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8. Chapter 8 - Contract Management

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8.1 Overview of contract management

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  1. Contract management is the process of systematically and efficiently managing contract development, implementation, and administration for maximizing financial and operational performance and managing inherent risk. Contract management encompasses the life cycle of a contract and involves many stakeholders including, but not limited to the contracting officer, the client department and the supplier.
  2. Contract administration is an important part of contract management, which includes those activities performed after a contract award, to ensure files are properly maintained and that the contractor meets the requirements of the contract.
  3. Contract management is an essential element of the procurement process that protects the interests of Canada while ensuring that suppliers are being treated fairly. Contract management can be divided into four distinct phases:
    1. pre-contractual (planning);
    2. contracting (bidding and awarding of contract);
    3. contract administration (after the contract is awarded);
    4. post-contractual (close out, warranty and audit).
    The pre-contractual phase is addressed in the contents of Chapter 2 - Defining the Requirement and Requisition Receipt and Chapter 3 - Procurement Strategy. The importance of early involvement by contracting officers during the pre-contractual phase cannot be overstated, as this sets the tone for the balance of the contract life cycle activities.
  4. Planning of the details of how the contract will be managed should start during the formulation of the requirement itself, which will set the standards of what the contractor must do, how performance will be monitored and what standards will be used. These details, together with other procedures related to how the contract will be managed, should be included in the bid solicitation, to allow bidders to determine what is required of them, to plan the activities needed and to reflect the costs in their bids.
  5. The contracting phase is addressed in Chapter 4 - Solicitation Process through Chapter 7 - Award of Contracts and Issuance of Standing Offers and Supply Arrangements. Responsibility for the elements of the contracting phase fall generally to the contracting officer, though client departments have lead responsibility for some elements (see Annex: Specific Division of Responsibilities Agreements).
  6. In general, the level of effort required for contract management will vary depending on the value and complexity of the procurement. Low dollar value or simple contracts may require only minimum management, while more complex contracts will require continuous monitoring by both the client and the contracting officer. A dedicated team of clients and contracting officers may be assigned to large projects, where roles and responsibilities are defined in more detail.

8.5 Contract administration

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  1. Both the client department and Public Works and Government Services Canada (PWGSC) must administer the contracts. It is important that the client and the contracting officer understand and agree on who is responsible for managing and administering the various aspects of the contract.
  2. Contracting officers responsible for the management of contracts should be aware of any institutional or personal sanctions. As per section 12.1.3 of the Treasury Board (TB) Contracting Policy, TB may require that sanctions be imposed on either the department or certain officials when contracting practices or contract administration is not acceptable.
  3. Contracting officers should set up and maintain complete and up to date documentation on every aspect of the contract, both to provide a record of actions taken and to protect Canada's interests under the contract. The files will provide an organizational memory of activities and events and should include, where applicable, but not be limited, to the following:
    1. the procurement planning documents;
    2. the requisition and any amendments;
    3. the solicitation documents;
    4. bid evaluation plan and resulting evaluation documents;
    5. professional and specialist's advice;
    6. risk identification, assessment and mitigation;
    7. environmental considerations, impacts, and mitigation;
    8. conditions or sanctions imposed by the Vendor Performance Corrective Measure Policy or the Ineligibility and Suspension Policy;
    9. correspondence with clients;
    10. contract conditions;
    11. contract amendments;
    12. work schedule, including milestones and deliverables;
    13. payment schedules, invoices and payments;
    14. other correspondence (written and email);
    15. records of phone discussions;
    16. formal records of meetings, including minutes;
    17. records of decisions;
    18. warranties;
    19. management reports, including audit reports, and
    20. contract closeout documents.
  4. Additional information on environmental considerations is provided in the Guideline for Integration of Environmental Performance Considerations in Federal Government Procurement, in section 4. Contract Management; in section 5. Use, Operation and Maintenance; and in section 6. Disposal.
  5. For guidelines on file organization, see Annex 8.1: Guidelines on File Organization and Make-up.

8.10 Administration of Service Contracts

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  1. Section 16. Service contracts of the TB Contracting Policy sets out the policy for service contracts. Article 16.11.3 states the following:
    "The contracting authority should appoint a contracting officer and the technical authority should appoint a project officer (who may be the same person), to be responsible and accountable for monitoring the work through:
    1. regular physical progress and financial reports from the consultant or professional;
    2. attending progress meetings with the consultant or professional;
    3. examining the work in progress to ensure conformity with contract requirements;
    4. monitoring time, resource, cost and quality aspects of the work against a pre-determined and agreed work plan;
    5. amending the contract to reflect new requirements, work schedules and payment provisions in response to changing circumstances;
    6. conducting technical and financial audits;
    7. accepting or approving the work at intermediate stages and at completion;
    8. certifying all payments and following up to ensure timely payment.
    The division of these responsibilities among authorities should be agreed to before placing the contract."

8.15 Contract Performance

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  1. The management of a contract involves many activities to ensure fulfillment of that contract. Events can sometimes alter or disrupt the performance of a contract. For example, a contractor may default on contractual obligations, disputes may arise about contract conditions, or there may be a need to make amendments to the contract after it has been awarded.
  2. Whenever the satisfactory fulfillment of a contract is jeopardized, contracting officers should take the necessary steps to serve and protect the interests of Canada. Contract disputes should be dealt with fairly, and as promptly as possible. Contracting officers should keep procurement files complete and up to date, to provide a record of actions taken.

8.20 Canada's Obligations

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In managing a contract, contracting officers must ensure strict adherence to all of Canada's obligations. A breach of such obligations could nullify a surety bond. Where responsibility lies with a client department, the contracting officer should ensure the client authority is aware of the obligations.

8.25 Contract Payments

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Work performed or goods received under a contract must be paid for in accordance with the government's policy on the payment of accounts providing for payment within 30 days. The payment period is measured from the date that the goods or services were received, in acceptable condition, at the location(s) specified in the contract, or the date that an invoice in proper form was received, whichever is later.

8.30 Progress Payments

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  1. Progress payments need to be measured against milestones. A project progress monitoring system should be in place to provide an indication of when the work has been accomplished. Progress payments must include appropriate documentation that is retained on file.
  2. When milestone progress payments are not appropriate, then payments may be made at set times during the contract period.

8.35 Claims for Progress Payment and Invoicing

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  1. No payment, other than a progress payment, may be made under a contract unless a person authorized by the appropriate minister certifies that:
    1. the work has been performed;
    2. the goods have been supplied or the services rendered as the case may be; and
    3. the price charged is according to the contract or, if not specified by the contract, is reasonable.
  2. When a payment must be made before the completion of the work, delivery of the goods or rendering of the service, the payment must be in accordance with the contract.
  3. Claims for progress payment are normally routed, through the contracting officer, to the client for verification and authorization of payment. Contracting officers processing payment claims must act promptly. The standard due date for payment is 30 days, after invoicing or receipt of goods, whichever is later. Acceptable performance standards should be set by the sectors/regions to allow adequate time for the certification of the claim by an authorized representative of the client.
  4. Claims for progress payment must include the completed form PWGSC-TPSGC 1111 Claim for Progress Payment, which requires a certification of contract expenditures.
  5. The contractor normally sends invoices directly to the client. A copy must also be sent to the contracting officer and kept on file.
  6. Invoices that include billings for items not received are not considered due until all items are received. If a contractor wishes payment for a partial shipment, a revised invoice, if permitted by the contract, must be submitted.
  7. Clients are required to notify contractors of any error or missing information in an invoice or supporting documentation, within 15 days of receipt. Clients should return, within 15 days, any invoice not in accordance with the terms of the contract, to the contractor for resubmission.

8.40 Exchange Rate Fluctuation Provision

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For contracts with an exchange rate fluctuation provision, client departments and contracting authorities must ensure that this provision is applied during invoicing and payment. Invoices must indicate the adjustment required and would typically include form PWGSC-TPSGC 450 Claim for Exchange Rate Adjustments showing the adjustment calculations, all in accordance with the contract terms.

8.45 Interest

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  1. Simple interest will be paid automatically on any amounts that are overdue, provided that Canada is responsible for the delay. The general conditions of the SACC Manual reflect this policy. The amount of interest will be shown separately on the cheque stub or accompanying remittance advice.
  2. Interest will be calculated from the day after the due date to the day before the date that the payment is issued. However, interest will not be paid until the contract payment is made.
  3. Interest is calculated according to the following formula:
    Interest = Amount owed x ([that date's bank rate + 3%] x [number of days interest payable/365])
  4. The provisions for payment of interest on overdue accounts set out in the general conditions must be strictly adhered to, except in special cases where the client requisition and appropriate provisions in the contract specifies a payment period longer than 30 days, for example when extensive product evaluation, inspection or testing requirements are involved.

8.50 Overtime

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  1. When a contractor performs overtime under a contract, added costs may be incurred by Canada in the form of overtime premiums. Recognition of the additional cost by Canada depends upon the attendant circumstances and the cause of the overtime. Work performed under contract to Canada should not attract higher overtime charges than would apply to similar commercial work.
  2. Scheduled overtime premium costs included in a contractor's overhead account and applied to contracts are allowed, if contracts account for a pro rata share of the overtime.
  3. Unscheduled overtime premium costs to specific contracts are allowable only, if the overtime is due to Public Works and Government Services Canada (PWGSC) or client demands for accelerated delivery, increased delivery quantities, or other reasons initiated by the client for which benefit to Canada can be demonstrated.
  4. If the need for unscheduled overtime appears likely, the contracting officer should ensure that proper provisions concerning authorization, rates and dollar limits are included in the contract.
  5. The contracting officer should consult with the cost analyst to ascertain whether the contractor's cost system includes overtime premium costs in the overhead account or as a direct charge to the particular contract, in accordance with the Guideline on the Use of Cost and Price Analysis ServicesThe information is only accessible to federal government department and agency employees. (PDF).
  6. When deciding to authorize unscheduled overtime, the contracting officer must:
    1. consult with the client and jointly determine that authorization and the need of overtime will result in benefit to Canada;
    2. ensure that funds are available to reimburse the contractor;
    3. determine the aggregate limits of time and costs of the overtime to be authorized;
    4. determine what delegation of authority, if any, should be made to the client representative;
    5. ensure that provision for proper claiming and approval of overtime claimed, and overtime payments to the contractor, is included in the contract, and
    6. ensure that the procurement file includes clear documentation of all elements included in the decision to authorize overtime.

8.55 Claims for Extra Payment

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  1. From time to time, contractors submit claims for upward price revision of firm price contracts, based on changes caused by Canada. A firm price contract may not be amended to provide for upward price revision, without prior approval of Treasury Board (TB), unless either the contract contains an escalation clause, covering the adjustment requested or the contract conditions allowed for the adjustment requested.
  2. The advice of Legal Services should be obtained to determine whether a proposed extra payment is considered an amendment to the contract or an "ex gratia" payment.
  3. The approval of TB is required for all extra payment claims, irrespective of the dollar amount. As a general rule, TB will not approve claims for extra payments arising solely from the following causes:
    1. increases in labour or material costs;
    2. changes in freight rates;
    3. revisions in exchange rates;
    4. delays caused by the contractor;
    5. errors on the part of the contractor; or
    6. other difficulties that the contractor overlooked, but should have foreseen.
  4. TB has granted full authority to deputy heads to make "ex gratia" payments, and to designate officials within the department to act on their behalf. See TB Directive on Payments.

8.60 Services of Non-residents - Entry Requirements

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  1. In the performance of a contract, a contractor may wish to use the services of a non-resident employee on a temporary basis. The determination of eligibility to enter Canada is the responsibility of Immigration Canada.
  2. United States nationals may apply for employment authorization at the port of entry. All others must obtain authorization before the point of entry. To obtain the correct documentation and necessary authorizations, the applicant must contact the nearest Canadian embassy or consulate.
  3. Canadian citizens residing outside Canada always have the right to work in Canada.
  4. In cases of emergency service requirements, the client department (or Public Works and Government Services Canada) must provide the contractor with written notice, including details of the emergency. In some emergencies, this information may be provided by telephone to the appropriate immigration authorities.

8.65 Assignment of Monies

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  1. Contracting officers may receive from contractors, banks, other financial institutions, or other sources, statements or documents showing that persons or companies, other than the contractor, claim to be entitled to receive monies under a contract with Public Works and Government Services Canada (PWGSC) or Canadian Commercial Corporation (CCC).
  2. Payments to persons other than those named in the contract will only be made in cases of bankruptcy, the appointment of a receiver-manager, or an assignment of debt pursuant to Part VII of the Financial Administration Act.
  3. This does not include those cases where the contractor owes a debt to Canada for tax arrears where Canada Revenue Agency has obtained Treasury Board (TB) approval to collect taxes due or has requested a deduction for taxes due to Canada.
  4. If the claim relates to a bankruptcy or insolvency situation, see 8.120 Bankruptcy, Receivership, Insolvency.
  5. The contracting officer, immediately upon receipt of a notice of assignment of money under a contract with a request to pay the assignee of the Crown debt, should contact the Payment Standards Division, at 819-956-9328 or via e-mail at: dlpsd.lddnp@tpsgc-pwgsc.gc.ca to obtain information on how to process an assignment of Crown debt.

8.65.1 Receipt and Deposit of Monies

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  1. When contracting officers receive monies directly from contractors with respect to a particular claim by Canada, these monies must be sent, in compliance with TB Contracting Instrument "ARCHIVED - Policy on Deposits", to the departmental accounting unit, as soon as possible. A memorandum must accompany the monies, with copies to the client and the Cost and Profit Assurance Group (CPAG). The memorandum should include:
    1. a brief description explaining why monies are being remitted;
    2. the name of the client;
    3. the PWGSC file/contract serial number; and
    4. the name and telephone number of the contracting officer.
  2. In the National Capital Region (NCR), the monies are sent to:
    Finance Branch
    Public Works and Government Services Canada
    Portage III, 12B1
    Gatineau, Quebec K1A 0S5
  3. Outside NCR, the recipient is the appropriate PWGSC regional director's office.
  4. Reference should be made to section 10.70 Recovery and Disposition of Contract Claims Adjustments Process.

8.65.5 Release of Contract Financial Security

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  1. Surety bonds, according to their terms, automatically expire when the contractor has fulfilled all obligations under the contract. When the contract has been completed, surety bonds must be destroyed.
  2. Where a contract, in respect of which a security deposit (government guaranteed bonds, bills of exchange, irrevocable standby letters of credit) was given, has been completed or terminated through no fault of the contractor, the security deposit must be returned to the contractor. The contracting officer must instruct the Finance Branch to requisition a cheque for the amount of a bill of exchange plus accumulated interest, or to request to arrange the release of bonds, letters of credit and other negotiable instruments deposited.

8.65.10 Financial Claims by Canada

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  1. There are two general categories of claims by Canada as a result of contracting activities:
    1. overpayments or overclaims, as may occur when reported as a result of audit, and
    2. legal disputes, for example, termination for default, bankruptcy (only when the amount owing is actually known and final).
      Note:Either instance can only be determined when a contract has been completed or terminated.
  2. Where monies may be owing to Canada as a result of contracting activity, sectors/regions are to determine the liability and amount owing with assistance, as necessary, from Legal Services.
  3. There are special procedures to be followed whenever there are suggestions of unreasonably high profits from any contract placed pursuant to the Defence Production Act, or from any contract other than a competitive firm priced contract. See Annex 8.5: Refunds of Excess Profits Earned on PWGSC Contracts for details of these procedures.
  4. The contracting officer should liaise with the contractor to get concurrence of the final amount owing. Once that amount has been established, the contracting officer, in accordance with TB Contracting Policy, must formally advise the client to establish an accounts receivable. The client must advise PWGSC that this has been done, and take collection action.
  5. Many organizations have roles to play relating to these claims by Canada.
    1. The contracting officer is responsible to:
      1. review the acceptability of contractor claimed amounts;
      2. respond to audit observations, as required;
      3. liaise with the client department as to concurrence on the final amount, and
      4. advise Cost and Profit Assurance Group (CPAG) of all settlements reached.
    2. Audit Services Canada (ASC) provides audit reports on specific contracts.
    3. Legal Services is responsible to:
      1. identify the potential risks and liability faced by Canada as a result of claims against the contractor;
      2. inform the contractor, when requested by the contracting officer, of Canada's claim, by way of a formal legal demand;
      3. initiate legal action against the contractor.
    4. Industrial Technologies Office of Industry Canada (IC) is responsible to:
      1. follow up on the disposition of all audit qualifications and/or observations raised by ASC, except for audit issues involving interpretation of the Contract Cost Principles 1031-2, which are a responsibility of PWGSC; and
      2. resolve issues and disputes in the case of joint Canadian Commercial Corporation and Industry Canada agreements.
  6. Reference should be made to section 10.70 Recovery and Disposition of Contract Claims Adjustments Process.

