion of work;
          Labour and Material Payment Bond --equal to 50%
             of the contract value, guarantees payment of
             subcontractors/suppliers.

A security deposit is usually provided in an amount of at least 5% of
the tender. The deposit must be a certified cheque, a bank draft, a
Northern Store draft, a guarantee from the Contractor‟s bank, or
such other security as the municipality considers acceptable. The
security deposit must be payable to the Community.

It is often a practice of the government to keep the security deposit
of the successful bidder as damages if the bidder:

          Refuses to enter into a contract;
          Refuses or is unable to provide the required contract
           security;
          Withdraws the tender during the tender acceptance
           period and prior to the acceptance by the municipality.

A bid bond will be in a form approved by the Federal Treasury
Board and from a company whose bonds are acceptable to the
municipality. It is made payable to the municipality.

Once the bidder‟s tender is accepted, the surety (bonding
company) is liable under the bid bond. The surety will be liable if
the bidder defaults for any of the same reasons as arise with
security deposits:




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The GNWT‟s rule of thumb in terms of the surety being liable for
damages suffered is as follows:

          Liable for the difference between the defaulting bidder‟s
           tender and the next lowest bidder;
          Liable for the inconvenience and expense of calling new
           tenders;
          Liable for additional damages resulting from delays in
           the commencement of the work.

The maximum damages payable under the bid bond, regardless of
the actual loss, is the face value of the bond.

After the opening of tenders, all security deposits other than those
of the two low tenderers, may be returned to the respective bidders.
Bid bonds are normally only returned when so requested by the
contractor. Bid security from the two low tenders should be retained
by the municipality. Upon contract award the bid security of the
unsuccessful tenderer is returned to him. With respect to the
successful tenderer, the bid security is normally retained by the
municipality. If a security deposit was used as the bid security, this
is normally retained and is used as part of the contract security.




Remember Security deposits or bid bonds are returned after:

   the opening of the tenders; and
   upon award of the contract.




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1-7.2 Contract Security
The purpose of contract security is to guarantee that the contractor
will:
       perform and complete the work in accordance with the
         contract requirements;
       discharge his lawful obligations and satisfy lawful claims
         against him; (pay his bills);
       ensure that his subcontractors discharge their lawful
         obligations and satisfy lawful claims against them (pay
         their bills).

The contract security can be one of the following (these are GWNT
requirements):

          a performance bond and a labour and material payment
           bond each in an amount that is equal to not less than
           50% of the contract amount; or
          a security deposit in an amount that is equal to 10% of
           the contract amount (normally the 5% bid security plus
           an additional 5% security).

The bonds referred to above must usually be in a form as approved
by the Federal Treasury Board (Federal Contracts). Copies of
acceptable standard bonds are included in Appendix – Bid
Preparation .

A performance bond is a surety bond that is provided by the
Contractor to guarantee completion of the work, if the contractor is
in default under the contract and is so declared by the Owner, the
Surety is responsible to ensure that the work is completed to the
satisfaction of the Owner. The Surety is liable for and must pay all
the excess costs of completion of the work, up to the value of the
performance bond.

A labour and material payment bond is a surety bond that is
provided by the Contractor to guarantee payment of the lawful
accounts of certain persons, subcontractors or supplies (claimants)
that have performed work or supplied material (including
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equipment) to the project.




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A “claimant” is described in the bond as one having a direct
contract with the Contractor or any of his subcontractors for labour,
material or both that is used in the performance of the Contract.
Note: The C.C.D.C. Performance Bonds describe a claimant as
one having direct contact with the contractor only.)

All claimants must give written notice of their unpaid accounts to
the surety and the Contractor within specific time limits, otherwise
their claims will be disallowed under the terms of the bond. A notice
of claim for work performed or material supplied must be given
within 120 days after the date on which the claimant performed the
last of the work or supplied the last of the material for which his
claim is made. The surety is not liable for a sum greater than the
amount specified in the payment bond, and that amount will be
reduced by any payment(s) properly made under the bond.

When security deposits are given as the contract security, these
funds are used for the same purposes as the bonds. However, as
the total amount of the security required is only 10% of the contract
price, there may not be sufficient funds available to cover all the
claims.

The performance and payment bonds are kept by the owner and
are not returned to the contractor. If security deposits are given,
they are generally returned with the payment for Substantial
Completion.

The GNWT has procedures which explain what to do when a
supplier or subcontractor is not getting paid. These procedures
could be modified where appropriate to better suit a municipality
contracting application. They will be reviewed in detail in the
contract administration section.




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1-7.3 Bonding Not Insurance
Surety bonds, whether bid, performance or payment bonds, are not
insurance policies. A surety bond is a three party undertaking,
naming a Principal (the contractor), an Obligee (Municipality or
Owner) and a Surety (Bonding Company), under which the Surety
agrees to indemnify (hold harmless) the municipality against loss
arising from the failure of the Contractor to perform its obligations. If
the Surety loses money as a result of fulfilling its obligations under
the bond, it will look to the Contractor for reimbursement of such
loss. The Surety requires the Contractor to sign a personal
Indemnity Agreement whereby the Contractor agree to indemnify
the Surety against any loss it may suffer by reason of having issued
its bonds to the Contractor.

As an example, assume a contractor gave the municipality a
performance bond on a particular project. For some reason the
Contractor‟s unable to finish the contract; there is $5,000 worth of
work remaining. The Surety finishes the contract for the Contractor
and it costs them $10,000. Because of the indemnity agreement,
the Surety will try to get their $10,000 costs back from the
Contractor. They may try to seize their bank account, sell their
house or take their dog. It won‟t be a pleasant experience.




Where to find what you need to know
Resources
See Appendix – Gov. Policies, Regs, Acts
Websites: www.pws.gov.nt.ca - PW&S Guidelines
www.cca-acc.com/documents/documents.html Canadian
Construction Association




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Questions
Bid and Contract Securities




Instructions:

1. Exercise to be completed in pairs.
2. Discuss with your partner and answer the following questions.
3. Be prepared to discuss your answers with the class.

Time: 20 minutes

Questions and Answers

1. What is the purpose of bid security?

2. If a contractor cannot get bonding, what percentage of the
contract amount is required for bid security for GNWT contracts?

3. What is the purpose of contract security?

4. What is the main difference between bonding and insurance
policies?

5. If contract security is obtained from a bidder and the bidder has
already given a 5% security with his tender (he cannot get
bonding), how much more is he required to put up for the contract?

6. If a bidder cannot get bonding, what type of forms of cash
security could you accept?

7. With respect to a payment bond, what is the main difference
between a federal form of bond and a non-federal form?


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8. If a tender requires a bid security, and you neglect to submit the
security, your bid will likely be rejected?
1-8 Business Incentive Policy
Presenter‟s Handout


1-9 Other Considerations
1-9.1 FOB – “Free on Board”

What is FOB?

             Point where ownership changes;
             Transportation loss or damage implications;
             Affects ownership, loss and damage claims;
             Equalizes costs.

FOB Origin, Freight Collect
          Buyer owns goods in transit;
          Buyer bears and pays freight bills;
          Buyer files transportation claims.

FOB Origin, Freight Prepaid
          Buyer owns goods in transit;
          Buyer files transportation claims;
          Seller pays freight bills.

FOB Destination, Freight Collect
         Seller owns goods in transit;
         Buyer pays freight bills;
         Seller files transportation claims.

FOB Destination, Freight Prepaid
         Seller owns goods in transit;
         Seller files transportation claims;
         Seller pays freight bills.
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Test (Open Book)
Contract Regulations




Instruction:

1. To be completed on one‟s own.

2. Be prepared to discuss your answers with the class.

Time: 15 minutes

1. What should you announce at a tender opening?
2. What should you announce at a proposal opening?
3. What parameters should be used to justify sole source
   contracts?
4. Give an example of what would be an acceptable reason for
   sole source contracting a service or purchase of goods in your
   community?
5. What parameters should be used to justify negotiated
   contracts?
6. Give an example of what would be an acceptable reason for
   negotiating contracts for a service or goods in your community?
7. Should communities accept late tenders if they give a
   submission time deadline? Why?
8. What information is required in your tender advertisements?
9. What is the difference between an invitational tender and a
   public tender?




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Section 2
The Tendering Process

2-1 Overview
Project Management is a process of taking an idea and turning it
into a completed facility or structure. The project management
process is typically comprised of six stages as noted below:

      Planning
      Predesign
      Design
      Tendering
      Construction
      Warranty

This section deals with the tendering stage. The tendering stage
usually starts once the design phase has been completed and ends
with the award of the contract. Most governments have developed
tendering practices and procedures which are based on
construction industry standards, common sense and common law.
This course will look at the tendering procedures used by the
GNWT as they have all of the checks and balances required to
meet all of your legal obligations while securing the best possible
value for the dollar.

The GNWT procedures are used for the most part by the Housing
Corporation, the Department of Transportation and the Department
of Public Works and Services. The private sector may do their
tendering in a variety of ways and there are few rules or procedures
which they must follow. In general, however, they will follow a
process similar to those used by most government agencies.

Government departments also have directives and regulations
which must be followed when tendering projects. These directives
and regulations were discussed in the previous section and
elements will be covered in this section as well.
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It is recommended that you follow the GNWT policies, regulations
and directives wherever possible, as the government approach is
based on common law principles. Of course, it is always prudent to
obtain legal counsel when you are not absolutely certain about any
elements of the contract process.




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2-2 Objectives
This section covers the preparation of tender documents.

By the time you have completed this section, you will be able to:

             Demonstrate a thorough understanding of the
              tendering policies and procedures used by the
              GNWT.
             Prepare a request for bids.
             Accept and evaluate bids.
             Solve typical tendering problems which arise.

This section covers the following skills for the Occupation of Senior
Administrative Officer as identified in the DACUM Chart:
   - Preparing tender documents.
   - Negotiating and monitoring service contracts.




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Student Notes:

Reading for understanding is a huge part of this manual. As with
all the reading, students are requested to read the materials
actively, according to the instructions given in the Student Skills
section of this manual. Remember the key elements of the process:

   Preview, taking time to understand the structure or outline of
    what you're reading
   Come up with questions that you want answered by the text
   Practice full immersion reading-if you notice your attention
    wandering, gently bring it back to the task in hand
   Deface your manual by underlining and writing comments and
    questions as you read
    Discover answers to your questions-creating images of yourself
    as a detective, uncovering clues to a mystery
   Recite what you have read and talk about it with others.
    Remember you teach best that which you need to learn, so try
    teaching it to someone else
   Review and review again, making it a habit to reflect on the
    material you are learning even in your walks to and from the
    classroom
   Take time to play with the new ideas you're learning, imagining
    scenarios in your mind.

Assignment 1.


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Being mindful of the active reading process, actively read this
whole module and complete the following:



Ten questions I have as a result of reading the Tendering
Section and want to get answered are:

1.

2.


3.


4.


5

6

7


8

9

10

Ongoing Assignment
As you further your understanding by re-reading the materials, visit
the suggested websites, discussing your questions with resource
people etc. ensure that you get the answers to these questions and
persist until you do. Write the answers in the margins beside the
question so that you know you have completed the task.

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It is likely that you will discover more questions as you work with
the materials. Take the time to note these questions as they come
up, and make a point of getting the questions answered by
accessing written and human resources.




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2-3 Tendering Process
2-3.1 Tendering Overview

General goals and objectives which ensure “best practice” policies
for purchasing goods or services are as follows:

             to complete the contract for the best value, on time
              and on budget;
             to ensure that fairness is shown to all interested
              bidders; and
             to support the involvement of Northern and Local
              workers and businesses.

The tendering process starts when the plans and specifications
(referred to as the tender documents) have been finished and the
tendering process is complete when a contract has been awarded.
The tender call is the first stage of the tendering process and
includes all activities from the preparation of the tender documents
up to the receipt of tenders from the contractors.

The tender review covers the time from receipt of tenders to the
contract award. The tender review process includes the detailed
evaluation and assessment of the submitted tenders. The contract
award is the final phase of the tendering process.

When tendering, be certain to ensure equal opportunity for all
bidders.
          put ad in newspapers;
          use a departmental source list to obtain names of
            qualified contractors;
          use standing offers (and rotate the business
            equitably).

Designate one official spokesperson to field bidders' questions and
ensure new/additional important information is communicated to all
bidders.

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Give the same information to all interested bidders.




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Energizer – Match the term to the definition




Instructions:

1. Exercise to be completed in pairs.
2. Discuss with your partner and answer the following questions.
3. Be prepared to discuss your answers with the class.

Time: 10 minutes

A Contractor’s Dictionary

Definitions                                         Match

Contractor                                           ____
Bid Opening                                          ____
Bid                                                  ____
Low Bidder                                           ____
Engineer‟s Estimate                                  ____
Auditor                                              ____
Lawyer                                               ____

a) People who go in after the war is lost and bayonet the wounded.
b) A wild guess carried out to two decimal places.
c) People who go in after the auditors and strip the bodies.
d) A gambler who never gets to shuffle, cut or deal.
e) A poker game in which the losing hand wins.
f) A contactor who is wondering what he/she left out.
g) The cost of construction in Heaven.



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2-3.2 Authority to Tender
Undertaking the tender process introduces legal obligations upon
the municipality. Once tendered, contracts are formed between the
municipality and the bidders; therefore, certain approvals and
documents must be used in the process.



Remember:

   Issuing tender documents triggers legal obligations




Assignment:




Do you have a community by-law or policy which deals with
contracts?

If not, identify what you should include in a bylaw or policy. Visit
the City of Yellowknife‟s website at www.city.yellowknife.nt.ca/ to
see their bylaws.

Visit the PW&S website www.pws.gov.nt.ca/ to see a sample of a
policy.




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Sample Policy

Handout




   Community by-laws ensure:
       money available to proceed with the contract;
       checks and balances are in place in the process; and
       there is a legal authority to commit the community.


2-4 The Tender Call and Tender Opening
The tender call includes four stages:

   Preparation of the Tender Documents
   Request for Tenders
   Amendments to Request for Tenders (Addenda)
   Receipt of Tenders

Tenders must be called for every contract except when Sole
Sourcing or Negotiating Contracts as discussed in the previous
section.

Tenders must be called by a method which will provide all qualified
firms with an equal opportunity to obtain municipal business.
Depending on the size of the project, the Tender Call period usually
lasts approximately three weeks.




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2-4.1 How Much Time To Allow Bidders to Submit?
The time frame to allow for submission of bids will depend on:

   The process you select
       Invitational (quick turn around)
       Advertised (14 days or more)
   Types and complexity of the tender
       Goods, services, construction, consulting, etc.

The community should ensure that there is sufficient time between
issuing the tender and the closing date, such that potential bidders
may obtain tender documents, prepare and submit bids. As noted
above, allowing a minimum of two weeks to three weeks is
recommended for this purpose.




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2-4.2 Contents of Tender Documents
The tender documents include drawings and specifications. The
specifications include the Instructions to Tenders, the Tender, the
General Conditions and Technical Conditions. A specification will
also include Supplementary General Conditions also referred to as
Special Conditions in addition to the standard General Conditions.




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Exercise
Tender Submission




Instructions

1. Exercise to be completed in groups of three or four.
2. Analyze the information given and fill out the attached tender
form.
3. Be prepared to discuss your answers with the class.

Time: 15 minutes

Information

In this exercise you are going to approach a bid from the side of the
contractor.

You own a construction company named ABC Construction Ltd.
Your business address is P.O. Box 22, Fort Simpson, NT X0E 2J8

You have received one addendum on this tender.

The project title is “Fort Simpson Garage Retrofit”. The owner is
the Village of Fort Simpson.

You will do all the work with your own forces except for the
electrical and mechanical work. You have received the following
prices from subcontractors for this work:




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Electrical:   Bill‟s Electric - southern firm           $9,000
              Smith‟s Electric – northern firm          $9,100

Mechanical: Northern Plumbing – northern firm           $15,000

You have estimated your own costs to be $50,000. Your total price
will be your costs plus electrical plus mechanical.

You estimate it will take you 6 weeks to do the work.

Your price will increase by $5,000 if you are required to replace the
furnace; this is an optional price requested by the Village.

NOTE: You now have the information needed to complete the
tender form. Complete your tender and put it in the attached
envelope.

