. . . the fact is that the RFP process should be as you indicate a guidance tool as opposed to a selection tool. Unfortunately the public sector seems to look for absolutes as a way of mitigating risk as opposed to making the right choice in terms of choosing the best supplier partner.
My response in the comment stream for the November 4th, 2013 Procurement Insights EU Edition post The trouble with algorithms by Tom Moore
In my January 26th, 2013 post titled “Breaking News: Vendor’s efforts to sue government for $62 million as a result of losing bid understandable but misguided,” I expressed my understanding of why Bruce Atyeo had made the decision to sue the Canadian government . . . I however did not agree with it.
Even though Atyeo was on the favorable side of Justice Peter Annis’ ruling to the tune of $30 million, my position has not changed.
In fact if anything, I am more adamant relative to my earlier stated belief, based on the fact that rather than serving justice, the Annis ruling will actually further entrench the belt with suspenders risk averse mindset that has both dominated and limited public sector procurement effectiveness.
Even though he won $30 million dollars relating to lost profits resulting from the award of a 2004 relocation contract to competitor Royal LePage Relocation Services, Atyeo’s disappointment that he did not receive punitive damages was palpable.
His belief that a heavier penalty would have served as a deterrent in that it would have gotten the government’s “attention” and stopped “the behaviour” that led to the suit, was where he and Justice Annis parted ways in calculating the government’s ultimate financial liability. Annis concluded that punitive damages would “serve no purpose in terms of denunciation and deterrence.”
However, what both men have failed to see is the bigger picture, and the far reaching consequences of this outcome.
To begin, and as outlined in my February 2010 article Latest Government of Canada Procurement Scandal Belies the Very Principles Associated with Effective Purchasing Practices, relationships between the government and its supply partners over the life of a long-term contract will by natural progression become familiar and strong. This is necessary for the contract to be successfully executed. Does this afford the incumbent supplier a certain advantage when the contract comes up for renewal? Absolutely! In the real-world where people deal with whom they know, like and trust this is not only understood but accepted.
The problem is that public sector procurement practice flies in the face of this logic by imposing an artificially created “level playing field” framework for doing business that is based more on politics than on practicality.
In explaining his ruling, Annis concluded that “Envoy Relocation Services should have won the five-year deal in 2004.” Why?
A question that is of even greater importance is whether or not they were the better supply partner. In other words, Royal LePage Relocation Services maintained the contract because they were known and were doing a good job. The issue with their selection was the result of the “requirement” to retender the contract in the first place.
In the end, and while one might be tempted to question Justice Annis’ ruling, and Atyeo’s seemingly sanctimonious denouncement of the procurement process, the truth is that neither man had any choice but to do what they did based on the government’s flawed belief that everyone deserves a shot at government business.
Until this changes the system will continue to be mired in the morass of unwarranted rights as opposed to sound business principles – a situation made worse by Justice Annis and Mr. Atyeo.
Atyeo lawsuit . . . the beginning of litigious procurement?
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Procurement Insights 
colincram
November 12, 2013
This is a most difficult issue. In the UK, there is a temptation for public sector procurers to rely on procedures to get the ‘right’ answer. If one has followed the procedures, the answer must surely be ‘right’. However, as Hansen has pointed out, that is not necessarily the case. If public sector procurers don’t follow the procedures properly, but end up with the best result, they can be sued by aggrieved parties. There is nothing to prevent people applying regulations and laid down procedures and arrive at the most commercially sensible result. However, only the most capable have the skills to do so. The solution isn’t to try to upskill everyone, who may need them only rarely, but a better approach might be to create centres of expertise, where people who have the necessary aptitude can get the training, gain experience and pass this onto collegues and more junior staff.
charles
November 13, 2013
Colincram,
You have amused me by saying public officers may not follow the procedures properly but end up with the best result….???…..this might give us a new dimension of what the best result can be arrived at….regardless of the process and who is to judge the result as being the best….is it the officer who must comply with the procedures or the general public…who must focus on the outcome?…and by the way, when do we judge a decision as being right?….would it mean that at the award phase….its pre-mature to judge the decision as being the best result?….all these have left me scratching my head to conduct more research on the same!!
piblogger
November 13, 2013
My interpretation of Colin’s comment is that if you are a slave to procedures you may not end up with the best outcome. Conversely, the best outcome is not dependent upon the procedures you follow.
