Last February, Ontario released Building a Better Tomorrow, billed as "A Discussion Paper on Infrastructure Financing and Procurement’. The Paper makes clear that the Government needs help from the private sector in tackling some of the Province’s infrastructure challenges, which are many. The Paper welcomes the feedback, the creativity and the capital that the private sector can contribute to the development of the Province’s economy. It also parallels a mounting interest across Canada in public-private partnerships.
There is a growing rapprochement between the public and private sectors. Now then is a good time to revisit the place of private sector proposals to provide goods and services, submitted to the public sector on an unsolicited basis. This article looks at why the public sector in Canada appears to remain aloof to an idea which, on its face at least, offers the possibility of forging new relationships, as well as the potential for achieving a more efficient and cost-effective means of delivering services to Canadians. It also examines some internal public sector dynamics that private sector companies should take into account when planning to make a proposal to a public a sector entity that is subject to the trade agreements.
THE TRADE AGREEMENTS
A familiar comment heard from those who oppose the use of unsolicited proposals is that Canada’s major trade agreements – the North American Free Trade Agreement (NAFTA), the World Trade Organization (WTO) Agreement on Procurement, and the Agreement on Internal Trade (AIT) – allow for competitive bidding only. It’s not that the trade agreements explicitly forbid the use of unsolicited proposals. Rather, it’s that unsolicited proposals do not fit neatly into the language that lays down competitive bidding as the preferred method of procuring goods and services. For example, Article 501 of the AIT provides that the purpose of the procurement chapter of the Agreement is to "establish a framework that will ensure equal access to procurement for all Canadian suppliers in order to contribute to a reduction in purchasing costs and the development of a strong economy in the context of transparency and efficiency."
Detractors argue that a public sector entity that receives and evaluates an unsolicited proposal is in breach of the principle set out in Article 501 on the basis that "if it isn’t expressly authorized, it’s illegal" – a weak argument, in light of the fact that the AIT includes explicit exceptions to the principle of competitive bidding. In fact, it could be argued, under the right circumstances, that an unsolicited proposal amounts to one of the stipulated exceptions.
As weak as the detractors’ argument is, those who support the acceptance of unsolicited proposals have taken to heart the old adage that a flow of words is no proof of wisdom, and have made little if any effort to try to explain how the trade agreements allow the practice. Some justification is called for, at least from those who have put in place the infrastructure to facilitate unsolicited proposals.
MERITS OF UNSOLICITED PROPOSALS
Quite apart from the legal status of unsolicited proposals under the trade agreements, a view offered in defense of unsolicited proposals is that they promote a thoughtful, non-traditional, value-added approach to the management of government operations and service delivery. According to this view, unsolicited proposals are designed to encourage proponents to submit ideas that are "unique, innovative, and valuable". This view assumes that the private sector is capable of much energy and creativity, which should be tapped in the interest of the broader public good. Not everyone, however, shares this view.
Others hold that the private sector is rarely if ever able to submit ideas that are truly ‘unique’, that can only be shared with the public sector through an unsolicited proposal. This view may be overly cynical, to the point where it loses all credibility. It assumes that only the public sector is capable of creativity (a reversal of the old cliché idealizing the boundless genius of the free enterprise system).
These commentators are not afraid to go the extra length. They say that unsolicited proposals are not likely to provide any substantive advantage in the quality of the proposals over those submitted through the more conventional, competitive bidding framework. And to the extent that an idea is truly innovative, they add, it should be channeled through the competitive bidding process. The final blow is their claim that the quality of innovation may in fact be inferior, because proponents may be tempted to use unsolicited proposals as an easy opportunity to market their offerings, without offering value or innovation.
THE IMPORTANCE OF AN INFRASTRUCTURE
Aside from the legalities and the merits, it is not possible to overstate the importance of having in place a robust infrastructure for processing unsolicited proposals (such as a guideline or other similar procedure or directive). Not having this infrastructure makes it difficult if not impossible for any public sector entity receiving an unsolicited proposal to make sure that the proposal – and the process followed to evaluate it – is credible, defensible, and is perceived that way by the public. It leads to a clear disincentive to accept unsolicited proposals. It is not surprising then that the public sector often greets unsolicited proposals with fear, sometimes even with scorn.