After you submitted your tender and ½ hour before the tender
closing, Northern Plumbing increased their price by $1,000. What
should you do?

Subcontract prices are announced at the tender opening?

After you submitted your tender and ½ hour before the tender
closing, Northern Plumbing increased their price by $1,000. What
should you do?

Use the tender forms in Appendix – Tender Forms and Templates




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2-4.2 Types of Tenders
As discussed in the previous section, tenders are generally
requested in one of two ways:

      Public
      Invitational

Exceptions are sole source and negotiated contracts which are also
covered in the previous section.


2-4.3 Describing the Requirement
Instructions to bidders are the rules that govern the tender process.

Key clauses:

   Closing time and date…
   Late bids not accepted…
   Lowest or any response not necessarily accepted…
   Verbal responses not to be relied upon…
   Conditions for accepting fax bids or amendments


2-4.4 Describing the Work
Be clear in what you want or need.

A good understanding of the requirements for the contract and
other factors relating to the contract is essential in order to:

   develop a clear and complete statement of work or
    specifications;
   determine the life-cycle costs of the contract (avoid
    unnecessary contract amendments);
   identify and secure the required approval(s);


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   determine the time required to have a contract (avoid undue
    expediency and pressures for sole sourcing or higher
    contractor fees);
   establish the proper approval and payment procedures for
    efficient contract management (avoid risks and liabilities to the
    government);
   select a qualified contractor at a reasonable rate;
   pinpoint the skills, experiences and support required from the
    contractor(s);
   secure the required funding, contract administration and senior
    management endorsements.

Describe the work:

      Clearly
      Concisely
      Completely
      Not too restrictively


2-4.5 Types of Specifications
      Performance – functions to be performed
      Design – drawings and specifications
      Functional – intended use or application


2-4.6 Tender Deposit/Planholder’s Log
A tender deposit is a deposit made by the contractor in order to
obtain a set of tender documents. It must not be confused with bid
security. Most contracting authorities other than the GNWT, require
a refundable deposit of $50 to $500 when supplying tender
documents to contractors. This ensures that the documents will be
returned to the owner (community) by the unsuccessful bidders.
The returned documents can be used for the actual construction.
In the GNWT, a “non-refundable” deposit of $50 is usually required
to get a set of tender documents for projects over $100,000. The
intent of the deposit is to limit the number of documents being

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requested by the contractors to those that are actually needed.
The cost of printing documents is quite high and some control
measures are need to ensure these documents are not wasted.
For projects under $100,000 the documents are usually free.




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A log or listing of all planholders is kept for each tender. The
Planholders Log is usually classified as public information and is
available to the public any time prior to or after tender closings.
The information including bidder‟s name and address may be
provided to contractors over the telephone or may be sent by
facsimile to contractors requesting the information. This document
is a valuable piece of information for bidders. From this listing you
can usually determine which general and subtrade contractors are
interested in bidding the project.


2-4.7 Amendments to Request for Tenders (Addenda)
An addendum is any change or clarification to the tender
documents issued by the Community during the tender call period.
In order that all contractors bid on the same tender package,
addenda are used to ensure that all bidders receive written
notification of changes or clarifications. A contractor MUST indicate
on the Tender Form, that the submitted bid reflects ALL Addenda.
A price which excludes any issued Addendum will not be equivalent
to bid submissions from other contractors and may be disqualified.
The planholders log is used as the source document when issuing
addenda.

All prospective bidders require information
       Written tender addendum
       Describe changes in requirements


2-4.8 Standardized Tender Documents.
It is recommended that you use standardized tender and contract
forms. These can be modified from the GNWT forms to suit your
municipality‟s needs.

Standard terms and conditions.


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Exercise
Tender Call Preparation




Instruction

1      Read the information given below. The intent is to prepare a
       competitive tender for the purchase or lease of a fax
       machine.
2.     This exercise will be done in groups. Choose a
       spokesperson and prepare a presentation on a flip chart.

Time: 20 minutes

Background

The Community‟s present fax machine is 5 years old and is
continually breaking down. You have been asked to purchase or
lease a new one. You must now prepare a tender package. Some
of the items you should consider include price, delivery time, terms
of payment, northern preference, warranty and maintenance.
Options to consider could include memory, delayed transmission,
capability, paper size, quality of print, and power requirements.

Task

Working with your group, list the items you would include in your
tender package to perspective bidders.




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Where to find what you need to know
Resources
See Appendix - Gov. Policies, Regs, Acts.
Appendix – Tender Forms and Templates
Websites: www.pws.gov.nt.ca/ PW&S Forms



2-4.9 Receiving and Opening of Tenders
You cannot accept a bid after closing time. Go by an official clock!

Establish clear rules on facsimile bids. If they are not allowed, DO
NOT accept them.

Provide basic security.
 Request bids in a sealed envelope. Ensure confidentiality of
   bid information.
 Open the bids in public forum

Tenders are opened as soon as practical after the closing time.
Public and invitational tenders are opened in public. Anyone may
attend the opening.

The Tender Opening Committee should consist of at least two
members:

      Chairperson
      Secretary

The committee will open all tenders that have been received on
time. Any late tenders should be returned unopened to the
respective bidder.




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The Chairperson usually announces the official name of the project
for which he/she is about to open tenders. Upon opening each
tender envelope, the Chairperson should announce:

   The name of the tenderer;
   Whether or not security, if required, was furnished with the
    tender.
   The amount of the tender.
   Any amendment(s) to the amount (total) of the tender.

The Secretary then records the above information on a Tender
Register. Every tender should be initialized by each member of
the Tender Opening Committee.

Don‟t evaluate the tenders in front of the bidders.




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Exercise
Receiving Tenders




Instructions:

1. Break into groups
2. Discuss case in group
3. Be prepared to discuss with class

Time: 15 minutes

Questions
You had called tenders for the purchase of a surplus town truck.
Sealed bids were required but according to the tender call,
facsimile bids were not acceptable. At 12:45 pm, two hours prior to
the tender closing, Taylor‟s Trucking, one of the contractors
bidding, called up the town office. Because it was still lunchtime
only a receptionist was in the office. Although the receptionist was a
junior employee, she had spent many years working for the town
although never in procurement. The contractor asked the
receptionist if a fax tender would be acceptable and she said, “Of
course we will accept a fax.”
The contractor was a local contractor but was going to be busy and
thought that by faxing the tender he could save some time. The fax
was sent and received at about 12:55. At 3:00 the bids were
opened and Taylor‟s Trucking was in attendance at the opening. He
was shocked when his bid was not opened. When you were asked
what had happened to his bid, you said you had never received it.
You also knew that you had looked at the three other envelopes at
about 2:00 pm and knew that Taylor‟s Trucking had not submitted.

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At 4:00 pm you were sitting at the front desk when you came
across the fax from Taylor‟s. His bid was almost double the price
offered by the other bidders. The receptionist had received and
stamped it but forgotten it under a pile of papers.


What will you do?




What will you tell Taylor?




Why?




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Test (Open Book)
Tender Call and Opening




Instruction:

1. Exercise to be completed in pairs.
2. Discuss with your partner and answer the following questions.
3. Be prepared to discuss your answers with the class.

Time: 10 minutes

1. What should you announce at a tender opening?

2. Should communities accept late tenders if they give a
submission time deadline? Why?

3. To whom should you normally award your contracts?

4. What is a “planholder‟s log”? Should this document be
considered confidential?

5. What is an addenda? When are they issued?

6. Name two statute laws which could affect the administration of
your contracts.




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Exercise
Evaluating Tenders




Instructions:

1. Break into groups
2. Discuss case in group
3. Be prepared to discuss with class

Time: 15 minutes

Background
A contractor submitted the low price for a community project: the
prices were as follows:

Northern Contractors             $80,000
Bill‟s Contracting               $95,000
ABC Construction                 $93,000
Ed‟s Builders                    $98,000
Novel Construction               $50,000

What are the steps you should take?


What if Novel made a mistake in calculating their costs? What
should you do?




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Exercise
Evaluating Tenders




Instructions:

1. Break into pairs
2. Discuss with your partner
3. Be prepared to discuss with class

Time: 10 minutes

A contractor submits a bid. His full-time bookkeeper signed a
tender for him but was not authorized as having signing authority
for the company. The tender had a substantial error on it. The
contractor advises you of the mistake and wants to withdraw.


What should you do?




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2-5 Evaluation
2-5.1 Tender Review

The prime purpose of the tender review is to determine the lowest
responsive tender submitted by a responsible contractor. The
review may also disclose mistakes in the tenders.

The Tender Review consists of three principal functions:

       Administrative Review- Is the tender responsive?
       Technical Review - Is the tender responsive?
       Contractor Evaluation- Is the contractor responsible?

Responsive Tender

Compliance/responsive
     Meets all tender requirements?
     Is the bid qualified?
     Does it meet your tender specifications?

A responsive tender is a tender that follows all of the requirements
specified in the tender invitation. If a requirement is not followed the
tender is non-responsive. If the tender documents are changed by
the contractor or if the bid is qualified in some way, the bid is non-
responsive. For example, if a contractor changes the requirement
„Supply and install 16 metal windows” to “Supply and install 16
wood windows” the bid is non-responsive.

If a tender is non-responsive this may be grounds to disqualify the
tender, however this is not so in every case. For example, assume
a tender requests an optional price for wood windows in place of
metal windows, and the contractor does not provide a price for this
option. The tender is non-responsive but would not normally be
disqualified.




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As another example, let us assume the Community tendered a
supply, ship and erect contract for the construction of a duplex in
Norman Wells. In other words, the contract would require the
contractor to supply the materials, ship them to Norman Wells and
then build the duplex. A bidder then decides to submit a bid for the
labour portion only; he will not supply the materials. This bid would
be classified as non-responsive and would be disqualified. The
bidder is offering to do something other than what was requested.
His bid does not meet the requirements of the tender.

Responsible

Responsible refers to a bid from a responsible contractor; it refers
to the capability of the contractor to do the work.


2-5.2 Administrative Review
The Administrative review of tenders will determine whether the bid
is responsive, and if it is not responsive, whether the bid should be
disqualified. The following four common situations may cause a
tender to be non responsive and therefore subject to
disqualification.

   No bid security or the wrong type of security, has been
    provided with the tender.
   The tender is not on the prescribed document provided by the
    community.
   The tender is not complete in all aspects.
   The tender is qualified (conditional) in some manner or form.
    (The example of the wood windows).




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2-5.3 Technical Review
The technical review will determine whether the price submitted by
the apparent low bidder is fair and reasonable. The technical review
may reveal inconsistencies between the Community estimate and
the tenders such as:

   the amount of the lowest tender differs significantly from the
    tender estimate prepared by the community; i.e., the estimate is
    $2 million and the lowest bid is $3 million;
   the amount of the tender, although consistent with the estimate,
    differs significantly from the other offers received; i.e., all
    tenders are around $3 million except the lowest tender which is
    at $2 million.

In these cases the Community should re-examine the estimate to
confirm its accuracy. The following discussion provides the
procedures to be followed in the case where the tenders are either
too high or too low.


2-5.4 Tender Too Low
When the lowest tender is obviously inadequate, and the
Community is of the opinion that the bidder does not have the
necessary resources to complete the work, the bidder is made fully
aware of the situation and is requested to review his tender. The
Community may suggest that the contractor review this estimate in
detail. Following this review there are usually two possible
outcomes:

   After a careful review, if the bidder agrees that his tendered
    price is unrealistic (a mistake has been made) and requests
    that his tender be withdrawn, the contractor is usually permitted
    to withdraw his tender without penalty.
   After a careful review, if the bidder insists that his tendered
    price is correct and is in strict accordance with the tender
    documents, the Community should request confirmation of the

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   tender price in writing and should award the contract
   accordingly. This assumes the bidder is responsible.




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Under no circumstances should the bidder be permitted to
increase the offer originally submitted.



2-5.5 Tender Too High
When the lowest tender is obviously excessive, and a review of the
scope of work required by the contract confirms that the Community
estimate appears to be correct, the lowest bidder should be
requested to review his estimate. The review may be accomplished
by having the bidder submit his estimate for review by the
Community. This review should result in either:

Acceptance of a reduced offer based on minor changes to the
scope of work - This will result from negotiations with the low bidder
to reduce the bid amount based on minor changes in the scope of
work.

Reinviting from the three low bidders - This would occur if the
Community is unable to secure a satisfactory reduction in price
from the low bidder in relation to the proposed minor changes in the
scope of work or when the scope has been reduced in a material
manner (greater than 15%).


Recalling Public Tenders - This course of action would be
selected where the changes in the scope of work assume major
proportions and substantiality change the character of the work.




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2-5.6 Contractor Evaluation
The next step in the process is to determine which contractors are
responsible; that is, capable in all respects to perform the contract.
The following factors are considered in measuring the resources
and competence of contractors:

   Financial resources; the Community may ask for a reference
    from the Contractor‟s banker.
   Organization, plant and equipment; are they sufficient?
   Personnel - managerial and technical; are they qualified?
   Experience on similar types of contracts.


2-5.7 Approval Process
Once the tender review process has been completed, the
Community should be in the position to recommend award of the
contract to the lowest responsible contractor who has submitted a
responsive tender. The Contractor is notified of the award normally
by facsimile with the original letter sent by mail. A copy of a letter of
Acceptance is included in Appendix – Tender Forms and
Templates. The Senior Administrative Officer (SAO) or his/her
approved delegate should sign the letters of acceptance.

After-the-fact contracting ratification ("retroactive contracting")

Managers must plan for the time required to process and approve
contracts. If they verbally command service before the contract is
awarded, they face several problems:

   They have no written record of any quality control and approval
    mechanisms to which both parties have agreed.

   In many cases, they must simply pay the contract price as they
    do not have contract terms and conditions to enforce.



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Under Common Law, verbal agreement constitutes a legal and
binding contract.




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Verbal commitment before bids opening

According to the principles of British Common Law, a verbal
agreement or commitment is legal and binding and is considered to
be a valid contract. So managers may not indicate that they will
award the contract to any given company. They and/or the
community government could be liable for incurred expenses or
"business" damages.

Change Orders/Amendments

The Contracting Regulations allow for amendments. However,
contracts should only be amended to:

-     reflect unforeseen changes in scope or related conditions;
-     facilitate attainment of the primary objective of the contract.

Contracts should not be amended to:
-     pay for contractor's mistakes;
-     correct poorly defined specifications;
-     correct unsecured commitment to specifications;
-     accommodate contract administration shortfalls.


2-5.8 Contractor Approval
The execution of a document refers to the Contractor signing the
Contract. The execution of the contract is important and the rules
for signature depend on the type of company that is being awarded
the contract:

   An Incorporated Business, Society or Cooperative Association
   A Sole Proprietorship, Partnership or Joint Venture
   A Band Council




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For an Incorporated Business. Society and Co-operative
Association the document must be sealed with the corporate seal
and signed by a signing officer(s) of the company, with the position
of that signing officer indicated below the signature. A sealed
contract does not need to be witnessed although it normally will be.
The person normally signing should be the President or Secretary.

For a Sole Proprietorship and Partnership, the document must
be signed by the signing officer with the position of that signing
officer indicated below the signature. The person signing should be
the President/Owner or a Partner. The signature must be
witnessed. A contract with a partnership does not need to include
every partner signature.

For a Band Council, the document must be signed by the Chief
and the Band Councilors. In addition, a document, which may be
called a resolution, authorizing the Band Council to enter into a
particular agreement should be attached to the agreement. Such a
document may be in a form similar to the following:


A meeting of the Band Council was duly convened on the ___ day
of ______, 20 ___ for the purpose of entering into an agreement
with the Government of the Northwest Territories to (state purpose
of the agreement).

A majority of the Band Councilors by vote of ___ consented to enter
into the said agreement.

The Band Councilors duly elected in accordance with the
constitution of the Band as provided for by the Indian Act of
Canada, are: (list of the Band Councilor). (Provide sufficient space
for signatures of Chief and Band Councilors.)


There may be instances where there is no council but only a Chief
of the Band. In this instance the Chief would be the appropriate
party to sign the agreement.