8.65.15 Financial Security Issues related to Amendments

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  1. Before authorizing any material changes in contract conditions, contracting officers should ensure that such changes do not invalidate security obligations by obtaining the consent of the surety company.
    "Material changes" means any change to the contract, except a change which on the face of it and without further explanation or investigation, is clearly for the benefit of the surety. Examples of changes requiring the surety company's approval are: changes in the contract price; changes in the scope of the work; revision to the completion and/or delivery dates specified in the contract; and changes in the payment schedule."
  2. When the change must be made via a contract amendment, a copy of the draft amendment should be sent to the surety company for concurrence. When the contract contains a provision for design or engineering changes within certain limits, it is not necessary to obtain the surety company's prior consent. In this case, the company only needs to be kept informed. If the limits must be changed, the surety company's consent is required.
  3. In cases where the contract price is being increased, it may be advisable to increase the amount of security to reflect the revised contract price. The face amount of a contract support letter of credit may be increased or reduced commensurate with the change in risk that has occurred. It may be changed by an amendment to the letter of credit. Alternatively, the letter of credit may contain an express provision for a change by a specified or determinable amount or amounts on a specified date or dates or upon presentation of the document(s) specified for this purpose, such as an interim certificate of completion. Any new letter of credit, if applicable, should be received before the contract is amended.
  4. If a security deposit exceeds the amount required due to changes in the contract price, the excess must be returned to the contractor (see 8.155.1 Refunds of Excess Profits). The face amount of a contract support letter of credit may be reduced commensurate with the change in risk that has occurred. The face amount may be changed by an amendment to the letter of credit. Alternatively, the letter of credit may contain an express provision for change by a specified or determinable amount or amounts on a specified date or dates or upon presentation of the document(s) specified for this purpose, such as an interim certificate of completion.

8.70 Contract Administration Considerations

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8.70.1 Industrial Security

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The client department must ensure that the contractor has a valid security clearance for the entire duration of the contract. When using standing offers or supply arrangements as a method of supply, client departments must confirm with the Canadian Industrial Security Directorate (CISD) that the required level of security is met prior to issuing call-ups, and contracts. It is the responsibility of the client department to ensure that every person accessing the work site(s) has the proper security clearance. The contracting officer must ensure that the organization security status, at time of contract award, is communicated to the client department. The contracting officer must also communicate to the client department any changes in security statuses during the contract period as identified by CISD.

8.70.1.1 Compliance and Enforcement with Industrial Security Requirements

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  1. In the case of non-compliance with the security requirements during the life of a contract, the Industrial Security Sector (ISS) has put in place a Policy on Compliance and Enforcement with Industrial Security RequirementsThe information is only accessible to federal government department and agency employees. (DP 123) that provides Public Works and Government Services Canada (PWGSC) with a mechanism to address private sector non-compliance with Government of Canada (GOC) industrial security requirements and to adopt a progressive and measured approach to handle non-compliance.
  2. ISS will track non-compliance with industrial security requirements on GOC procurement instruments and update the contracting authority(ies), client department(s) and other parties at select points within the compliance and enforcement process. In the event of revocation of a security clearance, the Assistant Deputy Minister of the respective Branch will also be notified so that PWGSC contracting authorities managing other procurement instruments can be advised.
  3. The DP 123 will be applied when non-compliance has been confirmed.
  4. There are three levels of gradual enforcement, which will require action from the contracting authority.
    1. Level 1: Letter of warning listing corrective measures required by the organization
      ISS will inform the contracting authority and client department by providing a copy of the letter sent to the private sector organization. The contracting authority should start discussion with the client department as to what actions/option may be available if the contractor does not redress the non-compliance issues. Legal counsels should also be involved in the discussions. The organization has 30 calendar days to comply.
      The file must be documented accordingly
    2. Level 2: Letter restating corrective measures and advisement of intent to revoke an organization’s clearances, if not corrected.
      Once again, ISS will inform the contracting authority and client department by providing a copy of the letter sent to the private sector organization. The contracting authority and the client department should discuss the consequences non-compliance with the security requirements may have on the contract. Ensure that the legal counsels are involved in discussions. The organization has 30 calendar days to comply.
      The file must be documented accordingly
    3. Level 3: Letter advising of revocation of the security status.
      At this time, it is really important for the contracting authority and the client department to do a risk assessment that would look at different options like:
      1. amending the security requirements of the contract at the level met by the contractor. In this case there is a need to establish measures that will address the portion of the work the contractor cannot do anymore due to not holding the required security status. Any amendments need to be discussed with the legal counsel as it may not always be considered under the Canadian International Trade Tribunal as contract management;
      2. terminating the contract for default (refer to 8.135.15 Termination for Default). In this case, the Vendor Performance Corrective Measures Policy applies. (See 8.180 Vendor Performance Corrective Measure Policy)

8.70.2 Compliance with the Integrity Provisions

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  1. As stated in the Ineligibility and Suspension Policy the contractors, offerors or suppliers must notify the Registrar of ineligibility and suspension (the Registrar), in writing, within 10 business days, of any criminal charges, convictions or other circumstances as described in the Policy with respect to themselves, their affiliates and their first tier subcontractors, as well as any change affecting the list of directors or corporate owners.
  2. Where non-compliance with the Integrity Provisions is identified during the period of the contract (including contracts with task authorizations, standing offers or supply arrangements), the contracting officer must consider, after weighing the impact on operational requirements and having regard to any representation made by the contractor, terminating the contract for default, setting aside the standing offer and terminating any call-ups, or canceling the supply arrangement and terminating any resulting contracts issued by Public Works and Government Services Canada (PWGSC).
    1. If informed by the Registrar that a contractor has been determined ineligible or suspended, the contracting officer must contact the Acquisitions Program Integrity Secretariat (APIS), by e-mail at TPSGC.DGAIntegrite-ABIntegrity.PWGSC@tpsgc-pwgsc.gc.ca for assistance.
    2. Where a contract is terminated for default for reasons of non-compliance with the Integrity Provisions, the contracting officer must provide the contractor with a notice period of no less than two weeks that the contract is being terminated. During this time, the contractor may make representations on such matters as maintaining the contract.
    3. A contractor subject to a termination for non-compliance with the Integrity Provisions may be required to enter into an Administrative Agreement with PWGSC, as an alternative to termination. Administrative Agreements are negotiated by the Departmental Oversight Branch (DOB) of PWGSC, and the terms and conditions are within the sole discretion of DOB.
  3. For the approval of procurement instruments, contracts, supply arrangements, standing offers, as well as for contract assignments where the supplier has been determined to be ineligible or suspended, see section 1.1 Exceptions to Internal Approval Authorities of Annex 6.4.1 Approval Authorities and Additional Signing Authorities in Support of Clients' Programs Only – Other than for Canadian Commercial Corporation.

8.70.5 Amending Contracts

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  1. Contract amendments are used to formally delete, modify, or introduce new conditions to the original contract. The need for an amendment may arise from continuing negotiations or to deal with an unforeseen circumstance. When amending a contract, Canada's best interest should be considered. Amendments are subject to agreement by both parties to the contract. Where the vendor is subject to a relevant Vendor Performance Corrective Measure Policy (VPCMP), the length of the contract cannot be extended either by an amendment or through the exercise of an option unless:
    1. there is insufficient time to recompete; or
    2. there are other exceptional circumstances.
    These situations require ADM approval in accordance with 8.180.25 Exceptions.
  2. Contracting officers must carefully analyze the need for an amendment versus the need to issue a new contract and every effort should be made to avoid:
    1. inadequate initial funding, resulting in an amendment to increase the contract value;
    2. inadequate pre-planning, resulting in an amendment to the design, specifications or quantity involved; and
    3. improper administrative procedures, necessitating an amendment to the specifications and delivery or other requirement in order to protect the contractor or government agency involved.
  3. In addition to the above regarding contract amendment in general, for the purpose of the Vendor Performance Corrective Measure Policy (VPCMP), a conditional amendment is a specific type of contract amendment. It is used for operational reasons in lieu of a full or partial termination for default when there is a performance issue for which the vendor is primarily responsible. When a contracting officer is ready to terminate or partially terminate for default, a conditional amendment is available as an alternative to immediate termination. If the vendor refuses the conditional amendment, then the contract must be terminated for default and no normal amendment can be issued. (See 8.180.10 Definitions for more information on conditional amendments and 8.180.15.1(c) for the paragraph to be inserted in a conditional amendment. See also 8.135.15 Termination for Default and Annex 8.4 Termination for Default.) As with terminations for default, conditional amendments will trigger a VPCMP Assessment process under the VPCMP. (See 8.180 Vendor Performance Corrective Measure Policy.)
  4. Integrity Provisions
    1. For each amendment to a contract where the Integrity Provisions have been amended, except for administrative amendments and call-ups against standing offers, contracting officers must follow the verification process specified in section 5.16 Integrity Compliance. For further details on the verification process, see sections 5.16 Integrity Compliance and 8.70.2 Compliance with the Integrity Provisions.
    2. When a significant contract amendment is to be done for an existing contract which does not contain the most recent Integrity Provisions (e.g. increase to the contract value, to exercise an option, to extend the contract period, to modify the requirement, or the assignment of a contract), contracting officers must propose to add or revise the Integrity Provisions of the contract. Contracting officers may use the Template Letter for Addition of Provisions to an Existing Contract (see 8.13. Annex: Letter Templates for Integrity).
    3. Where the contractor refuses to make changes to the Integrity Provision or provide the certification as requested in the Template Letter for Addition of Provisions to an Existing Contract, best efforts should be made to ensure that the supplier has a clear understanding of the terms of the new Integrity Provisions. This may include having a manager contact the contractor directly. Where the contractor still refuses to update the Integrity Provisions, the refusal should not prevent the continuation of business operations and the contract amendment may proceed. For assistance, contact the Acquisitions Program Integrity Secretariat (APIS), by e-mail at TPSGC.DGAIntegrite-ABIntegrity.PWGSC@tpsgc-pwgsc.gc.ca.
  5. The amendment format will follow the form of the original contract. The amendment should identify, by using complete clauses, any changes, additions, conditions or deletions.
  6. To reduce administrative costs, contracting officers and client departments should combine as many individual changes as possible into each amendment. For example, multiple design changes or deviations can be amended together.
  7. Amendments should receive the same distribution as the original contract.

8.70.10 Approval of Contract Amendments

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  1. Legal services must be consulted on conditional amendments before being considered.
  2. With the exception of administrative amendments and pre-approved options, contracting officers are to complete the Procurement Risk Assessment for Amendments to determine the risks associated with the proposed amendment and the appropriate approval authority required.
  3. For more information on forms of amendment requests and the appropriate approval levels, see Chapter 6 Approvals and Authorities.

8.70.15 Exercising Options

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  1. Before exercising a contract option, contracting officers must first verify if the option was pre-approved. If not, the appropriate approval authority must be sought, in accordance with Chapter 6 Approvals and Authorities, before amending the contract.
  2. Before exercising the option, the contacting officer should confirm that the prices for the option are still fair and reasonable. It may be appropriate to negotiate a lower price when market prices for such goods or services have dropped significantly since contract award.

8.70.20 Administration of Contracts with Task Authorizations

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  1. The following paragraphs highlight some considerations regarding the administration of task authorizations (TAs). (See 3.35.1 Contracts with Task Authorizations for information on issuing and monitoring contracts with task authorizations.)
  2. A detailed and current record of all authorized tasks must be kept for each contract with a task authorization process. The contractor or the client department is responsible for creating and updating this record, as established in consultation with the client department during the procurement planning stage. This record may contain but is not limited to:
    For each authorized task:
    1. the task number and, as applicable, task revision number(s);
    2. a title or brief description of each authorized task, as applicable;
    3. the total estimated cost specified in the authorized TA of each task, GST or HST extra, as applicable;
    4. the total amount, GST or HST extra, expended to date against each authorized task (as applicable);
    5. as applicable, when a task is completed, the committed amount should be reduced to reflect the actual expenditure and the change should be reflected in the record of task authorizations;
    6. the start and completion date for each authorized task, as applicable;
    7. the active status of each authorized task.
    For all authorized tasks:
    1. the amount (GST or HST extra) specified in the contract (as last amended, as applicable) as Canada's total liability to the contractor for all authorized TAs; and
    2. the total amount, GST or HST extra, expended to date against all authorized task authorizations.
  3. Before authorizing a task, the organization authorized to issue the task to the contractor (normally the client) must ensure that:
    1. the task can be completed on or before the expiry date of the contract with task authorizations. If it cannot be, the task authorization cannot be issued until after the contracting officer amends the period of the contract with task authorizations;
    2. the total estimated cost of the TA, GST or HST extra, is within the client’s authority limit relative to individual task authorizations specified in the contract. (If the total value exceeds that limit, the TA must be forwarded to PWGSC for authorization and issuance); and
    3. the task authorization will not cause the exceeding of the amount (GST or HST extra) specified in the contract as Canada’s total liability to the contractor for all authorized TAs.
  4. When a task is completed, the committed amount may be reduced to reflect the actual expenditure, and such changes must be reflected in the record of task authorizations.
  5. See 3.35.1.35 Separation of Duties relative to the separation of duties in TAs.

8.70.25 Design Change or Deviation

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  1. If there is no design change or deviation provision in the contract, the procedure may be instituted only after an authorization document is received from the client and is incorporated in the contract via an amendment (see 8.70.10 Approval of Contract Amendments). Adequate funds should be authorized and set aside for changes. If additional funds are required, a requisition amendment is required.
  2. Each design change or deviation request must have technical approval by the technical authority or project authority and, as specified in the contract, be approved by the contracting officer.
  3. Whenever possible, a design change requiring a price adjustment should be negotiated before the change in work is made.
  4. Design changes or deviations can result in upward, downward or nil adjustment to contract costs. After approval by the client, the contracting officer is responsible for prompt negotiation of price adjustments, and ensuring that these changes are reflected in the total contract price.
  5. The form PWGSC-TPSGC 9038 Design Change/Deviation, should support deviations and changes.
  6. Surplus materiel resulting from an authorized design change or deviation must be accounted for and reported to the contracting officer.

8.70.25.1 Design Change or Deviation Procedure

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The following is an example of a design change or deviation procedure:

  1. When it is necessary to depart, either temporarily or permanently, from the governing technical data in a contract, the technical authority or project authority or the contractor may originate a request for design change or deviation.
  2. The contractor may initiate the design change or deviation process by completing section 1 of form PWGSC-TPSGC 9038 Design Change/Deviation including a ceiling price for the change, subject to negotiation, and sending three copies to the technical authority or project authority and one to the contracting officer. When required, copies of the supporting technical data should be submitted.
  3. A subcontractor must submit the form through the contractor, who will ensure that all the information required is entered, before submission.
  4. The technical authority or project authority, with the sole right to deny approval, will review the design change or deviation request, and either approves it, and forwards it to the contracting officer, or rejects it, and returns it to the contractor.
  5. The technical authority or project authority may initiate the process by sending five copies of the form to the contractor. After providing the contractual information required, the contractor will retain one copy, and send three copies to the technical authority or project authority and one to the contracting officer.
  6. Where equipment or stores affected by the change are being procured under more than one contract, a separate form is required for each contract, unless the technical authority or project authority has specifically authorized the use of one form for all contracts held by a single contractor. In all cases, the form should show all contract references, including the file number and the serial number assigned by the contracting officer.
  7. The contracting officer will:
    1. negotiate a firm price, if possible, or another pricing basis that is consistent with the existing basis of payment in the contract;
    2. provide contractual authority for the design change or deviation; and
    3. sign the form and send a copy to the contractor and the technical authority or project authority. Upon receipt, the contractor will implement the change.
  8. The contractor should direct enquiries regarding the design change or deviation procedure to the technical authority or project authority. The contracting officer or the technical authority or project authority will provide blank forms to the contractor, who will provide them to the subcontractors.

8.70.30 Loans of Department of National Defence Materiel

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  1. When a contract does not provide for the loan of the Department of National Defence (DND) materiel, the contractor may request such a loan.
  2. Such requests should be directed to DND, Director Disposal, Sales, Artifacts and Loans (DND/DDSAL).
  3. Returns must be made:
    1. when the materiel is no longer required;
    2. when repairs are beyond the capability of the contractor;
    3. when recalled by DND/ DDSAL, or
    4. on completion of the contract.
  4. The contractor must return the materiel, as directed by DND/ DDSAL, and should request from DND/ DDSAL, in writing, instructions for the disposition of the items to be returned. The request should include a description of the items, identification or NATO stock number, their condition, and the loan agreement number.
  5. DND/ DDSAL will issue disposition instructions, and inform all concerned. The contractor must arrange for the return of the items as directed and confirm action by returning a signed copy of the "Notice to Ship" to DND/ DDSAL.
  6. At their discretion, the local Canadian Forces Quality Assurance Representative will carry out inspection on issue and return of DND-loaned materiel.
  7. The contractor must report lost, damaged or destroyed DND loaned materiel, in writing, to DND/ DDSAL, which is responsible for coming to a resolution with the contractor.

8.70.35 Return of Special Test Equipment and Special Production Tooling

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  1. Contractors must provide DND/ DDSAL with at least 60 days written notice before the date when the production assets will no longer be required. The notice should identify the contract or loan agreement serial number under which the production assets were held, location of the equipment, a brief but adequate description of the surplus production assets and the total estimated value, if applicable.
  2. A decision to retain production assets for future use should be supported by a cost/benefit analysis, which provides an estimate of the storage and transportation costs involved, the duration of the storage, the refurbishing/modification costs that may be required to re-activate the assets, including installation/set-up charges, if applicable, and the remaining operational use or life of the equipment.
  3. DND/ DDSAL will advise the contractor on the most appropriate method of retention and storage of the assets. DND/ DDSAL will arrange for the transfer of production assets to another contractor, or a storage facility; or will prepare the appropriate documentation, declaring the items surplus, and forward it to Crown Assets Distribution Centre.

