[a] A public private partnership (PPP) where design, construction, financing, maintenance and operation are provided by the proponent.

Transcription

1 FAIRNESS MONITORING GENERAL 1. Fairness monitoring is becoming common where an entity, usually government, quasi-government or a large institution (sponsor), is embarking upon a major project requiring the involvement of an outside party (proponent), and chooses to select the proponent in a competitive open bidding process. The project often involves construction of buildings, roads or physical infra-structure but may also be for the provision of goods or services. The project may be carried out in a variety of ways: [a] A public private partnership (PPP) where design, construction, financing, maintenance and operation are provided by the proponent. [b] The proponent provides the design and then undertakes construction of the design, known as design/build. [c] The sponsor provides detailed plans and specifications of the project, and the proponent tenders the price it requires to construct it. 2. The reality is that in today s world, these projects have become very complicated and frequently the proponents that choose to become involved, are consortiums made up of national and international companies. 3. The sponsor is concerned that at the end of the competitive open bidding process, it can be verified that the process culminating in the choice of a successful proponent was fair and even-handed. In other words, it must be demonstrated, to use the vernacular, that the bidding game took place on a level playing field, and give all the players the same reasonable chance to win.

2 2 4. To ensure that this concern is satisfied, sponsors are increasingly turning to the use of fairness monitoring. The fairness monitoring occurs as follows: [a] The sponsor will hire an independent party whose function will be to monitor the bidding process from the outset to the selection of the successful proponent and, perhaps, to the close of dealings with that proponent. [b] The fairness monitor will monitor all aspects of the process. [c] The fairness monitor will report at the end of the process, and perhaps on an interim basis if required, as to the fairness of the process. [d] The report(s) will be public so as to offer assurance and comfort to the proponents and the public (where government contracts are involved) that the process is fair. What follows is an effort to describe and explain in some detail, what is required in fairness monitoring and how it is carried out. THE PROCESS 5. There doesn t appear to be unanimity as to when, for fairness monitoring purposes, the process begins and when it ends. However, we identify the following elements, all of which, in our view, are properly included in the open competitive bidding process: i. Defining the project ii. Project announcement and Request for expression of interest (RFEOI) iii. Request for qualification (RFQ) iv. Request for proposal (RFP) v. Conflicts of interest and confidentiality vi. Sponsor/proponent communications vii. Evaluations

3 3 viii. Post-selection activity ix. Fairness monitor reports A sponsor may choose to have fairness monitoring in some but not all of these elements. These elements will be addressed in detail in this article. THE ROLE OF THE FAIRNESS MONITOR, AND WHY MONITOR 6. As mentioned above, the use of fairness monitoring is becoming more and more widespread. However, there is some inconsistency in the labels given to those performing the function. Sometimes, the title fairness auditor is used. Also in use are fairness advisor and fairness commissioner. 7. In the business world, the word auditor has taken on a fairly narrow meaning, as evidenced by its use in the practice of accounting, and in the activities of those in the role described as auditor general. To over-simplify, the term auditor frequently implies an active hands-on investigating function which analyses past activity, with a view to influencing future activity. While obliged to be a diligent observer, the fairness monitor s role is more passive, with the emphasis on reporting on what has happened, not on what should happen in the future. Further, unlike a conventional auditor, the fairness monitor, as set out in the following paragraph, may have played a part in what has happened. 8. At the outset, it must be unequivocally stated that it is not the role of the fairness monitor to offer advice on any legal, economic, management, technical or financial matter. The sponsor must look elsewhere for counsel in such matters. What if the sponsor asks the fairness monitor for advice on a matter that involves fairness? While there may not be unanimity on the following point, it is our view that it is within the scope of the role of the fairness monitor to relate to the sponsor that a proposed course of action may result in a negative comment in a report. This may take place in response

4 4 to an inquiry from the sponsor or may be initiated by the fairness monitor who has seen or heard something impacting on fairness. The sponsor may then go back to the drawing board and revise or delete the proposed course of action. In a broad sense, that might be construed as the giving of advice. Without getting into a debate on semantic technicalities, we choose to describe such an act as informing, rather than advising the sponsor, though we are not uncomfortable with the advisor characterization. We suggest that providing information to the sponsor in this way, will have the result of enhancing the fairness of the process. Therefore, it is in the interests of all parties that this be done. 9. To summarize, we are of the view that while nothing of substance turns on it, fairness monitor, rather than fairness auditor or fairness advisor, is the appropriate designation and responding to and communicating with the sponsor with information along the lines described above falls within the scope of fairness monitoring. Regarding the designation fairness commissioner, it is our view that the word commissioner is sufficiently generic and neutral that monitor, auditor or advisor roles could be properly so described. 10[a]. Independence: The complete independence of the fairness monitor is crucial. To insure it, the fairness monitor must not in any way be beholden to the sponsor or be subject to its direction. This, of course, applies with equal force to the proponents. Regarding the sponsor, however, a concern arises because the fairness monitor is engaged by it. How is this concern to be resolved? The answer is that the contract of engagement between the sponsor and the fairness monitor must make the independence clear and unequivocal. 10[b]. The fairness monitor must, of course, be free from any bias for or against the sponsor or any proponent, and free, as well, from any reasonable apprehension of bias.

