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 that 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.
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