What is Procurement?
Plan to Purchase
Needs Assessment
Feasibility Study
Cost Estimate
Cost Benefit Analysis
Business Case
Terms of Reference
Define Potential Contract Scope and Deliverables
Approval To Go To Market
Intellectual Property Rights
Policy: Ch 1 - Planning
Aboriginal procurement guidelines
Capital asset management framework
Guidelines for IT services contracts
Purchasing handbook: a guide to acquiring goods and services

What is Procurement?

Procurement is a lifecycle that within the Province of BC is defined as:

All phases of the process to engage external entities in the exchange of taxpayer funding for goods and services through a contractual arrangement

The phases of the procurement lifecycle are:

Phase / Begins With / Ends With / Includes
1. Plan / Review of Needs / Documented Plan / Assess internal requirements, available budgets, industry trends, etc. and create documents such as feasibility studies, cost benefit analyses and/or business cases.
2. Pre-Award / Documented Plan / Go/No Go Award / The appropriate solicitation method is issued (ITQ, ITT, RFP, RFQ, etc), documents are prepared and submitted by vendors, and offers are evaluated. Includes clarification of major deliverables, timelines and costs.
3. Award / Go/No Go Award / Executed Contract / The requesting organization reviews and discusses terms of agreement with successful vendor(s) and enters into a binding contract signed by both parties.
4. Administer and Monitor / Executed Contract / Close-Out/Review / Goods and services are provided, payments are received by vendors. Includes change management, issues, performance management and reporting.
5. Close Out and Evaluate / Close-Out/Review / Closed Contract / Determine overall contract results; formulate future requirements, record contractor performance and that of the contract management team.

View detailed procurement process maps for each of the procurement phases identified above.

Plan to Purchase

Planning is how a purchasing organization decides what to buy, from what source, and for how much. During the planning stage:

  • The needs and requirements are defined;
  • Business owners, stakeholders and risks are identified;
  • Costs are estimated and options analyzed; and
  • Approvals to proceed are obtained.

The more time spent in the planning stage, the more potential value is available to influence outcomes of a procurement process, as demonstrated in the graph below.

More information about the phases of the procurement lifecycle is available here.

How do you know if you have done sufficient planning, and what does good planning look like? It is the responsibility of the purchasing organization to define how best value will be achieved, and take responsibility both for the goods and services that are purchased from the marketplace, and the management of the arrangement that is put in place. Core policy outlines how ministries are expected to achieve best value through procurement planning.

There are a variety of tools available to help you plan. The tool you use depends on the time available, and the estimated cost and complexity of the opportunity. The tools available include:

  • Needs Assessment: Answers who, what, when, where, why and how
  • Feasibility Study: After needs assessment, checks if internal resources could do the work
  • Cost Estimation: Can be preliminary or detailed, used to support decision to contract
  • Cost Benefit Analysis: Costs out available options and evaluates against potential benefits
  • Business Case: Comprehensive planning document for substantive contract opportunities
  • Terms of Reference: Defines the work to be performed and contract specifications

When do you use each tool? The graph below provides high level guidance for when each tool could be used. Remember, it is the responsibility of the purchasing organization to complete planning that is appropriate to the size and scope of the opportunity in question.

Before you begin completing these tools, it is useful to have a sense of the overall kinds of questions that need to be answered and information you will gather during the planning process. These include:

