Pricing and Incentives Questionnaire

The Procurement Support Services Sector of Public Services and Procurement Canada (PSPC) is currently developing Phase 3 of the Practitioner’s Guide for Procurement Pricing, dealing with the determination of price and profit in a contract. We are looking for your input on Canada’s current profit policy (Supply Manual Chapter 10.65) as well as further insight into other pricing practices applied by your organization, specifically as they relate to profit and incentives.

1. Please provide comments, feedback and suggestions on Canada's current policy and guidelines for the calculation of profit (Supply Manual Chapter 10.65) and its components based on your experiences.
See specific sections identified below.

a) Return on Capital Employed (Fixed and Working Capital) (Supply Manual Chapter 10.65.1) to (Supply Manual Chapter 10.65.20)

b) General Business Risk (Supply Manual Chapter 10.65.25).

c) Contractual Risk (Supply Manual Chapter 10.65.30). Please explain your typical method of risk and profit rate assignment within contractual risk.

d) Total Profit – “Total allowable profit must be lowest of i. sum of supportable amounts by factor; or ii. 20% of total cost” (Supply Manual Chapter 10.65.35).

2. Please provide suggestions, best practices or different methods of procurement pricing practices employed by you or your organization when procuring.

Consider the following:
• Determination of price and profit;
• Assessment of risk related to capital employed, business risk and contractual risk;
• Profit considerations for long-term contracts;
• Frequency and reasons for renegotiation/review/revision.

3. Do you or your organization use incentives and/or performance based contracting when procuring? Please identify the types of incentives used in your contracts.

4. A Target Profit Rate methodology is under review and consideration for use by Canada. This method relies on benchmarking average industry profit and earnings data to determine baseline profit rates for procurement pricing that are aligned with market conditions, with adjustments available to reflect the nature and risks of individual procurements.

Please share your views on the adoption of a Target Profit Rate methodology for the determination of profit on negotiated contracts in Canada as well as any factors you feel would need to be considered.

5. Negotiated pricing for PSPC's contracts is cost-based, meaning the calculation of the price is based on costs or estimated costs of production plus a mark-up. PSPC's Supply Manual (10.75 of the Supply Manual) accommodates alternatives to cost-based pricing as prescribed by (10.65 of the Supply Manual).

Have you or your organization successfully applied an alternative to cost-based pricing?
Please describe this approach. When would you recommend its use?

6. Have you consulted the new Practitioner’s Guide for Procurement Pricing, Phase 1, which can be found on BuyandSell.ca at the following link: Phase 1 ? Comments and feedback on your experiences with the Guide would be appreciated.

7. Moving forward, PSPC will be hosting small workshops to discuss and deliberate some of the changes in Phase 3 of the Guide. Your input is important. Please provide the name and contact details of an individual within your organization if you would like to participate in these workshops to be scheduled in fall 2019.

8. Additional comments and feedback?