Negotiating Contracts in Canada: Tips for Contract Managers

Negotiating Contracts in Canada

Overview

The expectations on public sector procurement professionals to be up-to-speed on all of the possible issues related to risk, can be unrealistic. One of the common problems is the workload and the number of competing priorities which impact the resources available to respond in a timely fashion. 

Competitive bids need to be issued; policies updated: contracts need active oversight; staff hiring and retention; trade agreement obligations; supplier performance evaluations; or Indigenous engagement must be factored in to the decision-making. As an internal resource for the organization, procurement is to provide the expertise to multiple end users, on a wide variety of challenges. That’s the job.

Working with external consultants is one of the means to identify and mitigate risks. There can be various types of services which supply chain consultants can provide. These can range from fairness advisor, staff training, ERP implementations, project-based advice, sourcing strategies, or a suite of services such as offered by a group purchasing organization (GPO).

Rather than trying to attract and retain competent procurement resources, many organizations are opting to partner with consultants. Health care service providers have successfully been working with GPOs for decades. IT services, HR, logistics, construction, and commodities are commonly acquired services through consulting agreements. More governmental organizations are seeing advantages of complementing staffing resources with the expertise available from consulting services. Think about entering into a contract to install a new roofing system for a multi-story complex with a roofing company for ~$5M. Which materials are best suited to the environmental conditions? What type of payment method should be used? What if there is a problem with water damages 6-months after completion? What if the building envelope doesn’t meet the code? While these are part of the usual negotiations, an Owner needs competency on their side to address the risks. Expecting a staff person, who is unfamiliar with the nuances of this type of construction, to do this off-the-side-of-their-desk, invites unnecessary risk. A consultant might cost $50,000 to provide the strategy and advice to address the risk. Repairing a leak could cost $500,000. Not bringing in the expertise in these situations, occurs too often. 

There are risks of contracting or outsourcing procurement services to 3rd parties. It may put a ceiling on job growth within that organization, which sends a message to staff that tenure is not a priority; training may be capped because the services can be bought; concern for morale with existing staff; there is a greater dependency on the 3rd party services; a loss of organizational knowledge; inconsistency in service providers. As with other professional service agreements, managing the relationship with a consulting service is a requirement to ensure value for money and responsive services. There are pros and cons to any consulting agreement and it needs to be considered for the long-term, strategic benefits.

Fractional work

An adjunct to contracting for expertise is fractional work. This is a growing area for consultants to be contracted on a monthly retainer by a client. Independent contractors are able to work for several clients concurrently, under NDAs, which suits their personal life style and utilizes their professional expertise. The client is able to access the skills as and when required and the consultant or fractional contractor has a familiarity with the client needs and market sector. This reduces the learning curve if only hiring for part time expertise. 

Fractional differs from part time in that there is an expectation that there will be a continuous need for a foreseeable period of time but not necessarily on a firm daily/weekly/monthly basis. The client has access to the expertise and can reduce their salary costs. Services can include specialized knowledge on business strategies or for functional advisory roles on coaching and mentoring skills. Fractional work can embed the external advisor on a project team and have that level of commitment without it being a full-time resource. The client and advisor agree on hours of work, hours of commitment, and the hourly rate or retainer fee. Fractional work is not intended to replace full time staff or executives. This gives flexibility to the fractional contractor and reduces the fixed salary and benefits of a full-time employee being paid by the client. Both parties need to weigh the pros and cons in this type of relationship – but it’s working.

Value for money

There are trade-offs when working with consultants – services cost money. One health care organization had inventory management problems, supplier performance issues, and a high departmental staff turnover rate. They were not able to get a handle on these chronic problems. 

Inventory fulfilment rates were low. Following the advice of the consultant, there was a reduced inventory investment of 50% and the inventory fulfilment rate went to 98% satisfaction. Supplier performance had never been measured. Competitive bids determined where to buy from but didn’t address the other risks, such as the bull whip effect – too much stock in one period and not enough the next. The consultant drafted a performance evaluation methodology, which invited input from all the health care stakeholders, and sent “report cards” out to the major suppliers/distributors. The solution involved improving relationships with their key suppliers/distributors. The intention of the consultant was building trust and relationships amongst the stakeholders. While the inventory service problems were the tip of the risk iceberg, the other problems were below the surface. There was a legacy of positive working relationships with improved staff retention.

Another municipal organization with members from remote communities, struggled with risk when issuing competitive bids and the inherent legal risks. The consultant identified where there was a lack of understanding on bidding obligations and how to effectively manage contract risks. Within the staffing resources of these communities, it was not possible for them to send enough individuals to take formal training. The consultant tailored a combination of f2f and online sessions to address targeted risks. Off-the-shelf wouldn’t cut it.

Is consulting expertise an investment or an expense?

Public Procurement In Canada:

Procurement professionals play a pivotal role in the public procurement world. These experts are well-equipped with the knowledge and skills needed to navigate the intricacies of procurement processes. Whether you’re looking to enhance your procurement acumen through procurement management courses or seeking valuable insights through procurement webinars, the landscape for public procurement offers many opportunities to explore.

The Procurement School encompasses a wide range of activities aimed at achieving the best value for taxpayer money. Procurement service providers work closely with public sector procurement consultants to streamline processes, maintain transparency, and uphold ethical standards. This collaborative effort ensures that the procurement landscape remains fair, competitive, and cost-effective.

Obtaining a procurement certification or a purchasing certificate can be a wise decision for those aspiring to excel in public procurement. These certifications validate your expertise and demonstrate your commitment to professionalism in the procurement arena. Procurement professionals are highly regarded for their ability to make informed decisions that benefit both the public and the government agencies they serve.

Public procurement is not just about acquiring goods and services; it’s about contributing to the well-being of communities and the country. The individuals in this field understand the significance of their roles and strive to uphold the highest standards of ethics and accountability.

Whether you’re a seasoned procurement professional or just starting your journey, the public procurement landscape offers a wealth of opportunities for growth and development. From procurement management courses to ongoing procurement webinars, resources are available to help you stay informed and up-to-date with the ever-evolving world of procurement.

Written by: Larry Berglund

Larry is one of our leading Subject Matter Experts. Larry, who played guitar in a rock band in his early days, is also the author of several books.

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Disclaimer: The views and opinions expressed in this article are those of the Subject Matter Experts and do not necessarily reflect the official policy or position of The Procurement School.

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