  1. Who needs to be involved?
  2. Who is the business owner and who will make decisions about the funding available, timelines and quality standards?
  3. Who will be affected by the results of this work, and how can I involve them in the process?
  4. What technical experts need to be involved in the process?
  5. Do we have time to assess the market and involve vendors in a conversation?
  6. Who will be responsible for overseeing progress and reporting back on value achieved?
  7. What is the need?
  8. Is there a true need? Or something that would be “nice to do?”
  9. What are the quality standards that must be met?
  10. Are the expectations realistic?
  11. What is the existing situation, and how will a contract change the situation?
  12. Are there internal resources that are already working on this or could meet the need?
  13. Is there a corporate supply arrangement that could be used immediately?
  14. Are there businesses in the marketplace that could meet this need?
  15. How much time is available?
  16. How soon do we need this contract to start?
  17. How much time do we have to run the solicitation process?
  18. Realistically, how soon must the contract be complete?
  19. How much money is available?
  20. What is the budget and how will we know when funding for this work is approved?
  21. Is there a way to do some of this work with existing resources?
  22. Does a corporate supply arrangement exist for the thing that I need?
  23. How will the marketplace be evaluated?
  24. What factors are critical to success of this opportunity?
  25. What skills, knowledge and experience are needed for this contract?
  26. Is there an existing contract that we have learned lessons from?
  27. Who will be included in the evaluation process?
  28. Do I need help creating the evaluation handbook?
  29. What does success look like?
  30. How will I know that the contract has been successfully completed?
  31. How will success be measured? (eg. time worked or deliverables)
  32. What are some of the key checkpoints to review progress? What might get in the way of a successful contract and outcome?
  33. How will the procurement process and subsequent contract be managed?
  34. What will the final form of the contract look like?
  35. What are the specific responsibilities that I will transfer to the contractor? What will the ministry maintain responsibility for?
  36. What kind of risks need to be addressed?
  37. Will the contractor need any specific training or information to complete their tasks?
  38. Are there privacy and information security considerations for this contract?
  39. How will open conversation be maintained through the contract?
  40. What records will need to be kept from the procurement process and ongoing contract?
  41. How will contract amendments be managed?

If you can answer these questions, you may be ready to move to the pre-award stage of the procurement process. If you aren’t sure, contact a procurement specialist, or begin using the tools available, starting with the needs assessment.

Needs Assessment

A needs assessment helps you understand program goals and objectives for a future contract. Assessing and analyzing the need is a first task in proper planning.The needs assessment is completed by the purchasing organization and allows for an assessment of the work or services that are needed compared to what currently exists.

  • Access theneeds assessment template to complete this task.

First, examine the current situation and compare it to the objective(s) or desired outcome(s) of the task or project identified. Outcomes may be long-term, intermediate or short-term in nature. A basic analysis between the current and the proposed outcomes should highlight the gap between today's reality and tomorrow's proposed outcomes.

The approach to assessing your need can be summed up as follows:

Project (Why): / State the project/activity and how it relates to the mandate of the branch/division/ministry. Who will benefit?
Objective (What): / Identify the desired objectives and outcome(s) of the project. E.g. cost savings, improved customer service, better turnaround time, safer environment for the public, etc.
Deliverables (What): / Define the deliverables/outputs in measurable terms. E.g. units produced, hours of service, clients served, participants trained, sessions conducted, reports produced., etc. Identify project / contract risk exposures and treatment plans.
Qualifications (Who): / Identify human resource requirements, including experience. E.g. professional engineer, accountant, management consultant, etc.
Standards (How): / State any applicable service standards or other requirements that are associated with the approach that should be taken.
Time Period (When): / Estimate how long the project will take, identify critical deadlines, and establish progress milestones and target dates.
Location (Where): / Determine the locations where this work needs to be performed and the impact on scheduling, logistics, resources and monitoring.
  • Next Step: Complete a feasibility study to see if internal resources could meet the need.

Feasibility Study

A feasibility study is used to help determine whether contracting the particular work or service is possible with internal resources, and therefore within core government policy.The generic feasibility study analyzes several solutions against a set of pre-existing requirements for contracting out.

  • Access the feasibility study template to complete this task.

Prior to the feasibility study, complete a needs assessment. The feasibility study helps the purchasing organization determine how to use the contractor as a resource to fulfill the program goal, and how that resource will complement in-house resources and priorities.

A decision to contract may be feasible if the following factors are in place:

  • The desired outcomes for the project have been defined in the needs assessment.
  • The output of the contract is defined and measurable - the ministry is in a position to specify what the contractor is expected to do, and knows how to evaluate contractor performance.
  • Using internal resources to complete the project has been considered, and it is apparent that the level of expertise needed is not available and cannot practically be created or acquired.
  • The resources and knowledge to handle the project already exist outside of government.
  • A contract is the least costly way of obtaining the works or services, all other things being equal.
  • Sufficient funds are available in the relevant appropriation to pay for the project.