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Exercises (Open Book)
Tender Review




Instructions

1.    Exercise to be completed on your own.
2.    Be prepared to share your answers with the class.

Time: 5 minutes

Questions

1.    Define “Responsive” and “Responsible” in your own words.

2.    What factors should be considered when evaluating a
      contractor to determine if they are responsible?

3.    Who has the authority to approve contracts in your
      community? What are the limits?

4.    What would you do with a tender which was not signed or
      sealed properly?




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Exercise
Tender Calls and Tender Review




Instructions:

1. Break into pairs
2. Discuss with your partner
3. Be prepared to discuss with class

Time: 10 minutes

Background
Tenders were called for the provision of an emergency generator in
a building in Fort Liard. The estimated cost of the supply and
installation of the unit was $135,000. The municipality invited bids
from two companies, Alpha Company and Beta Enterprises.
Tenders closed on Thursday at 3:00 pm and both bidders
responded, as follows:
Alpha Company       $128,540
Beta Enterprises    $132,975
After closing the tenders, a complaint was received on behalf of
Charlie Corp. alleging that Charlie Corp. was not asked to bid.
Town staff agreed this was the case and recognized that a fourth
company, Delta Group, also could have bid. Under pressure from
Charlie Corp, the municipality decided to re-tender.
The tender call was revised to include additional piping, valves and
connections worth an estimated $20,000. Thus the estimate on the
second package of work was $155,000. Bids were subsequently
received from all four bidders as follows:

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Delta Group          $146,500
Alpha Company        $148,540
Beta Enterprises     $150,975
Charlie Corp.        $155,000
All four companies were BIP approved and all four companies had
identical Local and northern content. The low bidder was Delta
Group and therefore the contract was awarded to them.
Alpha Company complained to the Mayor, and demanded that the
contract be awarded to them on the basis of the initial tender call.
Alpha complained that if they were not awarded the contract they
would seek legal advice.
Fort Liard awarded the contract to Delta Group.
Questions
1. Was the public contract authority permitted to only invite tenders
from Alpha and Beta in the first tender invitation? Was this an
appropriate approach to follow?



2. Was the public contract authority required to re-tender?



3. Was the public contract authority permitted to cancel the first
tender invitation?


4. Who should the contract be awarded to?



5. What course of action might Alpha‟s lawyer suggest they take?
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Exercise
Tender Problems




Instructions
1. Exercise to be completed in groups of three or four.
2. Discuss the options as a group and be prepared to share your
answers with the class.

Time: 30 minutes

Backgound
Due to increased economic opportunities your community is facing
a long term housing shortage. Therefore the town council is looking
at developing land as quickly as possible. Currently the council is
reviewing a plan to create 35 building lots.

Your Task
You are the municipality's director of operations. Of the eight
council members, seven are newly elected. The council has asked
you to make a presentation to explain their part in addressing the
housing shortage. They want a very clear and straight forward
presentation outlining the proposal and tendering process so that
they can provide serviced land at the right place, the right time and
at the lowest possible cost.

Prepare the presentation outlining the steps you recommend
council takes to ensure this project is a success. Use the
information in your student manual including the Councilor‟s
Handbook to Municipal Land Development, and include any GNWT
Directives you think should guide the process.



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Include diagrams and flow charts if you think that it will help further
understanding for the council.




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Exercise – Role Play
Establishing and Applying Selection Criteria when Awarding
Contracts




Time: 1 hour

Instructions

Part I (10 minutes)
Break into groups of 4.

This exercise involves role playing so each member of the group
must be “cast” as one of the following characters: D. Lewis, a
purchasing officer for the Town of Inuvik (this character appears in
three separate “plays”); J. Henderson, a northern supplier; S.
Bolton, another northern supplier: L. Marshall, an Edmonton-based
supplier.

Read the common background information and then your particular
“character‟s” information. Prepare your strategy.

Part II (20 minutes)
Allow each of the suppliers to meet with D. Lewis for 5 minutes and
attempt to get the contract.

When not meeting with D. Lewis the other group members should
be developing a selection criteria list the contracting authority
should consider in order to choose a supplier.




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Part III (15 minutes)
Arrive at a group consensus for your selection criteria for this
contract. Then identify the steps you should be taking for
purchasing the vehicle. Provide justification.

Part IV (15 minutes)
The workshop facilitator will lead all workshop participants in a
discussion of the selection criteria and the steps to purchasing the
vehicle.




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Section 3
Proposals

3-1 Overview
Requests for Proposals are not usually used to obtain goods.
Proposals are a method of obtaining services where more than just
the cost factor must be considered.

Proposals would be used to hire an architect, engineer, lawyer or
doctor or consultant. They are also used to procure services for
operating and maintaining airports, group homes, or leasing
apartments. Design build contracts could also be formed by way of
a proposal call. Where possible and practical, contracts should be
formed as a result of a tender and not from a proposal call. They
only variation in the tenders is usually the price. With proposals
there may be many variations. Tenders are relatively easy to
evaluate when compared to proposals, and much easier to justify.

However, when you wish to obtain the expertise of the marketplace,
proposals should be used. With proposals you not only compare
prices, you also look at the experience and knowledge of the
proponents to ensure you are getting the best value and approach
to delivering the service you require.

In general terms proposals are specialized, technical business
documents that offer persuasive solutions to problems. It has been
said

"Perhaps the best example of just how challenging proposal writing
can be involves proposal writing for the …government where
federal tax dollars are involved" (Finkelstein, 2000). The same
writer also stated "Writing proposals for the government is truly an
exacting and unforgiving activity. The content, layout and
procedures are precisely spelled out, and evaluation of proposals is
rigorous and comprehensive". Selection panels composed of

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technical, management, human resource, financial and other
experts evaluate each proposal. They aggressively seek out all
discrepancies between tasks and skills, skills and costs, and so
on… “They score each proposal based on the effectiveness of the
solution, the risks involved, the costs in both time and dollars, and
the capabilities and past performance of the proposing company.
The goal of the source selection process is to select the proposal
that offers the best value to the government."




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3-2 Objectives

When you have completed this module, you should be able to:
      1. Define when to use a Request for Proposals
      2. Describe and understand the essential elements of an
         RFP
      3. Write RFP‟s
      4. Evaluate RFP's
      5. Describe, identify and apply an evaluation process for
         proposal submissions
      6. Be confident about where to find resource information
         and people with whom you can consult for discussion,
         clarification and guidance when following through on the
         RFP process.
This module relates to the following skills from the Dacum Chart for
Senior Administrative Officers:
      - developing the skill, knowledge and abilities to perform
      contract services as these attributes relate to Requests for
      Proposals and Proposal Evaluation




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Student Notes:

Reading for understanding is a huge part of this manual. As with
all the reading, students are requested to read the materials
actively, according to the instructions given in the Student Skills
section of this manual. Remember the key elements of the process:

   Preview, taking time to understand the structure or outline of
    what you're reading
   Come up with questions that you want answered by the text
   Practice full immersion reading-if you notice your attention
    wandering, gently bring it back to the task in hand
   Deface your manual by underlining and writing comments and
    questions as you read
    Discover answers to your questions-creating images of yourself
    as a detective, uncovering clues to a mystery
   Recite what you have read and talk about it with others.
    Remember you teach best that which you need to learn, so try
    teaching it to someone else
   Review and review again, making it a habit to reflect on the
    material you are learning even in your walks to and from the
    classroom
   Take time to play with the new ideas you're learning, imagining
    scenarios in your mind.

Assignment 1.
Being mindful of the active reading process, actively read this
whole module and complete the following:
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Ten questions I have as a result of reading the Proposal
Section and want to get answered are:

1.

2.


3.


4.


5

6

7


8

9

10

Ongoing Assignment
As you further your understanding by re-reading the materials, visit
the suggested websites, discussing your questions with resource
people etc. ensure that you get the answers to these questions and
persist until you do. Write the answers in the margins beside the
question so that you know you have completed the task.

It is likely that you will discover more questions as you work with
the materials. Take the time to note these questions as they come
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up, and make a point of getting the questions answered by
accessing written and human resources.




3-3 Proposal Process

3-3.1 Introduction
Proposals are a method of obtaining services where more than just
the cost factor must be considered. As an example, let us assume
you need a Consultant to provide you with a design of a new
community office building. When reviewing proposals received
from different design firms you will want to evaluate:

   Who are the people that are going to do the design and what is
    their experience in designing buildings like this?
   How long will the project take to design?
   How much money will the design cost?
   How will the designers proceed with the work; what methods
    will they use to ensure the community gets what it wants?
   Who have these designers done work for in the past? What is
    their track record?

You can see, cost is only one of the criteria to evaluate. Just as
important, and perhaps more important, are the other criteria.
When you hire a doctor, lawyer, architect or engineer, you may not
want the cheapest one.




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Exercise




Time: 5 minutes

Check the main elements used in scoring proposals, according to
Finkelstein:
 They aggressively seek out all discrepancies between tasks and
   skills, skills and costs.
 They score each proposal based on the effectiveness of the
   solution, the risks involved, the costs in both time and dollars,
   and the capabilities and past performance of the proposing
   company.
 They score each proposal based on the effectiveness of both
   time and dollars.


Number the following in the order for a Municipal Officers to
get the ball rolling to receive proposed solutions to the
problems that your organization wants to solve by contracting
out?

_____        A representative of the municipality issues an RFP
             (Request for Proposals).
_____        The RFP includes specific deadlines and delivery
             requirements and indicates that the Proposal must
             precisely meet all format and content specifications
_____        Conduct preliminary research and discussion to
             evaluate the objectives of the project.



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_____        The RFP precisely spells out the problem that needs
             to be solved and the parameters and constraints on
             any proposed solution.

3-3.2 Requests for Proposals (RFPS)
All potential purchasers should review Section 808-1, of the
Financial Administration Manual (FAM), which provides government
directives and guidelines on the proposal process. Proposals are
different from tenders. Unlike a tender, an RFP is not an offer, but
only contemplates an offer. Unlike the receipt of a tender, the
receipt of a proposal is not an acceptance, and therefore does not
result in a contract.

An RFP is used when the purchaser is looking for the best value
solution to resolve a problem or to deliver a good or service, but is
not exactly sure how to achieve it. Whereas a tender is used when
the purchaser knows exactly what good or service they want and is
looking for the best price to deliver it.

Question




When do you use a proposal?
_____________________________________________________
_____________________________________________________
_____________________________________________________
___________________________________________________

Provide an example of a proposal:



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3-4 Preparing a Request For Proposals
3-4.1 What to Include

It is recommended that your RFP document contain, at a minimum,
three distinct sections:

   Instructions to Proponents-those people submitting the proposal
   Terms of Reference
   Evaluation Criteria

Your RFP should also make a statement to eliminate lobbying such
as "Any lobbying of members of Town or Band Council, Board
Members or Town employees by the proponent may result in
immediate elimination of the proposal submission."

A municipality should establish rules to maintain confidentiality
whether using the proposal request or tender invitation method to
enter into contracts.

An RFP must be carefully drafted to ensure that it is, in fact, a
proposal and cannot be interpreted as a tender. Simply calling a
document a proposal does not automatically make it a proposal.

Public Works and Services, with the assistance of Legal Counsel
with the Department of Justice, has developed a standard template
document that provides a unified structure for the development of
Requests for Proposals which can be seen further on in this
section.


Where to find what you need to know
Resources:
Appendix – RFP
Websites: Template is available in Microsoft Word 97 format at
http://www.gov.nt.ca/PWS/cforms1.htm.


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3-4.2 What Not to Include

To clearly establish that a proposal is intended to be a proposal, not
to be confused with a tender, the words „tender‟ or „bid‟ should not
be used at all in the proposal documents.


Question




The three distinct sections that an RFP must include at a very
minimum are:
1.           ___________________________________________
             ________________
2.           ___________________________________________
             ________________
3.           ___________________________________________
             ________________

Can you identify what is required in each of the three RFP
sections?




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3-5 Developing Your RFP
Since a proposal is one proponent‟s unique solution to a need or
problem, the terms of a proposal cannot be absolutely set out in the
proposal call. Usually, some level of further negotiation will need to
take place before the final terms of the contract are agreed upon.

Ultimately, any one of the various proponents may not be able or
willing to contract on the terms eventually developed. Therefore,
RFPS should not include the requirement for bid security, nor shall
they require proposals to be irrevocable for any period of time.


3-5.1 Structure

The RFP should be structured in the following manner:

a)     First the administrative ground rules are set out so that
       proponents have a clear understanding of the process.
b)     Following this, the project is described in detail, explaining
       what the contractor will be expected to do.
c)     Then the mandatory requirements are stated, and the
       desirable requirements itemized. Finally, proponents are told
       what they have to provide in order to be evaluated.




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Question




List the two things that a RFP should not include:


1.____________________________________________________
___

2.____________________________________________________
___


Number the following steps in order according to how a RFP should
be structured:
_____         the mandatory requirements are stated, and the
              desirable requirements itemized.
_____         the administrative ground rules are set out so that
              proponents have a clear understanding of the
              process.
_____         proponents are told what they have to provide in order
              to be evaluated.
_____         the project is described in detail, explaining what the
              contractor will be expected to do.




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3-5.2 Outline


Where to find what you need to know
Resources See Appendix RFP

See also "Procurement Guidelines Manual:
http://www.pws.gov.nt.ca/pdf/publications/Table_of_Contents.pdf

Websites: Template is available in Microsoft Word 97 format at
http://www.gov.nt.ca/PWS/cforms1.htm.


Instructions to Proponents

This section should include information and instructions on the
administrative parameters of the proposal call.

These instructions should incorporate, as required:

   A brief description of the requirement so that proponents have
    an understanding of the requirement and can tell immediately
    whether they are interested enough to read the entire document
    Contact person for inquiries during the period between RFP
    release and closing.

Terms of Reference

It is strongly recommended that careful thought be put into
developing this section so that your requirements and goals are
clearly described. RFPs that do not have well-defined Terms of
Reference will most likely result in large variations in the
methodology and fees presented in the proposals received, and
thus will be more difficult to analyze and compare.




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Check the following:

   Did you quantify requirements whenever possible?

   Is the RFP precise, concise and easily understood?

   Are the requirements large enough to warrant a staged process
    calling for interim deliverables?

   If you anticipate that some proponents will be unable to meet
    the mandatory requirements, can you justify them from a
    business perspective?

   Are the anticipated results of a successful solution stated clearly
    in objective, preferably measurable outcomes such as "to
    deliver a management training program to at least 20 students,
    with at least 80% of the students attaining 60% or higher as a
    course average."

When describing the requirement, you should use the following
terms:

   “must” for crucial qualifications or response, the absence of
    which would be automatic grounds for rejection of a proposal,
    and

   “should” to describe an important requirement, but one not so
    important that its absence would mean automatic
    disqualification.


Terms of Reference should include:

Municipal Mandates and Responsibilities
A short description of your community government and how the
project will relate to the community/program may help the
proponent with an understanding of the requirement.


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Background
Under the heading “Background”, you could give proponents a brief
history of the events leading up to the RFP.

Requirement and Project Scope
A detailed description of the scope of the work should be included.
This would adequately define and quantify the limits of the project.
This may include, but is not limited to:

   a background statement describing the situation leading to the
    requirement
   the objective - a statement describing the general intent of what
    is to be achieved
   the scope - a detailed description of what is to be achieved
   details of any constraints, such as Government policies and
    standards, land settlement legislation, current and proposed
    related activities, security, sensitivity to other interests,
    protection of the environment, conservation of resources and
    other restrictions
   details of any special local and Northern approaches that are to
    be undertaken during the performance of the work
   financial limits of the budget and cash flow (this is discretionary
    and should not be included if it might mislead proponents, result
    in improper proposals or diminish the possibility of the GNWT
    receiving the best value)
   details of available client support or responsibilities.

Bulky reports or documents that may be useful background
information or help to define the scope of work, but are not critical
at the proposal stage, may be referenced as available for viewing
during the proposal period.

Schedule
A schedule for the work, with as much detail as possible, should be
included with the proposal call. Critical milestone dates that must
be met should be explicitly described in the Terms of Reference
(i.e., preliminary report dates, final report dates, etc.).


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Mandatory Requirements / Minimum Standards
There may be criteria in the RFP that the proponent must comply
with. These criteria may be mandatory requirements or minimum
standards. If so, you must state this fact in the RFP. Further, you
must state that, if the proponent is unable to meet this criteria, the
proposal submission shall be disqualified.

