Purpose
The purpose of Policy Notification (PN)-154 is to notify Acquisitions Program (AP) contracting officers of new audit clauses to align with current pricing guidance.
The inclusion of general and supplementary audit clauses in the Standard Acquisition Clauses and Conditions (SACC) Manual, serves to reinforce and clarify the use of audit clauses in contracts.
Effective date
PN-154 is effective upon publication of the next release of the SACC Manual scheduled for December 2022, which will incorporate the updated general conditions and the new clause C1004C.
Expected outcomes
- Add and refine audit clauses to enhance consistency and transparency, and encourage both efficient and economical performance in a contract involving different basis of payment;
- Enhance awareness and proactive management of the risk factors in contracts to yield collaboration amongst stakeholders, and drive the achievement and assurance of value; and
- Strengthen Canada’s capability and capacity to manage pricing throughout the lifecycle of the contract and contribute to sound stewardship of public funds, procurement modernization and modern comptrollership.
Background and context
As a result of an independent study dated December 2015 (Department’s response), several components of Canada’s pricing framework are being adapted to incorporate innovative pricing practices and align pricing with desired procurement performance objectives to achieve best value for Canadians.
Several consultations held since then have provided insights and best practices on the application of pricing and profit principles to support the delivery of optimal value especially in negotiated contracts. This involves determining a contract price when market prices are not available and/or negotiated pricing is required.
The audit clauses referred to in this PN, represent an extra measure to simplify and foster further consistency and transparency where there may be a need to mitigate price risks through validation.
Requirements and responsibility
The Acquisitions Program (AP) contracting officer leads the development of the procurement process and a key element of this process is to establish, document and validate the contract price. For contracts where the price is based on estimated costs (e.g., negotiated fixed price contracts) or actual costs incurred after contract award (e.g., cost reimbursable contracts), a detailed breakdown of the cost, profit and incentives should be included in the contract Basis of Payment section.
For all contracts, notwithstanding the pricing approach, a general audit clause must be included in the contract terms and conditions to mitigate financial risks. For contracts where the chosen basis of payment involves reimbursing a contractor for all acceptable contract costs incurred, the contracting officer must include SACC Manual clause C1004C in the contract terms and conditions to validate the costs claimed by the contractor and make adjustments to amounts payable as necessary.
Public Works and Government Services Canada (PWGSC) has dedicated in-house Chartered Professional Accountants (CPAs) for the provision of financial expertise to assist AP contracting officers in developing validation strategies and to validate contract price as required or as stipulated in the Directive on the Use of Cost and Price Analysis Services
and the Guideline on the Use of Cost and Price Analysis Services.
Guidance
The Practitioner’s Guide for Procurement Pricing provides more information on building a common understanding among all stakeholders in regards to pricing components and options. This includes guidance on risk sharing, responsibilities and the encouragement of innovation through the use of pricing. More specifically, Sections 3, 4 and 5 of the new guidance relating to bases of payments, incentives, costing, profit determination and the use of a validation strategy complement Chapters 4 and 10 of the Supply Manual.
The Directive on the Use of Cost and Price Analysis Services and the Guideline on the Use of Cost and Price Analysis Services describe the professional accounting services available to assist contracting officers involved in identifying financial and pricing risks and determining the most suitable pricing approach of a procurement.
Revisions to the Supply Manual
The Supply Manual has been updated to reflect this PN. For more details, refer to the Affected Supply Manual sections listed below.
Revisions to the Standard Acquisition Clauses and Conditions Manual (SACC)
The SACC Manual has been updated to reflect this PN. For more details, refer to the Affected SACC Manual sections listed below.
Revisions to the Standard Procurement Templates
There are no changes to the Standard Procurement Templates.
Contact information
Enquiries related to PN-154 and to price analysis and assurance services can be sent by email to the Price Support Directorate at the following address: TPSGC.PASoutiendesprix-APPriceSupport.PWGSC@tpsgc-pwgsc.gc.ca.
Questions related to the Supply Manual can be sent by email to the following address: TPSGC.PASPSPublications-APSPSPublications.PWGSC@tpsgc-pwgsc.gc.ca.
Questions related to the SACC Manual can be sent by email to the following address: TPSGC.Outilsdapprovisionnement-ProcurementTools.PWGSC@tpsgc-pwgsc.gc.ca.