8.75 Administration of Standing Offers and Supply Arrangements

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8.75.1 Reporting for Standing Offers and Supply Arrangements

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  1. Contracting officers must ensure that the supplier fulfills all reporting requirements in the standing offer (SO)/supply arrangement (SA), as applicable.  Typically, suppliers must report on a quarterly basis on the call-up/contract activities.  Such reports may contain, but are not limited to, the following information:
    1. the standing offer/supply arrangement number;
    2. the supplier name;
    3. the reporting period;
    4. the call-up/contract number for each call-up/contract, including amendments;
    5. the client department;
    6. the contracting authority;
    7. the date of the call-up/contract;
    8. the call-up/contract period;
    9. the line items acquired/services provided;
    10. the value of the call-up/contract, Goods or Services Tax/Harmonized Sales Tax included, as applicable.
  2. Each standing offer/supply arrangement should clearly describe the reporting requirements for the supplier, as applicable, and must indicate the timeframe by which each report must be submitted after the reporting period. For that purpose, contracting officers must insert Standard Acquisition Clauses and Conditions Manual clauses M7010C in their standing offer and S0010C in their supply arrangement.
  3. Reporting Requirements for Client Departments
    Contracting officers must ensure that client departments fulfill all reporting requirements as identified users of the standing offer/supply arrangement, as applicable, in a timely fashion. Client departments may be required to provide more detailed reports than those required of suppliers and include information regarding bid solicitation, supplier responses and selection of successful bidder(s). These reports provide contracting officers with valuable information on the effectiveness of these methods of supply.

8.75.5 Revisions to Standing Offers

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  1. Standing offers are not contracts so cannot be amended or assigned.
  2. Standing offers typically have a provision that an offeror must provide 30 days written notice of its intent to withdraw its RFSO. The contracting officer would then issue a "Revision to the Standing Offer and Call-up Authority", to notify all the identified users and the offeror of the effective date of the withdrawal. Call-ups received by the offeror before the effective withdrawal date are legally binding and must be honored.
  3. The Contracting Officer can issue a "Revision to the Standing Offer and Call-up Authority" for reasons such as to extend the RFSO period or update other relevant instructions in the RFSO.
  4. An offeror may revise their standing offer within the limits established in the RFSO solicitation process. The Contracting Officer would then issue a "Revision to the Standing Offer and Call-up Authority" to reflect the appropriate revisions.

8.75.10 Managing Proportional Basis of Selection

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  1. When proportional basis of selection is used for selecting the contractor among multiple standing offers, the contracting officer must ensure that identified users are aware of their obligation to award call-up activities, in accordance with the predetermined work distributions stated in the SO.
  2. The offeror that is furthest under the ideal percentage in relation to work distributed to the other offerors will be selected for the next call-up. The ideal percentage is stated in the standing offer. A spreadsheet is an acceptable method to track all call-ups and to maintain a cumulative total for each offeror.
  3. For more information on the ranking methodology for multiple standing offers, see 4.10.20.5 Ranking and Methodology for Multiple Standing Offers.

8.80 Employer-employee Relationship

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  1. The client department is responsible for ensuring that an employer-employee relationship does not develop during the performance of the contract.
  2. The contracting officer must ensure that descriptions of the work or changes to the work will not result in an employer-employee relationship. For more information on employer-employee relationships, see 2.55 Employer-Employee Relationships.

8.85 Subcontracting

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  1. As stated in certain Standard Acquisition Clauses and Conditions(SACC) Manual general conditions (e.g. 2030) forming part of the contract, a contractor must, in this case, obtain the consent of the contracting officer before subcontracting, by using form PWGSC-TPSGC 1137 Permission to Subcontract (PDF Version 121 KB)The information is only accessible to federal government department and agency employees. - (Help on File Formats). In this case, the contractor must certify that the proposed subcontract is subject to all of the same conditions as contained in the contract. The contracting officer will only consent if satisfied with the subcontractor and the proposed subcontract.
  2. Any deviations are entirely at the risk of the contractor.
  3. The award of a subcontract does not relieve the contractor of any contractual obligations, or impose any liability upon Canada in relation to the subcontractor.

8.90 Assignment of contracts

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  1. Under the Standard Acquisition Clauses and Conditions (SACC) Manual general conditions, the written permission of Public Works and Government Services Canada (PWGSC) is required before any contract assignment.
  2. When the contract contains security requirements, the contracting officer, with the assistance of the Canadian Industrial Security Directorate, must ensure that the assignee meets all security requirements specified in the contract.
  3. In order to comply with the Integrity Provisions, the proposed assignee needs to provide a signed certification (see Annex 8.13 Letter Templates for Integrity) and, if applicable, a list of names of directors, or, for privately owned corporations, the names of the owners of the corporation. The contracting officer must then proceed to verify compliance to the Integrity Provisions as further detailed in section 5.16 Integrity Compliance.
  4. If the assignee, or its affiliates, is found to be ineligible or suspended under the Ineligibility and Suspension Policy, the contracting officer may refuse the assignment or request a Public Interest Exception to the Assistant Deputy Minister of Acquisitions Branch for the contract of the proposed assignee. See section 4.21 Integrity Provisions for details on procurements where the supplier is ineligible or suspended.
  5. All proposed assignments supported by a contracting officer must be referred to a cost analyst for review, and then, to Legal Services for drafting of the necessary legal documents.
  6. When a contractor assigns a contract, the responsibility for all or part of the performance is transferred to a third party. However, the assignment of a contract must not relieve the original contractor of any obligations under the contract or impose any additional liability on Canada, in relation to the assignee.
  7. In order to protect Canada's interest, the transfer of the liabilities and rights of the contract from the original contractor under the original contract to the assignee, will be done so that the original contractor is ultimately liable for the performance of the contract. An acceptable manner of protecting Canada's interest is to obtain the original contractor's guarantee of performance in the event that the assignee fails to perform.
  8. The contracting officer will forward the assignment agreement to the appropriate PWGSC signing authority, with the reasons for the assignment, the number and value of contracts involved, and the financial condition of the assignee.
  9. In the case of Canadian Commercial Corporation (CCC) contracts, a copy of the approved assignment should be forwarded to the Cost and Profit Assurance Group (CPAG), in order to maintain data on supplier financial status, or to the appropriate vice-president of the CCC.

8.95 Financial Security and Contractor Difficulties

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If the contract contains financial security, and the contracting officer becomes aware that a contractor may have difficulty in successfully completing the contract, then the surety company should be informed immediately.

8.100 Bonding Companies

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Whenever a bonding company has failed to honour its undertakings, the matter must be referred to Legal Services for appropriate action, and to the Corporate Secretary who must notify Treasury Board (TB).

8.105 Protecting Canada's goods

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  1. If a contractor is delinquent in discharging its accrued liabilities, subcontractors or suppliers may attach liens to goods that Canada has taken title to through full or partial payment. Steps should be taken to protect Canada's interests.
  2. This is not required for service contracts, and is generally not cost effective for goods contracts under $25,000.
  3. Where a contractor has given security under section 427 of the Bank Act, a waiver must be obtained for the bank's priority over Canada's title to the goods. The contracting officer must consult with Legal Services.
  4. If the contractor should change bank, and a new waiver is not obtained, or if the contractor fails to disclose that security was given, Canada's title could be affected.
  5. To protect Canada's interest with potentially insolvent or bankrupt contractors, the contracting officer must obtain a waiver when a bank or other financial institution has a prior lien on the contractor's assets. If the waiver is unobtainable, consult with Legal Services, the cost analyst, and Cost and Profit Assurance Group (CPAG), to determine if the contractor's credit position warrants relieving the contractor of the contractual obligation relating to bank liens.
  6. To preclude the attachment of liens, the contracting officer should check that the contractor has met payment obligations under the contract to its workmen, subcontractors and suppliers.
  7. The contracting officer should promptly review all indications of unpaid invoices or wages or unreasonable delays in the payment; and carry out a cost analysis, if appropriate, in cooperation with a cost analyst, in accordance with the Guideline on the Use of Cost and Price Analysis ServicesThe information is only accessible to federal government department and agency employees. (PDF).
  8. The frequency, scope and extent of checks will be determined and carried out by the contracting officer, based on cost/benefit, and the contractor's payment record, credit rating and financial strength.
  9. When the financial analysis indicates potentially serious financial problems, a report should be sent to CPAG, who will distribute copies to all procurement sectors/regions. The sectors/regions in turn should compile lists of all open contracts with the contractor involved, including the contract values and anticipated completions dates and return these lists to CPAG.
  10. CPAG will then determine whether a discretionary verification should be carried out, and what would be the scope and extent of the verification.
    Sectors/regions should only enter into new contracts with the contractor with due caution and proper justification.
  11. A discretionary verification is carried out by qualified personnel and approved by CPAG. Discretionary verifications may be commissioned only by CPAG, and will be performed on a timely and prompt basis, so as to lessen potential risks to Canada.
  12. If the total risk exposure is $2,000,000 or over, a discretionary verification will normally be undertaken. A determination will be made, as to the protection provided to Canada by any security deposits (government guaranteed bonds, bills of exchange, irrevocable standby letters of credit), performance bonds, labour and material payments bonds, or registration action taken or intended.
  13. If the total risk exposure is under $2,000,000, CPAG will, in consultation with the sector/region involved, determine the need to commission a discretionary verification, after taking into account any financial security provision or registration action.
  14. When the verification points to a breach of the contractor's specific contractual obligation to effect prompt payment to its workmen, subcontractors, or suppliers, CPAG will provide written advice to the sectors/regions and senior financial officers of the client(s) holding the contracts in default.

8.110 Registering Notice of Interest in Goods

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  1. In provinces other than Quebec, Canada can register notice of its interest in the goods with a view to protecting itself against the risk of liens. The registration requirements differ for each province. The contracting officer must consult with Legal Services.
  2. In practical terms, because of the complexities involved, this action is appropriate only on high dollar value contracts.

8.120 Bankruptcy, Receivership, Insolvency

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  1. The contracting officer must consult Legal Services when:
    1. a contractor proposes a settlement while in an impending or actual receivership, bankruptcy or insolvency condition;
    2. the contract is secured by surety bond guarantees or other securities; or
    3. a contractor has given security to a bank under section 427 of the Bank Act.
  2. Upon receipt of a bankruptcy, receivership or insolvency notice or when there is an indication of such, the contracting officer must:
    1. inform the relevant director;
    2. develop a plan, in consultation with the client, for completion of the work; and
    3. advise Cost and Profit Assurance Group (CPAG) and Legal Services.
  3. When a contractor is in formal bankruptcy, the contracting officer must, in consultation with Legal Services, pursue the rights of Canada, including:
    1. realizing on any contractual securities;
    2. proving title to any Canada property in the contractor's possession;
    3. ensuring payment, if Canada is unsecured, in priority of other unsecured creditors; or
    4. offsetting money payable to the contractor against any amount due to Canada.
  4. After formal bankruptcy or receivership, monies due to the contractor must be sent to the trustee in bankruptcy or the receiver-manager, as applicable.

8.125 Goods or Services not in accordance with the Contract

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It is the responsibility of the client to inform the contractor, as specified in the contract, if the goods or services are not in accordance with the contract. Failure to do so may prejudice any subsequent claims by Canada.

8.130 Timely Performance

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  1. Under SACC Manual general conditions, time is of the essence of the contract. If a contractor fails to deliver the goods or perform the services on time, the contracting officer should ascertain, in consultation with the client and Legal Services, the facts surrounding the delay. If the delay was caused by factors beyond the control and without the fault or negligence of the contractor, the contracting officer should extend the time of performance of the contract for a period equal to the length of the delay. Excusable delays are detailed in general conditions. In all other circumstances, the contractor is responsible for the delivery default. If the contractor is in default in carrying out the delivery commitments, the contracting officer may, upon giving notice in writing to the contractor, terminate the contract fully or partially.
  2. Where the time of delivery is to be extended due to delays beyond the control of the contractor, and if the contract is secured by surety bonds, the contracting officer must:
    1. advise the surety company and obtain its concurrence before the completion dates specified in the contract are actually extended; and
    2. advise the surety company and obtain its concurrence before adjusting the contract price, due to additional work requirements, if applicable.

8.135 Terminations

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To determine which type of termination might be involved, see 8.135.5 Termination for Convenience of Canada, 8.135.15 Termination for Default and 8.135.20 Termination by Mutual Consent. For termination clauses, see subsection 5-J of the Standard Acquisition Clauses and Conditions (SACC) Manual.

8.135.1 Suspension of the Work - Stop Work Order

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When a client wishes to suspend the work under a contract rather than cancel it, SACC Manual clause J0500C or J0502C should be used. The suspension of the work allows the client to obtain a review of the contract status before deciding the type and extent of termination (including a termination for default). If a client wishes to reinstate a contract after a stop work order has been issued, the stop work order must be cancelled (see clause J0501C). In this event, it may be necessary to adjust the delivery terms and/or contract price. It is the responsibility of the contracting officer to determine the reasonableness of all claims for additional costs that the contractor may make. Amendments to cover payment of such costs must be approved in accordance with the contract amendment approval and signing authorities. (See Annex 8.3: Termination for Convenience Process for a detailed description of the termination for convenience process.)

8.135.5 Termination for Convenience of Canada

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  1. Occasionally, Canada may terminate a contract for convenience in accordance with the termination for convenience provision of the general conditions applicable to the contract. See Annex 8.3: Termination for Convenience Process for a detailed description of the termination process. This may be due to curtailment of funds, discontinuation of a government program, or other circumstances, which make the procurement of the good or service unnecessary. To protect the integrity of the bid solicitation process, Canada may also terminate a contract for convenience, if it is determined that it has been mistakenly awarded to other than the lowest-responsive bidder. Clauses related to the termination for convenience notices are in subsection 5-J of the SACC Manual (see clauses J0001C, J0002C, J0003C, J0006C).
  2. Termination for convenience applies when:
    1. the client has requested termination;
    2. a termination for default cannot be considered because the contractor is not in default; and
    3. a termination by mutual consent would not be more advantageous to Canada.

8.135.10 Involvement of the Termination Claims Officer

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The Termination Claims Officer (TCO), Price Support Directorate (PSD), Procurement Business Management Sector (PBMS), should be involved immediately in the claim settlement process resulting from contracts that are partially or completely terminated for convenience. Accordingly, the contracting officer should contact the TCO, as soon as the notice of termination for convenience (see SACC Manual clauses J0001C, J0002C, J0003C, J0006C) is issued, and should provide the TCO with a copy of the notice. The email address for the TCO's group is tpsgc.parrc-aptfc.pwgsc@tpsgc-pwgsc.gc.ca.

8.135.15 Termination for Default

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Termination for default applies when the contractor is in default in carrying out any of the obligations under the contract, usually through non-performance or delayed delivery. The section "Default by the Contractor" in the SACC Manual general conditions provides the basis for termination for default. For more information on termination for default, see Annex 8.4: Termination for Default.

8.135.20 Termination by mutual consent

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  1. On rare occasions both parties may agree to termination without claims or penalties, usually where the client has requested full or partial termination of a contract, the contractor has incurred minor or no expenses and is willing to forego a claim, and the matter may be settled at no cost to Canada.
  2. Termination by mutual consent does not apply when it is in Canada's interest to issue a termination for default or when the contractor claims additional costs following the reduction or cancellation of all or a portion of the contract.
  3. On receiving the client's request for termination by mutual consent, the contracting officer should request the contractor to confirm that no claim is involved, and must refer the matter to Legal Services in accordance with 8.135.35 Involvement of Legal Services in Cases of Termination.
  4. Since no claim is made, the TCO is not involved in this process.

8.135.25 Request for Termination by the Contractor

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When a contractor requests a termination because of anticipated losses in performing the contract, consent will not be granted. Instead, the contractor should be instructed to carry out its obligations under the contract. The contractor may, on completion of the contract, request an "extra payment" for additional costs incurred or losses suffered, if some responsibility for the additional cost or for the loss can be ascribed to Canada. (See 8.135.1 Suspension of the Work - Stop Work Order).

If the contractor refuses to carry out the contractual obligations, the contract must be terminated for default.

8.135.30 Financial Security Issues Related to Terminations

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  1. If the contract is secured by a security deposit (government guaranteed bonds, bills of exchange, irrevocable standby letters of credit), it should not be terminated without the prior advice of Legal Services.
  2. If the contract is secured by surety bonds, it must not be terminated as this would also terminate the existing contractual relationship with the bonding company. When a contractor fails to perform a contract, or when a claim is received for non-payment of labour or material, and a payment bond is in place, contracting officers must immediately inform the surety company in writing, requesting that corrective action be taken. Contracting officers must not enter into negotiations with the contractor or claimant.

8.135.35 Involvement of Legal Services in Cases of Termination

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  1. The following terminations must not be issued without a written legal opinion:
    1. all terminations for default;
    2. terminations by mutual consent, and
    3. terminations for convenience.
  2. In seeking the opinion of Legal Services, the contracting officer should submit the procurement file with a chronological index of the documents forming the basis for the termination request, together with a short note outlining the events leading to termination. Based on this information, Legal Services will render an opinion and advise as to the appropriate method of termination.

8.135.40 Adjustment to Source Lists

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Terminations for convenience by Canada should not result in any adjustment of the source lists, while terminations by mutual consent may require correction of source lists. Terminations for default are usually the cause for the deletion or suspension of the contractor from the source list.

8.135.45 Public Works and Government Services Canada Offices Outside Canada

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Termination procedures for contracts awarded by Public Works and Government Services Canada (PWGSC) offices outside Canada may differ from those for contracts issued in Canada; therefore, the termination procedures serve only as a general guide.

8.135.50 Approval Authority

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Stop work orders and notices of termination must be approved and signed by a contracting officer in accordance with the Procurement Risk Assessment for Amendments (PRAA). The total contract value at the time of the termination is used in the value question of the PRAA.