Mandatory requirements or minimum standards must be
established in the proposal call if they are to be used as evaluation
criteria.

A mandatory requirement or minimum standard must be included in
the proposal call, if it is to be used during evaluation. Conversely,
since a proposal is to be disqualified if it fails to meet mandatory
requirements or minimum standards, the proposal must
not include minimum standards if these minimum standards are
not, in fact, intended to be mandatory.

Progress and Final Reports, Submissions and Reviews
You should detail the requirements for progress and final reports or
submissions in the proposal. This should consist of a list indicating
the stages at which submissions will be required, the detail to be
achieved at each stage of the work, and the number of submission
copies required. You should note approval and acceptance
requirements relating to performance at each stage.

Cost (Fees and Disbursements)
You should instruct the proponent to break down completely how
the cost of the service will be determined. This may include hourly
or per diem rates for all personnel and equipment and for additional
work, and a detailed estimate of expense disbursements,
if these will be payable under the contract. Specific criteria for
establishing fees or the timing of payments should be stated in the
RFP.




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Related to this is whether or not to provide the project budget in the
RFP. There must be a balance between giving proponents enough
information so that they can prepare a sound proposal, and
providing so much information that you lose the advantages of
competition. In some cases, it may be to your advantage to include
the project budget.

Some alternatives to consider:

   Not give the budget, let the proponents offer their best price,
    and give points during the evaluation. Unless the value
    assigned to price is significant, a proponent with a high price,
    who also scores high for solution and capability, could win while
    a proponent quoting half the price and with an adequate solution
    and adequate capability would lose.
   Tell the proponents how much of a budget they have to work
    with and then either don‟t award points for price or assign a very
    low value for price.
   Not give the budget, and accept the lowest priced proposal that
    meets a minimum standard. You will need to set out minimum
    scores to be attained in order to be considered.
   Not give the budget, divide proponent‟s price by the number of
    points the proposal scores, and then accept the proposal that
    offers the lowest cost per point.

Evaluation
By law, the RFP must provide the criteria by which proposals will be
evaluated. These desirable criteria should be carefully selected so
that the evaluation will properly reflect the project requirements,
and so that the best overall proposal will be selected.

The desirable criteria can usually be broken down into three key
areas: solution, proponent capability, and price. The RFP must
describe the criteria that will be used in the evaluation and provide
the relative weightings.




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Clearly describe the mandatory criteria. Any proposal that does not
meet all of the mandatory criteria cannot be evaluated; it must be
rejected. Because of the “pass or fail” nature, we recommend the
mandatory criteria be kept to a minimum and identified separately,
even if they are described elsewhere.

Minimum Scores
Applying a minimum, or “upset” score can be a good way to avoid
ending up with a winner who demonstrates sound competency in
most areas but is totally unacceptable in one. It is also an effective
alternative to heavy reliance on mandatory requirements to ensure
quality of service. You need to advise proponents, in the RFP, that
not achieving a minimum score on a given criteria will result in the
proposal not receiving further consideration during evaluation.

Presentations/Short Lists
If the intent is to create a short-list and invite those proponents
making the list to make presentations to the evaluation committee,
proponents must be made aware in the RFP whether:
 An additional set of marks is available for presentations;
 Marks for the presentation form part of the original 100%;
or
 Presentations will be used to support the evaluation of the
     information contained in the proposal.

Evaluation Rating Form
The use of a rating form for use during the evaluation process is
recommended. The PW&S RFP template provides an example as
does the Financial Administration Manual.

The FAM 808-1, Appendix B, example includes typical criteria
related to consulting proposals. Other criteria could include:
 related experience of company
 local and Northern content

As for the evaluation criteria, the weighting should also be
specifically tailored to suit the purposes of each RFP.


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Specific Criteria for A/E RFP’s
PW&S has developed specific criteria for evaluating
Architectural/Engineering proposals. These specific criteria are
discussed in the Project Management Manual. They could serve
as useful guidelines for developing and evaluating RFPs for
community projects as well.

Proponent Response Guidelines
The quality of the proposed solutions depends to a great extent on
the amount of accurate, detailed information that you provide to the
proponents. The level of detail about the evaluation criteria
influences proponent behaviour. You should guide the proponents
to provide the information you want, in the manner consistent with
how you are going to evaluate the proposals

Pro-Forma Contract
Terms and conditions of the contract (ideally a sample of the
contract document that will ultimately be entered into) should be
appended to the RFP. This allows all proponents to become
familiar with the terms and conditions of the ultimate contract and
sets out the contract terms that are considered to be mandatory.
This precludes a proponent from introducing his own standard form
contract, which will likely contain unfavourable terms to you, as part
of the proposal.

Proposal Award
This section describes awarding the contract and notifying
proponents. Once the proposal evaluation process has been
completed, the purchaser should be in a position to either award
the contract or to obtain approval to make the award. Once internal
authority or approval has been obtained to award a contract, the
successful proponent must be contacted and final negotiations
undertaken to conclude a contract with minimum delay.




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Negotiating the Contract
If you have included a Pro-Forma Contract as part of the Request
for Proposals, you have already established the essential contract
terms that are considered as mandatory to the process. It may be
necessary to undertake negotiations with the “winning”
proponent in order to conclude the contract. These negotiations are
likely necessary to finalize details of the work, deliverables, costing
or contract terms.

Even if the proponent has met all of the contractual terms as part of
his proposal, do not advise the proponent that they have “won”! If
contractual items are still to be finalized and you indicate to the
proponent that they are the winners, your negotiating position will
be diminished. Instead, you may wish to advise them that, after
initial evaluation, their proposal was rated the highest and could
potentially provide the best value, but a final written contract still
needs to be prepared.

Ensure that the proponent understands that until such contract is
finalized, there is no contractual relationship.

Caution: Negotiations do not mean fundamentally changing the
requirements or the proposal. Minor negotiations necessary to
finalize the contract and providing clarity and understanding of the
respective roles and responsibilities are acceptable. In some cases,
it may be necessary to revise the scope of the work, but this should
not be a significant change.

Pre-Award Considerations
Prior to entering into a contract, a number of important tasks need
to be undertaken:
 Obtain authority to enter into the contract (if necessary);
 Provide for financial commitment;
 Document contract details for reporting purposes.




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Contract Summary & Commitment Form
A Contract Summary & Commitment form is provided in the Public
Works & Services electronic forms system which serves these
purposes, as necessary. You can contact your regional PW&S
office to obtain a copy of the form which you could use as a
guideline to developing your own form.

In certain cases, additional information may be required for financial
commitment or as part of a recommendation for contract award. It
is recommended that requirements for more information be
attached to this form as required.

The form provides for the collection of essential information relating
to the contract, such as:
     Contractor information;
     Project information;
     Award process

See Appendix – RFP, for an example.




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Exercise (Open Book)
Proposals

Instructions

1.     Read the information given below. The objective of this
       exercise is to prepare an outline of a request for proposals.
       The Community needs to have a building evaluation done on
       the existing hamlet office.
2.     This exercise will be done in groups. Choose a
       spokesperson and prepare your outline on a flip chart.

Time: 1 hour

Background
The GNWT has devolved some of their responsibility to your
community. This will mean that 5 more people will need office
space in the community office.

The present building is 20 years old and requires extensive
upgrading. If the 5 people are going to work out of this office, an
addition would be needed. The other option is to contract a new
building and move out of the old building.

You need to hire a consultant to evaluate the existing office to
determine which is the best option. Should you add on or build?
You will need to prepare a request for proposals for this evaluation
report.

Task
Working with your group, list the items which should be included in
a request for proposals for this work. Prepare a Project Description,
a description of the Information to be provided in the Proposal,
Required Proposal Content and the Method of Evaluation. Use the
GNWT Directive as a guide.



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3-5.3 Checklist For Your RFP Process
The following minimum items should be included as they apply.

A Project Description (Terms of Reference) including:

    the purpose of the work, i.e., a very brief general description
     of the end product;
    the scope of work, i.e., a very brief general statement of the
     extent of the work;
    the project circumstances, e.g., location, constraints, unusual
     conditions, etc.;
    investigations and examinations to be conducted by the
     successful Proponent;
    relevant policies, standards and requirements, e.g., protocol
     and confidentiality requirements;
    Government resources to be made available to the successful
     Proponent, e.g., personnel, support services and information;
    a time schedule for completion of each stage of the work;
    the requirements for progress reporting, interim approval and
     final acceptance of the work and the financial controls to be
     applied by the Government; and,
    instructions.


A Description of Information to be Provided in the Proposal:

    names, qualifications and locations of proposed personnel
     and their responsibilities in the work of the contract;
    resources to be assigned or made available to the project;
    list of subcontractors and their qualifications and locations;
    proposed methodology or approach to the work of the
     contract;
    descriptions of relevant work on similar projects and a client
     list;
    proposed project schedule with comments if varied from the
     schedule called for;

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    hourly personnel rates, estimated total fees and expenses
     with an explanation; and,
    head and branch office locations and proposed work
     performance locations.

Required Proposal Content and Manner of Evaluation, including:

    a full description of content and format expectations;
    criteria and formulae to be used in evaluating proposals;
    submission acceptance closing time and location; and,
    statements of critical project requirements and specifications,
     e.g., "If the Proponent cannot meet stipulated schedule
     deadlines, it would not be appropriate to submit a proposal."


3-6 Proposal Evaluation Guidelines
Do not include with RFP
The following represents general comments and guidelines for
evaluating Proposals and is not to be incorporated into the Request
for Proposals.

General

If mandatory requirements or minimum standards have been
included in the RFP, the proponent must comply. A proposal that
does not meet mandatory or minimum requirements must be
disqualified.

The purpose of the rating is to determine the "best value for the
funds expended". The rating should be based on a comparison of
the fees and expenses to the services offered, rather than an
evaluation of the service itself. A proposed fee should be given a
low rating if it is either too high or too low for the amount of work
proposed. If the fee is reasonable and realistic in comparison to
the services offered, it should be given a high rating.

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Consider the following:

      whether the contractor has the necessary expertise to
       perform the work, based on the qualifications and
       experience of personnel to be assigned or made available to
       the job, and the firm's experience and performance on
       similar projects.

      whether the proposal is likely to produce the desired results,
       based on the work plan, methodology, schedule and use of
       other resources.

      whether the estimated cost of the work is realistic and
       reasonable.

The following discussion relates to evaluation criteria as outlined in
Financial Administration Manual (808-1) for consulting services.


Evaluation Criteria:

Project Team

The committee rating is based on the knowledge and skills of
specific people identified to work on the job. The background of the
firm is secondary, but still important to guarantee performance.

The committee may give an overall score based on a general
opinion of the qualifications of the proposed team members. It is
recommended that proposals which are closely tied for a high rating
are rated with more precision. This may be done by dividing the
proposed project team into individual members who are each
assigned a weighting. These weightings are then adjusted on the
basis of their individual involvement times, to come up with an
overall score.




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Methodology

Consider the following:

     is there a demonstrated understanding of the purpose and
      objectives of the work?
     adequate attention to and handling of all issues raised in the
      terms of reference?
     is the approach appropriate, comprehensive, feasible and
      responsive to the unique features of the work?
     does the proposal meet the standards required?

Methodology explains how the work is to be performed. It may be
broken down into categories, with the weights adjusted on the basis
of the emphasis of each component. The major factors to consider
in adjusting the weights is the amount of time and detail proposed
for each task

Experience

   has the contractor provided similar services in the past?
   has the contractor performed work for the Department/Agency
    before? Where? When? Results?

The primary source of the information for this rating is the proposal
itself. This is an objective rating based on the actual experience
cited in the proposal, rather than a performance appraisal or
reference.

Project Schedule

This rating should reflect the firm's ability to logically plan and
deliver a quality service.




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Fees and Expenses

      is there a per diem rate quoted for each member of the
       project team?
      have all minimum necessary costs been established and
       included in the budget?
      is the proposed cost within the budget ceiling?

There should be clear fee and expense estimates in the proposal,
including person hour estimates and rates for the project team.
Evaluators should compare proposed fees to the methodology, and
rate them on whether they generally conform to the time required to
perform each task. The per diem rates should be in the same
range as those usually charged for similar services. The expenses
should be examined for validity.

All approved Northern contractors are rated by deducting 15 or 20
percent off the total estimated cost for the project. In consideration
of BIP preference, the evaluators should consider the location of
the business's head office or branch offices; where the work will
actually be done; what percentage of the work will be completed in
the NWT; and what percent will be done locally.

References/Appraisals

      past performance in terms of staying on-budget, on-
       schedule, and cooperating with staff
      general competency
      satisfaction of previous project manager(s)

   The rating for this category is based on the references provided
   or requested, previous performance appraisals of work done for
   the Department in the past, and previous staff experience with
   the contractor.




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Exercise




Complete the following statements using your own thoughts:
The RFP Template provides
_____________________________________________________
_____________________________________________________
_____________________________________________________

 I think the Template is effective
because______________________________________________
_____________________________________________________
_____________________________________________________

If there is anything I would change about the Template it would
be___________________________________________________
_____________________________________________________
_____________________________________________________
____________________________________________________




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SAMPLE-         CONSULTANTS          PROPOSAL       RATING
SCHEDULE
Project:


                                      Unit       Assigned         Total
  Item        Rating Criteria        Points       Weight         Points
                                   Awarded (A)      (B)         (A) x (B)
                                                                  = (C)


   1

   2

   3

   4

   5

   6

 PROPONENT:                                                 TOTAL
Comments:

Committee Member:________________Date:________________

                  LEGEND:                          RATING POINTS:
 A - Evaluation Points Awarded ( 0 – 10)     Poor          0 - 3 points
 B - Weighting Factor                        Fair          4 - 6 points
 C - Sub-Total Weighted Score (A times B)    Good          7 - 8 points
                                             Excellent     9 - 10 points



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(Alternate)                 PROPOSAL RATING SCHEDULE

                                   Unit       Assigned    Total Points
                                               Weight
 Item Rating Criteria             Points                 (A) x (B) = (C)
                                Awarded (A)     (B)

   1

  2

  3

  4

  5

  6


                                    SUB-                        (C)
                                  TOTAL: (C
           LOCAL/NORTHERN BONUS POINTS
   PLUS: (C)       X (D)          X 15% =

   PLUS: (C)            X (E)                 X 5% =


 PROPONENT:                                                   TOTAL


Comments:




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Committee Member

   LEGEND:                                           RATING POINTS: Poor - 1 - 3
   A - Evaluation Points Awarded                               points; Fair - 4 - 6
   B - Weighting Factor                                        points; Good - 7 - 8
    C - Sub-Total Weighted Score (A times B)                   points; Excellent - 9 -
    D - % Northern Content provided by                         10 points
 Registered Northern Business
    E - % Local Content provided by                Local Content - the dollar value of the
 Registered Local Business                         goods and services required by the
 Northern Content - the dollar value of the        contract supplied by any local
 goods and services required by the contract       business. Local content may include:
 supplied by any northern business or northern     (a) goods and services supplied by a
 supplier. Northern content may include: (a)       local business or local supplier acting
 goods and services supplied by a northern         as the general contractor. These are
 business or northern supplier acting as the       referred to as "own forces"; (b) goods
 general contractor. These are referred to as      and services supplied by any other
 "own forces"; (b) goods and services supplied     local business or local supplier so long
 by any other northern business or                 as these goods and services are
 northern supplier so long as these goods and      required for the completion of the
 services are required for the completion of the   contract and are paid for by the
 contract and are paid for by the contract.        contract.




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       EXAMPLE OF RATING SCHEDULE FOR A PROPOSAL

                                                         Unit           Total
                                          Assigned
      Rating                                             Points         Points
No.                                       Weight                                     Remarks
      Criteria                                           Awarded        AxB
                                          (A)
                                                         (B)            (C)

1     Personnel to be assigned or made    20
      available to the project

2     Methodology or approach             15

3     Past relevant experience            15

4     Project schedule                    10

5*    Fees and expenses as compared to    25
      estimate

6     Past performance appraisals         15

      TOTALS                              100                           Maximum
                                                                        1000

       * For proponents qualifying for northern preference, the fees and estimates
       should be adjusted in accordance with the Government's Business Incentive
       Policy.




