3. The use of competitive public procurement in Quebec

Promoting competitive procedures below the thresholds by introducing an intermediate threshold above which entities must use the ITT

Below the CFT thresholds, Quebec's regulatory framework ensures sound contract management by imposing a number of mechanisms on public bodies, including the possibility of:

• proceeding by CFT or ITT

• competitor rotation

• putting in place control provisions related to the total value of the contract and any additional expenditure

• establishing a monitoring mechanism to ensure the effectiveness and efficiency of the procedures used

• introducing, subject to any applicable cross-governmental agreement, measures promoting the procurement of goods, services, or construction works from competitors or contractors in the region concerned.

This last point reflects a major issue in Quebec that is common to several OECD countries: the economic development of small and medium-sized enterprises - local SMEs, and SMEs in remote regions.

Accordingly, each public entity has internal regulations indicating the procedures to be followed in accordance with its principles. Prior to 1^st January 2018, municipal agencies were able to award contracts directly if the amount was less than USD 25 000; and by invitation to at least two suppliers if the amount was between USD 25 000 and USD 100 000. Since then, municipal bodies are able to put in place any rules they wish for the award of contracts involving expenditure of less than USD 100 000 as long as they adopt regulations on contract management specifying the circumstances in which these different modes will apply. Given that each entity defines the procedures to be followed in its rules of procedure, the rules may differ from one entity to another, which impacts the clarity of the regulatory framework for suppliers and increases the risk of integrity violations. For example, for a professional services contract, the TBS may use direct award contracts when the estimated amount is less than USD 50 000, whereas the Ministry of Transportation, Sustainable Mobility and Transport Electrification must prioritise the ITT up to USD 89 999. According to data for public bodies, for procedures below the thresholds and above USD 25 000, although the different regulatory frameworks require bodies to assess the possibility of proceeding by CFT or ITT, the use of direct awards is much more widespread. Indeed, below the thresholds for the period 2016-17, CFTs represent only 18% of the amount of the procedures, ITT 22.5% while DCAs represent more than 59.6% of these procedures (Figure 3.1).

Figure 3.1. Percentage of procedures used by public bodies below the thresholds for the period 2016-17 and 2015-16

Note: This data does not take account of agreements between public bodies; occupancy agreements entered into with or by the Société québécoise des infrastructures; contracts for the management of the government's real estate holdings; concession contracts for the exercise of a commercial activity on behalf of the government and for which royalties are paid to it; orders for goods resulting from a standing offer agreement, as well as requests for services resulting from an on-call contract.

Source: (Treasury Board Secretariat, 2017[4]).

To promote more competitive procedures below the thresholds but also to promote the integrity of the system, some OECD countries have introduced two thresholds, one above which the public entity must use the CFT, and one above which it must use a competitive and simplified procedure such as the ITT. Beyond the regulatory framework, it is necessary to support contracting authorities by providing them with clear guides or guidelines on the choice of procedure and the steps to be followed. Box 3.1 describes the system in place in Ireland, which has established guidelines applicable to all public bodies in order to inform them about which procedure should be followed according to each value. The Government of Quebec could therefore consider standardising the rules on the method of awarding contracts below the thresholds by developing guidelines to promote competitive procedures and by encouraging public and municipal bodies to introduce a harmonised intermediate threshold above which entities should be able to use the ITT.

Providing clear rules and guidelines for the use of all exceptions, particularly for the concepts of “confidentiality and protected information”

As in all regulatory frameworks for public procurement, Quebec has provided for exceptions to the CFT in specific cases. Agencies may use direct award contracts or ITT as appropriate. Although certain cases are common to several regulatory frameworks in OECD and non-OECD countries, they nevertheless require clear rules or guidelines to limit abuse of these exceptions. For example, in Quebec there is no regulatory framework defining the concepts of “confidentiality” or “protected information” in the context of public procurement. The OECD experience in several countries, including countries of the European Union and Norway, has shown that one of the main problems encountered by public officials relates to the definition of the term “confidential”. Characterising a procedure as confidential in order to award a contract to a specific supplier has a negative impact on the perception of public procurement as an open and fair process (OECD, 2019[3]). Therefore, to ensure the effectiveness and integrity of the system, the use of this exception requires clear rules and definitions. The Government of Quebec could provide a clear definition and guidelines for the concepts of “confidentiality” and “protected information” to limit the abuse of these exceptions. Box 3.2 describes international best practices for procedures that have confidential aspects.

