Tendering policy on federally funded capital projects for First Nations on reserve

1.0 Purpose

1.1 This directive states the policy of the Department of Indigenous Services Canada (ISC) regarding the tendering policy on federally funded capital projects (excluding housing and infrastructure funded by or under the responsibility of the First Nations and Inuit Health Branch) for First Nations on reserve.

1.2 This updated version comes into effect on August 1, 2021 and supersedes all versions before it. Projects approved for funding prior to August 1, 2021 will continue to comply with the tendering policy in place at the time of approval and are not required to comply with the updated policy.

2.0 Scope

2.1 This directive is applicable to ISC staff involved in the funding of and assisting with the planning, development and implementation of capital projects by First Nations, excluding First Nations capital projects funded by or under the responsibility of the First Nations and Inuit Health Branch, and First Nations capital projects where the departmental staff are directly involved in the planning, development and implementation through activities such as hiring a project manager or other professional services for a project.

3.0 Authorities

3.1 Letter from the Minister of IAND (now Minister of Indigenous Services) to all First Nations Chiefs and Councils, on Accountability and Financial Transfer Arrangements, in particular, the competitive process in contracting for on-reserve capital works, dated June 4, 1996.

3.2 Increased Ministerial Authority and Accountability, 1990.

4.0 Issuing Authority

4.1 This directive is issued under the authority of the Senior Assistant Deputy Minister, Regional Operations Sector.

5.0 Definitions

5.1 Indigenous contractor/supplier: as defined by the Procurement Strategy for Indigenous Business (PSIB) a sole proprietorship, limited company, cooperative, partnership or not-for-profit organization where:

• at least 51% of the firm is owned and controlled by Indigenous people
• at least 1/3 of the firm's employees, if it has 6 or more full-time staff, must be Indigenous

If a firm is operating under a joint venture or consortium:

• at least 51 % of the joint venture or consortium must be controlled and owned by an Indigenous business or businesses as defined above.

A firm must certify that it meets the above criteria and it must provide proof of eligibility upon request.

5.2 Invited tender: the tender is limited to a selected list of contractors who are invited to submit a bid on the project. At least 2 qualified firms should be invited to bid to ensure an adequate level of competition.

5.3 Open or public tender: open tenders, sometimes referred to as public tenders, are publicly advertised, usually through newspapers, postings in local construction association offices or a public electronic bidding service. Open tenders must allow all qualified and interested contractors an opportunity to bid on the project. Once advertised, some individual contractors may be contacted to ensure that they are aware of the project being tendered, should they wish to participate in the tendering process. Public advertisement or notification of a project must be wide enough to ensure a sufficient number of qualified and interested contractors are available so that a competitive tendering process is achieved. Bids submitted by qualified and interested contractors who may have become aware of the project and whose place of business may be outside the geographical area of advertisement cannot be refused.

5.4 Tendering process: the procedure by which tender documents, or specifications describing the requirements and qualifications necessary under a project, are put in the hands of contractors or suppliers who will be interested in preparing and submitting bids to undertake the project. Under a competitive process there are 2 different methods used for carrying out a tendering process. The first method is an invited tender and the second is an open tender.

5.5 Value for money: normally, the lowest valid bid price, which incorporates specified provisions for local content, committed to by the contractor or supplier in carrying out the project. Other factors that can be taken into consideration in the assessment of value for money may include but are not limited to asset life cycle costing, contractors' record of past performance, economic development opportunities of the community, environmental impact and anticipated project outcomes.

It is important that these assessed factors be clearly identified and incorporated in the tender documents and the evaluation criteria.

Tender documents may also include basic requirements with respect to areas such as the use or availability of local materials, services, contractors and labour, as well as skill enhancements under apprenticeship or facilities operator programs. Bidders will have to incorporate these requirements within the contract and their bid price to ensure a valid bid.

Specific training and economic development initiatives should be coordinated with planned capital works, but would not generally be a part of the contracting process. For example, training to provide an individual with the basic skill sets needed should be planned and carried out in advance of a capital project. The project would then provide job opportunities and on-the-job experience for the trained individual. This could be done as part of an apprenticeship program.