5 5 Noone (sponsor, proponent or anyone else) should have any reasonable ground to suspect that the fairness monitor has a bias. Therefore, the process for selecting the fairness monitor should be open and fair. 10[c]. It must be made clear to all that the contract of engagement will govern the duties of the fairness monitor. In addition, any later RFQ or RFP should acknowledge those duties, their extent and any limitations, so that there is no misunderstanding as to what they are. The proponents, as well, should clearly understand the specifics of the role assigned to the fairness monitor. FAIRNESS: ITS THREE ASPECTS IN THE COMPETITIVE BID PROCESS 11. Absence of bias: The evaluators of competing bids must be unbiased. This means that they are not influenced by preconceived ideas or conflicting interests in favour of a particular conclusion. The usual court-approved test applies: Would a fair-minded and well-informed person have a reasonable suspicion that an evaluator was moved to a conclusion by considerations not relevant to the approved criteria? 12. Level playing field: The evaluation must offer a level playing field, i.e., be evenhanded, in the sense that all bidders get the same information and the same opportunities. This must be reasonable and be consistent throughout the process. 13. Reasonable decisions: Each decision evaluating a bidder, must, in every aspect of the evaluation, be supported by logic and soundness. Each decision must be one that a well-informed and reasonable person could make.

6 6 THE BIDDING PROCESS i. Defining the project 14. This element falls to the sponsor. It will involve legal, economic, technical, financial and even, perhaps, political considerations. It will certainly involve detailed input from the sponsor s own personnel and will frequently require a number of specialized external consultants. It may manifest itself in what is called a business case or a business plan. As stated in paragraph 8 above, we view participation in this element as outside the scope of the role of fairness monitor. Further, participation by the fairness monitor in these early stages of the project, makes him/her more vulnerable to allegations of lack of objectivity in reporting (e.g., you are reporting on the process you designed. ) ii. Project announcement and RFEOI 15[a]. Once a project utilizing the competitive bidding process has been announced, a sponsor will be obliged to identify potential proponents. This can result in advertising in media known to come to the attention of such proponents, e.g. daily newspapers, trade journals. It can happen less formally by the sponsor putting out the word to the trades. There will frequently be the publication and circulation of a document called a RFEOI. In any event, it is our view that the fairness monitor should be involved at least to the extent that he/she can report on the scope of the effort to identify, i.e., was the target group of potential proponents unduly narrow? was there any bias either for or against any potential proponent? This might include reviewing the wording of advertising or RFEOI wording and learning where and how they were circulated. 15[b]. When potential proponents have been identified, the sponsor will determine to whom it wishes to submit Requests for Qualification. iii. Request for Qualifications (RFQ)

7 7 16[a]. This document provides sufficient details and information about the proposed project to enable potential proponents to determine if it is of interest to them. It will usually provide information about the procurement process. It will most certainly describe the details that the sponsor needs to determine if the proponent is qualified to take on the project, and will probably set out the format in which those details are to be provided. We are of the view that prior to publication, the draft RFQ should be reviewed by the fairness monitor for the purpose of ascertaining if the implementation of any part of it might attract a negative comment relating to fairness 16[b]. When responses to the RFQ have been received from potential proponents, the sponsor must then evaluate to determine a short list of proponents who will be invited to submit a bid on the project. Evaluation will be done by a committee specifically charged to do so. Depending on the size and complexity of the project, the committee may be large or small. It may be comprised of owner personnel or outsiders having appropriate knowledge, or a combination of both. No matter what format for evaluation is chosen, the three aspects of fairness (see above) must be scrupulously adhered to and applied. In so doing, all considerations must be referable to something found within the four corners of the RFQ. 16[c]. Again, depending on the size and complexity of the project, there may be a considerable body of material in the responses to be reviewed and understood by the evaluation committee members. It is our view that the process of reviewing and understanding the material, whether it is done by the members on their own or in committee or both, need not be monitored by the fairness monitor. However, we are firmly of the view that the part of the process wherein the selection is actually made, (i.e. the comparisons of the relative merits of each of the proponents) be monitored. If this happens at a meeting or meetings (the usual method) the fairness monitor must be present. If it happens by way of communications (e.g., ) the fairness monitor must be party to each and every such communication. The object of the exercise for the fairness monitor is to be able to report on what is raised in paragraph 16[b] immediately above, viz., whether the aspects of fairness have been scrupulously adhered to and applied.