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      Instructions For Preparing And Using The Rating
      Schedule
      Note: A copy of the Rating Schedule form should be issued
      and explained within the Request for Proposal documents.
      1. Assign a weight to each criterion based on its relative
      importance. (For convenience, use a total weight of 100 so
      each weight is a percentage.) The weights and the criteria
      may vary from contract to contract depending on the nature
      of the work, except that price information is always required.
      Include the assigned weights in the Rating Schedule form
      issued within the Request for Proposals. Every proposal
      must be evaluated using the same weights.
      2. Using a separate form for each proposal received, enter a
      rating score for each criterion in Column B, according to the
      following code.
                   Poor             1-3        points
                   Fair             4-6        points
                   Good             7-8        points
                   Excellent        9 - 10     points
      Multiply the individual weights in Column A by the individual
      scores in Column B and enter the products in Column C.
      Add these products in Column C and enter the total at the
      bottom.
      3. Compare the total scores on each form. The highest total
      score should indicate the proposal which potentially will
      provide the best value to the government.




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Assignments




Self-Improvement Opportunities:

1.    Interview 2 Senior Administrative Officers. Write a report on
      their experiences working with RFP's. Include such topics
      as:

Mistakes I have seen in RFP'S

Best RFP practices

Worst RFP practices

Who to call on for help when designing an RFP

What to watch our for in the RFP/Evaluation of Proposal/Contract
Award Processes

Most helpful/Required Policy and Guidelines to use when designing
and implementing the RFP.

Advice

Start you own file of examples of RFP's. Collect as many as you
can. Note each one's strengths and weaknesses.


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2. Interview a consultant who writes proposals to get work. Ask
them about the Best and Worst RFP‟s they have worked with. Are
some RFP's easier to work with? What makes them easier? Are
some more difficult? What makes them more difficult? What about
the actual process of working with the organization after the have
one the contract? What makes a "dream" client? What makes a
"nightmare" client? How did they resolve difficulties with clients so
that they could move forward and deliver the requirement? What
were the personal and financial costs involved in getting the job
done? Take notes and tell someone about the consultant's
experiences.

3. Make and objective assessment of the existing RFP process at
your place of work. What are the strengths of the process? What
are areas for improvement? What can you do to make the process
more amenable to win/win for both the contractee and the
contractor?

4. "The proposal evaluation process is objective, consistent and fair
with little room for personal bias". Discuss this statement, giving
reasons for your answer.

Surf the Web. Got to Web sites that include:

   http://www.psassociates.com/judgement-00.htm
   http://www.proposalsthatwin.com/art8.htm
   http://www.neci-legaledge.com/seminars/IP/Ipmattoc.html

Read the articles and hit the various links. Print articles that you
find interesting and which may be useful to your work with RFP's
and Proposal Evaluation.

Make a note of any other websites that are useful.

Take notes or print up pages detailing publications and Newsletters
which are available to purchase and may assist you in your

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Exercise




Instructions:

1. Break into groups
2. With your group you will discuss the scenario and evaluate the
proposals using an evaluation form.
3. Be prepared to discuss with class

Time: 1 hour

The Mackenzie Valley Construction Association is organizing a
one-day seminar in Norman Wells to deal with subsurface
conditions in northern locations and appropriate design solutions.
Delegates will arrive Tuesday evening and leave on Thursday
morning. A catered dinner and entertainment is required on
Wednesday evening. It is your responsibility to award a
contract to cater the dinner and provide entertainment.

Terms of Reference
Proposals are required for the supply, preparation, serving and
cleanup of a dinner for 30 delegates and 20 spouses. The
successful proponent will also provide entertainment for the
evening. This is an important event as it is the only time for two
years these individuals will get together. The dinner should include
an appetizer, salad, entrée and dessert. The Association will set up
its own cash bar. Entertainment will include several technical
presentations and the Association will organize these. The
successful proponent shall provide entertainment such as
music/dance appropriate for the occasion.
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This entertainment will follow the technical presentations and
should begin about 9:30. It is anticipated that the event will begin at
7:00 pm and end at about 1:00 in the morning.
The dinner will be provided in the Aubergine Hall, in Norman Wells.
The proponent may use the cooking facilities in the Hall or may
cook the food off location.
The proposals will be evaluated based on the following criteria
Dinner Menu                 25 points
Entertainment               25 points
Cost                        35 points
Previous experience         15 points
At the appointed time three proposals were received. They were all
received on time and were all received from responsible
proponents.




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Proposal Number 1 Received from Ace Caterers
Thank you for the opportunity of submitting this proposal to you in
response to your RFP.
Ace Caterers has been active in the Norman Wells Area for the
past 5 years. Ace Caterers is a wholly owned subsidiary of The
Pingo‟s Restaurant. The Pingo‟s Restaurant has been providing
restaurant and bar service to Norman Wells residents for 6 years in
our location in the center of town.
We will provide dinner to your guests at a cost of $45 per plate
regardless of the number of meals required. This assumes 50
meals will be served. All meals will be prepared in our restaurant
and transported to the Aubergine Hall where the food will be kept
hot on hot plates and in heated trays until required. We propose the
following menu:
Starter             Smoked char on rye toast with lemon garnish
Salad               Mixed greens
Entrée              Medallions of Caribou with new potatoes, and
                    vegetables
Dessert             Cranberry tart with cream
                    Rolls, butter and crackers
                    Coffee, tea and Iced water
We recognize the importance of entertainment at an event such as
this and offer for your enjoyment the Hot Shock Rock Band from
Yellowknife who will entertain you with their special brand of rock
music combined with a discotheque between sets.
The additional cost of the rock band is $2,500 plus expenses.
During the past three years we have catered over 50 special
dinners similar to yours. We are confident we can meet all your
expectations and needs.

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Proposal Number 2 Received from Betty’s Catering
Thank you for the opportunity of submitting this proposal for your
considering. Although we have not been in the catering business
for long, we have a good record in Norman Wells with many clients
and can give you their references too.
The basic preparation of the meals will be undertaken in our
professional kitchen. The final preparation and cooking, however,
will be completed in the Aubergine Hall. We are familiar with their
facilities, having catered several dinners there during the last year.
The following menu is an example of what we can offer. We would
propose that there be some choice of starters and desserts so we
propose a following menu. Each guest would choose a menu one
week prior to the meal. However, some additional plates of each
item would be available in the event that someone change‟s their
minds.
Appetizer            Bagel chips with tofu and smoked char spread
OR                   Smoked char chowder
Salad                Strawberry salad with poppy seed honey
                     yogurt dressing
Main Course          Muskox sausage and vegetable stew with
                     cheese roll topping on noodles
OR                   Ginger Caribou Kebobs with foil wrapped
                     vegetables
Dessert              Warm northern berry sauce on yogurt cups
OR                   Cranberry banana whip
                     Rolls, butter and crackers
                     Coffee, tea and iced water

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The cost for the dinner will be a flat cost of $1,250 plus an
additional cost of $22 per plate.
Entertainment:




There is a local Norman Wells band called the Wells Wanderers
that play light dance music and jazz. This group is very popular
however they are available that evening and I suspect would be
very suitable. The cost for the engagement would be $1,200.
That you for this opportunity of proposing to you and we are certain
that we can satisfy your requirements and you will be very happy
with the service we can provide and we look forward to hearing
from you.
Yours sincerely,
Betty‟s Catering




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Proposal Number 3 Received from Burt’s Burgers
Hi. Thanks for letting us propose on your dinner requirements. We
run the local burger bar and would love to provide meals and
entertainment for your get together. We have catered over one
hundred parties, fairs, carnivals and other gatherings both indoors
and outdoors over the past three years.
Starter      Soup with rolls, butter and crackers
Salad        Chef‟s salad
Main Course Caribou burger with French fries
Dessert      Choice of pie and ice cream
The cost for each dinner will be $17.50.
Entertainment:
We would suggest you talk to the Wells Wanderers a local band.
We have never heard them play but we told they are real good. We
have spoken to their leader and believe they would be available at
a price of about $1,200 for the evening.


It sounds like fun. Hope we hear from you.
Burt‟s Burgers




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Applying all relevant information, to whom would you award
the contract? Give reasons to explain your decision.


Adapted with permission of Canada North Projects & David Aikens
& Associates and used by School of Community Government, with
permission.




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Exercise
Preparing an RFP




Instructions
1.Read the information given below. The objective of this exercise
  is to prepare an RFP for the project. The Project is to have a
  building evaluation done on the existing community hall in your
  village.

1. This exercise will be done in groups. Choose a spokesperson
   and prepare your outline on a flip chart.

Time: 2 hours

Background
Your community had received substantial funding from the
Aboriginal Healing Foundation for a four-year project. The
Aboriginal Healing Foundation initiative includes extensive use of
the community hall.

The present community hall is eighteen years old and requires
extensive upgrading. There is talk in the community of building on
an addition as well, for the community's Aboriginal Healing
Foundation project staff. The other option is to contract a new
building and move out of the old building.

The Project
Prepare an RFP to hire a consultant to evaluate the existing
community hall and determine which is the best solution. Should
you renovate and add-on, or build a new hall?

Your Task
Prepare an RFP using the GNWT Directive as your guide.
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Where to find what you need to know
Resources:
Appendix – RFP
Websites: Template is available in Microsoft Word 97 format at
http://www.gov.nt.ca/PWS/cforms1.htm.




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3-7 Writing Successful Proposals
While municipalities will be putting together RFP‟s to contract
goods and services, there will also be occasions when the
municipality will want to apply for monies (additional government
funding) which originate from federal, territorial and local levels for
special programming. Using the internet, your local library, and
resourcing with people "in the know" including politicians, you can
discover how to bring those dollars to your community. You may
also create a special project Board and register it as a non- profit
society. Then you may apply for private sector funding from
foundations or corporations. Using technology to find money is a
good idea. You can find a list of important publications, and
resources at the Canadian Centre for Philanthropy website
http://www.ccp.ca/contact.htm

Monies are available for many purposes including:

   Annual Campaigns: money to support annual operating
    expenses, infrastructure improvements, program expansion,
    and in some case, one-time only expenses (like purchasing a
    computer system),

   Building/renovation funds: to help build a new facility or
    renovate an existing facility, although building funds are
    normally the most difficult to secure,

   Capital support money for equipment, buildings, construction
    and endowment. These types of projects are not quickly funded.
    It often takes 2-3 years for the total funding to be secured. This
    type of request is a major undertaking by the applicant
    organization,

   Challenge monies: these types of funds act as leverage to
    secure additional grants from foundations and corporations.
    They're awarded contingent upon your raising additional grant
    funds from other funding sources,


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   Conferences/seminars: Money to cover the cost of attending
    conferences, planning them and hosting them. Funding may be
    used to pay for all of the conference's expenses, including
    securing a keynote speaker, travel, printing, advertising and
    facility expenses such as meals,

   Continuing support/continuation grant: If you've already received
    a grant award from a funder, you can return to apply for
    continuing support,

   General/operating expenses: These funds may be used for
    salaries, fringe benefits, travel, consultants, utilities, and other
    expenses necessary to operate a program,

   Matching funds: Funds that are awarded with the requirement
    that you must find other funding to match or exceed the initial
    grant,

   Program Development: Funding to pay for expenses related to
    organizational growth, the expansion of existing programs, or
    the development of new programs,

   Seed money: Most often these types of grants are awarded for
    a pilot program. Seed money gets the program underway but
    other grant monies are needed to continue the program in its
    expansion phase,

   Technical assistance: Money to improve your internal program
    operations.
    (Source-Beverly Browning, 2001)




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3-7.1 Steps for Preparing Your Request for Funds:
Remember the things you were looking for when you completed
your exercise on proposal evaluations? Keep your pencil
sharpened when you put together your own proposal. Make sure
you go over the RFP carefully and make a list of all of the
requirements the funding agent wants you to include in the
proposal. When you have completed preparing your proposal, go
back and check off each item as you cross reference it to the RFP.

Step-by-step Guide

1.  Assess your needs
2.  Prioritize-decide what needs funding first
3.  Design a funding plan identifying the kinds of funds you need
4.  Create a planning team representing everyone who has a stake
    in the project
5. Find out when the grant applications are due
6. Determine what kind of application format is required
7. Develop a draft funding request document for critique and
    review
8. Ensure you have included all the required information as per the
    Invitation for Proposals document or the RFP
9. Polish your document
10. Submit your application and hope for the best
11. Follow-up with contacts from the potential funding organization


3-7.2 Writing a Winning Proposal
Preparation: Study and carefully follow the RFP or Application
guidelines

Introduce yourselves: Introduce your organization

Purpose: Describe the purpose of your proposal. Why have you
written it?


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Background: Write a compelling need statement describing the
problem that needs to be solved. Include current and relevant data
on the problem including the demographics of people who will be
served

Scope: What are the limitations of your proposal and why?

Approach: Describe how grant funds will be used in your
proposed solution. Create measurable objectives describing who is
being served, when and for how long?

Result: How will the solution solve the problem?

Statement of work: What tasks will be performed as part of this
solution?

Personnel: Who will be doing the work and why are they
qualified? Show lines of accountability-who reports to whom

Facilities and equipment: What physical resources will you be
using to do the work?

Costs: How much money will the proposed solution require?
Include a detailed Budget

How much time will the proposed solution require: Use a
timeline

Summary: What are the benefits of adopting this proposal-
emphasize the basic beneficial changes this proposal will bring
about

Housekeeping: Who should be contacted for further information?




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Attachments: Include the right attachments-include appendices if
necessary giving resumes etc.

1. Package the proposal so that it is easy to follow and well written
   (see Tip No. 4 of Judgment Day: A Look Inside the Evaluation
   Process, by Michael Asner, in the Appendix - RFP).

2. Write with passion using your brain and your heart, using the
   most up to date research and information available.


Where to find what you need to know
Resources:
Appendix – CRP Pilot
Websites: www.rurral.gc.ca for CRP update
http://www.psassociates.com/judgement-00.htm
http://www.proposalsthatwin.com/art8.htm
http://www.neci-legaledge.com/seminars/IP/Ipmattoc.html
http://www.neci-legaledge.com/seminars/IP/Ipmattoc.html




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Assignment
Developing a Proposal




Instructions

1. Divide the Class in halves-A and B. Each half will then be divided
into groups of 4.
2. Those groups which are "A" groups are the Project Teams
3. Those groups which are "B" groups are the Evaluation Teams.
4. Your Task is as follows:

Time: 2 hours

Project Teams
Using the information available in this manual, any other tips you
may have, and the guidelines for the Canadian Rural Partnership
Pilot Project (Appendix – CRP), develop a proposal for funding. The
budget for your project must not exceed $80,000. The proposal will
be rated according to the scale developed by everyone together in
the "B" groups. Make copies of your proposals for everyone in
class. All proposals will be submitted to the Evaluation Teams (the
"B" groups).

Evaluation Teams
The "B" Groups-The Evaluation Teams, are charged with the
responsibility of evaluating and awarding funds. Each Evaluation
Team will evaluate the proposals and report back to the whole
group, which proposal was successful in its Application for funding
and why.

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Section 4
Contract Law


4-1 Overview




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Section 5
Contract Administration

5-1 Overview
Contract administration may be defined as the art of obtaining and
managing contracts to ensure acceptable results. To be effective,
communities must control three areas:
      • Time
      • Cost
      • Quality

The responsibilities of the community do not end once the terms
and conditions of a contract have been negotiated and a contractor
has been chosen. The contract should be overseen to ensure that
the municipality is getting the best value and quality.

Some contracts will require more monitoring than others –
depending on how complex the project is.

You cannot take for granted that the contractor will perform as you
expect. You will need to manage the business relationship with
your contractor and possibly any sub-contractors.




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5-2 Objectives
This section covers Contract Administration.

By the time you complete this section, you will be able to:
        Demonstrate the understanding of the importance of
          obtaining and managing contracts to ensure acceptable
          results.
        Demonstrate the ability to understand a contract and to
          manage it in accordance with its terms.
        Demonstrate an understanding of how to monitor
          performance and follow contract management activities.
        Demonstrate an understanding of how to and why you
          would amend a contract. Including contract
          amendment/change order, basic principles, typical
          clauses (i.e. time extensions), and contemplated change
          notice.
        Demonstrate an understanding of the importance of
          inspecting goods and services upon receipt, and the
          importance of including operating manuals,
          service/training, and guarantees/warranties, and the
          regulations for contracting dangerous goods in the
          contract.
        Demonstrate an understanding of the importance of a
          preconstruction meeting, project documentation, and
          evaluation of a contractor‟s performance.
        Demonstrate and understanding of and how to do
          progress payments including procedures,
          mobilization/demobilization, holdback funds, and
          disputed claims.