8.140 Disputes

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  1. When managing a contract, disputes may arise between parties to the contract. Disputes must be handled expeditiously. All parties must meet their contractual obligations. Proper record keeping is vital for clarification, audit or termination purposes.
  2. If a contracting officer is unable to resolve a contract dispute, the matter should be brought to the attention of the contracting officer's immediate supervisor.
  3. Consultation with Legal Services is recommended to ensure the protection of the interests of Canada. Consultation with the Business Dispute Management (BDM) Program, Departmental Oversight Branch (DOB), is recommended to prevent or limit unnecessary escalation and to create conditions for early resolution.
  4. When any business dispute associated with a contract (i.e. construction, acquisition, letting, leasing and disposal of real property) cannot be resolved through discussion, the contracting officer should immediately advise the contractor, in writing, of the Alternative Dispute Resolution (ADR) services available in the BDM Program.
  5. Any questions concerning the BDM Program or any of its services should immediately be referred to the Manager, Business Dispute Management Program by email at the following address: GestionConflit.ConflictManagement@tpsgc-pwgsc.gc.ca.

8.140.1 Contract dispute resolution

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  1. All enquiries, from contractors or contracting officers concerning the options for dispute resolution should be addressed to the Manager of the Business Dispute Management (BDM) Program, Departmental Oversight Branch, by email at the following address: GestionConflit.ConflictManagement@tpsgc-pwgsc.gc.ca.
  2. The BDM Program provides coordination, prevention and Alternative Dispute Resolution (ADR) services upon request to support the management of business disputes with third parties, other government departments and PWGSC employees to facilitate timely and appropriate action. ADR services provided through the BDM Program include consultation, facilitated discussions, mediation and arbitration.
  3. Prevention and Mitigation
    1. When a conflict does arise, the contracting officer must make every effort to resolve the dispute with the contractor as soon as possible.
    2. If the contracting officer and contractor do not resolve some or all of the issues in dispute, they should then attempt to resolve the dispute as soon as possible through the involvement of a senior level contracting authority or a senior project authority.
  4. Conflict Intervention
    1. If involving a senior level contracting authority or a senior project authority (as stated in c. ii.) does not resolve some or all of the issues in dispute, the contracting authority should immediately advise the contractor, in writing, of the ADR services available through the BDM Program, Departmental Oversight Branch. The contracting authority can also enlist the assistance of the BDM Program.
    2. Any party to a PWGSC contract can approach the BDM Program and request assistance in managing a business dispute.
    3. If an ADR service is requested, the BDM Program will inform the other parties of the request and determine their interest in such process. If the parties are interested, the ADR process will be initiated.
    4. If an ADR process does not resolve the dispute, the parties’ rights are not compromised.

8.145 Contract Settlement Board

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This section of the Supply Manual has been removed. The dispute process is replaced as per section 8.140 Disputes.

8.145.1 Contract Settlement Board - Procedures

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This section of the Supply Manual has been removed. The dispute process is replaced as per section 8.140 Disputes.

8.145.5 Contract Settlement Board - Meetings

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This section of the Supply Manual has been removed. The dispute process is replaced as per section 8.140 Disputes.

8.145.10 Contract Settlement Board - Settlement Offer

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This section of the Supply Manual has been removed. The dispute process is replaced as per section 8.140 Disputes.

8.145.15 Contract Settlement Board - Non-acceptance of Settlement

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This section of the Supply Manual has been removed. The dispute process is replaced as per section 8.140 Disputes.

8.150 Contract Dispute Advisory Board

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This section of the Supply Manual has been removed. The dispute process is replaced as per section 8.140 Disputes.

8.150.1 Contract Dispute Advisory Board - Procedures

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This section of the Supply Manual has been removed. The dispute process is replaced as per section 8.140 Disputes.

8.150.5 Contract Dispute Advisory Board - Non-acceptance of Settlement

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This section of the Supply Manual has been removed. The dispute process is replaced as per section 8.140 Disputes.

8.155 Final Payments

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  1. The total time charged under a fixed rate contract should be verified for acceptability and accuracy of recording before the final claim is processed for payment. The findings of such verifications will be noted on the procurement file.
  2. The contracting officer, or other qualified personnel designated by the sector/region concerned, should carry out the verification of time for acceptability.
  3. Verification of time for accuracy of recording should be carried out by qualified personnel from the financial division or section in the directorate concerned, or other suitably qualified personnel with the prior approval of the director who is also responsible for setting the standards of verification for the accuracy of recording.

8.155.1 Refunds of Excess Profits

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As the result of an audit, or for various other reasons, it may be determined that a contractor has realized unreasonably high profits from a contract. On such occasion, a contractor may need to return excess profits to the department. The special procedures for dealing with these situations are in Annex 8.5: Refunds of Excess Profits Earned on Public Works and Government Services Canada Contracts.

8.160 Cost Submissions Standards for Cost Reimbursable Contracts

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  1. The contractor will be paid, in accordance with the contract, the cost reasonably and properly incurred in the performance of the work. Upon completion of the work, on all cost reimbursable contracts meeting the cost threshold, the contracting officer must place on the procurement file a certification to the effect that the final amount paid represents a reasonable price. This certification should be based on the findings of a cost audit, if one was done.
  2. The agreed final price, after all reconciliations, is then formalized in a contract amendment, generally referred to as "finalization of cost amendment", which adjusts the total contract price to reflect the final price. This amendment should also state that further claims cannot be submitted.
  3. The audit provision in contracts valued over $50,000 with Canadian contractors allows for the determination of the actual costs incurred, to determine the final contract cost of cost reimbursable contracts and the reasonableness of the price.
  4. All cost reimbursable contracts require a cost submission upon the completion of the contract. All multi-year cost reimbursable contracts, except for repair and overhaul (R&O) services, will include a provision for an annual cost submission, as a mandatory deliverable item.

NOTE: For R&O service contracts, an annual cost submission is at the contracting officer and the audit agency's discretion.

8.165 Cost Audit

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  1. The selection of cost reimbursable contracts for audit will be made by the contracting officer after consultation with the Cost and Profit Assurance Group (CPAG) within the Policy, Risk, Integrity and Strategic Management Sector, in accordance with the following:
    1. all contracts associated with Major Crown Projects (MCPs); and
    2. if risks of significant overpayment are apparent.
  2. For those contracts selected for audit, the sectors/regions will supply to CPAG a copy of the contract document, along with copies of all cost submissions received.
  3. A copy of the audit report will be forwarded to the contracting officer, along with an audit notification form prepared by CPAG detailing overpayments and/or comments requiring approval.
  4. The contracting officer will establish a final price with the contractor based on the audit findings. Every effort will be made to do this within 90 days of the audit report being received. The contracting officer will notify CPAG of the terms of the settlement and resolution of all audit issues raised in the contract audit.
  5. When the contractor has agreed to the final price, the contracting officer must certify that the price charged is reasonable and in accordance with the contract.
  6. Reference should be made to section 10.70 Recovery and Disposition of Contract Claims Adjustments Process.

8.175 Contract End and Contract Close Out

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  1. It is the contracting officer’s responsibility to ensure that all contract activities are completed in order to consider the contract closed out.
  2. A contract is considered to be fully completed when:
    1. the required deliverables have been received in accordance with the contract; and
    2. the client has accepted the deliverables and the invoice has been paid in accordance with the contract price and basis of payment; and
    3. there are no outstanding work deficiencies, changes, payments or claims that require formal release action.
  3. Contracting officers should ensure the administrative closure of the file has been carried out in accordance with established procedures (e.g. reporting, return of Government Furnished Equipment/Government Supplied Material disposal of surplus material and assets etc.).
  4. Contracting officers should ensure that the procurement file is properly documented and archived in accordance with established Public Works and Government Services records management procedures.
  5. Best Practices:
    1. Wherever possible, files/contracts with warranty periods should be retained and warranty periods noted, until the warranty has expired or until any warranty claims are resolved.
    2. Where a contract created Intellectual Property (IP) for Canada or associated rights, the related documentation should be kept until such time as the Government of Canada no longer has need of the IP. The contract may need to be kept indefinitely.
    3. Contract files with any outstanding legal or operational issues or requirements related to oversight (e.g. audits) should not be archived until such time as the issues are resolved.

8.180 Vendor Performance Corrective Measure Policy

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8.180.1 Vendor Performance Corrective Measure Policy - Introduction

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  1. The purpose of the Vendor Performance Corrective Measure Policy (VPCMP) is to assist the PWGSC procurement community in mitigating procurement risk for future contracts and improving client service. There are a number of tools to meet this purpose. The VPCMP is just one of those tools. Other tools include the Code of Conduct for Procurement and the Standard Acquisition Clauses and Conditions (SACC) Manual. Collectively these tools provide a foundation on which the relationship with vendors is established.
  2. The VPCMP is in effect as of November 4, 2010. However, the VPCMP was implemented on an extended trial basis with no consequences for vendors from November 4, 2010 to June 28, 2011 inclusive. There will be no consequences resulting from terminations for default and/or conditional amendments that fall within the scope of the VPCMP and that occurred during that period. Otherwise, the provisions of the applicable previous version remain in effect for transactions issued prior to November 4, 2010.
  3. Vendor performance issues are an important component of procurement risk management. As shown in the Process Chart on the Risk Management Approach to Vendor Performance (See Annex 8.6), those issues have to be considered at all four phases of the contract management process.
  4. The VPCMP applies to PWGSC Acquisitions Branch as a common service provider for transactions under its authority. The scope of the VPCMP on such transactions is clarified below. The VPCMP focuses on using a vendor’s performance information from closed contracts for:
    1. Rejection of offers for competitive and non-competitive procurements: Bids/offers/arrangements received from vendors subject to a Vendor Performance Corrective Measure (VPCM) will not be considered for evaluation if the terms of the VPCM are relevant to that procurement. Specifically, with respect to vendors with a VPCM, the following applies:
      1. no negotiation is to be initiated and no offer is to be accepted for a sole source contract;
      2. bids on competitive procurements of goods or services are to be rejected;
      3. offers for standing offers for goods or services are to be rejected; and
      4. arrangements for supply arrangements for goods or services are to be rejected as well as bids for contracts under supply arrangements where PWGSC Acquisitions Branch is the contract authority.
    2. VPCM Assessment: Terminations and/or partial terminations for default and/or conditional amendments on the following transactions trigger a VPCM assessment at the end of the contract or at the expiry date of the standing offer:
      1. sole source contracts awarded on or after November 4, 2010;
      2. contracts awarded pursuant to competitive solicitations (other than (ii)(C) and (ii) (D) below) issued on or after November 4, 2010;
      3. call-ups under standing offers awarded pursuant to a Request for Standing Offers issued on or after November 4, 2010; and
      4. contracts under supply arrangements awarded pursuant to a Request for Supply Arrangements issued on or after November 4, 2010 where PWGSC Acquisitions Branch is the contract authority.
      However, for the above transactions, no consequences against vendors under the VPCMP will be enforced for terminations for default and/or conditional amendments that occurred from November 4, 2010 to June 28, 2011 inclusive.
  5. In addition, a relevant VPCM entails the following effects on procurement:
    1. A VPCM does not affect existing contracts.
    2. Where the vendor is subject to a relevant VPCM, the length of the contract cannot be extended either by an amendment or through the exercise of an option unless:
      1. there is insufficient time to recompete; or
      2. there are other exceptional circumstances.

      These situations require ADM approval in accordance with 8.180.25 on exceptions.
    3. No call-up can be issued against any existing standing offer.
  6. In addition, the general information on the nature and extent of performance problems gained during the contract and post contract phases should be used in the other phases. In the pre-contractual phase this information will assist in the development of the procurement risk strategy. During that phase it will also assist with assessing the need for a customized or tailored program for managing vendor performance on specific commodity or commodity groupings. This information is also important in developing not only performance criteria but also any other risk mitigation terms for both solicitation and contract documents in the contracting phase.

8.180.5 Principles

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  1. PWGSC has the authority and the duty to take reasonable measures to ensure that it can rely on its vendors to perform their obligations. It has the same right as other purchasers in the market to assess a vendor's performance, and may take action to prevent future problems, based on the vendor's past performance. The discretion to take such action will be taken in a fair and reasonable manner.
  2. The VPCMP is founded on principles that support PWGSC’s commitment to carrying out contracting in a manner that enhances competition, fairness and transparency.
  3. Any corrective measure taken should rationally relate to the nature and severity of the problem for which it is applied.

8.180.10 Definitions

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For the purpose of the generic process in this policy, the following terms or expressions have the following meaning:

  1. Conditional amendment: refers to an amendment to a contract being made for operational reasons in lieu of a termination for default or a partial termination for default because of poor performance. This type of amendment may only be considered when the contracting officer is ready to terminate (full or partial) for default. It is an alternative to immediate termination for default. If not accepted by the vendor, the termination for default will be issued.
  2. Poor performance: means anything less than full performance of a contract by a vendor that results in either a termination for default or a conditional amendment. In both situations the vendor is primarily responsible for the poor performance. This definition extends to all aspects of performance that the contracting officer and the client want to consider and specify for evaluating the vendor's performance during the contract. (Terminations for default also include partial terminations for default.)
  3. Vendor Performance Corrective Measure (VPCM): is a condition or limitation placed on a vendor's ability to contract with Public Works and Government Services Canada (PWGSC) in the future on the basis of PWGSC's assessment of the vendor’s past performance. The VPCM affects the vendor’s eligibility for consideration for award of contracts and issuance of contract amendments.
  4. Expiry date of the standing offer: means the date upon which the standing offer has ended or the date the standing offer is permanently set-aside, whichever occurs first.
  5. Vendor Information Management System (VIM):  is a database available to the users of the Automated Buyer Environment (ABE). It stores vendor information including VPCMP notes and VPCMs.

8.180.15 Generic Process

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8.180.15.1 Contract administration concerning the Vendor Performance Corrective Measure Policy

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  1. Contracting officers must enforce the terms of contracts. A performance issue may lead to the following:
    1. enforcement of the remedies available under the contract;
    2. a note placed in the Vendor Information Management (VIM) System; and
    3. a Vendor Performance Corrective Measure (VPCM) Assessment.
  2. The contracting officer will document the following in the contract file:
    1. vendor performance issues, i.e., non-compliance with the performance criteria specified in the contract;
    2. proof of communication with the vendors on the issues; and
    3. proof of having sent a copy of the VPCMP to the vendor as part of the above communication.
  3. When a contract is terminated for default or when a conditional amendment is issued, the vendor is to be notified in writing of the performance issue(s) and a copy of the notification must be kept in the contract file. The contracting officer must include the following applicable text in the notification:
    1. For conditional amendments:
      "The parties agree to this amendment on condition that Canada has the right to consider the poor performance, which has led to this conditional amendment, for the purpose of assessing whether a VPCM will be placed against the vendor. The parties agree that this conditional amendment will result in a note in VIM and will trigger a VPCM assessment process at the end of the contract or at the expiry date of the standing offer."
    2. For terminations for default, see SACC Manual clauses J1000C and J1001C for the text that must be inserted.
  4. The procedures on terminations for default are set out in section 8.135.15 Termination for Default and Annex 8.4 Termination for Default. For conditional amendments see section 8.70.5 Amending Contracts. Legal Services are to be consulted for both actions.
  5. A contract terminated for default or for which there was a conditional amendment issued triggers a mandatory assessment to determine whether a VPCM is to be applied. The contracting officer will follow the generic process set out in 8.180.15.5 Vendor Performance Corrective Measure Assessment.
  6. As soon as the VPCM co-ordinator is made aware of the default event, a letter of reminder will be sent to the contracting officer by email, outlining the initial steps in the assessment process.
  7. Timeliness in the Tracking, Recording and Follow-Up of Corrective Measures
    1. The contracting officer must complete Part I of form 149 and return it to the VPCM co-ordinator at CoordPMCRF.VPCMPCoord@tpsgc-pwgsc.gc.ca within five business days of receipt of the letter of reminder.
    2. A verification of the VPCM database will then be done to determine the vendor’s VPCM history and whether there is an ongoing assessment involving the same vendor.
    3. If there is an ongoing assessment for another contract, the contracting officer will be informed by email that the authorization for assessment of the new case will be put on hold until the previous assessment is completed.
    4. If there is no ongoing assessment for the same vendor, the contracting officer will receive the authorization to proceed with the assessment. This authorization will include the history of default events already registered in the VPCM database for that vendor.
    5. The assessment is to be completed (including all required signatures) within three months from the date of authorization.
  8. A note in VIM for a contract or a standing offer that was terminated for default or for which there was a conditional amendment issued will remain for six years from the date of the termination for default or conditional amendment. After six years, the note will be removed from VIM. The note may be removed sooner if the termination or conditional amendment was part of the history which contributed to the imposition of a VPCM.
  9. In addition to the above, PWGSC reserves the right to put a note in VIM, called "Other Performance Records", for other significant issues pertaining to the performance of a contract. Other Performance Records require Assistant Deputy Minister, Acquisitions Branch (ADM/AB) approval to be added to VIM. The provisions of the generic process described in section 8.180.15.5 do not apply in such cases. While such notes may result in the application of a VPCM, they are not considered for the purpose of the generic process.
  10. For information on the VPCMP and its application, please contact the VPCM co-ordinator by sending an e-mail to CoordPMCRF.VPCMPCoord@tpsgc-pwgsc.gc.ca. Questions related to the Vendor Performance Policy promulgated in 1996 can also be addressed to the VPCM co-ordinator.