8 8 iv. Request for Proposal (RFP) 17[a]. This is the most significant document of the process. It provides, comprehensively, the details of the project (plans, specifications, financial details, etc.) which the proponents must address in constructing their bids. As well, it will provide an itemized description of the format the bid must adopt. It will go on to describe how evaluation will be carried out, and will set out the terms and conditions of this phase of the process (e.g., sponsor/proponent communications, the sponsor s discretionary rights, confidentiality, any compensation for unsuccessful proponents, etc.). 17[b]. As indicated in paragraph 8 above, we see it as fundamental to the role of the fairness monitor that he/she review the contents of the RFP, and that the sponsor be informed if the effect of a provision will adversely impact on fairness, and risk resulting in a negative comment in a fairness monitor report. Such informing should take place on the initiative of the fairness monitor or in response to an inquiry from the sponsor. 17[c]. As noted in paragraph 16[b] above, all considerations in the selection of a short list of qualified proponents must be found within the four corners of the RFQ. It must be stated with equal force that for the balance of the bidding process, the RFP is the bible. It may be amended from time to time on notice to all proponents, but its role as the fundamental governing document never changes. All considerations, communications and responses must link to something which can be found within the four corners of the RFP. 17[d]. While the fairness monitor must be fully conversant with the terms and conditions of the RFP, it has been our experience that it is difficult, if not impossible, to be as conversant with the myriad of details contained in the plans, specifications and financial requirements. Therefore, if the fairness monitor has any doubt as to whether

9 9 the sponsor is stepping outside the RFP in any contact with a proponent, he/she should raise the matter and seek clarification. v. Conflicts of Interest and Confidentiality 18[a]. It is essential that those involved in all aspects of the process be free from any conflict of interest. Full disclosure of the names of all involved and of any relationship with any other person that might raise a conflict, is required. Often there is a committee or a designated individual who will deal with and attempt to resolve any conflict problems. We view this area as consisting of primarily legal considerations, the addressing and resolution of which is outside the role of the fairness monitor. If in the resolution of such concerns a protocol or system is put in place (e.g., the implementation of screening devices), it is within the role of the fairness monitor to monitor whether the protocols are being observed or the system followed. 18[b]. It is axiomatic that confidentiality applies to all information and data being circulated as part of the process. The measures and documentation designed to ensure confidentiality are substantially matters of law. We, therefore, see it outside of the role of the fairness monitor. However, the fairness monitor must be aware of the confidentiality measures, including security measures (e.g., physical storage of material and access to it; access to computer sites), and monitor that they are being observed. vi. Sponsor/proponent communications 19[a]. Because of the size and complexity of many projects currently being undertaken, it has been determined that it is in everyone s interest, that prior to preferred proponent selection, communication take place between the owner and the various proponents. It has been shown that this results in better understanding, more focussed efforts, and expedition of commencement once a proponent has been selected. These communications can happen at face-to-face meetings, by telephone

10 10 conference, by or by conventional mail. As noted in paragraph 17[a], the RFP will often set out provisions as to how this is to happen. Because proponents are concerned about their competitors becoming aware of how they are proceeding, these communications must be private and confidential as between each proponent and the owner. A term often used to describe such communications is bilateral meetings or bilateral communications. 19[b]. We are firmly of the view that the monitoring of these bilateral contacts is a most significant part of the role of the fairness monitor. It is in these one-on-one situations where by inadvertence or otherwise, comments might be made or impressions given that might be construed as providing an advantage to one proponent over another. For instance, there might be a situation, whether intended or not, where an exchange might have the appearance of one party seeking to negotiate with the other, e.g., If you let us provide our alternative to Specification X in the RFP, we can provide a money-saving response. Using this example to illustrate the point, the sponsor s proper response should be: Present that in writing and we will consider if the RFP should be amended. (Amending the RFP will result in the other proponents having an equal opportunity.) If the sponsor were to respond otherwise, the fairness monitor would be obliged to inform the sponsor at the earliest time that there was concern about unequal treatment. 19[c]. In summary, the fairness monitor must be party to all bilateral contacts. He/she must be: - informed when any face-to-face meetings are scheduled; - connected to any telephone conferences; - copied with each and every written communication. The sponsor should also keep for the fairness monitor s review, a log or note of any unplanned bilateral contact that might occur, with details as to what took place. Therefore, it is essential that the engagement contract with the fairness monitor contain an undertaking from the sponsor to keep the fairness monitor fully informed, particularly as to contacts with proponents. The fairness monitor should not be obliged to ferret out data. However, the fairness monitor must understand these projects are complex