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Student Notes:

Reading for understanding is a huge part of this manual. As with
all the reading, students are requested to read the materials
actively, according to the instructions given in the Student Skills
section of this manual. Remember the key elements of the process:

   Preview, taking time to understand the structure or outline of
    what you're reading
   Come up with questions that you want answered by the text
   Practice full immersion reading-if you notice your attention
    wandering, gently bring it back to the task in hand
   Deface your manual by underlining and writing comments and
    questions as you read
    Discover answers to your questions-creating images of yourself
    as a detective, uncovering clues to a mystery
   Recite what you have read and talk about it with others.
    Remember you teach best that which you need to learn, so try
    teaching it to someone else
   Review and review again, making it a habit to reflect on the
    material you are learning even in your walks to and from the
    classroom
   Take time to play with the new ideas you're learning, imagining
    scenarios in your mind.

Assignment 1.
Being mindful of the active reading process, actively read this
whole module and complete the following:
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Ten questions I have as a result of reading the Contract
Administration Section and want to get answered are:

1.

2.


3.


4.


5

6

7


8

9

10

Ongoing Assignment
As you further your understanding by re-reading the materials, visit
the suggested websites, discussing your questions with resource
people etc. ensure that you get the answers to these questions and
persist until you do. Write the answers in the margins beside the
question so that you know you have completed the task.

It is likely that you will discover more questions as you work with
the materials. Take the time to note these questions as they come
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up, and make a point of getting the questions answered by
accessing written and human resources.
5-3 Contract Management
       Establish and maintain a good relationship with the
        contractor

       Be sure you know what standard business practices are
        with respect to the service you are paying for so that you
        know if you are getting value.

       Treat the contractor as an equal, not as a servant. This is
        a business relationship in which you both are relying on
        each other to meet the commitments of the contract.

       Keep adequate, written records of all dealings with the
        contractor and administration of the contract. Keep file
        notes of telephone conversations, notes from meetings,
        records of invoice payments and processing, etc.


5-3.1 Understanding the Contract
Be sure that you understand the contract. The contract should be
managed in accordance with its terms. That is, ensure that the
provisions required under the contract are met within the timelines
and confines of the contract.

       Know what you should be getting for the contract price.

       Be aware of potential risks – things that could go wrong,
        and have a plan for managing those risks.

       Understand all of the contractual obligations and how to
        measure the performance of the contractor in terms of
        meeting those obligations.

       Time is best controlled with the use of schedules.
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Question




What are some of the potential risks with contracts?




If you make it a policy to use a good tender/proposal process, you
will usually get better value as the process helps clearly define what
is needed, how much it will cost, and how long it will take.

A signed contract ensures both parties are clear on the costs as
well as the schedule and scope of work. Partial or progress
payments should be tracked.

Quality is controlled initially by carefully specifying the products
desired. Inspections or reviews ensure that the product/service
specified is delivered as promised. The extent of the inspections is
obviously dependent on the complexity of the product. As an
example, a new school will require numerous inspections by
architects, mechanical, electrical and structural engineers. The
delivery of a new truck, however, will probably only require an
inspection by one person. In both cases the intent is to ensure the
product or service that was received was in accordance with what
was requested.


Remember, if you specify the product you desire in a clear and
concise way in your Request for Proposals or Bid specs or in the
contract before signing, then you will avoid misunderstanding that
could lead to receiving poor quality goods or services.

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5-3.2 Monitor Performance
The contract should be managed to ensure it is performed on time
and in accordance with the contract provisions.

       Monitor the performance of the supplier against the agreed
        performance indicators.
       Give feedback regarding performance.
       Agree on mechanisms for resolving problems as they arise.
       Address any emerging issues and seek assistance on
        problems which cannot be resolved quickly.
       Make any contractual amendments if required.
       Seek specialist advice whenever unsure of the rights of
        either party or the correct application of the contract.

5-3.4 Contract Management Activity
       Accept delivery of services and any associated goods.
       Process claims for payment in accordance with the contract
        and the requirements of your community policy.
       Monitor contract price and payments against budget.
       Administer warranty arrangements.

5-3.5 Receipt and Inspection
Upon receipt of goods or services, the person responsible should
undertake an inspection check. This basically consists of
comparing the contract and the specifications attached to it to the
receiving document, packing slip, progress report, etc. and then to
the actual goods or services to ensure that items conform to
characteristics, quantity, etc. In other words, that the material
received is really the material that was ordered. If deviations are
noted, it is up to the person responsible to obtain the appropriate
permission to go back to the contractor to rectify the problem.



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For example, this would apply to purchasing office equipment such
as computers or photocopiers, community vehicles, etc. With
most construction projects, the contractor is responsible for the
receipt of goods.




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As covered in the contracting law section, try to work it out first with
the contractor before you take any legal action.

5-3.6 Operating Manual
Goods delivered should include an operating and maintenance
manual whenever appropriate, i.e. computer hardware, and should
be specified in the specifications before entering in a contract.

5-3.7 Service/Training
The community should have identified the need for training or for
after sales service in the original requirements.

However, if this was not done at the time of entering into the
contract or at the time of receipt of goods or services, this area
should be reviewed to determine if either will be required or if it is
part of the supplier‟s package.

5-3.8 Guarantees/Warranties
These should be identified up front with the supplier when issuing
the contract. In many cases, your specs in the tender or RFP
should ask for identification of guarantees and warranties.
However, this is often part of the supplier‟s package.

Upon receipt of goods or services, a thorough inspection will
ensure the product is acceptable. The person in charge must then
ensure that the required conditions are in place to maintain the
guarantees or warranties in effect.

For example, if a consultant has provided a report, received
payment and hears nothing for six months, it is reasonable to
expect that there will be no requests for adjustments.

5-3.9 Dangerous Goods
The NWT regulations for the contracting of Dangerous Goods state
that no person shall handle, offer for transport, or transport
dangerous goods unless they have attained the required
certification or are working under the direct supervision of a person
who has acquired such certification. When contracting for

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Dangerous Goods, the municipality should verify that personnel
handling such goods have received the required training.




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Dangerous Goods must be handled and packaged in special ways
(for example in sealed containers), including special safety
markers, in order to satisfy safety requirements and mandatory
safety standards. Where a municipality is not familiar with the
procedures or the safety law, they should seek the required
information from the GNWT or include these considerations in the
contract.

5-3.10 Amendment Preparation
When amendment or change orders to a contract are required such
that the time, cost or quality will be different than that originally
specified, the person managing the contract for the community
should ensure with whomever is responsible for making final
decisions on the contract, that the change is allowed and
authorized. To facilitate this process, it may be advantageous to
decide at the outset of a contract on the magnitude or type or
changes that will require such consultation, that is, establish what
you can make decisions on, what requires your supervisor‟s
authorization, and what requires council‟s authorization. Again, this
demonstrates why policies and regulations are so important.

An example is:

The municipality is building a garage for community vehicles. You
might be authorized to approve changes to the electrical and
mechanical (based on the consultant‟s recommendations) up to
$20,000. But, you would need your supervisor‟s authority on
structural changes and overrides. It might be that a council
approval would be required for changes in subcontractors to the
project which would impact local employment or benefits. Again,
these are areas that a policy could cover.

Any amendments to contracts must be made in writing and form
part of the contract.

Change orders and amendments will be addressed later in this
section.

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5.4 Contract Amendment/Change Order
The key factors to be considered are:

        changes to the technical or contract requirement are
        discussed and these changes are justified;
        deviations from planned performance are recognized and
        justified;
        actual costs incurred are compatible with contract
        document pricing;
        delivery dates have been maintained and followed up
        where necessary;
        copies of progress claims and invoices are maintained on
        file and are in accordance with the contract/standing offer
        document.

A change order is a written agreement between the Contractor and
the Community to modify, add to, or otherwise alter the work from
that originally specified in the contract documents. It is the only
legal means available to change the contract conditions after the
award of the contract. Change orders may be used to change the
contract plans and/or specifications, to order extra work, to cover
adjustment to contract unit prices for overruns and underruns, and
to effect payment after settlement of claims. Change orders may or
may not have an effect on the time and/or cost of the contract.
When approved by both parties, the provisions of a contract change
order become part of the contract.

As an example, let us assume the Community has a contract with a
local contractor to build a school. Halfway through the construction
the Community decides to add a parking lot. The Community (or
their consultant) will normally prepare a design for the parking lot.
They will ask the contractor what effect this added work would have
on the project schedule. Assuming the Community and the
Contractor reach an agreement on the added cost and time, a
contract change order will be prepared for both parties to sign. This
change order will increase the contract price and may extend the

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contract completion date.




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In most standard contracts, there are stipulations which allow the
Owner to make changes in the work after the contract has been
approved. In the GNWT “Request for Tenders, Construction and
Service Contract” form, the clause which allows the owner to make
changes is as follows:

Clause:
make written changes in the work by adding to, deleting from
or revising the work so long as the changes do not
fundamentally alter the Contract.


5-4.1 Basic Principles
Although every change must be individually evaluated, the following
basic principles apply to all types of change orders:

   Change orders should be consistent with the general intent of
    the original contract. In the example of the parking lot, it is
    within the general intent of building a school.

   All change orders must be in writing and must be approved by
    the appropriate signing authority; the Contractor should sign the
    change order to indicate his acceptance thereof.

   Change orders should be approved by the Community before
    any of the extra work has commenced.

The Community and the Contractor should establish at the
preconstruction conference:

   The identities of the individuals authorized to request and
    approve change orders.
   The handling procedures for change orders.
   Time limits for each stage of the approval process.




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Typical Causes - Time Extensions

There are countless causes of changes that may impact the
Contractor on a construction project. Some of these causes could
hopefully be avoided if the project is planned well from the
beginning (e.g. ensuring the contract plans are not ambiguous).
Some of the more typical causes are listed below:

   Change to or unknown site conditions.
   Ambiguous contract plans and specifications.
   Interference on the site by another contractor.
   Late or defective owner furnished materials.
   Poor contract administration by Community (late approvals,
    inspections, late payment, etc.).
   Change in regulatory requirements.
   Change in design or scope of the project (new owner
    requirements).

Normally, an extension of time will be granted when the Contractor
has been delayed due to circumstances beyond his control. In
applying the term “beyond his control‟, it is assumed that the
Contractor has acted in a prudent, businesslike manner and has
not generated the delay by lack of proper planning.

Causes beyond Contractor‟s control:
 strikes at work site
 strikes at manufacturer‟s plant
 changes in the work (in some cases)
 delay by the Community (work suspension, late approvals and
   decisions
 abnormal weather (extremes only) conditions


5-4.2 Contemplated Change Notice
Time extensions are not granted for a delay mainly due to the
Contractor such as:
 poor planning, organizing, controlling inadequate or inefficient
    manpower
 insufficient weather protection
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When the Community decides to proceed with a change, the
Community should discuss the proposal with the Contractor and
prepare a tentative document which is often referred to as a
Contemplated Change Notice. This document should include a
complete description of the change, supported by detailed drawings
and specifications where necessary. In the example of the parking
lot, the design would be detailed with this document. This would
probably be prepared by your Consultant.

The Contractor is then required to submit a firm price for the
change and to state the effect the change will have on the contract
completion date. To the fullest extent practical, the impact of the
change should be reviewed and agreed upon during this change
order approval process.

Changes frequently have an impact upon the performance of other
work that is not in itself changed. The term “impact” refers to the
indirect delay or interference that a change on one phase of the
work may create on another phase. The costs of such delay or
interference must be given to the owner.

The Contractor should indicate in his proposal, the length of time
his proposal is to be considered firm.

Communities Approval

If the Contractor‟s proposal is acceptable to the Community, a
Contract Change Order is prepared on a form similar to that given
in the Appendix - Administration. If however, all efforts fail to
provide mutual agreement on the cost of the change, the change
order will either be abandoned or the work will be done on a cost
plus basis in accordance with the contract.

In a cost plus situation, there are only two cost components to deal
with: actual expenditures and the specified percentage mark-up to
cover overhead, profit, etc. These costs should be covered in the
contract or specified in the change order.


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It will be necessary to use the Contractor‟s records and the records
maintained by the resident site staff to determine costs. Hence,
accurate and detailed job records are essential. It is strongly
recommended that daily mutually agreed upon records be kept
which detail manhours, equipment hours, incorporated materials,
etc. This is the best way to avoid disputes in this area.
Exercise




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Exercise
Change Orders




Instructions
1.     Exercise to be completed in pairs.
2.     Be prepared to discuss your answers with the class.
3.     Fill out the change order form provided.
4.     Review the information carefully; ask questions if something
       is not clear.
Time: 20 minutes


Information
You are contracting to have a duplex built in your community,
Northern Town. You realize you will need to have two additional
electrical outlets added to each duplex; one in the kitchen and a
second in one of the bedrooms. You go to the contractor and ask
for the changes to be made. Prepare a change notice to give to the
contractor.
Other information is noted below:
1.     Use today's date.
2.     The Contractor is Great Big Builder.
3.     This is your first change notice to the contractor.
4.     The project is titled: "Northern Town Duplex".
5.     There will be no change to the schedule.

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An example of a Change Quotation form is as follows:


SAMPLE
Change Quotation
Job Name:                              Job No.:
Location:                              Contract No.:
Date:                                  Change Qte:
                                       PCN No.:
Description




REQUESTED BY:




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Exercise
Change Orders




Instructions
1.    Exercise to be completed by yourself.
2.    Be prepared to discuss your answers with the class.
Time: 5 minutes
Questions - True or False
1___Change Orders are a good way for a contractor to make extra
money.


2___Change Orders are a good way to get the contractor to do
work for nothing.


3___A Change Order is the only legal means available to change a
contract condition.


4___If you cannot agree on the price for the extra work then the
Contractor doesn‟t have to do the extra work.


5___A Change Order can be issued for any type of work whether it
is related to the project or not; i.e., you are building a $100,000
house and you can ask the contractor to build a $50,000
garage/shop as an extra.


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6___Verbal change orders on contracts are enforceable.


7___The project is delayed because you made a mistake in
ordering the materials. The Contractor is entitled to a time
extension.


8___The project is delayed because a sub-contractor started a
week late due to a prior commitment. The contractor entitled to a
time extension.


9___There was a blizzard in Northern Town in February which
delayed the project by a week. The contractor is entitled to a time
extension.


10___The extra work you had your contractor undertake on a
project will delay contract completion by one month. Your
contractor entitled to charge for the extra costs of his on-site trailer,
temporary heat, phone, power etc. for this delay.




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5-5 Preconstruction Meeting
Probably the most important meeting you will have on the project is
the preconstruction conference. At this meeting all the ground rules
should be established for administering the project. Items which
should be discussed include:
   Roles and responsibilities of all the key players in the project
    municipality, consultant and contractor. Phone and fax numbers
    and mailing addresses should all be recorded.
   Lines of communication.
   Authorities for progress payments, change orders and extra
    work.
   Schedules and cash flow requirements.
   Shop drawing procedures, timing.
   Payment procedures and timing.
   Site office requirements and storage of on-site materials.
   Safety procedures, site security.


This meeting is generally organized by the municipality.


5-6 Project Documentation
Once the project gets started, a very important component of
project management is the project documentation, that is the
written records of what happened on the project.
Good project documentation is one of the best ways to avoid
litigation. Some components of good project documentation are:
   Letters/Minutes of Meetings/Phone Calls
   Letters are another important form of documentation and
    should be written when something significant has occurred
    which you want to put on record.
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   Minutes of all meetings should be kept which document when
    and where the meeting occurred, who attended the meeting
    and what was discussed.
   Documenting all of your phone calls, both outgoing and
    incoming, is also a good habit to get into. While this is very
    tedious, it could be very important for some claim in the future.
    A summary of what was said should be recorded. A follow up
    letter should confirm all important phone conversations.