I once received an e-mail from a senior Treasury executive responding to my observation that the projected savings associated with the Canadian Government’s Way Forward initiative did not make any sense. Specifically my contention that there was no logic to support the government’s numbers.
This individual – in writing no less – responded by saying that I may very well be right but what was important was the fact that the government followed procedures in selecting the solution and vendor. This, he stressed, is what was most important. Sadly, it is this focus on following procedures as opposed to achieving the best outcome that continues to permeate public sector procurement.
Ian Burdon
November 13, 2013
Without wanting to sound too precious, I’ve taken the time to have a look at the Court’s decision and reasoning. I won’t pretend to have analysed it exhaustively (it is a very long and detailed judgement) but since Annis J bluntly describes aspects of the process as “a scam” and some of the Crown’s actions as being “in bad faith” then it seems that there is more to this than initially meets the eye. Justice Annis, understandably, also did not like Crown witnesses trying to “mislead” (his word) the Office of the Auditor General and the Court.
There is a difference between blindly following a process in self-defence and, apparently, engaging in behaviours which, on a fair reading of the Findings in Fact, made the Court’s decision to overturn the contract inevitable.
piblogger
November 13, 2013
To start Ian thank you for providing such an obviously intelligent and well researched comment relating to this controversial case.
You raise excellent points – I am very much looking forward your expanded commentary that will be published as a post in this blog today.
As indicated in this post, “while one might be tempted to question Justice Annis’ ruling, and Atyeo’s seemingly sanctimonious denouncement of the procurement process, the truth is that neither man had any choice but to do what they did based on the government’s flawed belief that everyone deserves a shot at government business.” Emphasis of course on “neither man had any choice but to do what they did.”
My problem is not with Justice Annis’ ruling but with the government’s approach to managing complex relationships including the associated tendering process. I believe, and similar to the case referenced in a recent post titled “Values under pressure: Is there a way to keep your job without compromising your values?” (http://wp.me/p1XSrf-nX) in which performance targets inadvertently drove unintended behaviors, the Envoy case speaks to the larger issue of how the government does business.
I question for example the need to arbitrarily re-tender contracts in which the incumbent supplier is delivering to expectations. Instead of having to go through the time consuming, expensive and illusionary process of having to issue a new RFP in a quest to get the best deal and keep everyone honest, perhaps a better way would have been to establish objective and adjustable metrics within the framework of a Relationship Charter such as the one proposed in Andy Akrouche’s book “Relationships First: The New Relationship Paradigm In Contracting.” (http://www.lulu.com/shop/andy-akrouche/relationships-first-the-new-relationship-paradigm-in-contracting/ebook/product-21285780.html?ppn=1)
Given the consensus by numerous industry experts that 90% of all contract winners are determined before the RFP is issued (http://www.youtube.com/watch?v=IMIlGJWVL38&feature=share&list=TLFrEMZlRFnCDBBlxyIcX0yfmDS3xzvK5c), and the growing cynicism that has led to articles such as the one by Michael W. McLaughlin (Why You Should Ignore RFPs; http://mindshareconsulting.com/why-you-should-ignore-rfps/), it is clear that the present system is seriously flawed.
While the Atyeo case shines a needed light on this problem, my fear is that rather than stimulate the necessary change in the process, Justice Annis’ finding will only add additional layers of process to a bureaucracy that is already weighted down with arbitrary and largely unnecessary regulation.
Kelly Barner
November 13, 2013
This is an interesting story – and it contains a number of all-too-common supply management challenges. The lack of ‘fair and equal treatment’ of the suppliers bidding for the Crown’s Integrated Relocation Program (IRP) is just the beginning.
Despite the fact that Atyeo was disappointed about Judge Annis’ decision not to award punitive damages against the Canadian government, a $30M settlement is a huge sum. Then again, it cost Envoy Relocation $10M in legal fees to get to this point – fees that they had no guarantee would be returned and that could have been used to pursue other business ventures. It was a 2004 contract that caused Envoy to sue, and it took nearly a decade to get to an award. The money probably wasn’t the primary motivator.
