Updated: 5 days ago
There are 4 main types of agreements that you may enter into that the governments in Canada typically use. Understanding which type of agreement the solicitation will result in may impact your strategy in putting together your proposal, and what you can expect if you win a competition.
In each of these cases, the terms and conditions are often provided by the government (particularly often in the federal or provincial governments). In some cases, negotiation of terms, or contractor terms may be acceptable.
1. Traditional Contract – This is a standard contract where the contractor provides goods or services as described in their proposal, according to standard terms and conditions. In some cases, these can be negotiated, and in fewer cases, the contractor may be able to recommend their own terms. This contract is a guarantee of work, and the contractor is required to provide the services. These are typically with individual suppliers.
2. Task Authorization (TA) Contract – This contract requires a “task” to be issued to the contractor. Without a task, typically no work is required. However, some TA contracts are “mixed” and have a component that the contractor has to deliver outside of any Task (like a traditional contract). TA contracts are typically a guarantee of work, and often contain a clause that a certain percentage of the contract value will be paid to a contractor even if no Task Authorization is issued.
Standing Offer Agreement (SOA) –This is a ranked list of suppliers that the owner can issue a “call-up” to in order to request work (services or goods). Suppliers are typically ranked according to their total score from the solicitation period, although other ranking methodologies may be provided in the solicitation. This SOA award on its own does not represent a contract and there is no guarantee of work. The SOA along with a completed call-up form a full contract. An SOA typically has a defined work allocation methodology:
Right of First Refusal. This is a common methodology, where the top-ranked supplier is always first offered any package of work, and has the right to accept or decline. If the supplier declines, the next-ranked supplier is offered the work. This was developed to have a "prime" and "backup" model of service delivery, but is now commonly used to manage larger lists of suppliers.
Rotational. This method goes through the order of suppliers based on their original ranking from the RFSO (Request for Standing Offer). The first-ranked supplier will be first to be offered the first call-up, the second-ranked supplier will be first to be offered the second call-up, etc.
Defined $-value allocation. This method provides a specific $-value of call-ups a supplier may be permitted. Any supplier on the list may be offered a call-up as long as they have $-value allocation remaining. For example, the first-ranked supplier may be given a $-value allocation of $1M, the second $750k, and the third $500k. The first-ranked supplier may be given any number of call-ups up to a total value of $1M, after which they cannot be issued any more call-ups. So if they are issued a single call-up at $1M, that is all they are able to get!
Defined call-up limitation. This method is similar to the $-value allocation method, but each supplier is given a defined number of call-ups they are permitted. For example, the top-ranked supplier may be given up to 25 call-ups, the second-ranked up to 20 call-ups, etc. In this method, $-value does not come in to play. This method is less common than the ones higher in the list.
Mixed. Any of the above methods may be mixed together as best meets the contracting authorities needs. In addition, other methods may be used should none of these more common methods meet the needs of the contracting authority. However other methods are less common.
Supply Arrangement (SA) – This is an unranked list of pre-qualified suppliers. The owner typically issues a “Supply Arrangement RFP,” “Request for Service (RFS),” or similar document to a subset of suppliers on the list (or all pre-qualified suppliers, depending on the terms of the SA). Suppliers are then required to compete against the specific requirements requested in that subsequent competition. In some cases, directed contracts are permitted within specific rules (that is, contracts may be issued directly to a pre-qualified supplier without any competition).