5-6.2 Contract Documents

A clean and unchanged set of the original contract drawings and
specifications should be kept on file. The original schedule and cost
estimate should also be stored in a secure place. An up-to-date set
of as-built drawings (red line the changes) should be kept to
illustrate the changes as they occur. Schedules should be updated
as events change keep all the old schedules for record purposes.


5-7 Evaluation of Contractor Performance
As the contracting authority for a service contract, you have a
responsibility to verify if the community did indeed receive the
quality and quantity of services that were contracted for, and for
which it disbursed funds.

On completion of a service contract, the municipality should
evaluate the work performed by the consultant. It is recommended
that the contracting officer involve officials competent in the
particular field in the evaluation. The amount of detail included in
the evaluation report will relate to the complexity of the service
contract.




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Evaluation reports should include:

       A general description of the work undertaken, its location
        and the terms of reference
       The quality of the work performed;
       The efficiency of the consultant in managing time and
        resources;
       The capabilities of any specialists assigned to the work;
       An analysis of the cost of the work and the estimated value
        received;
       Recommendations for further considerations

If judgmental comments are provided, they should be supported by
complete and factual detail. This is particularly important when the
evaluation is not favourable. Also, if the community did not live up
to its end of the contractual agreement and it affected the project,
this should not be held against the consultant.


5-8 Account Verification and Payment
Requisition
Verification of accounts before payment is a normal financial
practice carried out to ensure that amounts are properly payable.
As a minimum, the verification procedures necessary for individuals
with authority to confirm contract performance and price involve
checking to ensure that:

   Supporting evidence exists to verify that goods or services
    have been supplied, e.g. a packing slip;
   Goods or services have been supplied in the quantity and to
    the specifications laid down in the order or contract; e.g. in the
    case of goods, the receiver should initial the packing slip;
   Prices claimed are in accordance with the contract;
   Goods or services supplied have been ordered by an individual
    with expenditure initiation authority;
   The computation of the charges is arithmetically correct;

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   Discounts have been deducted;
   Inadmissible extras have not been added, e.g. provincial sales
    tax if the order is from southern Canada; and
   The account, or part of it, has not been paid previously.

These verification steps will usually be carried out by the person
who exercises the authority to confirm contract performance and
price. Persons with spending authority have responsibility to obtain
all supporting documentation necessary for the accounts
verification process, including the original requirements definition,
the corresponding contract, related packing slips, etc. These
documents are essential for each payment to be made because
they show the extent of commitment involved, agreed prices for the
services or supplies, agreed contract terms and conditions.




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Test




Time: 5 minutes

Multiple Choice.
Select the best answer for each of the following questions:

1.     Contract administration may be defined as the art of
       obtaining and managing contract to ensure:
a)     acceptable results
b)     quick results
c)     best cost
d)     high quality.

2.     To be effective at contract administration, communities must
       control three areas:
a)     time, cost, quantity
b)     time, cost, quality
c)     time, quality, quantity
d)     cost, quality, quantity

Provide a Short answer.

1. The responsibilities of the community do not end once the terms
   and conditions of a contract have been negotiated and a
   contractor has been chosen. Why?




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Check all the correct answers.

1.    To ensure that the provisions required under the contract are
      met within the timelines and confines of the contract you
      should:
     Use schedules to control time.
     Give a time extension.
     Be aware of potential risks – things that could go wrong, and
      have a plan for managing those risks.
     Know what you should be getting for the contract price.
     Understand all of the contractual obligations and how to
      measure the performance of the contractor in terms of
      meeting those obligations.
      Have a signed contract.
     Request a Contemplated Change Notice.
     Keep written records of what happened on the project.
     Monitor performance.
     Upon receipt of goods or services, the person responsible
      undertake an inspection check.
     Have a preconstruction meeting.

2.    Evaluation of Contractor Performance reports should
      include:
     The quality of the work performed.
     A payment schedule.
     Recommendations for further considerations.
     An analysis of the cost of the work and the estimated value
      received.
     A Contemplated Change Notice.
     A general description of the work undertaken, its location
      and the terms of reference.
     The efficiency of the consultant in managing time and
      resources.

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     The capabilities of any specialists assigned to the work.




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5-9 Retention of Contract Documents
5-9.1 Contract Documentation

The documentation on a contract file should provide a complete
history of the procurement. The contracting authority must ensure
that contract files provide a complete audit trail containing details
on matters such as options, decisions, approvals, amendments,
etc. This is extremely important for answering questions, justifying
actions/decisions, evaluating the results and future reference.

It is therefore essential that every document on the contract file be:

   CLEAR
   COMPLETE
   CONCISE
   CORRECT



5-10 Progress Payments
5-10.1 Procedures
On larger contracts, payments are often made on an interim basis,
usually monthly. These payments are one of the most important
tasks Communities must handle during the course of the contract.
Care must be taken by the Community to ensure they are done
properly. Insufficient payments will have an adverse effect on the
contract‟s cash flow. This could negatively effect the performance
of the contractor. Excessive payments may result in the Community
losing the financial leverage needed to ensure timely completion of
the contract. No payment should be made, however, until the
contract is signed and the required securities and insurance
certificates have been received.



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The payment procedures should be specified in the contract.
Progress payments are usually made on a monthly basis and
typical payment terms usually require payment within 30 days of
receiving an Invoice.

On lump sum or fixed price contracts, it is important to get an
accurate cost breakdown of each item of work. The breakdown
should be evenly balanced with each item containing its
proportional share of overhead and profit. The Community should
ensure the contractor does front-end load this breakdown. This
should thoroughly discussed at the start-up meeting. Sample
progress payment form is included herein


5-10.2 Mobilization I Demobilization
One of the more difficult areas to evaluate in a contract that
involves construction of any kind is the mobilization and
demobilization cost. Mobilization costs should normally include the
costs of obtaining all permits, insurance and bonds and the moving
onto the site of all plant and equipment; i.e. field offices including
the installation of power and phones, on-site sanitary facilities, job
water, equipment, etc.. Demobilization costs include the removal of
the plant and equipment from the site. On unit price contracts it is
sometimes recommended that mobilization and demobilization be
separate line items with a fixed allowance as determined by the
Community. With this approach, contractors will not be able to
inflate the mobilization amount. The amount specified, however,
should be a realistic figure. The location of the potential bidders
must also be considered before adopting this approach; their costs
should be relatively similar. Generally the mobilization costs are
built into the unit prices but either method is acceptable.

Equipment and materials (if applicable) which are delivered to the
site but not yet incorporated into the work may be eligible for
payment. The materials must be on-site however and the contractor
should provide a copy of the invoice for all the material/equipment
to support his claim for payment.


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Holdback Funds
In accordance with the NWT Builder‟s Lien Legislation, 10% of all
construction contract payments must be retained by the Owner.
This holdback is released 45 days after substantial completion
unless someone files a Lien. The Lien legislation does not apply to
communities. However, it is probably wise to withhold the 10% as a
security to ensure the work gets completed.

On service type contract, a 10% holdback is sometimes retained to
ensure contract performance. This holdback is discretionary. As
with the construction contracts, it is the Communities decision
whether to have one or not.

5-10.3 Disputed Claims
Statutory Declarations
Should you receive a progress payment request which is partially
incorrect, you should phone the contractor to discuss the problem.
This may result in the claim being amended. If a claim is amended,
a copy of the changes should be sent to the contractor. If a
payment request is substantially correct it is important to process
the portion of the payment which is correct. Don‟t hold up the entire
payment for minor modifications. Remember, when contractors do
not get paid they usually don‟t pay their subcontractors or suppliers;
everyone suffers. The project may suffer as well.

There is no legislation in the NWT which requires Communities to
specify statutory declarations. This requirement is a decision of the
Community. It is recommended that if statutory declarations are
desired, they should only be required for the substantial and final
completion payments.

Where to find what you need to know
Resources:
Appendix – Tender Forms and Templates
Appendix - Administration
Websites: www.pws.gov.nt.ca/ for Procurement guidelines
http://www.proposalsthatwin.com/art8.htm

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                   Contemplated Change Notice

PROJECT:
COMMUNITY:
PROJECT NO.:
DATE:
C.C.N. NO.:


The following items are proposed changes to the contract for this
project. All material and workmanship are to be as described in the
contract documents unless otherwise stated. Please submit an
itemized quotation for changes to the contract value and/or to the
project schedule within _____________ calendar days. Please
indicate with your quotation the length of time your price is good for.

Optional:   “All work affected by these proposed changes shall be
            held in abeyance and no work in connection with the
            changes shall be executed until authorized by the
            Engineer.‟


REQUESTED BY:
****




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                           Sample Control Sheet
Contract Summary General
Note: Prices do not Include GST
Contract Value        General      Sub #1      Sub #2          TOTAL
Phase 1        20%      $59,000                                 $59,000
Phase 2        50%    $102,500     $13,000     $32,000         $147,500
Phase 3        30%      $88500                                  $88,500
Sub-Totals            $250,000     $13,000     $32,000         $295 000

Change Orders
CO#1                        $7,000                   $7000      $14,000
CO#2                        $42,100                             $42,100
CO#3                           $450                   $9000      $9,450
Totals                     $299,660   $13,000        $48,000    $360,650

Progress Payments (Base Fee)           Payment         TTD     % Complete
PP#1 Advanced Payment                      $5,000       $5,000       1.69%
PP#2       Apr-99                          $44,750      $19,750      6.69%
PP#3       May -99                         $24,500      $44,250      15.00%
PP#4       June-99                         $14,750      $59,000      20.00%
PP#5       Jul-99                          $14,750      $73,750      25.00%
PP#8       Au -99                          $44,250      $118,000     40.00%
PP#7       Oct-99                          $29,500      $147,500     50.00%
PP#8       Jan-00                          $29,500      $177,000     60.00%
PP#9       Feb-00                          $14,750      $191,750     65.00%
PP#10      Mar-00                          $14,750      $208,500     70.00%
PP#1l      Ma -00                          $14,750      $221,250     75.00%
PP#12      Jun-00                          $14,750      $236,000     80.00%
PP#13      Oct-00                          $14,750      $250,750     85.00%
PP#14      Ma –01                          $14,750      $285,500     90.00%
PP#15      Jun01-Jan02                     $14,750      $280,250     95.00%
PP#17      Apr/May 02                      $14,750      $295,000     100.00%

Progress payments (Change Order Work)
PP#15 Jun 00-Jan01         CO#1            $5,000       $5,000
PP#I6 Mar-01               CO#1            $7,000       $12,000
PP#17 Apr/May01            CO#2            $41,132      $11,132
PPttI8 Jun-01              CO#2            $13,299      $24,431
PP#19 Jul-01               CO#2            $6,272       $30,703
PP#20 Au -01               CO#2            $5,240       $35,943
PP#21 Sep -01              CO#2            $1,255       $37,198
PP#22 Oct-01               CO#2            $375         $37,573
PP#22 Oct-01               CO#3            $8,946       $46,519




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Section 6
Risk Management

6-1 Overview
The following overview is taken from the NWT and Nunavut
Municipalities Associations‟ Risk Management Manual. It is used
with permission.

Risk Management is “an ongoing systematic effort to identify and to
control the risk of losses to which municipalities are exposed, and
to finance those losses which do occur in a cost effective fashion.”

While risk management is used to describe a number of different
business processes dealing with operations that involve risk, in this
section we will address risk management as it applies to contract
clauses to protect municipalities from the risks of losses happening
to municipal assets. In particular, we are going to focus on risks
and liabilities being transferred from one party to another,
sometimes knowingly, and sometimes not, during the issuance of a
contract.

Most lease, purchase orders, construction and general services
contracts are written by lawyers and can be quite complex. The
party drawing up the document has a distinct advantage in that they
will tend to draft the clauses in their favor. The contract is reviewed
primarily by the department purchasing the goods or services who
pay particular attention to the items that are of particular interest to
them – the price, construction schedules, delivery dates, penalties
etc.-- but pay little attention to such classes as indemnification,
limitation of liability, and insurance. The assumption is that they are
straightforward, standard or innocuous. Not true!

Indemnification clauses can be so one sided that Party A
indemnifies Party B for losses caused by Party B‟s own negligent
acts. Shopping center leases are notorious for the landlord making
the tenant responsible for accidents that occur in common areas
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over which the tenant exerts no control. Insurance clauses require
one party to the contract to obtain coverages that are either not
necessary or not available. Additional rent provisions in leases
may require the tenant to make up shortfalls in insurance coverage
on the shopping centre when they have no input into the coverages
purchased.

As you can see there is a need for the risk manager to review
contracts before they are signed. This is not to take the place of a
legal review. It is simply another set of eyes reviewing the contract
primarily from a risk perspective. Not all lawyers are experts on all
facets of contracts, particularly insurance clauses.

Your insurance broker or consultant will usually provide some
assistance in reviewing contracts and in fact may insist on
reviewing large complex contracts themselves since the
underwriters have concerns about liability and risk being assumed
under contracts.




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6-2 Objectives
This section covers Risk Management.

By the time you complete this section, you will be able to:

                Demonstrate an understanding of the importance
                 of Risk Management.
                Demonstrate an understanding of insurance
                 clauses and their importance in contracts.
                Demonstrate an understanding of a Certificate of
                 Insurance, additional insured, Force Majeure
                 clauses, penalty clauses, and loss control
                 activities.
                Demonstrate an understanding of the difference
                 between insured, additional insured, and named
                 insured.




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Student Notes:

Reading for understanding is a huge part of this manual. As with
all the reading, students are requested to read the materials
actively, according to the instructions given in the Student Skills
section of this manual. Remember the key elements of the process:

   Preview, taking time to understand the structure or outline of
    what you're reading
   Come up with questions that you want answered by the text
   Practice full immersion reading-if you notice your attention
    wandering, gently bring it back to the task in hand
   Deface your manual by underlining and writing comments and
    questions as you read
    Discover answers to your questions-creating images of yourself
    as a detective, uncovering clues to a mystery
   Recite what you have read and talk about it with others.
    Remember you teach best that which you need to learn, so try
    teaching it to someone else
   Review and review again, making it a habit to reflect on the
    material you are learning even in your walks to and from the
    classroom
   Take time to play with the new ideas you're learning, imagining
    scenarios in your mind.

Assignment 1.
Being mindful of the active reading process, actively read this
whole module and complete the following:
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Ten questions I have as a result of reading the Risk
Management Section and want to get answered are:

1.

2.


3.


4.


5

6

7


8

9

10

Ongoing Assignment
As you further your understanding by re-reading the materials, visit
the suggested websites, discussing your questions with resource
people etc. ensure that you get the answers to these questions and
persist until you do. Write the answers in the margins beside the
question so that you know you have completed the task.

It is likely that you will discover more questions as you work with
the materials. Take the time to note these questions as they come
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up, and make a point of getting the questions answered by
accessing written and human resources.
6-3 Insurance Clauses
Insurance clauses, on average, are the most poorly worded clauses
in the contracts. They often contain out of date terminology, call for
coverages that are not available or not needed, require limits that
are either way too high or way too low, and have the wrong party
providing the coverages.


6-3.1 Guidelines for Insurance Clauses
The party carrying out the activities should generally provide the
insurance. This can vary with construction contracts when it may
be beneficial for the owner to purchase insurance.

For liability insurance limits, the value of the contract has no
bearing on the limits that should be required. The limits should be
based on exposure to a loss. Remember, one quadriplegic can
cost as much as $8 million.

Don‟t agree to provide another party with a copy of your policy,
especially a liability policy. Amend those requirements to read that
a certificate of insurance will be provided.

When requiring a certificate of insurance, include a provision that
the other party‟s broker or insurer provides at least 30 days notice
of any cancellation or change in coverage material to the
agreement or contract.

Get some assistance from your insurance broker on how to word
the clauses.

If your municipality is required to add someone as an additional
insured, first get clearance from your broker that your underwriter
will agree to do it, then make sure it is only for the activities covered
in the contract.



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When contracting out services, require that the other party name
the municipality as an additional insured on their policy and require
them to provide a certificate of insurance.




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Where the contract requires that you provide the other party with a
Certificate of Insurance, add a statement that this is at the request
of the other party. The less certificates you have to issue, the
better.


6-3.2 Force Majeure Clauses
All contracts should have a force majeure clause. This clause
should allow either party to delay, or not complete, their obligations
if the delay or inability to complete is due to events over which
either party has no control. Usually included are things like labour
disputes, disasters, and Acts of God or Government.