Promoting more competition for CFT exceptions

A provision was introduced in the ACPB in 2017 for some specific exceptions, stating that a public body may award the contract following an invitation to tender when more than one contractor is available. More than ten cases are provided for in government regulations. This provision will therefore have a positive effect on competition and the integrity of the system. Indeed, as shown in the figure below, for the period 2016-17 (before the entry into force of this new provision), contracts awarded directly and by ITT represented, respectively, 19.5% and 0.7% of the total number of processes above the thresholds (which are therefore exceptions). This shows that ITT was not the preferred award method. For the period 2017-18, the number of ITT procedures increased to 4.4%, while direct awards decreased to 16.9%. These figures only partially reflect the benefits of the new provision, as it was not actually implemented until February 2018. The Government of Quebec should therefore continue its efforts to improve competition in awarding public contracts and to implement actions, such as further promoting ITTs, which is a more competitive procedure than direct awards.

Figure 3.2. Percentage of procedures used by public bodies above the thresholds for the period 2016-17 and 2015-16

Note: This data does not take account of agreements between public bodies; occupancy agreements entered into with or by the Société québécoise des infrastructures; contracts for the management of the government's real estate holdings; concession contracts for the exercise of a commercial activity on behalf of the government and for which royalties are paid to it; orders for goods resulting from a standing offer agreement, as well as requests for services resulting from an on-call contract.

Source: (Treasury Board Secretariat, 2017[4]).

In addition, with respect to the exceptional cases provided for in the regulatory framework, the Government of Quebec could the following ones by way of a CFT or ITT:

• contracts for legal services - ACPB and its regulations

• financial or banking services contracts - ACPB and its regulations.

Indeed, although the regulatory framework allows a public body to enter into direct award contracts, this does not prevent it from using a more competitive procedure such as the ITT or the CFT. However, these sectors are sufficiently competitive for these procedures to be conducted by CFTs. For example, in the Quebec business register, more than 500 businesses engage in activities related to legal services. In addition, in very specific and justified cases, such as contracts requiring a high degree of confidentiality or very specialised legal or banking services, a public body could even use the “confidentiality” or “sole sourcing” exception. Countries such as the United Kingdom have put in place multi-attribute framework agreements to meet this type of need in order to promote competition and limit the risk of integrity violations (Box 3.3).

Harmonising exceptions to CFTs between the regulatory frameworks for public and municipal bodies

For public bodies in Quebec, exceptions are provided for in the ACPB but also in its regulations. For municipal bodies, all exceptions are provided for in the relevant legislation (Cities and Towns Act (CTA), Municipal Code (CM), Transport Companies Act, Quebec Metropolitan Community Act and Montreal Metropolitan Community Act). The two regulatory frameworks governing exceptions to CFTs appear to be in line with international agreements to which public and municipal bodies are subject. However, there are some differences between the exceptions in the two regulatory frameworks. For example, the CTA, unlike the ACPB, does not provide exceptions for emergency situations or for reasons of confidentiality. In addition, certain exceptions such as sole sourcing are more detailed in municipal legislation than in the ACPB. Although these may reflect different types of procurement, a certain degree of homogeneity, including in terms of vocabulary, should be ensured in order to clarify the regulatory framework for the private sector, thus fostering the competitive environment and reducing the risks of integrity violations. The Government of Quebec should conduct a study to harmonise the exceptions to CFTs between the different regulatory frameworks.

Making a clear distinction between exceptions to CFTs and those falling under debarments and exemptions from the regulatory framework for public procurement

In addition to exceptions to CFT procedures, several regulatory frameworks in OECD countries also provide for debarments and exemptions from the public procurement framework. The exclusions generally relate to certain categories of purchases or expenditures that cannot fall under the scope of the public procurement legal framework because of transactions that do not correspond to a typical public procurement process. However, these exclusions still need to follow the principles of the regulatory framework. The exemptions relate to how the law applies to public and municipal bodies, including those that are not required to strictly follow the regulatory framework (OECD, 2019[3]). Quebec's regulatory framework provides only for exceptions to the CFT procedures and does not clearly distinguish between cases of exclusions or exemptions as in many regulations governing public contracts. For example, supply, service, construction or information technology contracts for the activities on foreign soil of a delegation general, a delegation or another form of representation of Quebec abroad are considered exclusions in many OECD regulations. The Government of Quebec would benefit from a clear distinction between procedures falling under exceptions to CFTs and those falling under exclusions and exemptions to the regulatory framework for public procurement. Box 3.4 provides an example of procedures excluded from the regulatory framework for public procurement in France.

