Ontario opens up for IT negotiations

The Ontario government is going to be giving the suppliers it uses for large IT projects more bargaining power through a pilot project that could eventually become a standard part of the province’s standard procurement policy.

In a notice that was recently posted to the online tendering service Merx, the government said it had set up a “limited contract negotiations framework that permits the negotiation of terms and conditions relating to specific and defined areas within the contract.” It will be limited to about five large IT projects that are up for bid within the next year apply online to contracts with a value of $10 million or more. The first such project will involve a tender for the Ministry of Health and Long-Term Care’s Health Care Network.

“In almost any other circumstance, the RFP must be signed as is,” said Neil Sentance, Assistant Deputy Minister of supply chain management, within the Ministry of Government Services’s Ontario Shared Services branch. “This will play out as it does and a preferred provider will be identified who will be awarded the contract. That will trigger negations for specific terms and conditions. Some of those may be fairly minor, some may be more fundamental.”

Under the framework, vendors will be able to negotiate limitation of liabilities and indemnities, ownership of intellectual property rights on custom software, contact termination and any reduction in prices or rates. Those involved must agree not to contest the outcome of the procurement process once a deal has been reached.

Sentance acknowledged that the project may cause situations to arise where the government has to find another preferred supplier. 

“Both sides can walk away from negotiations or from a gap that can’t be closed,” he said. “This in uncharted territory for us. We’ll have to see how that plays out.”

The framework was developed in part through a six-month discussion process with the Information Technology Association of Canada (ITAC), as well as a lawyer from Toronto-based Osler, Hoskin & Harcourt. ITAC representatives were not available for comment at press time, but in an announcement to its members the association said the program could see more firms bidding on contracts. “Some of the irritants and reasons preventing them from bidding in the past can now be negotiated. The pilot may well be less costly for bidders who don’t win since detailed negotiations occur after the contract award,” the notice said.

However, some IT providers weren’t as sure the program would do much for small and medium enterprises.

“We’ve got a long way to go,” said Barrie Marfleet, senior account manager with Toronto-based Ajilon Consulting Inc., which has worked on a number of projects for the Ontario government. “They’ve made some progress, but the only ones this is going to affect right now are the IBMs of the world. 

While the province wants to limit its exposure to any risks associated with IT product deployments, Marfleet said suppliers want the same thing. In the past, though, he said vendors have been asked to shoulder a lot of that load.

“Vendors just can’t sign a clause of unlimited liability. We’ve got the Enron scenarios that have reshaped how we have to look at our contracts legally,” he said, adding that there were plenty of other sticking points as well. “When you’re asking for a vendor to bid on an IT project, it’s not like buying tires off a shelf. There’s an awful lot of questions and negotiations that come up after you’ve been awarded as the vendor.”

Sentance said the framework is actually an extension of changes Ontario made to its procurement policy following discussions with vendors in the summer of 2001. These included issues around liability and intellectual property, he said. Although the pilot project will create more back-and-forth between the two sides, he emphasized that the aim is not to drag out the procurement process. 

“We’re hoping to see a broader range of creative and innovative solutions, things that would actually expedite the solution,” he said.

Ontario is also hoping the program will ease the way in which the government will purchase large amounts of commercial off the shelf products in addition to custom solutions, Sentance said.

Comment: [email protected]

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