For example, a municipality signs a contract to supply water to a
processing plant outside its boundaries. There are penalty clauses
in the contract such that the municipality has to pay the processing
plant $500 per day for each day it is unable to supply water to the
plant. A flood occurs and disables the water intake for the town
water supply. A force majeure clause would allow the municipality
out of its obligations and penalties while repairs are being made.

Loss control activities are the heart and soul of a good risk
management program. They require the support and efforts of all
employees, especially that of the SAO and Council. Unfortunately,
because results are difficult to measure, these activities are often
not given the priority they deserve.




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6-4 What to Watch for in Contracts
The following is an overview from an interview with a leading NWT
Insurance consultant.

“Basically with risk management, if you have subcontractors you
must make sure that they carry their own liability insurance. That
is key to protecting your community government. You want to take
as much risk off of your community government as possible. So any
time that you hire someone independent of the hamlet, town or city,
either to do snow removal, water delivery, garbage pickup, sewer
subcontracting, etc., you want them to carry their own commercial
general liability, and have your community added on as an
additional insured.

Or, alternatively, you should try to get a hold harmless agreement
put into place. But hold harmless agreements are becoming harder
to obtain so municipalities are starting to have themselves added
on to the contractor‟s insurance as additional insured. Or at the
very least, get a certificate of insurance so that it alleviates any
additional stress to your liability policies.

On the property side of the issue, you need to make sure that if you
are entering into a contract where a third party is going to have the
use or control of your property, whether it's a building or piece of
equipment, depending on the longevity of the contract, you either
want them to insure the building, with the municipality as an
additional insured, or alternatively, you want to gain from them
monetarily. “


6-4.1 Insured, Additional Insured, and Named Insured
“An „Insured‟ is the individual, group or organization that owns the
building, a contract, etc.




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An additional insured is when the municipality contracts a 3rd party
to deliver a service and asks to be named on the 3rd party‟s
insurance, but only with respect to the work that is being given out.
For example, the municipality awards ABC Water Delivery the
water contract and asks ABC to name them on the policy, but only
with respect to water delivery for the hamlet.

A named insured is something to avoid. That is when a named
insured on your policy has full power over your policy, full power to
change it, full power to do anything they so desire with it. A
municipality should never have another individual as a named
insured on their policy. If for some reason the municipality is
entering into such a contract, then the insurance company will want
to know exactly what the 3rd party is doing and whether or not they
own a part of the corporation, etc.?”


6-4.2 Contractor Risk Management
“You always need to make sure that the Contractor has a risk
management process in place as well. Say, for example, a
Contractor is renting your community hall for one week. In the
morning the Contractor should make a regular habit of walking
around the entire building, making sure that the fuel tank is okay,
making sure that all of the emergency lights are working, and so on.
And then in the evening, they make sure that anything that is
insured is locked down so that there is nothing out there that could
possibly help the claim to happen.

A simple walk around the building every day can prevent accidents,
and thus insurance claims and liability insurance from increasing
dramatically.

When you enter into a contract, it should be stipulated in the
contract that you want the Contractor to undertake a risk
management process. You cannot ask the Contractor after the fact
to add this element of responsibility.”



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6-4.3 Common Problems or Mistakes with Insurance
“The following are the most common problems and mistakes made
in dealing with insurance:
 A certificate of insurance is not requested of the Contractor.
 The municipality doesn‟t ask to be added on to the Contractor‟s
    policy as an additional insured.
 The municipal staff doesn‟t fully understand the contract that
    they are being asked to sign or contracts they are having other
    people sign.
 Not following up on requests for Contractors with respect to
    insurance. For example the municipality requires the
    Contractor to provide a certificate of insurance within 10 days of
    the contract, as well as to name the municipality as an
    additional insured, and to maintain and carry at all times a
    liability policy for the vehicles the Contractor is using in
    conjunction with the municipality. This is all written into the
    contract but the municipality doesn‟t follow up to make sure it
    was carried out. Then, if it ends up that the Contractor didn‟t
    understand what the municipality wanted, or they simply forgot
    to do it, the liability immediately falls back on to the
    municipality. “


6-3.5 Contract Liability Requirements
“The contracts the municipalities tend to use are modeled closely
on GNWT contracts. With those standardized contracts, aviation
insurance and other insurance requirements are often stipulated
which may not pertain to the particular contract being agreed upon.
It is important to learn to negotiate contracts, so that only insurance
which is required is actually requested in the contract. For
example, professional liability is not required for a garbage truck
operator, but commercial general liability is, as is automobile
liability and a pollution policy.”




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The best liability policy a municipality can have in place is to
contact someone who knows the answers if any problems arise or if
staff is not sure of how to handle something. A ten-minute
conversation can ultimately save years and years of litigation, and
tens of hundreds of thousands of dollars.

Don't do anything without a legal opinion, and when given a legal
opinion, follow it. Do not ignore it.




Where to find what you need to know
Resources:
NWT & Nunavut Associations of Municipalities – Risk Management
Manual
AON Reed Stenhouse




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Exercise
Insurance Terms




Instructions
1. To be completed on own.

Time: 5 minutes


Match the following terms to the definition that best matches them.
_____ 1.       Insurance Clauses
_____ 2.       Certificate of Insurance
_____ 3.       Additional Insured status
_____ 4.       Force Majeure Clauses
_____ 5.       Penalty Clauses
_____ 6.       Loss control activities
_____ 7.       Insured
_____ 8.       Named Insured
_____ 9.       Risk Management
_____ 10.      Hold harmless agreement
_____11.       Certificate Holder

a) An ongoing systematic effort to identify and to control the risk of
   losses and to finance those losses, which do occur in a cost
   effective fashion.

b) This clause should allow either party to delay, or not complete, their
   obligations if the delay or inability to complete is due to events over
   which either party has no control.

c) Is the individual or organization shown in the insurance policy.




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d) This means that the contractor extends insurance coverage under
   his/her policy in the event that you are sued as a result of work they
   do on your behalf.

e) The statements in a contract that deal with insurance coverage and
   insurance liability.

f)   A clause in which one party agrees to take responsibility for the
     actions of another party.

g) When an individual named in the policy has full power over your
   policy, full power to change it, full power to do anything they so desire
   with it.

h) A clause in a contract, which provides that, agreed performance
   criteria must be met; otherwise the penalty will be invoked.

i)   A document that indicates your coverage amounts, carriers and policy
     effective dates. It demonstrates evidence of an insurance policy.

j)   Is a client who wants to be named on the certificate of insurance to
     assure that they will be contacted if your policy cancels prior to the
     renewal date.

k) Processes to avoid losses from occurring, to reduce the frequency of
   their occurrence or reduce the magnitude of the losses that still do
   occur.




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Section 7
Ethics

7-1 Overview
Doing what is right-ethical conduct, needs to be a priority for any
employee working in a municipal government, operating on public
funds. In a nutshell, public servants are accountable to the public
for their decisions and their actions. Therefore, it is clear that public
servants must become very aware that their position does offer
possibilities for private gain. To avoid such conflict they must abide
by impeachable standards of integrity in business relationships both
inside and outside the organizations in which they are employed.

What municipal employees do, how they are influenced by their
private interests for their private gain or the private gain of friends,
family or others who may provide kickbacks or other benefits has
become a matter of public concern. The conduct of politicians has
been scrutinized and rightly so. There are many examples of public
outrage at abuse of position and power. The former Premier of B.C.
was forced to resign due to charges concerning unethical behavior.
Recently a former Chief of a Treaty Seven First Nation was found
guilty of mismanagement of public funds in her position as Director
of the Health Centre. She was awarding contracts to a friend and
paying outrageously high amounts for work, which was deemed
sub-standard. There was a full court inquiry. The implications of
unethical behavior are huge. When unethical behavior is suspected
and then proven, the confidence of the public (the electorate) is
shaken and sometimes shattered. Individual careers can be ruined
through unethical decisions.

Public employees need to be responsible public servants with a
keen awareness of ethics. But what exactly are ethics?




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7-2 Objectives
This section covers Ethics in Contracting.

By the time you complete this section, you will be able to:

             To create awareness of ethical standards in municipal
              administration.
             To promote understanding in the student of how
              ethical conflict is a part of their work as public
              servants.
             To promote critical thinking-linking theory with
              practice about how ethical situations can be dealt with
             To offer an example of a Code of Ethics.
             To further learning by providing practice in identifying
              ethical situations and proposing solutions.




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7-3 Ethics and Contracting
Ethics has to do with right and wrong, good and evil. There are
some generally held codes of conduct, which are held by most
people. "Do unto others as you would have them do unto you" --the
golden rule is actually an ethical guide. Individuals develop their
sense of ethical behavior from their family, education, religious
beliefs, training, and social expectations. Most people internalize a
beliefs such as "don't steal", "respect others", "walk your talk", and
"keep your word".

These beliefs usually serve us well in our everyday decisions
because little is at stake ethically or economically. But what
happens when an employer requires actions, which clash with our
sense of honesty and fairness? Then we are faced with an ethical
conflict.

Consider the situation of a manager who has pressure put on him
by a member of council, to expedite a land development process by
hiring a certain contractor, even though the contractor doesn't have
the reliable equipment required to do the job. The manager knows it
is very likely that the project will not be completed within the time
frame and then the municipality will be faced with having to pull the
bid security and setting off a whole chain of other events.

Always the ethical question is "What is the right thing to do?" or
"What ought to be done?"




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7-4 Ethical Situations
7-4.1 Conflicts of Interest
Personal financial gain

Consider the example of a supplier who won a contract but didn't
have the specialized capabilities on hand to complete a particular
aspect of the job, In an informal conversation the town manager
recommended that the supplier sub-contract a certain company in
Yellowknife to do the work. Unknown to the supplier, the town
manager was part owner of the Yellowknife company.

Clearly the issue is that the town manager used information
acquired in his professional capacity for personal gain in a private
capacity.


7-4.2 Conflicts of role or position
The manager who needs to fill a vacant position and hires a relative
on a preferential basis faces a clash between his/her role as a
relative and his/her role as a manager. In this case opening the job
for fair competition would have solved the problem. Often our roles
as a loyal employee can conflict with our roles as relatives,
spouses, self-employed people, people who are trying to get ahead
financially etc.

7-4.3 Preferential treatment
 This is all about bringing profit to family and friends, or people
    of influence. Managers need to be particularly vigilant about
    not awarding supply contracts preferentially.

   There are occasions where a manager, by offering special
    assistance to bidders, in dealing with the municipality, could
    possibly place them in a preferential position.

   Sometimes managers feel that the have an obligation to
    individuals who would profit from special consideration. This is

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   often the case with town councilors who put pressure on
   managers to make decisions a certain way.




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7-4.4 Approach to deal with Ethics in the Workplace
It is necessary that public servants follow the highest standards of
conduct regarding conflicts of interest, outside activities, the
acceptance of gifts and hospitality and dealings with the public.

Normally each public organization adopts their own regulations
regarding ethical conduct. Employees are usually required to agree
to abide by the regulations or code of ethics by indicating their
agreement with their signature.


7-4.5 Codes of Ethics
Codes of Ethics are adopted by Professional Associations and
departments to protect members, uphold the confidence of the
public, and to provide guidelines which help members/employees
determine where conflicts may arise in their duties as professionals
or as public servants and to guide their decision-making and
behavior.

An example of a relevant Code of Ethics is that of the Purchasing
Management Association of Canada. It follows verbatim.

7-4.6 Purchasing Management Association of Canada, Code of
Ethics
It is a condition of membership in the Purchasing Management
Association of Canada and its affiliated Institutes and Corporations
that members shall abide by the Constitution and the Rules and By-
laws of the Institute or Corporation in which they are members. This
Professional Code of Ethics is binding upon all members.

Precepts

Members shall not use their authority or office for personal gain and
shall seek to uphold and enhance the standing of the Purchasing
profession and the Association by:




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   Maintaining an impeachable standard of integrity in all their
    business relationships both inside and outside the organizations
    in which they are employed.




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   Fostering the highest standards of professional competence
    amongst those for whom they are responsible.

   Optimizing the use of resources for which they are responsible
    so as to provide the maximum benefit to their employers;

   Complying with the letter and the spirit of: the laws of the
    country in which they practice; the Association‟s “Principles and
    Standards of Purchasing Practice” and any other such guidance
    on professional practice as may be issued by the Association
    from time to time;

   Contractual Obligations

   Rejecting and denouncing any business practice that is
    improper.

Values and Norms of Ethical Behavior

Members will operate and conduct their decisions and actions
based on the following:

Honesty/Integrity

       Maintaining an unimpeachable standard of integrity in all
       their business relationships both inside and outside the
       organizations in which they are employed:

Professionalism

       Fostering the highest standards of professional competence
       amongst those for whom they are responsible.

Responsible Management

      Optimizing the use of resources for which they are
      responsible so as to provide the maximum benefit to their
      employers.
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Serving the Public Interest

      Not using their authority of office for personal benefit,
      rejecting and denouncing business practice that is improper.

Conformity to the Laws in Terms of:

      -the laws of the country in which they practice;
      -the Institute‟s or Corporation‟s Rules and Regulations;
      -Contractual obligations.

Norms of Ethical Behavior

      To consider first, the interest of one‟s organization in all
      transactions and to carry out and believe in it's established
      policies.

      To be receptive to competent counsel from one‟s colleagues
      and be guided by such counsel without impairing the
      responsibility of one‟s office.

      To buy without prejudice, seeking to obtain the maximum
      value for each dollar or expenditure.

      To arrive for increased knowledge of the materials and
      processes of manufacture, and to establish practical
      procedures for the performance of ones responsibilities.

      To participate in professional development programs so that
      one‟s purchasing knowledge and performance are
      enhanced.

      To subscribe to and work for honesty in buying and selling
      and to denounce all forms of improper business practice.

      To accord a prompt and courteous reception to all that call
      on a legitimate business mission.


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       To abide by and to encourage others to practice the
       Professional Code of Ethics of the Purchasing Management
       Association of Canada and it's affiliated Institutes and
       Corporation.

       To counsel and assist fellow purchasers in the performance
       of their duties.

       To co-operate with all organizations and individuals engaged
       in activities that enhance the development and standing of
       purchasing and materials management.


Rules of Conduct

In applying these rules of conduct, members should follow
guidance set out below:

Declaration of Interest
      Any personal interest, which may impinge or might
      reasonably be deemed by others to impinge on a member‟s
      impartiality in any matter relevant to his or her duties, should
      be immediately declared to his or her employer.

Confidentiality and Accuracy of Information
      The confidentiality of information received in the course of
      duty must be respected and should not be used for personal
      gain; information given in the course of duty should be true
      and fair and not designed to mislead.

Competition
     While considering the advantages to the member‟s employer
     of maintaining a continuing relationship with a supplier, any
     arrangement, which might prevent the effective operation of
     fair competition, should be avoided.




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Business Gifts and Hospitality
      To preserve the image and integrity of the member, the
      employer and the profession, business gifts other than items
      of small intrinsic value should not be accepted. Reasonable
      hospitality is an accepted courtesy of a business
      relationship. The frequency and nature of gifts or hospitality
      accepted should not be allowed whereby the recipient might
      be or might be deemed by others to have been influenced in
      making a business decision as a consequence of accepting
      such hospitality or gifts.

Discrimination and Harassment
       No member shall knowingly participate in acts of
       discrimination or harassment towards any person that he or
       she has business relations with.

Environmental Issues
      Members shall recognize their responsibility to
      environmental issues consistent with their corporate goals or
      missions.

Interpretation
       When in doubt on the interpretation of these rules of
       conduct, members should refer to the Ethics Committee of
       their Institute or Corporation




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Activities




Time: 10 minutes

1. What ethical standards/regulations guide the conduct of staff
in your organization? Provide a copy of the standards.

2. Provide examples of ethical situations where there is
potential for conflict and compromise. Describe them.

3. In your opinion, are the current ethical guidelines/regulations in
your organization an effective tool for handling ethical situations?
Give reasons for your answer.

4. If current ethical guidelines are inadequate, make
 suggestions for improvement (additions, clarification of procedures,
lines of accountability etc.)

5. Identify Ethical Situations and Propose solutions




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Where to find what you need to know
Resources:




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