Business to Government in Canada | SME Standing Offers

SME Standing Offers | Government of Canada

How does the federal government buy its goods and services? For the Small to Medium Enterprise (SME) there are a number of approaches, and these may also vary depending on whether you supply goods or services.

In the main, Public Works and Government Services Canada is the organization that does the buying for the government. The department is divided into organizations, whose focus is on specific product and service areas, and to help SME’s, an ‘Office of Small and Medium Enterprises’ has been established. Clearly, the procurement system is sufficiently complicated, that the government feels it necessary to provide specific advice and guidance to companies who want to do business with it.

The procurement landscape has greatly changed over the last several years, but the focus of government on “lowest cost” procurement has not. One way the government has of driving costs down is to establish a procurement method called a Standing Offer. In this approach, tenders are called for the supply of goods and services which are common across all departments – things such as pens, pencils, cars, and consulting services. In order to supply to the government, an SME must compete with other companies providing the same things. At the close of the bidding period, companies who meet the specifications for the product are ranked in order of pricing, lowest cost first. This is done in order to obtain the bets price for government, but it has the effect of reducing the capacity of small business to compete for business. Larger companies which can realize economies of scale will generally have a lower unit cost, and thus be higher up the list and more likely to get business, since departments wanting the product have to start with the first supplier and work down until they get to one who can meet the need.

As an example, let’s say the government wants to have Standing Offer for consulting services, so that it can be tendered once a year thereby cutting the government’s cost to tender, and the suppliers’ cost to prepare proposals. To make this as broad as possible, the specification for the types of professional services which a company needs to have available is very comprehensive. To be able to respond and get on the list of qualified suppliers, a company has to have a broad base of qualified professionals in many fields – audit, evaluation, systems design, web development, and so on. While the intent to save taxpayer money is laudable, many sole proprietorships cannot compete based on the broad specification, and they have to form alliances with larger companies. The larger companies can then meet the specification, and have the associates necessary to respond to department requirements. The unintended effect, of course, is to drive the cost of engaging such staff up for departments, since the larger company typically sub-contracts the work, and adds a substantial fee to the price of the sub-contractor. But remember, the company with the lowest costs goes to the head of the list, and the remainder follow in order of price.

The way this works, then, is a department having a requirement for consulting help has to go to the list of companies on the appropriate Standing Offer and start with Company 1. If Company 1 is completely busy, the department goes to Company 2, and so on until at Company X the resourcesare available.

The same practice is true whether your company offers pencils or expertise.

How does the federal government buy its goods and services? For the Small to Medium Enterprise (SME) there are a number of approaches, and these may also vary depending on whether you supply goods or services.
In the main, Public Works and Government Services Canada is the organization that does the buying for the government. The department is divided into organizations, whose focus is on specific product and service areas, and to help SME’s, an ‘Office of Small and Medium Enterprises’ has been established. Clearly, the procurement system is sufficiently complicated, that the government feels it necessary to provide specific advice and guidance to companies who want to do business with it.
The procurement landscape has greatly changed over the last several years, but the focus of government on “lowest cost” procurement has not. One way the government has of driving costs down is to establish a procurement method called a Standing Offer. In this approach, tenders are called for the supply of goods and services which are common across all departments – things such as pens, pencils, cars, and consulting services. In order to supply to the government, an SME must compete with other companies providing the same things. At the close of the bidding period, companies who meet the specifications for the product are ranked in order of pricing, lowest cost first. This is done in order to obtain the bets price for government, but it has the effect of reducing the capacity of small business to compete for business. Larger companies which can realize economies of scale will generally have a lower unit cost, and thus be higher up the list and more likely to get business, since departments wanting the product have to start with the first supplier and work down until they get to one who can meet the need.
As an example, let’s say the government wants to have Standing Offer for consulting services, so that it can be tendered once a year thereby cutting the government’s cost to tender, and the suppliers’ cost to prepare proposals. To make this as broad as possible, the specification for the types of professional services which a company needs to have available is very comprehensive. To be able to respond and get on the list of qualified suppliers, a company has to have a broad base of qualified professionals in many fields – audit, evaluation, systems design, web development, and so on. While the intent to save taxpayer money is laudable, many sole proprietorships cannot compete based on the broad specification, and they have to form alliances with larger companies. The larger companies can then meet the specification, and have the associates necessary to respond to department requirements. The unintended effect, of course, is to drive the cost of engaging such staff up for departments, since the larger company typically sub-contracts the work, and adds a substantial fee to the price of the sub-contractor. But remember, the company with the lowest costs goes to the head of the list, and the remainder follow in order of price.
The way this works, then, is a department having a requirement for consulting help has to go to the list of companies on the appropriate Standing Offer and start with Company 1. If Company 1 is completely busy, the department goes to Company 2, and so on until at Company X the resourcesare available.
The same practice is true whether your company offers pencils or expertise.

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