8.180.15.5 Vendor Performance Corrective Measure Assessment

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  1. Formal corrective measures are put in place when there is evidence that continued contracting with a vendor may pose a greater risk to Canada than is acceptable. This will be the case when there is a major instance of poor performance of a contract resulting in a termination for default or conditional amendment, or a cumulative record of terminations for default and/or conditional amendments.
  2. All steps of the VPCM Assessment process set out below must be fully documented in the file. See Annex 8.6.1 Required Procedure for Applying a Vendor Performance Corrective Measure (VPCM) for additional guidance on the required procedure for applying a VPCM using the generic process.
  3. As soon as the contract ends or as soon as the standing offer expires where there has been a termination for default and/or conditional amendment, the contracting officer on behalf of the director will complete the VPCM Assessment form PWGSC-TPSGC 149-1 (PDF Version 72 KB)The information is only accessible to federal government department and agency employees. - (Help on File Formats) by:
    1. taking into account the relative importance of the requirement(s) in the overall context;
    2. including VPCM history without considering the notes used as the basis for applying a previous VPCM; and
    3. establishing the ensuing consequence pursuant to the VPCM consequence grid in the form.

    The principal elements of the form are set out in Annex 8.7 Principal Elements of the Vendor Performance Corrective Measure Assessment.

  4. In the case of a joint venture, a VPCM Assessment will be completed for each member. The Current Contract(s) Score will be the same; however, each member will have a distinct history for the purpose of establishing consequences.
  5. The director must present the results of every assessment to the relevant director general/regional director general (DG/RDG).

8.180.15.10 Notice of intent for applying a Vendor Performance Corrective Measure

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  1. For the purpose of the VPCMP, there are two types of VPCMs:
    1. Debarment is the refusal by PWGSC Acquisitions Branch to do business with a vendor for a specified period. A debarment renders a vendor ineligible to bid on:
      1. contracts;
      2. standing offers and call-ups; and
      3. supply arrangements and contracts under supply arrangements where PWGSC Acquisitions Branch is the contract authority.
    2. Conditions may be applied against vendors in place of debarment, where considered more appropriate. Where a vendor is subject to conditions and has not met those conditions before bid closing date or before commencement of a non-competitive process, the vendor is declared ineligible to bid on or to receive:
      1. contracts;
      2. standing offers and call-ups; and
      3. supply arrangements and contracts under supply arrangements where PWGSC Acquisitions Branch is the contract authority.
  2. Notice to the vendor on the result of a VPCM Assessment:
    1. If the threshold to apply a VPCM is not met, the DG/RDG informs the vendor that (see Annex 8.8 Letter Template Where No Vendor Performance Corrective Measure Will Be Applied At This Time for letter template):
      1. No VPCM is applied at this time.
      2. The category of impact and the associated score for the contract(s) on which the VPCM Assessment was completed.
      3. Canada reserves the right to take the history score of all contracts with terminations for default and conditional amendments into consideration if another assessment is triggered by a further termination for default or conditional amendment on other contracts.
      4. The vendor has 15 business days to respond in writing and his response could include a request to present orally to the DG/RDG.
    2. If the threshold to apply a VPCM is reached, the DG/RDG will notify the vendor of the intent to apply a VPCM (See Annex 8.9 Letter Template for Notice of Intent to Apply a Vendor Performance Corrective Measure for letter template). In addition to the corrective measure, the notice of intent for applying a VPCM to the vendor must include:
      1. a list of:
        • terminations for default and conditional amendments for the relevant contract or standing offer including information on the category of impact and the associated score;
        • history of closed contracts with terminations for default and conditional amendments taken into account; and
        • history of VPCMs;
      2. the procurements against which the VPCM would apply, i.e., whether the VPCM will be across-the-board (affecting all aspects of the vendor's operations) or limited by product, division, geographic division, type of contract (such as urgent delivery requirement) or other factors;
      3. when, and how if applicable, the VPCM will end;
      4. where conditions are recommended, who will determine that they have been satisfied;
      5. a notification that the VPCM extends to any other business arrangements involving the vendor, including subcontracting, partnership and joint venture; and
      6. indication that the vendor has 15 business days to respond in writing and that his response could include a request to present orally to the DG/RDG.
  3. Review of Vendor’s Response
    1. For both cases in (b) above, if after having reviewed the vendor’s written response and any presentation material, the DG/RDG revises the assessment results, the DG/RDG informs the vendor of the following:
      1. the revised assessment results; and
      2. that Canada reserves the right to take the history score of all contracts with terminations for default and conditional amendments into consideration if another assessment is triggered by a further termination for default or conditional amendment in another contract.
  4. A vendor will be given access to documents relevant to its performance including the VPCM Assessment form on the same basis as would be available in a contract dispute.
  5. In the case where the threshold to apply a VPCM has been reached:
    1. The DG/RDG will send by e-mail a one-page summary of the VPCM case, a signed copy of the assessment form (PWGSC 149-1), along with any of the vendor’s written response and any presentation material to the VPCM co-ordinator;
    2. The VPCM co-ordinator will request a review and seek recommendation regarding a VPCM against a vendor from the Acquisitions Program – Policy Committee (AP-PC) line directors. The AP-PC line directors will be required to submit a response within five business days from the date the VPCM co-ordinator sends the request; and,
    3. Following the consultation period , the VPCM co-ordinator will forward the proposed VPCM and the results of the consultation with the line directors to the Director General, Policy, Risk, Integrity and Strategic Management (PRISM) Sector for review and recommendation.

8.180.15.15 Assistant Deputy Minister decision

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  1. In the case where a VPCM is to be applied, the Director General, Policy, Risk, Integrity and Strategic Management (PRISM) Sector will submit the assessment results to the Assistant Deputy Minister, Acquisitions Branch (ADM/AB). The ADM/AB is the sole approval authority for the imposition of a VPCM.
  2. Except where there is an approved Sector/Region Vendor Performance Program, the ADM/AB will review the assessment results, including information provided by the vendor.
  3. The ADM/AB will inform the vendor of the decision whether a VPCM will be applied (See Annexes 8.10 Letter Template for Decision to Apply Conditions as a Vendor Performance Corrective Measure and 8.11 Letter Template for Decision to Apply Debarment as a Vendor Performance Corrective Measure for letter templates).

8.180.15.20 Actions pursuant to a decision to apply a Vendor Performance Corrective Measure

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  1. The Assistant Deputy Minister’s (ADM) office sends a copy of the completed VPCM Assessment form to the VPCM co-ordinator in the Policy, Risk, Integrity and Strategic Management (PRISM) Sector. Information on a VPCM will only be entered into VIM by PRISM.
  2. The VPCM co-ordinator informs the authorities of relevant standing offers and supply arrangements about the imposition of a VPCM.
  3. A decision to reject a bid/offer/arrangement because of a VPCM can be made at any time up to contract award or issuance of a standing offer or supply arrangement. VIM is to be checked for a VPCM at bid closing for competitive procurements and prior to any interaction with a sole source vendor. With respect to call-ups, standing offers must be set aside for vendors that are subject to relevant VPCMs. In addition, VIM is to be rechecked prior to contract award. Where extending the length of a contract is being considered, VIM is also to be checked before issuing amendments or exercising options. For the right to reject a bid/offer/arrangement because of a VPCM, see section 5.55.5 Authority to Reject a Bid/Offer/Arrangement.
  4. In accordance with section 7.35 Notification to Unsuccessful Bidders/Offerors/Suppliers, the vendor must be informed of the decision to reject a bid/offer/arrangement because of a VPCM.
  5. If a member of a joint venture is subject to a VPCM, the bid/offer/arrangement, contract or call-up is to be rejected as a whole.
  6. VPCM information will be relevant and will remain on VIM for six years from the date the VPCM is implemented. Therefore, for the entire six year period, with regards to any future VPCM calculations, the VPCM in VIM will contribute to the history score of all subsequent assessments.
  7. When a VPCM ends, the VPCM co-ordinator will notify the sector/region that initiated it, which is then responsible for promptly notifying the vendor.

8.180.20 Standard Acquisition Clauses and Conditions Manual Provisions for Stop Work Orders, Contract Suspensions and Other Reasons for Bid Rejection

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No provisions under the VPCMP will in any way override PWGSC’s rights with respect to stop work orders, contract or supply arrangement suspensions, standing offer set-asides and other reasons for bid/offer/arrangement rejection set out in the SACC Manual.

8.180.25 Exceptions

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In cases of emergency in procurement, a DG/RDG may make a recommendation for an exception to a VPCM. In such cases, special care should be taken to protect Canada. Where an exception is made, the reason should be recorded on the contract file. Such exception must be approved by the ADM/AB or the approval authority designated in a sector/region vendor performance program

8.180.30 Sector/Region Vendor Performance Programs

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  1. A sector/region may establish a customized or tailored program for evaluating vendor performance and determining appropriate measures to apply for specific commodities or commodity groupings. Where such a program has the approval of the ADM/AB, it is not necessary that the ADM/AB review the cases. The decision can be made by the persons delegated that authority under the program.
  2. The determination to have such a program will be made in the context of the procurement risk management strategy for the specific commodity during the pre-contractual phase of the procurement process. If it is determined that a sector/region program will be developed, until this program is operational, the contracting officer is to apply the generic VPCMP process. Annex 8.12 Framework for Developing a Sector/Region Vendor Performance Program provides a framework for developing such a program.
  3. The program may incorporate elements from the generic VPCMP process.
  4. Once established, the customized vendor performance program is administered by the sector/region.

8.1651 Differences of Opinion or Interpretation

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On occasion, differences of opinion or interpretation may arise between the contracting officer and the auditor regarding the legitimacy of audit findings. The relevant director should resolve these differences of opinion or interpretation in concurrence with the Director, Acquisition Program Integrity Secretariat, before the Cost Audit Group will take close out action.

Annex 8.1: Guidelines on procurement file organization and make-up

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  1. Overview
    1. These guidelines are intended to help procurement staff in organizing their procurement files. Consistent filing methods allow for a more organized approach to procurement and ensure that anyone reviewing the file is able to locate documents with minimal effort. The importance of proper filing techniques is more evident when, for example, information is needed quickly for audits, Access to Information requests, Canadian International Trade Tribunal complaints, litigations, when a contracting officer takes over file responsibility and needs to determine the status of the procurement process, etc.
    2. As a general rule, documents should be filed in chronological order. A proposed format for file organization is set out below. The list of documents is not intended to be comprehensive and is subject to the professional opinion of the contracting officers. All the documents may not be applicable in all cases. Furthermore, file organization and the required documents may vary in accordance with regional/sectoral procedures and guidelines. Separate file volumes may be warranted to accommodate the excessive size of some documents. See Note: Paper and electronic information below.
  2. Documents proposed for the left-hand side of the file jacket:
    1. signed requisition and any requisition amendments;
    2. final version of the Statement of Work (SOW), plus any documents that alter the requirement, e.g., approved design changes, etc;
    3. Security Requirements Check List (SRCL);
    4. detailed documents for the Advisory Committee on Repair & Overhaul (ACRO), Procurement Review Committee (PRC) or Senior Project Advisory Committee (SPAC);
    5. record of decision by ACRO, PRC or SPAC;
    6. where only one person is capable of performing the work, the sole source justification along with responses provided by the client to questions appearing in Annex A of TB Contracting Policy Notice 2007-4 (see Annex 3.1 Treasury Board Questions for Sole Source);
    7. completed Fairness Monitoring Coverage Assessment and Recommendation form;
    8. signed original Formal Procurement Plan/Procurement Plan;
    9. approved original Contract Planning & Advance Approval (CPAA) form, Contract Summary, and CPAA for Amendment forms;
    10. documented evidence of the complexity level;
    11. completed and approved Procurement Risk Assessment (PRA), including any revision, with results;
    12. completed and approved PRA for Amendments, with results;
    13. signed Request for Reviewer Endorsement (Commodity) form;
    14. Notice of Proposed Procurement (NPP);
    15. Advance Contract Award Notice (ACAN);
    16. approved Contract Request and Contract Amendment Request;
    17. signed original Treasury Board submission and approval, and any amendment;
    18. signed original contract, standing offer, supply arrangement, call-ups and associated amendment documents;
    19. acknowledgement copy signed by supplier, as appropriate (e.g. the supplier’s signature is required on a "You are requested" contract);
    20. letters of authority (e.g. Go-Ahead letter, Letter of Intent, National Security Exception, Limiting Liability);
    21. formal legal agreements;
    22. integrity verification response (determination of ineligibility), documented evidence that Declaration Form received, Administrative Agreement was entered into, Public Interest Exception was approved;
    23. formal notifications (e.g. performance, conditional amendment, stop work order, termination, Comprehensive Land Claims Agreements);
    24. copies of any relevant acting delegation of authority memos;
    25. procurement summary from the Automated Buyer Environment (ABE);
    26. Record of Extract and Part Files (PWGSC-TPSGC 1015 (PDF Version 73 KB)The information is only accessible to federal government department and agency employees. - (Help on File Formats);
    27. copies of extract file contracts and their contract amendments;
    28. Request for Additional Funds (PWGSC-TPSGC 329 (PDF Version 65 KB)The information is only accessible to federal government department and agency employees. - (Help on File Formats);
    29. invoices/reports.
  3. Documents proposed for the right-hand side of the file jacket:
    1. acknowledgment of requisition;
    2. request for distribution of technical data;
    3. file index, if more than one volume exists;
    4. original solicitation document, plus document updates or amendments;
    5. letters of interest;
    6. minutes of bidder's conferences;
    7. bidder's questions and answers;
    8. bids received, including Bid Receiving Unit Report (can be placed in a separate volume);
    9. bid evaluation, including tabulation sheets, notes, signature of each of the evaluators;
    10. signed technical evaluation report (signature of all evaluators);
    11. signed financial evaluation report (signature of all evaluators);
    12. Fairness Monitor Report;
    13. price certification;
    14. price support;
    15. transportation analysis;
    16. legal opinions;
    17. policy opinions;
    18. documentation supporting strategic direction (environmental considerations, impacts and mitigation, trade agreements, CLCAs/PSAB, Intellectual Property, Vendor Performance, integrity verification, etc.) *;
    19. any comment provided following quality assurance reviews, cost analyst’s reviews and/or peer reviews;
    20. contract award notices;
    21. regret letters;
    22. supplier correspondence;
    23. client department correspondence;
    24. relevant e-mail messages;
    25. agendas and meeting minutes;
    26. notes to file (phone calls, summary of events, actions taken, lessons learned etc.) **;
    27. for Canadian Commercial Corporation files only, specific additional forms, as applicable;
    28. file close-out documentation.

* Documentation related to potential issues or problems may be better suited on the left side of the file.

** Procurement files should tell a story from beginning to end, and notes to file are an important part of this process. Notes to file can provide a file history, provide an explanation of problems encountered, and act as reminders to contracting officers.

Note: Paper and electronic information

  • any information received or created in paper format, must be maintained in its original hardcopy format and filed accordingly
  • any information received or created in electronic format, must be maintained in its original format and filed in the applicable GCdocs procurement case file
  • the use of copies for convenience (for example print-outs, photocopies or scanned versions) is permissible, however information in its original format must be kept for legal purposes and
  • all information, hardcopy and electronic associated with a particular requirement must be made available to complete procurement support activities and processes

Annex 8.2: Contract Management Early Warning Indicators

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The following factors, if present with a particular procurement, indicate there may be problems with the file. These factors should warrant further investigation and consideration and, in some cases, referral to more senior levels of authority.

  1. Before Contract Award
    1. Requirement early warning indicators:
      1. requisition transferred several times;
      2. receipt of a requisition for a stand alone procurement when an existing procurement instrument (such as a standing offer) already exists;
      3. urgent requirements without adequate rationale for urgency;
      4. potential situation for employee/employer relationship;
      5. sole source or no substitute requirements without adequate rationale;
      6. contracts with former public servants outside of guidelines;
      7. unclear/vague description of work/requirement;
      8. indications that the "deal is already cut";
      9. complex or innovative requirements requiring the development of new methodology;
      10. work already under way and requiring confirmation and backdating;
      11. unrealistic time frames;
      12. lack of responsiveness from contractor during negotiations;
      13. indication of requirement splitting;
      14. weak financial capacity of contractor.
    2. Sensitive files early warning indicators:
      1. sensitive requirements that may be of interest to various interest or stakeholder groups;
      2. highly visible requirements, especially ones of interest to the media;
      3. contentious requirements that may result in aggressive competition.
  2. After Contract Award
    1. Performance/management early warning indicators:
      1. unusual number and value of amendments without clear rationale;
      2. unexpected/unclear subcontracting activities;
      3. PWGSC excluded from meetings between contractor and client department;
      4. missed deadlines/reports/meetings;
      5. quality of performance/deliverables below expectations;
      6. excessive warranty claim;
      7. excessive maintenance services;
      8. invoices for out of scope items;
      9. frequent and unexplained turn over of contractor staff;
      10. request for amendments for out of scope work;
      11. disputes and difficulty with resolution of issues.
    2. Financial early warning indicators:
      1. contract cost not in line with forecasts;
      2. outstanding claims/invoices;
      3. poor and irregular billing/invoicing practices;
      4. reluctance to submit copies of claims/invoices;
      5. reluctance to supply supporting financial information;
      6. difficulty conducting audits;
      7. indication that business practices are deviating from the policies.