So was Atyeo just championing his high standards on behalf of all of the government contractors and prospective contractors? As he himself said, “I can’t help but wonder now many others (suppliers) have known a bid was rigged and if they had the money would have sued” (Calgary Herald, 7 April 2013).
I started doing some reading into the history of this deal and there are two parties that keep crossing paths: Atyeo and Royal LePage Relocation Services (RLRS).
1975: Atyeo co-founded Employee Relocation Services. In 1993 they were purchased by PHH Home Equity (U.S. based) and Atyeo stayed on to run their Canadian operation.
1997: PHH, now renamed HFS Mobility Services, decided to terminate their Canadian operation and worked out a deal whereby RLRS would take over any existing contracts. When the deal was finalized in 1998, Atyeo ‘left the services of HFS’ just as RLRS was awarded the first IRP contract (Cold Lake Sun, 29 April 2013).
It wasn’t until 1999, when Atyeo founded Envoy Relocation Services, that he started going up against RLRS directly for the IRP contracts, but the stage was already set for bad feelings between the local competitors.
Now I’m not saying that this history (and potential ‘sour grapes’ on the part of Atyeo) excuses wrongdoing on the part of the government or RLRS. After all, they’ve been accused of using their inside knowledge that the quantities provided in the bid were inaccurate, allowing them to enter a line item bid of $0 without any risk to their profits. But it does provide enough doubt to disqualify this case as the foundation for new laws or regulatory requirements – there is just too much history.
It would seem that troublesome ‘relationships’ exist beyond those between contracting parties and their suppliers. No bid is run in a vacuum, and no laws will ever be able to wipe away the effects of business taking place, particularly in the perceptions of the people and companies that repeatedly find themselves on the losing end of lucrative deals.
Here are the links to the sources I have quoted:
Calgary Herald, 7 April 2013
http://www2.canada.com/calgaryherald/iphone/news/latest/story.html?id=8211300
Cold Lake Sun, 29 April 2013
http://www.coldlakesun.com/2013/04/29/royal-lepage-relocation-services-envoy-the-canadian-armed-forces-and-the-government-of-canada-2
piblogger
November 13, 2013
As always Kelly, you provide both thorough and to this point in time uncharted insight into this troubling story.
The one common denominator that runs through this particular case is the breadth and total reach of relationships (good and bad), and their impact on the bidding process.
As previously indicated, numerous industry experts talk about 90% of all contract winners being decided before the RFP is issued.
How much longer will the government ignore the know, like and trust relational influence factor, and cease trying to create an open to all “artificial” level playing field that is the antithesis of how the world does business. Their insistence of continuing down this present path is what creates the problems as opposed to eliminating them.
The fact is that everyone does have the right and opportunity to build relationships before an RFP is issued. This access is the only aspect of the process that should be assured.
Shene
November 21, 2013
Procedures are meant to guide participants in hopes of obtaining the best results and best practices, in compliance with the law; while generating cost savings. I think if we look at this as issues of fair competition and innovation; there may be some different views on the problems with this case. I think the better questions or lessons that can be learned from this are 1) How can the government maintain good vendor relationships but meet the need to benefit from increased competition and innovation? 2) What procurement practices are in place that are now outdated based on technology changes, etc? I think there must be more open dialogue between businesses and government about procurement practices, barrier to entry, and analyzing costs/ ROI. Procurement professionals authorized to change procedures should be required to take action to do so, not go along with what has always been done.
piblogger
November 21, 2013
Both good points Shene – especially from the standpoint of assessing ongoing viability in terms of technological advancements and service delivery cost models. This is where I believe that Akrouche’s Relational Model comes into play as it recognizes that complex outsourcing relationships and corresponding agreements are not static in the real world, and can change just as easily within the term of the contract as well as at the renewal point of the contract. Having the mechanisms to check and confirm the veracity of the relationship including its objectives on an ongoing basis is the key to sustainable success.