Continuing efforts to enhance controls over the use of exceptions to competitive procedures

According to the regulatory framework, most exceptions to competitive procedures (sole sourcing, confidentiality, public interest), must be justified and authorised by the head of the public/municipal body. These bodies must put in place control provisions relating to the value of contracts and any related additional expenditure, particularly in the case of procurement through a direct award contract. There is no independent body to review and authorise the use of these exceptions at the level of individual agencies. The TBS exercises its monitoring authority over the SEAO to randomly verify compliance with the rules governing the contracting process, particularly in cases of exceptions to the CFT. Major efforts have been made by Quebec to limit the abuse of exceptions. Thus for 2016-17, 96% of the direct award contracts entered into by the public bodies analysed were justified by the correct legal or regulatory provision. However, the data vary by sector; for example, the figure is 92% for organisations in the health and social services network, which calls for the strengthening of internal controls over the use of exceptions to competitive procedures in order to get closer to attaining 100%.

Centralised publication of information on supplier performance

In order to obtain a public contract in Quebec, certain eligibility conditions are stipulated in the various laws and regulations depending on the purpose of the contract and its scope. These include holding the necessary qualifications, authorisations, permits, licences, registrations, certificates, accreditations and attestations (see “Using enhanced controls on the integrity of companies wishing to enter into contracts with public and municipal bodies” section in Chapter 4 for standards and approvals and the “Defining strategic contractual relationships with the private sector: a means of fighting corruption” section in Chapter 5 for AMP [Autorité des marches publics] authorisation). In addition to the eligibility conditions and in line with international best practice, Quebec has also introduced ineligibility conditions: a company that is found guilty of one of the offences set out in Annex I of the ACPB is ineligible for public contracts for a period of five years from the time that the guilty verdict is recorded in the register of companies ineligible for government contracts - RENA. These offences include acts of bribery, misrepresentation, fraud against the government and other instances of integrity violations. This register, which is kept by the President of the Treasury Board, can be consulted online: there were 764 companies were listed, 26% of which belong to the construction sector, as at 19/07/2018.

An objective assessment of a supplier's performance can identify irregularities in the performance of the contract and can be used as a warning system for integrity violations if this information is centralised. In Quebec, a best practice that is reflected in regulations and legislation is to use a supplier's poor performance evaluation to reserve the right to refuse participation in a tender process. For information technology contracts, government agencies must also record the supplier's positive or negative evaluation for contracts over USD 100 000 in a report. This provision is not included in all the ACPB's regulations, so the Government of Quebec would benefit from making it more widespread. In addition, as noted in the “Using a standardised environment to identify corruption risks during the contract performance phase” section in Chapter 5, this system is not centralised in the sense that a supplier's poor performance with one entity cannot be considered by a different public body in another procurement process. As stipulated in the Act to facilitate oversight of the contracts of public bodies and to establish the Public Procurement Authority– (Autorité des marchés publics, adopted on 1 December 2017), and in order to improve the system in place, the AMP's mandate is to centralise contractor performance evaluations so that public and municipal bodies can use them when evaluating bidders. However, for this provision to be effective, an implementing order must be adopted; the Government of Quebec would therefore benefit from implementing this system as quickly as possible in order to improve the efficiency and integrity of the system.

Promoting the use of multiple award criteria and incorporating the concept of the “most economically advantageous bid” in order to reduce the predictability of the bid

In Quebec, different rules apply depending on the subject matter of the contract. For example, in the case of contracts for professional services related to construction, public bodies are obliged to acquire the services of architects and engineers solely on the basis of the quality of the bid, since they are subject to mandatory tariffs set by the government.

In addition, for these organisations, the lowest compliant bidder rule generally applies. Although rules allowing the evaluation of the quality of the bid exist in some very specific cases, in practice it is the price criterion that is most frequently used. This elevates the risk of collusion and bribery since the main award criterion is predictable. The data provided by the TBS indicate that only 15% of the contracts of public bodies concluded between 2014 and 2017 include a quality criterion. Work is currently under way to propose new contractual rules and practices to public bodies to provide them with a wider range of tools to enable them to adapt their procurement strategy to the specific characteristics and particularities of each contract to be entered into (variable weighting of quality and price criteria).