Annex 8.3: Termination for Convenience Process

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  1. Overview
    1. Price Support Directorate (PSD), Procurement Business Management Sector (PBMS) was designated to provide termination settlement services including the processing of claims associated with goods and services contracts terminated for convenience by Canada. PSD was also designated to handle claims arising from United States and Canadian Commercial Corporation (U.S./CCC) contracts that are terminated for the convenience of the U.S. government. For terminations involving U.S./CCC contracts, the Executive Director, Strategic Policy Development and Integration Directorate (SPDID), Strategic Policy Sector (SPS), will ensure compliance with the certification and termination settlement functions that are required to conform with the U.S. Department of Defense and Department of National Defence Letter of Agreement (see U.S. Defense Federal Acquisition Regulation Supplements 225.870-6 and 249.7000). The Executive Director, SPDID will also be responsive to requests by the U.S. government for arranging for audits of U.S. government contracts or subcontracts placed directly with Canadian-based suppliers that are terminated for convenience.
    2. The contracting officer and the termination claims officer (see 8.135.10 Involvement of the termination claims officer) are responsible for the following termination activities:
      • The contracting officer:
        • issues Stop Work Order and Notices of Termination; and
        • administrates the non-terminated portion of the contract.
      • The termination claims officer:
        • assesses the contractor's request for any upward adjustment of the contract price for the non-terminated portion of the contract;
        • requests claim from contractor and forwards claim forms;
        • ensures acceptability of claim by assisting contractor with preparation;
        • determines, defines and arranges audit, as required;
        • arranges for inventory verification and screening by client;
        • negotiates final settlement with contractor;
        • prepares Settlement and Release document;
        • disposes of surplus inventory;
        • forwards Settlement and Release document to contractor for acceptance;
        • obtains invoice and signed Settlement and Release document from contractor;
        • submits invoice through client department; and
        • distributes Settlement and Release document.
    3. Occasionally, the client will require a contract status report before making a decision to cancel the contract. In this event, the client will inform Public Works and Government Services Canada (PWGSC) of its intention to reduce or cancel a contract by issuing a "Notice of Intent to Cancel" either by telephone or in writing. The client will usually request all or part of the following contract status information before making a final decision to terminate:
      1. quantity of stores produced against the contract;
      2. quantity of stores in production;
      3. value of raw materials and/or components acquired by the contractor to carry out the specific contract;
      4. the position with respect to tooling and capital equipment, especially where the contractor had to tool-up to carry out the contract;
      5. status of subcontracts;
      6. the most economical point at which to effect termination; and
      7. the approximate amount of termination claims, if known.
    4. The contracting officer must immediately request the information from the contractor and closely follow up to ensure that it is received as soon as reasonably possible. When the information is received, the contracting officer will forward it, together with any recommendations, to the client. Normally, the client's first request will be to cancel all or a portion of a contract, in which case the contracting officer should immediately issue a Stop Work Order. A Stop Work Order is a safeguard to ensure a halt in the work and remove the possibility of further expense being generated by the contractor. To terminate the contract, a Stop Work Order must be followed by the issuance of a Notice of Termination for Convenience.
  2. Stop Work Order – Notice of Termination
    On receiving the client's initial written instructions to cancel all or part of a contract for the convenience of Canada (see 8.135.5 Termination for Convenience of Canada), the contracting officer should immediately issue a Stop Work Order to advise the contractor to "stop work" (see the Standard Acquisitions Clauses and Conditions [SACC] Manual clauses J0500C and J0502C.) The Notice of Termination ( J0001C, J0002C, J0003C, J0006C) cannot be issued until the formal requisition amendment is received, and a legal opinion has been sought. The contracting officer should also contact and provide the termination claims officer with a copy of the Stop Work Order and the Notice of Termination.
  3. No Claim is Involved
    When a contractor advises the contracting officer that a claim will not be submitted following the receipt of a Notice of Termination, the contracting officer must eliminate the funding for the terminated items. Since no claim is made, the termination claims officer is not involved in this process.
  4. Client's Decision
    1. It is the client's responsibility to decide at what stage a full or partial termination should take place. Formal amendments to the requisition, confirming the decision to terminate, must be provided as quickly as possible.
    2. The contracting officer must not issue a Notice of Termination for Convenience until an amendment to the client's requisition has been received.
    3. The contracting officer should ensure that sufficient funds remain in the amended requisition to cover the contract value.
  5. Notice of Termination
    1. When the requisition amendment is received, the contracting officer will prepare the Notice of Termination or Partial Termination by using the clauses provided in subsection 5-J, of the Standard Acquisition Clauses and Conditions (SACC) Manual, and on advice from Legal Services will send the Notice of Termination to the contractor.
    2. After the Notice of Termination or Partial Termination is issued, the contracting officer must immediately forward a copy of the Notice of Termination to the termination claims officer.
      In order to avoid further costs to Canada and hardship to the contractor, a Notice of Termination must be issued as quickly as possible to finalize the implications of a Stop Work Order.
  6. Adjustment of Funds
    The funds in the contract must not be adjusted when the Notice of Termination is issued. The contract funds will be adjusted on the Settlement and Release document.
  7. Adjustment to the Price of the Non-terminated Portion of the Contract
    Whenever a contractor requests an upward adjustment to the cost or unit price of the non-terminated portion of a contract, the resulting claim for adjustment should be referred to the termination claims officer for review, before reaching any agreement with the contractor, concerning such upward cost or price adjustment.
  8. Termination File
    1. For non-complex, fully terminated contracts, the contracting officer should transfer the complete procurement file to the termination claims officer, if a claim is involved.
    2. For complex procurements or partial terminations, where the non-terminated portion of the contract is still active, the contracting officer will forward an electronic copy of each of the following documents to the termination claims officer as applicable: the contract, all amendments, specifications, pricing details, pertinent correspondence and any other information relevant to the termination.
  9. Informing the Contractor
    1. If a claim is involved, the termination claims officer will forward the termination claim forms which includes the Procedures Guide – Processing Settlement Proposals Related to Contracts Terminated for Convenience to the contractor.
    2. The following claim forms may be obtained from the termination claims officer.
      1. PWGSC 581 (PDF Version 652 KB)The information is only accessible to federal government department and agency employees. - (Help on File Formats) – Settlement Proposal for use by Fixed Price Prime Contractor or Fixed Price Subcontractor (Including Inventory Schedules A to D)
      2. PWGSC 582 (PDF Version 315 KB)The information is only accessible to federal government department and agency employees. - (Help on File Formats) - Schedule of Accounting Information
      3. PWGSC 583 (PDF Version 371 KB)The information is only accessible to federal government department and agency employees. - (Help on File Formats) - Application for Partial Payment
    3. The accompanying letter to the contractor should contain the following instructions:
      "In the event subcontractors are involved with this termination, please advise of the number of subcontractors who will require termination claim forms and their contact information. Please arrange to complete all sections of the claim in as much detail as possible. After signature by your executive authority, return the original and one (1) copy to this office.
      You are hereby requested to forward your completed claim as soon as reasonably possible. In order to assist you in meeting that date, we would be pleased to provide guidance and explanations necessary to ensure that your company takes proper action and that the correct information is included in the forms.
      Please note that all communications and documents with respect to your claim should be directed to: __________. (Insert appropriate name and address of the termination claims officer.)"
    4. After the termination claim forms are forwarded, the termination claims officer will contact the contractor to ensure that the forms have been received and that the necessary action is being taken on the contractor's part to submit a claim. If the contractor has any questions concerning the presentation of the claim, or the details of the termination settlement procedures, the contractor should contact the termination claims officer directly. When the contractor has completed the forms, the signed original is returned to the termination claims officer who will then become responsible for the resolution of the claim.
  10. Audit of Claims
    1. Upon receipt of a claim, the termination claims officer will determine the need for an audit. If the termination claims officer concludes that an audit is required, the termination claims officer will prepare the terms of reference for the audit and arrange for its completion.
    2. When an audit is performed, the termination claims officer reviews the cost factors reported by the auditor, and reconciles the contractor's claim with the auditor's report. The cost implications of any inventory adjustments should be discussed with the auditor, as well as with the contractor.
  11. Inventories
    1. If the claim from a Termination for Convenience involves inventory that is rendered surplus by the termination, the termination claims officer should send copies of the termination inventory schedules to the client in order to obtain instructions as to disposition, which will be either:
      1. Arranging for the verification and shipment of all, or any part, of the inventories to a recipient designated by the client. The costs associated with packaging, routing, shipping, etc., are a proper post termination charge to be added to the contractor's claim; or
      2. Arranging inventory verification (by the termination claims officer with the Inspection Authority of the client) so that the Settlement Offer may be adjusted to reflect any inventory discrepancies; or
      3. Arranging for the disposal of the residual inventory by a Crown Assets Distribution Centre (CADC). In this case, the termination claims officer should prepare a Sales Request (for surplus materiel and equipment) form on the Government of Canada Surplus Client Interface (GCSci)The information is only accessible to federal government department and agency employees.. (NOTE: Only approved government employees have access to the site.)
    2. Prior to Submitting the Sales Request (SR) the termination claims officer will obtain the certification of the client department and the Director of the PWGSC Contracting Directorate that the inventories are reasonable in relation to the requirements of the terminated portion of the relevant contract; that their use is not required for other existing PWGSC contracts, due to the nature of the goods; and consequently, that disposal is recommended. The termination claims officer will submit the online Sales Request on GCSci to CADC.
    3. Any proceeds realized from the sale of the surplus inventory are credited (less the CADC commission fee), back to the client, to the Consolidated Revenue Fund or to the revolving fund, as applicable.
  12. Settlement Offer, Close-out and Dispute Resolution
    1. The termination claims officer is responsible for reviewing the audit report, if one was completed, and negotiating a settlement offer with the Contractor. This offer informs the contractor of the amount of the settlement the termination claims officer is prepared to recommend to the Executive Director, Strategic Policy Development and Integration Directorate (SPDID) for approval.
    2. Once the contractor accepts the proposed settlement offer, the termination claims officer will prepare the Settlement and Release form, and submit it to Legal Services for review, to the Executive Director, SPDID for approval and signature, and then to the contractor for acceptance and signature. When the contractor's written acceptance of the Settlement and Release document is received, along with the final invoice, they are placed on the Price Support Directorate (PSD) file, and a copy forwarded to the contracting officer for the procurement file. A copy is also sent to the client to issue payment.
    3. If the contractor rejects the proposed settlement, the termination claims officer will advise the contractor, in writing, of the Alternate Dispute Resolution (ADR) services available in the Business Dispute Management Program within the Departmental Oversight Branch. (see 8.140 Disputes)
  13. Payment of the Settlement
    When a partial payment or final settlement payment related to a claim on a contract terminated or partially terminated for the convenience of Canada is approved and signed by the Executive Director, Strategic Policy Development and Integration Directorate (SPDID), the termination claims officer will place the original of the completed document on the Price Support Directorate (PSD) file, and make arrangements to implement the approved settlement payment.

Annex 8.4: Termination for Default

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  1. The decision to terminate a contract for default should be made only after all other possible solutions have been explored. In all cases, the advice of Legal Services must be obtained at an early stage, to ensure that any proposed action will not prejudice Canada's legal position and that the termination is legally enforceable.
  2. Failure to take action may prejudice Canada's interests.
    If a contract is secured by surety bonds, termination of the contract may change the existing contractual relationship with the bonding company.
  3. Canada has the right to terminate all or any part of the contract for default if:
    1. The contractor fails to make progress, so as to endanger performance of the contract.
      1. The contracting officer may provide the contractor in writing with a reasonable period of time, normally ten days, to rectify the situation. If this period must be longer, the contracting officer may require the contractor, within ten days, to show evidence of corrective action.
      2. If the contractor does not rectify the situation, the contracting officer may, subject to the limitations in the default clause, initiate action to terminate the contract for default.
    2. The contractor fails to perform any provision of the contract.
      If the contractor does not rectify such a defect within ten days of receipt of a notice from the contracting officer, the contracting officer may, within the limitations set forth in the default clause, initiate action to terminate the contract in whole or in part for default.
    3. The contractor fails to deliver the goods or perform the services within the time specified in the contract.
      1. In the absence of excusable delays, Canada has the right to terminate the contract immediately, regardless of how slight the delay may be. This includes the right to accept or reject goods shipped, but not yet delivered. In addition, if the contractor does make timely delivery, but delivers defective goods or improperly performs services, and is unable to take corrective action within the unexpired delivery schedule period, Canada also has the right to terminate for default.
      2. Whenever a contracting officer contemplates termination of a contract for failure to deliver on time, the contractor must be so advised, as soon as possible, after the default occurs. Failure to take such action may prejudice Canada's position.
      3. when there is reasonable assurance that delivery will be made, even though late, it may be desirable to discuss extension of the delivery time with client. If the delivery date is extended, negotiation for some kind of consideration may be appropriate. This constitutes a conditional amendment (see section 8.70.5 Amending Contracts), which triggers the requirement for a VPCM Assessment.
      This situation would arise when delivery would be further delayed by terminating and placing the contract elsewhere.
    4. the contractor becomes bankrupt or insolvent.
      Upon receipt of a notice of bankruptcy or insolvency, the settlement procedure outlined in 8.155 Final Payments should be followed.

Action to Recover Loss or Damage

  1. After termination, the contracting officer will determine the actual amount or best estimate of loss or damage suffered by Canada, and the distribution of the damages to be recovered from the contractor.
    Estimates of loss or damage should include any amount in excess of the contract price, which Canada may be obliged to pay in procuring the goods or services elsewhere.
  2. The contracting officer must refer claims to Legal Services when a contract is secured by a security deposit (government guaranteed bonds, bills of exchange, irrevocable standby letters of credit), or when Canada has a claim against a contractor that is related to a work package for which, the contractor has a claim against Canada.
  3. In all other cases, the contracting officer will attempt to negotiate a settlement. When a satisfactory settlement cannot be reached, the claim will be referred to Legal Services for action.
  4. When a contractor agrees with the proposed settlement, the recommendation to recover monies will be submitted to Cost and Profit Assurance Group (CAPG), or, in the case of a Canadian Commercial Corporation (CCC) contract, the Director, Finance and Resources Administration (FRA). Cost Audit Group or the Director, FRA, will issue an invoice to the contractor for the monetary recovery.
  5. If payment is not received within 60 days of the date of issue of the invoice, then CPAG or the Director, FRA, will advise the contracting officer to take appropriate follow-up action with the contractor. When normal follow-up procedures have not been successful, the matter must be referred to Legal Services.
  6. Claims must not be removed from departmental records until satisfied by payment or a properly authorized deletion action.

Contract Payment under Surety Bond

When a surety bond is being enforced, payments will be issued as follows:

  1. Performance bond: Upon completion of the contract to the satisfaction of Canada, the bonding company may be paid all amounts to which the contractor would be entitled under the terms of the contract;
  2. Payment bond: The bonding company must not be reimbursed for the payment of creditors from any funds held by Canada until the work is complete, and the surety company has fully discharged its obligations under the bond.

Annex 8.5: Refunds of Excess Profits Earned on Public Works and Government Services Canada Contracts

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  1. All indications from any source of unreasonably high profits realized from any contract placed pursuant to the Defence Production Act, or from any contract other than competitive firm price awarded pursuant to the Department of Public Works and Government Services Act should be reviewed in consultation with the Director, Acquisition Program Integrity Secretariat (APIS).
  2. Negotiated Refunds:
    1. Normally, the first step in negotiating a refund is for the contracting officer and APIS to review the evidence available, and decide whether the profits realized by the contractor can be recommended for acceptance or are in excess of what is considered to be fair and reasonable. In the event that the evidence is incomplete or inconclusive, consideration should be given as to whether the contractor will be approached for a statement of its position or whether a request will be forwarded to Audit Services Canada for additional verification. When all the evidence necessary is assembled, a final review will be made to determine what, if any, amount should be refunded, and the method of payment.
    2. In an attempt to ensure that suppliers are being treated consistently throughout Public Works and Government Services Canada (PWGSC), the Cost and Profit Assurance Group (CPAG) will distribute to the members of the Contract Audit Review Committee the proposed action plan of the contracting officer in respect to a contractor's excess profit, identified through audit. Any comments or concerns with the action plan should be communicated to CPAG within ten working days. CPAG will consolidate the input and forward it to the lead contracting authority for consideration.
    3. In some cases it will be in order to recover excess profits by deduction from current claims, or a part recovery may be affected through an assignment of income tax refunds. Ordinarily, however, the contractor will be expected to remit the full amount by cheque. If it appears that this action will create an unreasonable hardship, extended terms of payment may be considered.
    4. The agreed upon amount to be refunded and the terms of settlement will be set out in a letter to the contractor, approved by Legal Service, and signed by the responsible officer of the sector/region. Copies of this letter are to be sent to the Director, Acquisition Program Integrity Secretariat (APIS).
    5. After settlement is completed, it may be desirable to release the contractor from further obligation by detailing, in a formal agreement, the contract to which the settlement relates. Legal Services should draft this agreement.
    6. Cheques forwarded by the contractor should be made payable to the Receiver General and mailed to the contracting officer. The contracting officer will pass them to CPAG who will forward them to the Chief Financial Officer of the client.
    7. Reference should be made to section 10.70 Recovery and Disposition of Contract Claims Adjustments Process.
  3. Voluntary Refunds:
    1. Where a contracting officer receives notice from a contractor that they desire to return excess profits, or if a contractor voluntarily forwards a cheque in refund of such profits, the contracting officer should request a statement showing:
      1. a summary of the excess profits by contracts; and
      2. an explanation of the principal reasons, which accounts for the excess and how the amount was arrived at.
    2. Pending an appraisal of the information given by the contractor and of the particular circumstances of the case, any cheques received should be sent immediately to the Director, APIS, accompanied where possible, by a statement, showing the distribution of the refund over the contracts affected. The Director, APIS, will then forward the cheques to the Chief Financial Officer for the client.
    3. In deciding how extensive a review should be carried out in each case, the determining factors will be:
      1. the value of the contracts affected, and the total amount of the contracts let to the contractor;
      2. the explanations given by the contractor, as to the procedure followed in arriving at the amount of the refund;
      3. the capacity known to the contractor for assembly and interpretation of costs in accordance with Contract Cost Principles 1031-2, if applicable.
    4. If there is doubt as to the accuracy of the contractor's computations or if it appears that there may be other excess profits which have not been declared, then a full inquiry must be instituted;
    5. A final decision will be agreed upon by consultation between the sector/region concerned and the Director, APIS, and this conclusion will be communicated to the Chief Financial Officer of the appropriate client department.
  4. Refunds from Subcontractors:

    Refunds from subcontractors should be handled in accordance with the above procedures. In addition, however, it will be necessary for PWGSC to keep the prime contractor informed of its negotiations with the subcontractor, and in some cases, it will be preferable to deal with the subcontractor through the prime contractor. If the refund results from a contractual provision in effect between the prime contractor and the subcontractor, then the refund should be effected by the prime contractor. If the refund arises from circumstances not envisaged in the subcontractor's contractual arrangements with the prime contractor, then the refund should be effected by PWGSC, and should not result in a windfall being realized by the prime contractor.

