Public bodies give two cents on contract bidding process; Auditors eye relationship between VCC, KD Engineering

By Stanley Tromp, Vancouver Courier [Vancouver, B.C], 24 June 2011

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In these difficult economic times, when many cities are searching for waste and cutting back on services, most taxpayers would demand the best value for their money on goods and services. How is this best achieved?

Do all local public bodies put contracts out to bid? Contracts above what size? Are there other, sometimes unspoken, criteria besides lowest price for granting contracts? Is lowest price the best or only measure of value?

To answers some of these questions, the Courier sent a questionnaire to the vice-presidents for finance of 13 Crown corporations, local hospitals, universities and colleges--entities that altogether spent more than $3 billion for goods and services in 2009/10. (Only B.C. Ferries and Vancouver's city hall declined to respond.) The results are posted in an Excel spreadsheet at vancourier.com.

All said they follow a bidding process. For example, BC Hydro follows the Agreement on Internal Trade and the Trade, Industry and Labour Mobility Agreement (TILMA) between B.C. and Alberta. TILMA states that, with some exceptions, the purchase of goods more than $25,000 and services more than $100,000 must go to bidding. Other public bodies are subject to the Agreement on Internal Trade (AIT) and the New West Partnership Trade Agreement (NWPTA). Most entities say they never override these policies. BC Hydro did so less than five per cent of the time, for emergency situations.

The Vancouver Community College relationship with KD Engineering appeared to bypass these principles. The Ministry of Finance auditors confirmed that: "The College had no competitive procurement process for 31 years of facility services awarded to the contractor. This direct awarding of contracted services was contrary to B.C. public-sector procurement policy."

VCC had simply claimed it had awarded the work to the best company, but the auditors countered: "VCC's justification for the awarding was not supportable, for it could only have known if it got the best value by tendering and comparing different companies' bids. It is extremely difficult to measure best value from a cost perspective in a sole-source situation... By not doing so, the College created the risk of a real or perceived non-arm's length relationship developing between itself and the contractor."

The auditor refuted a complaint that KD Engineering's donations to the VCC Foundation may have affected its success. Such donations had been made indeed, but the amounts were modest: "Accordingly, such support was not significant enough to be considered a real factor behind the College's decision to award the contracts."

VCC vice president of finance Peter Legg says that from the time KD ceased working at VCC until a competitive process could be carried out, the college brought in two interim firms to maintain the building's systems. Johnson Controls was the winner from that competitive process, and has been servicing VCC under a three-year contract, which ends this year. The work will go out again for bids this summer.

"Our experience is that the exemptions for tendering that agencies have for sole-sourcing are sometimes abused," said Gregory Thomas, B.C. director of the Canadian Taxpayers Federation. "We think there should be systemic spot audit of any purchasing where these are exempt from tenders. It's incumbent on the governance bodies of public entities to seriously examine their exemption guidelines."

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