5.6 Sole source: a non-competitive tendering process that can be used when one of the following conditions warrant:

• pressing emergency in which delay would be injurious to the public interest
• professional services and construction contracts estimated expenditure does not exceed the following values and the use of open or invited tenders has been assessed as not suitable for the project:
  • for construction: $200,000 for general contracting approach and $50,000 for management approach
  • for professional services: $100,000
• the nature of the work is such that it would not be in the public interest to solicit bids
• only 1 person is capable of performing the contract

The exception should only be invoked where patents, copyright requirements, or technical compatibility factors and technological expertise suggest that only 1 contractor exists.

5.7 Professional services: services which are provided by firms or individuals with a high level of ability and knowledge in a professional, scientific, technical or managerial field. These services may include engineering, architectural, project management, contract administration, studies or investigations, planning, design, preparation or supervision of the construction, repair, renovation or restoration of a work.

6.0 Policy

6.1 Projects administered by First Nations under all funding arrangements

Federally funded capital projects administered by First Nations must be supported by the First Nations' own tendering policies which should recognize the requirements as stated below. The policies should encompass the key principles and mechanisms applied by the public and private sectors in tendering projects, while allowing for opportunities to incorporate local socio-economic benefits.

The following is a list of principles that must be included in First Nations tendering policies:

• a commitment to deal with all potential bidders on an equitable basis
• a commitment to establish specific criteria within which an open tendering process will be followed based on good contracting principles which take into consideration the dollar value, the complexity of the work to be undertaken and the number of firms within the area of competition who are able to meet the level of expertise and qualifications necessary
• all tender documents will be treated confidentially
• all tenders will be opened in public with appropriate safeguards
• all tenders will be assessed on the basis of a clear, consistent, predefined evaluation criteria

In addition, First Nations may also want to consider outlining the following within their tendering policies:

• a commitment to maximize the use and development of available First Nation resources or skills
• a commitment to develop and review annually a source list of qualified local and Indigenous suppliers from which to invite bids for projects under $1 million
• a discussion of the different approaches to deliver projects (such as day labour, construction management and general contractor).

The First Nation's tender and contract procedures for a given project must include designation of the "prime contractor" in relation to health and safety regulations. Depending on the construction approach selected for the capital project, either the general contracting management firm or the construction management firm would normally assume these health and safety responsibilities.

6.2 General contracting approach

For federally funded capital projects using the general contracting approach, the "Framework to Guide the Development of a First Nation Tendering Policy" applies. The tendering requirements are as follows:

6.2.1 Projects where construction cost is over $1 million. For capital projects excluding housing, which are funded in whole or in part by federal government contributions, open tenders must be called and publicly advertised (see advertising area coverage in open tenders, section 5.0 Definitions) to allow interested contractors an opportunity to bid on the project.

6.2.2 Projects where construction cost is between $200,000 and $1 million. The tendering process must have considered at least 1 of the 2 competitive tendering options:

• an open tender through public advertisement
• an invited tender where bids are invited from a selected list of at least 2 qualified contractors, which could be qualified Indigenous contractors or suppliers

6.2.3 Projects where construction cost is under $200,000. Contracts must be awarded in a manner that ensures value for money. The tendering process may be an open or invite tender, or a non-competitive process (sole-source contracting) if conditions warrant.

6.3 Construction management approach

Where a First Nation intends to implement a capital project using the construction management approach that is, a First Nation or construction manager assumes the role of a general contractor for the project, the Operational Parameters for the Review and Evaluation of Construction Management Projects apply. The First Nation must clearly demonstrate that the approach is more cost effective than general contracting.

In addition, the First Nation must have demonstrated adequate financial, technical and management capacities and it must also engage the services of a fully qualified construction manager.

If a First Nation requires approval for a project by the regional office and they want to use construction management, then the project must be assessed and approved by ISC regional office according to the "Operational Parameters for the Review and Evaluation of Construction Management Projects" based on a project specific business plan, prepared and submitted by the First Nation in accordance with the parameters.

