Finance

The procurement process is the process that is undertaken to secure necessary goods or services for the use of government from the private sector. This general Policy sets out the broad parameters of Government procurement with more specific requirements included in the other procurement policies forming the 3300 series and the Government of the Northwest Territories (GNWT) Procurement Guidelines and Procedures Manual.

Sections 44, 45 and 46 of the Financial Administration Act (FAA) and the Government Contract Regulations (GCR) specify the conditions for entering into contracts on behalf of the Government. In addition, other government policies and agreements must be complied with when undertaking any procurement. e.g. the Business Incentive Policy (BIP). The GNWT Procurement Procedure Manual lists all such instances. The PWS Procurement Guidelines is being revised to form the GNWT Procurement Procedures Manual.

Government procurement shall be conducted in a manner that will:

• in its commercial dealings, observe the highest standards. It must stand the test of public scrutiny in matters of prudence and probity, facilitate access, enhance suppliers’ access to contracts, encourage competition, and reflect fairness in the spending of public money;
• support operational requirements;
• support economic development;
• comply with Government legislation, regulation and policies;
• comply with the Government's obligations under the Agreement on Internal Trade; and
• comply with the GNWT Procurement Procedures Manual.

See PWS Procurement Guidelines. (Currently this is being revised to form the GNWT Procedures Manual.)

• FAA Sections 44, 45, and 46
• GCR
• BIP (63.02)
• Leasing of Improved Real Estate (11.22)
• Negotiated Contracts Policy (11.26)
• GNWT Code of Conduct Respecting Conflict of Interest and Oath of Office and Secrecy For The Employees of the GNWT. February 2005
• Agreement on Internal Trade

Failure to comply with policies and directives of the Financial Administration Manual may result in actions under Part X of the Financial Administration Act. The Government of the Northwest Territories may seek legal remedy in the Territorial Courts.

¹ Government Contract Regulations, May 1, 2006

² Agreement on Internal Trade def.

³ Government Contract Regulations, May 1, 2006

⁴ ibid

⁵ ibid

⁶ ibid

⁷ ibid

⁸ ibid

Appendix B – GNWT Procurement Flow Chart

Sole Source Authorization Form

Selecting the right instrument - Procurement Contracts versus Transfer Agreements

This section's objective is to provide guidance on when to use a procurement contract and when to use a transfer agreement.

A procurement contract is used to obtain goods or services. It is an agreement between a territorial government contracting authority and an outside party to purchase goods, provide a service or lease real property. Most often, the outside party is chosen through a competitive selection process, as described in GCR.

In a procurement contact the organization which provides the goods or services will do so expecting to make a profit with the contract. This is because the organization is taking all the risks associated with the contract.

A transfer (payment) arrangement is used to transfer monies or make in-kind contributions from the government to individuals, organizations or other levels of government (e.g., municipal governments) to further government policy and the department's objectives. Although transfer payments are primarily used for projects, they are also used extensively to deliver basic ongoing essential services.

Through contribution agreements, the Government provides funding that must be spent according to agreed upon conditions. Spending is monitored and reviewed to ensure that these conditions are met. These agreements vary in terms of level of control, flexibility, authority, reporting requirements and accountability.

In many cases, the organization signing a contribution agreement with the government will do so understanding that there will be a no-profit clause. This organization will accept this approach because the risks associated with the agreement are shared and in many cases if the services provided are in compliance with the agreement, all the risks are with the government, not the organization.

Consider the following principles when determining whether to use procurement contracts or transfer agreements:

Principle 1: A department should not benefit directly from the award of a transfer agreement.

To "benefit directly" implies that a department receives or acquires a needed good or service that supports its operations. Any indirect benefits a department may receive should be incidental to, or a by-product, of the main objective.

Principle 2: A core service that departmental staff are mandated to provide directly should not be funded through a transfer payment.

Goods or services are provided to the public either through departmental operations or through a transfer payment. It is ultimately the Legislative Assembly that decides what core services or goods a department will deliver directly.

A department mandated to directly deliver goods or services must carry out its responsibilities by using its own staff or issuing procurement contracts for other parties to undertake these duties. In either case, the department must fulfill its obligations. Because the department is mandated to deliver these goods or services directly, transfer payments cannot be used to discharge departmental responsibilities.

Principle 3: An individual or an organization that receives a transfer payment does not act on the government's behalf.

A transfer payment is awarded to a recipient to further the mandate of the department or government.

However, the recipient is not acting on the government's behalf. On the other hand, if the government awards a procurement contract to an organization or an individual to provide a service or deliver a good, then the organization or individual may be construed to be acting on the government's behalf.

Principle 4: A transfer agreement does not allow the awarding of damages in case of non-compliance.

Under a contribution, there is nothing acquired by the government. The department is obliged to reimburse the other party's eligible expenditures, as specified in the agreement. If the expenditures are not made or are not eligible, the party has no right to the contribution payment and the department may recover any money already paid. However, in that case, the department would have no right for damages because no harm to the department can follow from a recipient not complying with the agreement. There is then some risk in using the grant and contribution approach if a department is expecting to use the results of a project funded in this manner, notwithstanding that it would be an inappropriate use of transfer payments.

It is important that you consider all of these principles jointly and not in isolation of each other to make informed decisions.