  5. Assignment of Income Tax Refund:
    1. In the event that a settlement from the contractor must be financed partly from the proceeds of its income tax refund, the sector/region concerned will endeavor to obtain a voluntary assignment of the income tax refund in the following terms:

      "Receiver General of Canada
      Ottawa, Ontario

      (Company) ______________ of the City of _________ in the Province of ______________ does hereby authorize and direct that any amounts presently due or accruing due to it in the future from the Canada Revenue Agency, be applied in reduction of its debt to Her Majesty the Queen in right of Canada in the amount of $ ___________ on account of ________".

    2. In the case of a corporation, the direction should be under the seal of the Corporation and the signature of duly authorized officers. The form, which should be a separate document and not embodied in a letter, should then be passed by the sector/region to the Director General, Finance, Corporate Services, for processing in accordance with normal government practice. Treasury Board authorization is not required.
    3. Whether the assignment is voluntary or pursuant to section 155 (Deduction and set-off) of the Financial Administration Act, the Finance Sector assumes the responsibility of notifying Canada Revenue Agency (CRA) of the assignment. The manner in which money is transferred from CRA to PWGSC, or to the Department of National Defence (in the case of refunds to its own votes) is a matter for decision by the Finance Sector. However, the transfer will be made either by means of a Receiver General cheque or an interdepartmental Journal Voucher. Under either method, the transfer advice will be passed to the sector/region concerned who will forward it to the Director General, Finance Sector.

Annex 8.6: Risk Management approach to Vendor Performance Process Chart

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A flowchart representing the full mandatory steps of the Vendor Performance Corrective Measure Policy (VPCMP).

Overview of the Process Chart - Text version

This flowchart shows the full mandatory steps of the Vendor Performance Corrective Measure Policy (VPCMP). The flowchart is divided into the four phases of the procurement process: Phase 1: Pre-Contractual, Phase 2: Contracting, Phase 3: Contract Administration, and Phase 4: Post Contract. The Pre-Contractual and Contracting phases incorporate the risk considerations for applying the VPCMP. The Contract Administration and the Post Contract phases are where the VPCMP process is applied. Each required step is indicated in the relevant phase of the procurement process. For example, it must be determined at the Pre-Contractual Phase if a sector/region program exists.

Risk considerations for applying VPCMP (Phases 1 and 2)
Phase 1: Pre-Contractual

In this phase, the impact of vendor performance issues on the procurement strategy must be determined by following these steps:

  • Step 1 - Assess the impact of performance issues that might arise, as part of procurement risk management and commodity research. For sole source contracts, access the Vendor Information Management (VIM) system to verify if a Vendor Performance Corrective Measure (VPCM) applies prior to negotiation of terms and conditions.
  • Step 2 - Decision: Does a sector/region program exist?
    • If yes, follow sector/region program process for evaluating bids. Stop reading the contents of the chart.
    • If no, proceed to Step 3 of Phase 1.
  • Step 3 - Decision: Assess whether a sector/region program is required.
    • If yes, develop a sector/region program using Annex 8.12 of the Supply Manual. Until the program is operational, the contracting officer is to follow the generic process. Proceed to Phase 2: Contracting (risk considerations for applying a VPCMP).
    • If no, proceed to Phase 2: Contracting (risk considerations for applying a VPCMP).
Phase 2: Contracting

This phase gives the right to reject bids at evaluation stage. The right to reject also applies to offer and arrangements. The process is described in following steps:

  • Step 1 - Include performance criteria for evaluating vendor performance over the life of contract.
  • Step 2 - Decision: Determine whether a VPCM in VIM applies to the vendor being considered, once bids have been received.
    • If yes, verify if terms of VPCM apply to vendor. If a VPCM is applicable, reject the bid and notify the vendor. Stop reading the contents of the chart.
    • If no, proceed to Step 3 of Phase 2.
  • Step 3 - Continue evaluation.
  • Step 4 - Re-verify in VPCM that a VPCM has not been applied prior to award of a contract.
  • Step 5 - Award contract if no VPCM has been applied. No call-up contracts can be issued to a vendor subject to a relevant VPCM. Proceed to Phase 3: Contract Administration (VPCMP process).
Application of the VPCMP process (Phases 3 and 4)
Phase 3: Contract Administration

Assessment of vendor performance must be done during the contract period. Other performance records are added when significant issues require a note as per paragraph 8.180.15.1 (h) of the Supply Manual. The process is described in the following steps:

  • Step 1 - Monitor and document poor vendor performance with client. See paragraph 8.180.15.1 (b) of the Supply Manual for information on required documentation.
  • Step 2 - Decision: Determine whether performance issues are corrected.
    • If yes, contract ends normally. Stop reading the contents of the chart.
    • If no, proceed to Step 3 of Phase 3.
  • Step 3 - Decision: Determine if there is an operational requirement to continue contract.
    • If yes, offer conditional amendment in lieu of a termination for default and proceed to Step 4 of Phase 3.
    • If no, terminate contact for default and skip to Step 5 of Phase 3.
  • Step 4 - Decision : Is conditional amendment accepted?
    • If yes, issue conditional amendment and proceed to Step 5 of Phase 3.
    • If no, terminate contract for default and proceed to Step 5 of Phase 3.
  • Step 5 - At the end of contract or at the expiry date of the standing offer, proceed to Phase 4: Post Contract (VPCMP process).
Phase 4: Post Contract

Phase leading to the application of a Vendor Performance Corrective Measure (VPCM.) The process is described in the following steps:

  • Step 1 - Inform VPCM coordinator to add note to VIM and obtain authority to proceed with VPCM assessment process.
  • Step 2 - Complete mandatory assessment for a VPCM to mitigate risks.
  • Step 3 - Refer to Annex 8.6.1: Required Procedure for Applying a Vendor Performance Corrective Measure (VPCM) of the Supply Manual for information on required procedure for applying a VPCM. Performance information gained must be kept. It will be considered for future procurement processes in the first step of Phase 1: Pre-contractual.

Annex 8.6.1: Required procedure for applying a Vendor Performance Corrective Measure (VPCM)

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This flowchart shows the complete sequence of steps involved once the Vendor Performance Corrective Measure assessment was completed by the Contracting Officer.

Chart Overview

This flowchart shows the complete sequence of steps involved once the Vendor Performance Corrective Measure assessment was completed by the Contracting Officer. Beginning with the first step, this chart identifies the responsibilities of the Contracting Officers based on possible scenarios. For example, it must be determined whether or not the director accepts the assessment results. Once the decision is made, the reader must refer to the next relevant step in the process. The following steps describe the process to follow.

Director review of VPCM assessment results
  • Step 1 - Present VPCM assessment results to the director.
  • Step 2 - Decision: Does the director accept the assessment results?
    • If yes, then proceed to step 3
    • If no, VPCM assessment must be re-evaluated, then return to step 1.
  • Step 3 - Director presents assessment results to the Director General/Regional Director General (DG/RDG).
  • Step 4 - Decision: Does the DG/RDG accept assessment results?
    • If yes, then proceed to step 5
    • If no, VPCM assessment must be re-evaluated, then return to step 1.
  • Step 5 - Decision: Is threshold to apply a VPCM reached?
Stream 1 – Non-application of a VPCM
  • Step 1 - DG/RDG advises vendor of the assessment results (no VPCM), level of impact and no. of points that will be added to vendor contract history. Annex 8.8 provides a letter template.
  • Step 2 - Vendor has 15 business days to respond in writing. In addition the vendor may request a face to face meeting.
  • Step 3 - DG/RDG reviews vendor’s written response and any presentation material.
  • Step 4 - Vendor advised of final decision, category of impact and number of points that will be added to its contract history.
  • Step 5 - Contracting officer advises VPCM co-ordinator to update the note in VIM to indicate the category of impact (minor, medium or major) and number of points to add to the contract history of the vendor.
Stream 2 – Application of a VPCM
  • Step 1 - DG/RDG advises vendor of intent to apply a VPCM and level of impact. Annex 8.9 provides a letter template.
  • Step 2 - Vendor has 15 business days to respond in writing. In addition the vendor may request a face to face meeting.
  • Step 3 - DG/RDG reviews vendor’s written response and any presentation material.
  • Step 4 - DG/RDG informs the Acquisitions Branch DG/RDG Committee.
  • Step 5 - The VPCM co-ordinator sends documentation to the Acquisition Program – Policy Committee (AP-PC) line directors and seeks feedback regarding the proposed VPCM; the VPCM co-ordinator sends the results of the consultation to the Director General (DG), Policy, Risk, Integrity and Strategic Management (PRISM) Sector.
  • Step 6 - The DG PRISM submits the assessment results to the Assistant Deputy Minister, Acquisitions Branch (ADM/AB).
  • Step 7 - ADM reviews the assessment results.
  • Step 8 - Decision: Does the ADM apply a VPCM?
  • Step 9 - ADM advises the vendor that a VPCM will be applied and specifies the type and extent of the VPCM. Annex 8.10 and Annex 8.11 provide letter templates.
  • Step 10 - The ADM Office advises the VPCM co-ordinator of the decision to apply a VPCM. The VPCM co-ordinator adds a note in VIM.

Annex 8.7: Principal elements of the Vendor Performance Corrective Measure Assessment

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  1. Current Contract Impact Score
    This score refers to the impact of the poor performance issues over the entire period of the contract or over the entire period of the standing offer that resulted in a termination for default or conditional amendment. This score takes into account the relative importance of the requirements in the overall context. There are three categories of performance issues for consideration in the PWGSC 149-1 Assessment Form (Time of Delivery, Quality of Product, and Other), and the following grid applies:
    1. low impact = 1 to 3
    2. medium impact = 4 to 6
    3. high impact = 7 to 9
  2. Conversion Score
    Where an impact score of 9 points has been given for at least one performance issue, this will have a Conversion Score equivalent to 40 points. This falls under the category of major impact from poor performance. Otherwise, the following conversion table will be used:
    Table 1 – Conversion for the Total Current Contract Impact Score

    This table shows how to determine the converted score from the Total Current Contract Impact Score. The column headers identify the variables for determining the number of points to allocate to the vendor for the current contract: Total Current Contracts Impact Score, Category of Total Current Contract Impact Score and Conversion Score. The Total Current Contracts Impact Score is used to establish the Category of Impact and the Conversion Score. For example, if the Total Current Contract Impact Score is 17 points, the category of impact will be major and the converted score will be 40 points.

    Total Current Contract Impact Score Category of Total Current Contract Impact Score Conversion Score
    Equal to or less than 9 Minor 10 points
    Greater than 9 but less than 15 Medium 20 points
    15 or more Major 40 points
  3. History Score

    Contracts with a termination for default or a conditional amendment and VPCMs are taken into account to calculate the Total History Score, as follows:

    1. 10 points for each case of VPCM
    2. 10 points for each contract case with a minor impact of poor performance
    3. 20 points for each contract case with a medium impact of poor performance
  4. Total Impact Score and VPCM Consequences

    This score is calculated by adding the Conversion Score and the Total History Score. If the Total Impact Score is 40 or more, the consequences are as follows.

    Table 2 – VPCM consequences based on the frequency of cases

    This table shows the consequences of a Vendor Performance Corrective Measure (VPCM) based on the frequency of cases of the last six years. The column headings identify what determines the severity of a debarment: VPCM History, Consequence. The number of VPCM cases in the last six years is sufficient to determine the duration of a debarment. For example, if there is a previous VPCM case for the vendor, the consequence of a new VPCM will be an 18-month debarment or the imposition of conditions, if more appropriate.

    VPCM History Consequence
    No case within last six years Debarment of 6 months or, if more appropriate, conditions
    One case within last six years Debarment of 18 months or, if more appropriate, conditions
    Two cases within last six years Debarment of 36 months or, if more appropriate, conditions

    Note: Any excess points beyond the threshold (40 points) required for imposition of a VPCM (which are accumulated as a result of the Total Impact Score calculation) will not be carried over for purpose of future Total Impact Score calculations for future VPCMs.

  5. Consistency in Assessments

    Given that every default situation is different, it is important to allow latitude to contracting officers and client departments in the assessment of their particular cases.

    The following guidance is provided to ensure consistency across PWGSC Acquisitions Program.

    On the assessment form, the term "Impact", combined with the words "High", "Medium" or "Low", are used to characterize the severity of impact of a default situation.

  6. Guidance on Factors to Consider in Determining Impact

    In determining the severity of impact of a default situation, two factors relating to vendor performance must be considered: the consequences and the behaviour of the vendor as described below.

    • Factor 1: Consequences

      The determination of the consequences for government operations resulting from the default is the most important factor to take into consideration. In determining the consequences, Canada shall consider, but not be limited to, the following:

      1. endangerment/injury/death of human beings;
      2. diminishment in the quality and timeliness of providing services to the Canadian public;
      3. the complication of any possible success of future related government operations;
      4. wasting of public money/resources;
      5. destruction of property.
    • Factor 2: Behaviour of the Vendor

      The level of negligence of the vendor in creating the default situation and the efforts (degree of cooperativeness) demonstrated by the vendor in order to assist the government mitigate the consequences of the default.

  7. Guidance on how to determine whether the default has a High, Medium or Low Impact as it relates to each performance issue (i.e. time of delivery, quality of product or service, other)
    1. High impact

      The vendor defaulted on a requirement that was essential to an important and urgent or ongoing government operation which resulted in the success of an important operation being compromised.

      Example: A vendor failed to deliver key military equipment for an ongoing in-theatre operation overseas, resulting in a diminishment of Canada’s military capability for this important international mission. The default situation increased the danger for military personnel and international partners and compromised the success of the mission. The vendor was made aware of the fact that they were in default and was uncooperative to help mitigate the damage caused.

    2. Medium impact

      The vendor defaulted on a requirement and the government department incurred significant consequences. This resulted in complicating government operations in the short or medium term.

      Example: A vendor did not provide acceptable routine maintenance services on equipment used by a specific government department which provides important but not critical services to the Canadian public. The vendor attempted to cooperate when the problem became evident but was unable to resolve it and had been clearly delinquent in failing to recognize and indicate in their bid that their abilities were limited.

      As a result of the inadequate maintenance work performed by the vendor, regular government operations were rendered partially unreliable. The consequences of the default were decreased efficacy and efficiency of government operations, and therefore diminished service to the Canadian public. This service was hindered for a period of many weeks until a new vendor capable of correcting the problem was found.

    3. Low impact

      The vendor defaulted on a low dollar value requirement which was neither urgent nor critical to ongoing government operations. This default stemmed from factors partially out of the vendor’s control.

      Example: A vendor failed to deliver supplies because their foreign supplier has suddenly stopped making the specific product contracted for. This material was intended for the stockroom supply shelves and did not have a critical application and could be obtained from other sources. The vendor had proactively communicated their inability to provide the supplies, provided a full explanation and were amenable to helping in whatever manner they could. The consequence was that the procurement officer had to repeat the procurement and supplies in the stockroom were a bit lower than usual.

Annex 8.8: Letter Template Where No Vendor Performance Corrective Measure Will Be Applied At This Time

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(Full or partial terminations for default and conditional amendments trigger the mandatory assessment process at the end of a contract or at the expiry date of a standing offer to determine whether a Vendor Performance Corrective Measure (VPCM) will be applied. If the threshold to apply a VPCM is not met, the Director General/Regional Director General (DG/RDG) informs the vendor that no VPCM is applied at that time. This template is a reminder of what the Vendor Performance Corrective Measure Policy (VPCMP) prescribes. Italicized, bold text in blue in the letter template below must be adapted to the specific situation.)

Heading of Public Works and Government Services Canada

REGISTERED MAIL AND COURIER

Date: XXXX

Name of the vendor
Address

Attention: XXXX

Subject:

Result of the Vendor Performance Corrective Measure (VPCM) Assessment
{insert Contract or Standing Offer number, title, and delete this instruction}

Dear Ms., Mr. {insert name here and delete this instruction}

As per the Vendor Performance Corrective Measure Policy (VPCMP), Public Works and Government Services Canada (PWGSC)/Acquisitions Branch (AB) carried out a VPCM Assessment at the end of the above referenced {insert "contract" or "standing offer" and delete this instruction}. This VPCM Assessment was triggered by the following:

  • {List all terminations for default and conditional amendments of the above referenced contract or standing offer including the date of issuance and delete this instruction}

Based on the result of the assessment, this letter is to inform {insert name of the vendor here and delete this instruction} that:

  • no VPCM will be applied at this time;
  • {insert category of impact here and delete this instruction} and {insert the corresponding Conversion Score here and delete this instruction} will be recorded in the Vendor Information Management (VIM) system as the Current Contract(s) Impact Score;
  • the Current Contract(s) Impact Score will become part of your history score;
  • in the event that another assessment is triggered by a further termination for default or conditional amendment, Canada reserves the right to take the history score of all contracts with terminations for default and conditional amendments into consideration, while excluding the notes used as the basis for applying a previous VPCM.