6.3.1 Establishing resource levels

Should First Nations wish to use construction management approach, the resourcing package for projects funded by ISC can be broken down into 2 components:

Component 1 - Competitively awarded procurement:

The maximum eligible funding for the competitively awarded procurement portion of a construction management project will be the sum total of all competitively awarded works, plus limited agreed-to contingencies. Appropriate justification will be required when establishing a contingency amount. For all projects, a minimum of 90% of the competitively awarded procurement works must be competitively tendered before the resourcing level is finalized and work begins. For multi-year projects, at least 90% of the competitively awarded procurement works to be completed in the current fiscal year must be competitively tendered before the resourcing level is finalized and work begins.

The results of the competitive award process must be reviewed by ISC against the Class B estimates that were submitted at the time of effective approval. Approval of final resource level (project budget) will be subject to the satisfactory review of this information.

The contract limits for the competitively awarded procurement portion of the construction management projects are:

• for contracts over $200,000, open public tender
• for contracts between $50,000 and $200,000, invited or public tender
• for contracts under $50,000, invited or public tender or sole source if conditions warrant

Component 2 - Own-forces procurement:

This component allows for the procurement of goods and services directly utilizing the First Nation's local labour, equipment and materials, excluding private and band-owned business enterprises. To be eligible to use their own forces, the proponent First Nation must demonstrate its capacity to fully complete all aspects of the sub-trade work in accordance with the standards and specifications contained within the approved project submission, in providing skilled labour, appropriate equipment or the required material.

In order to establish a market value to the work being undertaken using own-forces procurement, an independent evaluation is required. In the absence of a competitive process for this type of work, the evaluation is a check to ensure that value for money is being achieved.

Where the value of the sub-trade work is under $200,000, which is the threshold established for public tendering in the competitively awarded procurement, the architect or engineer, ISC and the First Nations must agree to the value of work identified for that sub-trade based on industry standards and market value.

Where the value of the sub-trade work is over $200,000, the services of a Professional Quantity Surveyor are to be retained. An independent Professional Quantity Surveyor is a person who, by training and experience, is capable of giving advice on construction cost planning, preparing cost estimates and value analysis, setting up cost control systems and acting as an expert witness. Both the proponent First Nation and ISC must agree in advance on the professional quantity surveyor credentials and services to be provided.

6.4 Professional services resource levels

The contract limits for the professional services portion of federally funded capital projects (excluding housing) are:

• for contracts over $500,000: open public tender
• for contracts between $100,000 and $500,000: open or invited tender
• for contracts under $100,000: in a manner that ensures value for money through an invited or public tender or a sole source contracting if conditions warrant

7.0 Responsibilities

7.1 ISC headquarters:

• establishes and updates policies and procedures for the effective and efficient management of the tendering policies for federally funded capital projects for First Nations on reserve
• provides advice and assistance to regional staff on tendering policies for federally funded capital projects for First Nations on reserve

7.2 ISC regions:

• ensure that each Band Council develops and adopts a local tendering policy, and that each policy is submitted to ISC regional offices for review and acceptance in order to confirm that the minimum departmental requirements outlined in the documents Framework to Guide the Development of a First Nation Tendering Policy and Operational Parameters for the Review and Evaluation of Construction Management Projects (see Appendix A) have been met
• review and approve business plans for construction management projects submitted by First Nations
• ensure First Nations: chief and council
  • manage the project according to their tendering policy, if on general contracting or follow the Operational Parameters for the Review and Evaluation of Construction Management Projects, if that management approach is more cost effective and appropriate
  • has identified the prime contractor in the tender and contract documents for health and safety requirements
• where a First Nation has not adopted a tendering policy, the region is responsible to ensure that the capital projects undertaken by the First Nation meet the requirements of the departmental tendering policy

8.0 Enquiries

8.1 Matters related to the interpretation of this directive are to be referred to the director, infrastructure policy modernization and change management, at ISC Headquarters.

8.2 Requests for additional copies of this directive should be addressed to the ISC regional offices.

9.0 References

Appendix A - List of reference material

1. Framework to Guide the Development of a First Nation Tendering Policy
2. Operational Parameters for the Review and Evaluation of Construction Management Projects
3. Construction Contracting Guidelines for First Nations and Aboriginal Communities (CN1)
4. Contracting for Professional Services (CN2)
5. Contracting for Non-Professional Services (CN3)
6. First Nations and Aboriginal Communities Project Management Manual (TID-PM-01) (contact regional offices for a copy)

Sample tendering policies are available from ISC regional offices.