By Tanya Gaudet, CSCMP, C. Mgr., Manager, Procurement and Insurance Services at the Town of New Tecumseth
In non-negotiable bid formats (e.g., tenders) bidders are bound to their bid prices for acceptance for a fixed period (irrevocable bids). In the public sector, it isn’t unusual to see a bid irrevocability period of 90 or 120 days in our bid documents. After all, many public sector organizations are required to engage their Councils or Board of Directors before an award can be made, and often those individuals meet infrequently and require several meetings to solidify, document, and confirm an award decision.
Irrevocability periods have long been a point of contention among public buyers and suppliers alike, particularly within construction tenders. Just how long should it take to accept/award a bid? According to the Canadian Construction Association, it should typically be 30 days. (Gasp!)
You read that correctly. In 2018 the CCDC guide suggested 30 days as an appropriate irrevocability period. Fast forward to the COVID-19 pandemic and the impact it had (and continues to have) on the market for building materials, and the discontent has reached a boiling point.
It begs the question, are we overpaying by having a longer irrevocability period because the supplier is overestimating in order to mitigate their risk? Are we creating undue hardships by forcing suppliers to hold bid prices for three to four months? What do we do if the awarded supplier appears, cap in hand, asking for relief if lead times or pricing volatility derails their bid? Have you had suppliers breach, rather than perform the contract at a loss?
It would be my recommendation that all buyers investigate the possibility of shorter irrevocability periods, now, while the market is unpredictable, but also in the longer term. For those of you that still require Councils or a Board of Directors approval to award a bid, perhaps now may be the time to put forward a business case for delegated authority (with appropriate policies in place to manage such practice, of course). After all, in addition to lengthening the time to award, Council approval of awards and contracts may also expose the buyer to the risk of allegations of inappropriate political influence in the procurement process.
Another potential area to explore is limiting the use of Contract A type bids. Procurement lawyers are recommending negotiable bid formats more frequently, for all types of procurements. It appears that many of our peers are heeding that advice, and with much success.
If you are stuck with non-negotiable bid formats, consider at least a robust communications plan to notify your departments of the potential pitfalls of a long irrevocability period.
At the Town of New Tecumseth irrevocable bids should only be required where there are legitimate business reasons to do so, such as the need for bid security. A 30-day irrevocability period is encouraged. If the Department anticipates a protracted award, 60 or 90 days may be required, and they are reminded that the longer irrevocability may lead to inflated bid pricing.