For public and municipal bodies in Quebec, the regulatory framework allows for the evaluation of both price and quality. The concept of the most economically advantageous bid includes price, quality and other criteria that are not directly or separately taken into account by public bodies in Quebec, such as technical, aesthetic, environmental, social and technical assistance criteria, etc. Indeed, these criteria could in theory be considered under one of the “quality” sub-criteria. Moreover, by not grading technical aspects, public and municipal bodies do not encourage competition and innovation. The regulatory framework for municipal bodies further details the award criteria by providing for the use of “a system of weighting and evaluation of bids under which each bid is awarded a number of points based, in addition to price, on the quality or quantity of the goods, services or work, the terms of delivery, the maintenance services, the experience and financial capacity required of the insurer, supplier or contractor, or any other criteria directly related to the contract”. The Government of Quebec could promote the use of multiple award criteria beyond price or total acquisition cost and quality, and could consider the possibility of integrating the notion of “most economically advantageous bid” into the regulatory framework to encourage greater competition and reduce the risk of predictability of calls for tender. In addition, guidelines on the use of the different criteria could be developed for all activity sectors to guide procurement officials in their choice of criteria.

Considering the total acquisition cost criterion instead of the price criterion to ensure the true comparability of bids and establishing a Selection Committee when using the price criterion

When using the price criterion, care should be taken to ensure that the concept of total acquisition cost or life cycle costing (LCC) is used. This approach is being promoted in several countries, including countries subject to European Directives (Box 3.6 which provides Luxembourg as an example). Indeed, the integration of the different costs makes it possible to ensure better comparability of bids and limit the risk of integrity violations. In Quebec, despite the inclusion of this approach in certain regulations (Regulation respecting certain service contracts of public bodies – RCAOP, and the Regulation respecting contracting by public bodies in the field of information technologies – RCOPTI), its use remains very limited. The Government of Quebec could conduct awareness-raising and capacity-building activities to ensure greater dissemination and use of this concept. Officers responsible for enforcing contractual rules - RARCs could play an important role in promoting the use of the LCC.

For all tendering procedures that include a quality criterion, a selection committee meets to assess the quality of the various bids submitted. However, where the price criterion is used, there is no committee or other mechanism to ensure that decisions regarding the technical and administrative compliance of the bid are not taken by a single person. The Government of Quebec should therefore consider setting up a committee or another mechanism for tender procedures that include only the price criterion to evaluate the conformity of bids.

Publishing the entire regulatory framework for public procurement in Quebec on a single web page

The regulatory framework governing contract management for public bodies is published on the TBS site. It lists the various acts, regulations and orders covering public procurement in Quebec. Municipal legislation is published on the MAMH website, since the laws governing municipalities are the responsibility of the Minister of Municipal Affairs and Housing and not of the President of the Treasury Board. However, municipal laws are not accessible on the same page, although there is a link between the TBS site and the MAMH site. To ensure clarity of the regulatory framework, all statutory instruments should be listed and accessible from a single web page.

Providing more information on contract management, in particular for the upstream phase and the contract performance phase

The risks of integrity violations are present throughout the contract management cycle. Therefore, the publication of information about the contract management system and each procurement procedure allows for better monitoring of public expenditure by different stakeholders. In Quebec, a lot of documents and information are available on the SEAO. However, transparency could be improved in particular in the pre-tendering phase and during the performance of the contract.

Avoiding the use of public bid openings to reduce the risk of bid-rigging agreements between bidders

In Quebec, bid opening is made public. However, as stated in the OECD Recommendation on Fighting Bid Rigging, it’s necessary to “Design the tender process so as to reduce the opportunities for communication among bidders either before or during the tender process” (OECD, 2012[8]). Indeed, direct communication between suppliers should be limited as much as possible in order to reduce the risks of collusion. The Government of Quebec should therefore consider ways to limit the use of public bid openings while putting in place mechanisms to ensure that this step is carried out properly. One such mechanism is to conduct contract management procedures electronically. This eliminates the need for a public bid opening (see “Towards greater digitalisation of the contract management system in the service of integrity” section.