Closely related is the risk that the public sector entity may end up at the centre of a storm of controversy. As one experienced critic put it, the acceptance for consideration of unsolicited proposals in the public sector has a tendency to lead to abuse, and even collusion between the proponent and the public sector participants who are responsible to shepherd the proposal through the maze of government. Whether this is true most of the time or in a small number of cases only is anyone’s guess. Still, everyone’s anxiety level would drop several notches if a well defined procedure were in place.
Where a policy decision is made to accept unsolicited proposals, for a start there should be a well articulated rationale. What is the public sector trying to achieve? What broader public policy purpose is being served? Such a rationale should be supported by a solid, well documented procedure that provides guidance to would-be proponents, and assists in defending any challenge launched against a contract award. A well developed procedure would also help to ensure that the public sector entity had the vision and the tools to show that the decision to go ahead with an unsolicited proposal served the best interest of the public.
WHAT TO DO WITH GOOD IDEAS BUT NO INFRASTRUCTURE
Notwithstanding the debate swirling around unsolicited proposals, the fact is that the public sector is beginning to recognize the value of working closely with the private sector. For example, more and more public sector entities are putting in place strategies where they are moving from traditional purchasing where suppliers are treated as providers of commodities and where only price matters, to strategic partners where common business goals and objectives are developed, and where the risks and rewards are shared. There is a growing recognition that treating suppliers as just vendors increases costs and reduces efficiencies. Increasingly the procurement process is put within a wholistic context that includes the entire lifecycle of the goods and services being procured, which in turn helps generate cost savings and the solutions that are so much needed to tackle the challenges of modern government. While the private sector typically welcomes the more collegial approach, it often lacks the kind of nuanced understanding of the public sector environment that is needed to do well. This is also true where private sector organizations themselves take the lead in seeking a closer and more synergistic relationship with the public sector.
Private sector organizations are often puzzled by the lukewarm response their ideas receive when they propose to the public sector. They generally assume that if a proposal has merits, it will be picked up by the target department or ministry, and the wheels almost immediately put in motion to implement the project. As was noted above, the absence of an infrastructure for handling the process pretty much guarantees that the wheels – if they ever began to turn – will come grinding to a halt.
Another major factor is simply the workings of government itself. Public sector priorities and capital plans are typically set years ahead of their intended implementation. If the subject matter of a proposal is not already recognized in the target department’s agenda, it is improbable that the proposal will be received with any level of interest. Civil servants have enough challenges on their individual and collective plates and too few resources to go around. Taking on another project that has yet to receive the imprimatur of the appropriate internal authority is not going to be attractive – not to mention that taking up the mantle could be seen to be infringing the tendering laws.
Obviously what works for the private sector does not necessarily work for the public sector. Rather than spending time and effort pushing through a proposal that no one asked for, it is better to take a strategic view of what can be achieved, recognizing that the strategic view also tends to be the longer view. It is best to work to socialize the good idea and have it put on the target department’s agenda. This may take years, but once the public sector entity has ‘bought in’, the road ahead will be much smoother.
However, where a good idea makes it on someone’s agenda, there is always the possibility that the target department could decide to compete the idea or proposal received – a risk that a private sector proponent has to be prepared to live with. There is also the related risk that proprietary information may be shared. A private sector proponent will normally try to protect the propriety information through a non-disclosure agreement. But it isn’t always possible to get public sector entities to agree to bind themselves that way. There can be very good reasons for that.
In principle, the potential value to the public of unsolicited proposals is significant. But unless the related procedural issues are addressed, there isn’t likely to be much appetite for unsolicited proposals in the public sector. Procedure is integral to the success of the concept. It requires articulating a centralized process that is designed to ensure the transparency of both the evaluative criteria and the decision-making structure, a necessary step to protecting the integrity of the decisions made by public sector decision makers.
Without the appropriate infrastructure, it is often better to take a strategic approach and to work with the particular public sector entity to help shape the agenda of the future. This demands something other than a purely transactional focus. Among other things, it calls for a nuanced understanding of the workings of the machinery of government at many levels, and a commitment to stay the course for the long haul.
Denis Chamberland is Vice President, Outsourcing and Procurement Services with ABTS Global, and a partner with the law firm Aird & Berlis LLP.
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