As provided in the policy, {insert name of the vendor here and delete this instruction} may respond in writing regarding the VPCM Assessment. Such written response must be submitted to the undersigned within 15 business days following receipt of this letter. {Insert name of the vendor here and delete this instruction} may also include a request during this 15 business day period to present orally and, to this end, an appointment must be made with the undersigned. Please be advised that, if {insert name of the vendor here and delete this instruction} does not respond within the 15 business day period noted above, PWGSC/AB will proceed to record the Current Contract(s) Impact Score in VIM.

Yours truly,

Name of the DG/RDG
Name of the sector or region
Address
Phone number

Attached: Copy of the VPCM Assessment form

NB: You can view the Vendor Performance Corrective Measure Policy by going to: {insert the Internet address for the appropriate version of the VPCMP and delete this instruction}.

Annex 8.9: Letter Template for Notice of Intent to Apply a Vendor Performance Corrective Measure

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(Full or partial terminations for default and conditional amendments trigger the mandatory assessment process at the end of a contract or at the expiry date of a standing offer to determine whether a Vendor Performance Corrective Measure (VPCM) will be applied. If the threshold to apply a VPCMis met, the Director General/Regional Director General (DG/RDG) informs the vendor of the intent to apply a VPCM. This template is a reminder of what the the Vendor Performance Corrective Measure Policy (VPCMP) prescribes. Italicized, bold text in blue in the letter template below must be adapted to the specific situation.)

Heading of Public Works and Government Services Canada

REGISTERED MAIL AND COURIER

Date: XXXX

Name of the vendor
Address

Attention: XXXXX

Subject:

Notice of intent to apply a Vendor Performance Corrective Measure
{insert Contract or Standing Offer number, title, here and delete this instruction}

Dear Ms., Mr. {insert name here and delete this instruction}

As per the Vendor Performance Corrective Measure Policy (VPCMP), Public Works and Government Services Canada (PWGSC)/Acquisitions Branch (AB) carried out a VPCM Assessment at the end of the above referenced {insert "contract" or "standing offer" and delete this instruction}. This VPCM Assessment was triggered by the following:

  • {List all terminations for default and conditional amendments of the above referenced contract or standing offer including the date of issuance and delete this instruction}

Based on the result of the assessment, PWGSC/AB intends to apply a Vendor Performance Corrective Measure (VPCM) against {insert name of the vendor here and delete this instruction} pursuant to PWGSC’s VPCMP. This letter is to notify {insert name of the vendor here and delete this instruction} of the following:

  • PWGSC/AB intends to apply the following VPCM :
    • a xx month debarment
    • the period of debarment will begin on the date the Letter of Decision to apply debarment as a VPCM is signed by the Assistant Deputy Minister, Acquisitions Branch
    • the scope (See 8.180.15.10(b)(ii)(B))
  • OR
    PWGSC/AB intends to apply the following VPCM:
    • conditions that have to be met
    • the scope (See 8.180.15.10(b)(ii)(B))
    • when and how the recommended VPCM will end
    • who will determine that conditions have been satisfied

In addition to the above, for commodities within the scope of the VPCM, {insert name of the vendor here and delete this instruction} is advised that the VPCM would extend to any other business arrangements involving {insert name of the vendor here and delete this instruction}, including subcontracting, partnership and joint venture.

As provided in the policy, {insert name of the vendor here and delete this instruction} may respond in writing to this notice of intent to apply a VPCM. Such written response must be submitted to the undersigned within 15 business days following receipt of this letter. {Insert name of the vendor here and delete this instruction} may also include a request during this 15 business day period to present orally and, to this end, an appointment must be made with the undersigned. Please be advised that, if {insert name of the vendor here and delete this instruction} does not respond within the 15 business day period noted above, PWGSC/AB will proceed to record the Current Contract(s) Impact Score in VIM and continue the process to apply the VPCM described above.

Yours truly,

Name of the DG/RDG
Name of the sector or region
Address
Phone number

Attached: Copy of the VPCM Assessment form

NB: You can view the Vendor Performance Corrective Measure Policy by going to: {insert the Internet address for the appropriate version of the VPCMP and delete this instruction}.

Annex 8.10: Letter Template for Decision to Apply Conditions as a Vendor Performance Corrective Measure

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(Full or partial terminations for default and conditional amendments trigger the mandatory assessment process at the end of a contract or at the expiry date of a standing offer to determine whether a Vendor Performance Corrective Measure (VPCM) will be applied. If, as the result of a VPCM Assessment, a decision is made for applying conditions as a VPCM, the Assistant Deputy Minister, Acquisitions Branch (ADM/AB) informs the vendor of the decision. This template is a reminder of what the Vendor Performance Corrective Measure Policy (VPCMP) prescribes. Italicized, bold text in blue in the letter template below must be adapted to the specific situation.)

Heading of Public Works and Government Services Canada

REGISTERED MAIL AND COURIER

Date: XXXXX

Name of the vendor
Address

Attention: XXXXX

Subject: Decision to apply a Vendor Performance Corrective Measure

Dear Ms., Mr. {insert name here and delete this instruction}

As set out in the notice of intent to apply a Vendor Performance Corrective Measure (VPCM) letter dated XXXX, Public Works and Government Services Canada (PWGSC)/Acquisitions Branch (AB) has decided to apply against {insert name of the vendor here and delete this instruction} the following conditions as a VPCM pursuant to the Vendor Performance Corrective Measure Policy:

{Insert the following here and delete this instruction}

  • the conditions that have to be met
  • the effective date
  • the scope (See 8.180.15.10(b)(ii)(B))
  • when and how the recommended VPCM will end
  • who will determine that conditions have been satisfied

{Insert name of the vendor here and delete this instruction} must supply all information and documentation required by PWGSC/AB in order for it to assess if {insert name of the vendor here and delete this instruction} has met the conditions. Until such time that PWGSC is in a position to confirm that the conditions have been met, the VPCM will apply.

In addition to the above, for commodities within the scope of the VPCM, {insert name of the vendor here and delete this instruction} is advised that the VPCM would extend to any other business arrangements involving {insert name of the vendor here and delete this instruction}, including subcontracting, partnership and joint venture.

While PWGSC regrets any disruption to your business, Canada’s paramount concern must be the safeguarding of public monies. Should you require additional information, please contact {insert name of the Director General/Regional Director General (DG/RDG) and delete this instruction}, {insert title (Director General or Regional Director General) and delete this instruction} of {insert name of the sector or region here and delete this instruction} at {insert phone number of the DG/RDG here and delete this instruction}.

Yours truly,

Assistant Deputy Minister
Acquisitions Branch

CC: {Insert name of the DG/RDG and delete this instruction}

NB: You can view the Vendor Performance Corrective Measure Policy by going to: {insert the Internet address for the appropriate version of the VPCMP and delete this instruction}.

Annex 8.11: Letter Template for Decision to Apply Debarment as a Vendor Performance Corrective Measure

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(Full or partial terminations for default and conditional amendments trigger the mandatory assessment process at the end of a contract or at the expiry date of a standing offer to determine whether a Vendor Performance Corrective Measure (VPCM) will be applied. If, as the result of a VPCM Assessment, a decision is made for applying a debarment as a VPCM, the Assistant Deputy Minister, Acquisitions Branch (ADM/AB) informs the vendor of the decision. This template is a reminder of what the Vendor Performance Corrective Measure Policy (VPCMP) prescribes. Italicized, bold text in blue in the letter template below must be adapted to the specific situation.)

Heading of Public Works and Government Services Canada

REGISTERED MAIL AND COURIER

Date: XXXXX

Name of the vendor
Address

Attention: XXXXX

Subject: Decision to apply a Vendor Performance Corrective Measure

Dear Ms., Mr. {insert name here and delete this instruction}

As set out in the notice of intent to apply a Vendor Performance Corrective Measure (VPCM) letter dated XXXX, Public Works and Government Services Canada (PWGSC)/Acquisitions Branch (AB) has decided to apply against {insert name of the vendor here and delete this instruction} the following debarment as a VPCM pursuant to the Vendor Performance Corrective Measure Policy:

{Insert the following here and delete this instruction}

  • a xx month debarment commencing on the date of signature of this letter
  • the scope (See 8.180.15.10(b)(ii)(B))

In addition to the above, for commodities within the scope of the VPCM, {insert name of the vendor here and delete this instruction} is advised that the Vendor Performance Corrective Measure would extend to any other business arrangements involving {insert name of the vendor here and delete this instruction}, including subcontracting, partnership and joint venture.

While PWGSC regrets any disruption to your business, Canada’s paramount concern must be the safeguarding of public monies. Should you require additional information, please contact {insert name of the Director General/Regional Director General (DG/RDG) and delete this instruction}, {insert title "Director General" or "Regional Director General") and delete this instruction} of {insert name of the sector or region here and delete this instruction} at {insert phone number of the DG/RDG here and delete this instruction}.

Yours truly,

Assistant Deputy Minister
Acquisitions Branch

CC: {Insert name of the DG/RDG and delete this instruction}

NB: You can view the Vendor Performance Corrective Measure Policy by going to:{insert the Internet address for the appropriate version of the VPCMP and delete this instruction}.

Annex 8.12: Framework for Developing a Sector/Region Vendor Performance Program

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Customized past performance programs should address the following as appropriate and applicable to the circumstances:

  1. Scope: Under this section the sectors/regions will define the scope of each customized past performance program as it pertains to the commodity or commodities, type of procurement, dollar thresholds and contractual performance risk. This will also identify if the program is incorporated into any strategic procurement initiatives.
  2. How the Customized Program Works: This section will describe how the customized program works. The following are to be addressed when developing a program:
    1. Engagement with relevant industry associations and/or vendors/potential vendors
      1. Describe how industry associations and/or vendors/potential vendors will be engaged in the process of developing the customized program.
      2. Describe how the terms of the program will be communicated to vendors/potential vendors.
    2. Performance criteria
      1. Provide a clear definition of performance criteria. Criteria must be objective, measurable and relevant to the commodity or commodity groupings.
      2. Describe the methodology and process for evaluating performance including level of monitoring, client’s responsibility. The methodology must be relevant to the commodity or commodities.
    3. Consequences from past performance
      1. Define what will trigger an action for consequences.
      2. Describe the consequences on opportunities to bid or obtain future contracts including its scope of application, time periods, etc. Justify the nature, severity and relevance of the consequences based on the risk assessment for the program.
    4. Approval level for application of consequences - Establish the level of authority for such approval.
    5. Notification process
      1. Describe how and when vendors will be notified of consequences pursuant to the relevant customized program. This is conditional on having a notification process for each case of poor performance.
      2. The notification will describe the consequences and the extent of their scope in detail.
    6. Recourse mechanism - Establish a mechanism so that vendors have the opportunity to dispute the grounds for ensuing consequences.
    7. Accountability - Outline the roles and responsibilities for the stakeholders in the program.
    8. Documentation revisions - All relevant and necessary documentation, such as solicitation and contract documents, must be revised to set out the application of the customized program.
    9. Tools, forms and systems – List all tools, forms and systems developed for the needs of the program.

Annex 8.13: Letter Templates for Integrity

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1. Template letter of rejection of bid, offer or arrangement for integrity reasons

This template letter is provided for instances where the contracting officer has to advise the bidder, offeror or supplier that its bid , offer or arrangement has been found non-responsive due to relevant acts or convictions.

The bidder, offeror or supplier should be given 2 business days to respond.

*Note: Contracting officers will have to tailor the letter to their situation.

Public Works and Government Services Canada

Date: {insert date}

Attention: {insert contact name}

{insert supplier name and address}

Subject: Solicitation Number {insert solicitation number}

Dear Ms./Mr.{insert name}

We regret to inform you that your {insert bid or offer or arrangement, as appropriate} has been found non-responsive due to a relevant act or conviction which matches one of those identified in the Ineligibility and Suspension Policy, and that you have subsequently been declared ineligible to be awarded a contract.

The conviction of {include number and title of conviction} of {insert name of relevant Act in italics} was found against {insert name of company or individual against which the conviction was found}.

As indicated in the Ineligibility and Suspension Policy , the commission of the said acts or offences renders you ineligible to be awarded a contract.

If you have information which may indicate that the findings are not accurate, please provide it to the contracting authority, as indicated below, by 5 p.m. eastern time, {insert the date corresponding to two business days from notification to the supplier}.

If you would like further information on these new measures aiming at strengthening the integrity of the procurement process, see Public Works and Government Services Canada's Integrity Regime website at www.tpsgc-pwgsc.gc.ca/ci-if/ci-if-eng.html.

{Insert Contracting Authority’s name}

Contracting Authority, Public Works and Government Services Canada

{Insert contact details}

2. Template Letter for Addition of Provisions to an Existing Contract

This letter is to be used when adding or revising the Integrity Provisions in an existing contract, when a significant contract amendment is to be done such as an increase to the contract value (such as exercising an option), to extend the contract period, to modify the requirement or for the assignment of a contract.

The contractor, and its affiliates, may be requested, at any time, to provide additional information if required by the Registrar of ineligibility and suspension to perform a more thorough verification.

Note: Contracting officers will have to tailor the letter to their situation.

Public Works and Government Services Canada

Date: {insert date}

Attention: {insert contact name}

{insert contractor name and address}

Subject: Contract Number {insert contract number}

Amendment Number {insert amendment number}

Dear Ms./Mr.{insert name}

You are receiving this letter as a result of the Government of Canada recently announced update to its Integrity Regime launched in July 2015. The Regime, which introduced measures to strengthen the integrity of procurement and real property transactions, includes simplified language and provides additional clarifications and information on processes.

Moving forward, Public Works and Government Services Canada (PWGSC) will apply the updated Integrity Regime, referenced in the Annexes to this letter, to all solicitations and contracts.

In accordance with the updated Integrity Regime, PWGSC is requesting your consent to a revision to the above referenced contract to comply with these new measures and is requesting that you agree that general conditions {insert 2010A or 2010B or 2010C or 2020 or 2029 or 2030 or 2035 or 2040, as appropriate} ({insert appropriate date}) be replaced by general conditions {insert 2010A or 2010B or 2010C or 2020 or 2029 or 2030 or 2035 or 2040, as appropriate} ({insert date of latest version}) and form part of the above referenced contract.

If you agree, please return to my attention a signed copy of this letter no later than {insert month, day, year}, 5 p.m. Eastern Standard Time. In circumstances where a record suspension (criminal pardon) has been obtained, or capacities restored by the Governor in Council please provide us with a certified copy of confirming documentation from an official source within this timeframe.

Agreement

I, ___________________________________ {Contractor's Name} (herein referred to as the "Contractor" by its Authorized Signatory(ies)) hereby certify to the statements referenced in Annex A to this letter as well as agree to the afore-mentioned modifications to the general conditions to incorporate the new Integrity Provisions (referenced in Annex B to this letter) to the above referenced contract

Signature:__________________________________________

Date: ________________________________________

Print Name: ________________________________________

Title: ______________________________________________

We are looking forward to hearing from you. If you have any questions, please do not hesitate to contact me.

Regards,

Insert Contracting Authority’s name

Contracting Authority, PWGSC

Insert contact details

Annex A

Certification – Updated Integrity Provisions

By signing and returning this letter, the contractor certifies that:

  1. it has read and understands the Ineligibility and Suspension Policy, which can be found at www.tpsgc-pwgsc.gc.ca/ci-if/politique-policy-eng.html;
  2. it understands that certain domestic and foreign criminal charges and convictions, and other circumstances, as described in the Policy, will or may result in a determination of ineligibility or suspension under the Policy;
  3. it is aware that Canada may request additional information, certifications, and validations from the Bidder or a third party for purposes of making a determination of ineligibility or suspension;
  4. it has provided with this letter a complete list of all foreign criminal charges and convictions pertaining to itself, its affiliates and its first tier subcontractors that, to the best of its knowledge and belief, may be similar to one of the listed offences in the Policy;
  5. none of the domestic criminal offences, and other circumstances, described in the Policy that will or may result in a determination of ineligibility or suspension, apply to it, its affiliates and its proposed first -tier subcontractors; and
  6. it is not aware of a determination of ineligibility or suspension issued by PWGSC that applies to it.

Where the contractor is unable to provide any of the certifications required above, or must provide a complete list of all foreign criminal charges and convictions, it must submit with this letter a completed Integrity Declaration Form, which can be found at www.tpsgc-pwgsc.gc.ca/ci-if/formulaires-forms-eng.html.

Annex B

New Provisions to be included in the Contract

{insert 2010A or 2010B or 2010C or 2020 or 2029 or 2030 or 2035 or 2040, as appropriate} ({insert date of latest version}) Integrity Provisions – Contract

The Ineligibility and Suspension Policy (the “Policy”) and all related Directives in effect on {date} (insert the date on which the letter is sent} are incorporated by reference into, and form a binding part of, the Contract. The Contractor must comply with the provisions of the Policy and Directives, which can be found on Public Works and Government Services Canada’s website at www.tpsgc-pwgsc.gc.ca/ci-if/politique-policy-eng.html.

{insert 2010A or 2010B or 2010C or 2020 or 2029 or 2030 or 2035 or 2040, as appropriate} (insert date of latest version}) Code of Conduct for Procurement – Contract

The Contractor agrees to comply with the Code of Conduct for Procurement and to be bound by its terms for the period of the contract.