Requestfor Printers

You have been retained as an arbitrator by the Procurement Department of Hydro Two,an energy company who had issued a Request for Tender (RFT) for photocopiers. Yourresponsibility is to listen to the situation and provide a binding resolution. Your decisionwill resolve this issue and will setprecedence forfuture disputes.

The Printers RFT was issued as a cooperative procurement with Hydro Two acting asthe leading agency. Each of the agencies involved have their own budgets and haveprovided their usage information to Hydro Two. Internally, the Procurement Departmentreports to Finance and must consult with the Procurement Manager for final approvalsonprojects ofa certainvalue.

Throughtheirneedsanalysis,theProcurementDepartmentdeterminedthatitwouldbebest to award for two (2) years at a time so that any technology changes could becaptured in future contracts. The anticipated contract dates would be from April 1 toMarch31.The group determined they needed the following units:

• Group
  • Group 1- Plain Bond Copiers
  • Group2- Magazine-Finish Copiers(Glossy PaperCopiers)

• Type(Features)
  • Type 1- Copierspossess minimal features
  • Type 2- Copiershavetwo-sided copying capability
  • Type 3- Copiershave ability to reduce size ofdocument

• Class(Machine Speed)
  • Class1- Low-speed copiers
  • Class2-Low-speed/Low-volume Copiers
  • Class3- Acceleratedlow-speed/Low-volume Copiers
  • Class4- Intermediate-speed Copiers
  • Class5- Accelerated Intermediate-speed Copiers
  • Class6- High-speed Copiers
  • Class7- Accelerated High-speed Copiers

• PriceStructures
  • Monthly Rental
  • Annual Rental
  • Two-yearlease
  • OutrightPurchase

Suppliers were not required to bid on all units which meant there could be over 40differentpossibilitiesofunitconfigurations in the bids.Forexample:

Group1,Type1,Class 1 isa plain-bond,low-speed copierwithminimal features

In addition to the over 40 possible combinations, there are four (4) price structures thatalso need to be considered and analyzed.

This is a major analysis job, especially when you are told that the RFT was issuedopenly to the public on the eprocurement system and 12 suppliers responded. TheProcurement Department intended to establish this contract by awarding to the lowestbidder,creating a single award.

APotentialIssueArises

The RFT pricing was automatically posted on the eprocurement platform which allowedthe bidders to instantly know who the lowest bidder was at time of RFT close. After theanalysis was completed by the Procurement Department, the award was confirmed andthe eprocurement platform was updated to reflect the award. One of the bidders,Nearox, who was a major participant and competitor in this field, filed a disputerequesting a formal administrative hearing to challenge the award of the copier contractto a single bidder. Nearox's submission had some units at a lower price than GoldenCopier; they had also indicated that Hydro Two would need to award to multiplesuppliersas they could notprovide all the copiersindicated.

Golden Copier Company, the lowest compliant bidder, disagreed with Nearox's attemptto delay the formal award and requested that Hydro Two move forward with awarding tothem and deal with Nearox later. They were anxious to receive the orders from thecooperativeprocurementgroup.

Nearox was following the dispute process outlined in Hydro Two's procurement policybut even Hydro Two's Finance Director wanted to move on and award to Golden Copieras itseemed veryclearthatNearox was wrong.

CopierBackgroundatHydroTwo

Historically, copiers were supplied to the departments and agencies through a multi-awardcontractwithpricingestablished by the ProcurementDepartment.Justunderfive

1. years ago, the Procurement Department decided to solicit competitive bids for asingle year, single award contract for the general copiers. The ProcurementDepartment's policy states thatif one or more responsive bids within a category arereceived, a contract shall be awarded to the lowest responsive bidder; if, however,competitivebidsarenotreceivedinacategory,multipleawardsmaybeissuedtosome

or all qualified suppliers for that particular category only, at the discretion of theProcurementManager.