11 11 and generate heavy and hectic work loads for the sponsor and the proponents. As a result, the fairness monitor must be accommodating and reasonable in his/her expectations. vii. Evaluations 20[a]. Evaluation at the RFQ stage is discussed in detail in paragraphs 16[b] and 16[c]. If there is to be evaluation at the RFEOI stage, the details set out in those paragraphs and in the immediately following paragraphs would apply, any necessary changes being made. 20[b]. Needless to day, the evaluation process leading to selection of the preferred proponent is the critical and most sensitive part of the exercise. Frequently there will be detail in the RFP describing the criteria that will be looked at in respect of various components of the project. The weighting of the criteria and a rating system will also frequently be given. The fairness monitor must be fully conversant with all of this. 20[c]. There will usually be an evaluation committee charged with the final evaluation and the making of a recommendation of the preferred proponent. Because of the size and complexity of many projects, the evaluation committee will often seek the advice of various specialized sub-committees. The details of the various bids must be reviewed and understood by the members of both the evaluation committee and the subcommittees. As indicated in paragraphs 16[b] and 16[c] in relation to RFQ s, we do not think it is necessary to be party to the process whereby the committee members digest all of the material. The fairness monitor must, however, monitor all of the meetings where the comparisons are being made and the criteria and weighting and rating systems are being applied. This is so in respect of both the evaluation committee and sub-committees.

12 12 20[d]. It is our view, as well, that the fairness monitor should be present at the meeting or meetings where the sub-committees are reporting to the evaluation committee. The reason for this is as set out in para. 13, viz., each decision must be reasonable. This applies to any decision made in any part of the evaluation process. It doesn t matter that the fairness monitor, or any one else for that matter, might have come to a different decision. Each decision must be supported by logic and soundness. That logic and soundness must find its support within the four corners of the RFP and within the evaluation procedures that have been established. Any decision influenced by considerations outside of the RFP and the evaluation procedures is, by definition, unfair. 20[e]. In some projects, evaluation manuals are prepared for the guidance of evaluators. The fairness monitors should review them as to any provision that might attract a negative comment, and should be thoroughly familiar with them. viii. Post-selection activity 21[a]. Once a proponent has been selected, considerable negotiation and sponsor/proponent contact takes place. The selection does not end the opportunity for things to happen that might be characterized as unfair or improper. (e.g., a significant departure from a major component of the project as described in the RFP.) We are therefore of the view that the involvement of the fairness monitor should continue until final closing. 21[b] Another reason to monitor final negotiations is to offer the successful proponent and the public, assurance that the sponsor has not been guilty of bid shopping. This term has been defined by the courts as an attempt on the part of the sponsor to use the final negotiations to attempt to improve upon the proposal received from the successful proponent. While the courts have accepted the idea of final negotiations with the successful proponent, it can be argued that a duty remains on the sponsor to be fair in those negotiations.

13 13 21[c]. Frequently the sponsor offers a debriefing to unsuccessful proponents, wherein the proponent is informed by the sponsor of its view of the proposal. Often there is nothing negative to report, i.e., the successful proposal was simply the best of a good bunch. In any event, we are of the view that the fairness monitor should be present as a safeguard against the possibility of misleading or inaccurate information being communicated. ix. Fairness monitor reports 22. As set out in paragraph 4, item [c], the fairness monitor will provide reports as required. This will usually take place at the end of the RFQ stage, the RFP stage and after final closing. However, there are no rules on this and other occasions may arise justifying reports. All reports are to be made public. 22. As a final comment applicable to all of the above elements of the bidding process, the sponsor must understand that the fairness monitor must have the discretion to look at any communication or document (including access to any data room, electronic or otherwise) and to attend at any meeting, whether invited or not. All proponents should be made aware of this discretion. CONCLUSION 24[a]. As indicated in paragraph 5, a sponsor may choose to use fairness monitors on only some of the elements that we describe. It is our view, however, that the sponsor decreases vulnerability to charges of carrying out an unfair process if all the elements are covered. Certainly this is so if the project is large and complicated. It is even more important if the project has attracted some controversy. 24[b]. It is the duty of the fairness monitor to monitor the process in order to be able to report on its fairness, as described and detailed above. If in the course of the process

14 the fairness monitor is able to give information to the owner which might aid in the achievement of fairness, it is our view that he/she has a duty do so, as well. 14 Barry Vogel Q.C. (vogelb@telus.net) in collaboration with Hon. Roger Kerans and Hon. Ben Casson, all of ADR Chambers.