Providing consolidated information and statistics on the entire contract management system in Quebec

Currently, information on the contract management system can be found mainly in the statistical report on contracts of public bodies. Similar information at municipal level does not exist. The Government of Quebec will therefore have to consider providing consolidated statistical data. In addition to descriptive information, it is important to include performance monitoring indicators for the contract management system in general, including indicators related to complaints. Several OECD countries provide detailed reports on the contract management system, e.g. Chile, where the annual report on the management of public accounts in relation to public procurement includes various figures and indicators, but also information on current developments in the system based on three strategic priorities: efficiency and competitiveness, probity and transparency, and access to procurement opportunities (ChileCompra, 2017[14]).

Integrating additional functionalities into the SEAO and providing clear deadlines for the mandatory use of electronic bid submission

In recognition of the benefits of e-procurement, countries are increasingly digitising their contract management processes, covering the entire contract management cycle. Figure 3.3 shows the main functionalities covered by these systems in some OECD countries.

Figure 3.3. Functionalities of e-procurement systems in OECD countries

Source: (OECD, 2017[15]).

In terms of functionalities, Quebec’s electronic tendering system (the SEAO) seems to be used mainly as a platform for publishing notices and documents relating to public procurement. Indeed, the publication of CFT documents on the SEAO is mandatory for all public bodies, except for government enterprises (CFT notices only). The results of CFTs must also be published on a mandatory basis in the SEAO when this procedure is used.

Several subscription formulas are possible with monthly prices ranging from USD 6.65 to USD 119.95. The free formula allows consultation of certain documents and information only. The system does not yet have some of the key functionalities compliant with international best practices, in particular electronic reverse auctions, electronic catalogues and electronic invoicing. Given their advantages in terms of efficiency and integrity, the Government of Quebec should consider integrating these functionalities into future developments of the SEAO. Following Recommendation 1 of the Charbonneau Commission, responsibility for establishing the operating rules of the SEAO will be transferred to the Authority, who will work on this jointly with the TBS, six months after the CEO takes office.

A key functionality for improving integrity in the contract management system is the electronic submission of bids as it reduces contact between public officials and suppliers, improves the efficiency of the system, and increases competition. Quebec introduced this functionality on 18 June 2018, however current regulations do not require bidders and public bodies to use it. Moreover, no gradual approach is planned for the roll-out of electronic submission of bids. The Government of Quebec should provide clear deadlines for bidders to send their bids electronically for all tenders, regardless of the amount. For example, the European public procurement directives published in 2014 have set clear deadlines for the use of electronic tendering: from 1 April 2017 for central purchasing bodies and from 1 October 2018 for all other purchasers (European Commission, 2018[16]). The electronic submission of bids may also enable the Government of Quebec to centrally collect data on bidders and potential suppliers, to implement key performance indicators and identify certain warning signs related to collusion or bribery.

Developing an electronic system for expenditure below the minimum threshold

The publication of the results of any contract awards on the SEAO is currently only mandatory for contracts with a value equal to or greater than USD 25 000. Information on expenditure below this threshold is only available in the internal information system of each public/municipal body or in the estimates of expenditure in the National Assembly, which makes centralised use of this data impossible. To collect data and ensure the integrity of the system for these expenditures, the Government of Quebec could eventually develop a module in the SEAO or a specific electronic system. For example, countries such as Italy which have faced considerable challenges in terms of strengthening integrity, have set up an electronic market place for below-threshold purchases. (Box 3.9)

Developing a supplier database

In a contract management system, it is important to have a supplier database to provide all organisations with access to a larger number of potential suppliers and limit the risk of integrity violations. For private companies, registration in the database can help them avoid having to provide administrative documents for each bid submission. There is no supplier database in Quebec, while at the federal government level, one does exist. The Government of Quebec could therefore consider developing such a database. Indeed, the development of such a database would also be very useful for ITT and direct awards in order to identify more suppliers. For example, South Korea has an electronic public procurement system called KONEPS. This system has a supplier database that public entities can use to search for potential suppliers; it also means that companies do not need to send administrative documents for each new submission once they have registered in the system (PPS, 2014[17]). In France, a similar system has also been put in place via the “tell us once” principle: any information on suppliers that is already held by a French administrative body will no longer have to be requested from participants as part of an electronic bid (Ministry of Economy and Finance, France, 2017[18]).