Reference no: EM133363420

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. Your responsibility is to listen to the situation and provide a binding resolution. Your decision will resolve this issue and will set precedence for future disputes.

The Printers RFT was issued as a cooperative procurement with Hydro Two acting as the leading agency. Each of the agencies involved have their own budgets and have provided their usage information to Hydro Two. Internally, the Procurement Department reports to Finance and must consult with the Procurement Manager for final approvals on projects of a certain value.

Through their needs analysis, the Procurement Department determined that it would be best to award for two (2) years at a time so that any technology changes could be captured in future contracts. The anticipated contract dates would be from April 1 to March 31. The group determined they needed the following units:

• Group
  • Group 1 - Plain Bond Copiers
  • Group 2 - Magazine-Finish Copiers (Glossy Paper Copiers)
• Type (Features)
  • Type 1 - Copiers possess minimal features
  • Type 2 - Copiers have two-sided copying capability
  • Type 3 - Copiers have ability to reduce size of document

• Class (Machine Speed)
  • Class 1 - Low-speed copiers
  • Class 2 - Low-speed/Low-volume Copiers
  • Class 3 - Accelerated low-speed/Low-volume Copiers
  • Class 4 - Intermediate-speed Copiers
  • Class 5 - Accelerated Intermediate-speed Copiers
  • Class 6 - High-speed Copiers
  • Class 7 - Accelerated High-speed Copiers

• Price Structures
  • Monthly Rental
  • Annual Rental
  • Two-year lease
  • Outright Purchase

Suppliers were not required to bid on all units which meant there could be over 40 different possibilities of unit configurations in the bids. For example:

Group 1, Type1, Class 1 is a plain-bond, low-speed copier with minimal features

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

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

A Potential Issue Arises

The RFT pricing was automatically posted on the eprocurement platform which allowed the bidders to instantly know who the lowest bidder was at time of RFT close. After the analysis was completed by the Procurement Department, the award was confirmed and the 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 dispute requesting a formal administrative hearing to challenge the award of the copier contract to a single bidder. Nearox's submission had some units at a lower price than Golden Copier; they had also indicated that Hydro Two would need to award to multiple suppliersas they could not provide all the copiers indicated.

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

Nearox was following the dispute process outlined in Hydro Two's procurement policy but even Hydro Two's Finance Director wanted to move on and award to Golden Copier as itseemed very clear that Nearox was wrong.

Copier Background at Hydro Two

Historically, copiers were supplied to the departments and agencies through a multi- award contractwith pricing established by the Procurement Department. Just under five

1. years ago, the Procurement Department decided to solicit competitive bids for a single year, single award contract for the general copiers. The Procurement Department's policy states that if one or more responsive bids within a category are received, a contract shall be awarded to the lowest responsive bidder; if, however, competitive bids are not received in a category, multiple awards may be issued to some or all qualified suppliers for that particular category only, at the discretion of the Procurement Manager.

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

Three Different Views

To further the discussion around the dispute, here is the view from the three parties involved - Nearox, Hydro Two's Procurement Department, and Golden Copier Company.

The Procurement Department:

The Procurement Department cited seven (7) major issues to support its copier purchase decision through single contract competitive bidding, they include:

1. Single awards ensure fair competition and an equal advantage to all qualified suppliers desiring to do business with the municipality.
2. Competitive bidding that leads to a single award is reasonable since -                                                 a. The majority of the cooperative procurement department and agency needs can be satisfied by devising categories based upon machine- speed, copy volumes, and features.                                   b. Using bid categories based upon machine-speed and feature, competing vendorscan subsequently offer functionally similar equipment.  
3. The market demonstrates that competitive pricing is available on copiers. Therefore, by competitively bidding the copier term contract, Hydro Two is assured the benefit of lower, competitive pricing.
4. Single awards promote uniformity and standardization in the terms and conditions in municipal contracts for copiers. Multiple award contracts promote numerous and confusing conditions, since each supplier would use its own standard contract
5. Single award contracts ensure the agencies have maximum compliance with its maintenance and service conditions. This avoids the duplication of maintenance and service provisions contained in individual supplier's catalogues.
6. A single award permits the user department or agency acquiring the copier to readily identify the lowest priced copier with the features and speed required by the user department or agency.
7. Rules relating to this area supported the Procurement Department's view.