Last year, the Procurement Department solicited competitive bids and awarded acontract to the single lowest compliant bidder for each category in which it received atleast one compliant bid per category. In categories where no complaint bids werereceived, the Procurement Department chose to negotiate with the lowest-priced bidderfrom another category. If the bidder agreed to withdraw the terms that disqualified thebid, the Procurement Department would make a single award in the category to thatparticular bidder. However, if all bidders in the category refused to withdraw non-compliant conditions, no award was made. This process was deemed successful, as nomultiplecontracts were made on the currentcontract.

ThreeDifferentViews

To further the discussion around the dispute, here is the view from the three partiesinvolved - Nearox, Hydro Two's Procurement Department, and Golden CopierCompany.

TheProcurementDepartment:

The Procurement Department cited seven (7) major issues to support its copierpurchasedecision through single contractcompetitive bidding,theyinclude:

1. Single awards ensure fair competition and an equal advantage to all qualifiedsuppliersdesiring to do business with the municipality.
2. Competitivebidding thatleads to a single award is reasonable since-
   1. The majority of the cooperative procurement department and agencyneeds can be satisfied by devising categories based upon machine-speed,copy volumes,and features.
   2. Using bid categories based upon machine-speed and feature, competingvendorscan subsequently offerfunctionally similarequipment.
   3. The market demonstrates that competitive pricing is available on copiers.Therefore, by competitively bidding the copier term contract, Hydro Two isassuredthe benefitoflower,competitive pricing.
   4. Single awards promote uniformity and standardization in the terms andconditions in municipal contracts for copiers. Multiple award contracts promotenumerous and confusing conditions, since each supplier would use its ownstandardcontract.

1. Single award contracts ensure the agencies have maximum compliance with itsmaintenance and service conditions. This avoids the duplication of maintenanceandservice provisions contained in individualsupplier's catalogues.
2. A single award permits the user department or agency acquiring the copier toreadily identify the lowest priced copier with the features and speed required bytheuserdepartmentoragency.
3. Rulesrelating tothis areasupported theProcurementDepartment'sview.

Nearox

Nearox's view maintains that the proposed system of single awards for copiers did notpromote the efficiency and economy of the cooperative group. Nearox felt that theProcurement Department should enter into multiple-award contracts with each qualifiedbidderand allow fortestingand approval ofcopiers.Nearoxsupportedit's view with four

1. majorreasons:
   1. Copiers are not interchangeable. Differences among copiers make acquisitionsbased solely on the direct costs of copiers unreasonable, uneconomical, andinefficient. Nearox believes a single award system requires its copiers and thecompetition's to be compared as equals regardless of any dissimilarities ordifferencesthatmay exist.
   2. Copiers vary not only in terms of price but also in terms of quality of copiesproduced, dependability, service experience, and capabilities of suppliers toprovide necessary follow-up after acquisition. Nearox claims these criteria aredeemphasized under a single award approach and can properly evaluated andactedupon only through a multiple award system.
   3. User departments and agencies have a wide variety of circumstances and needsthat affect their copier requirements. These needs are best known only to theuser departments and agencies, which have no significant say under the singleaward system.
   4. The single award approach has superficial appeal because of apparent costsavings. However, when it is realized that copiers are not all alike, it is evidentthat the apparent savings are unrealistic, since no yardstick on cost savings canbe established.

GoldenCopierCompany

The Golden Copier Company view reasoned for dismissal of the Nearox dispute arguingthataccording to theirinterpretation ofthe policy:

1. The Procurement Department had no discretion to decide on a multiple awardcontract,ratherthan a single award contract.
2. The public policy strongly favoured single award contracts and such contractswererequired except:
   1. Whencompetitive bids were solicited and none received
   2. In the case ofan emergency
   3. Ifthe itemto be acquired was to be a single-source commodity

Studentsarerequiredtoreadandanalyzethecaseandthencompletethebelow;marksanddetailsareindicated in therubric.

1. Identifytheissue
2. Analyzetheissue
3. IdentifyandanalyzeHydroTwo'soptions
4. Explainwhatthearbitrator'sdecisionisandwhytheyaremakingthisdecision
5. Suggestoptionsforavoidingor reducingtheissuesinthefuture

Studentsarerequiredtousepublicpurchasingconceptsandtheoriestostrengthenanalysis.