Establishing the last two factors will depend on your ability to cost the intended project. A contract should be estimated financially as fully and carefully as possible, using the market data available, and compared with the cost of any alternative method of procurement.

If the factors relevant to the required works or services indicate you should go to contract, the documentation gathered can be used as the basis for any request for approval of the required contract.

  • Next Step: Complete a cost estimate to understand both the resources available and required.

Cost Estimate

The cost of a contract is estimated prior to issuing a public advertisement to the contracting community. The cost estimate and the Terms of Reference are typically used to obtain the necessary approval and/or financing to initiate the contract.Ministry contract cost estimatesusually do not include GST.

  • Access the cost estimate template to complete this task

Contract cost estimates are normally based on historical cost data for similar assignments, as well as knowledge of market rates for particular types of service. Such estimates are often calculated on the basis of unit costs for various components of the assignment. These estimates must include both the total estimated fees, and where applicable, all estimated reimbursable expenses. Cost factors to be considered may include:

  • Material;
  • Labour;
  • Direct project supervision;
  • Accommodation and meals;
  • Equipment and supplies;
  • Transportation;
  • Mobilization and demobilization;
  • Estimated overhead (~15%);
  • Estimated profit margin (~5%);
  • Applicable taxes;
  • Contingency (~5 to 10%);
  • Using the project requirements, estimate the number of person-days to complete each activity;
  • Multiply the person-days times the expected daily fee rate for the level of expertise required;
  • Add estimates of out-of-pocket expenses for travel. etc.

A cost estimate should be put in the context of the local marketplace. If there is a large demand for contractors, resulting in a shortage of qualified available contractors, prices are likely to be higher than could be expected in a normal or "balanced" marketplace. Assess the marketplace to determine contractor supply and demand:

  • Discuss the situation with other contract Expense Authorities;
  • Contact contractors to determine availability; and
  • Review advertising media for the amount of work being solicited.

A project cost estimate is "reasonable" when the results are what would be expected given a balanced market situation in the location where the good or service is being acquired. Consider the following options where market demand is "overheated".

  • Postpone the contract until the market becomes more balanced;
  • Find an alternative means by which to accomplish the work/service; or
  • Advertise the contract over a wider area than normal, to attract more contractors to bid.

Compare the contract cost estimate to the available funds. Consider the following options where the cost estimate is in excess of the available funds.

  • Review the project to determine if it can be scaled back or completed in phases, so that the amount of work is commensurate with the funds available.
  • If the project cannot be reduced, assess the project priority. If it is a high priority, assess what other lower priority projects may be cancelled or scaled back, in order to make funds available.
  • Proceed with a request for approval for seeking additional funds.

Next Step: For service projects >$100k, complete a cost benefit analysis; otherwise, seek necessary approvals to go to market

Cost Benefit Analysis

A cost benefit analysis can be either a stand-alone document or an integral portion of a much more comprehensive document like a business case. The basic intent is to cost out the available options and then evaluate them with a perspective of the cost and the benefit of each alternative.

  • Access the cost benefit analysis template to complete this task

A cost benefit analysis is required for service contracts of $100,000 (as outlined in Core Policy), and is created prior to taking steps to find a contractor.The needs assessment, feasibility study and cost estimate templatesare helpful documents to complete in advance of the cost benefit analysis.

If the contract is for the continuation of similar services and is not the result of exercising an option to renew, core policy indicates the ministry may rely upon the original cost/benefit justification if it is still relevant. If not, the ministry must update the original justification or provide a new justification.

Seven Steps for a Cost Benefit Analysis

The following seven-step process will produce a reasonably comprehensive cost benefit analysis:

  1. Consider all possible quantitative costs and benefits.
  2. List all unique qualitative costs and benefits.
  3. Ensure the time period is appropriate - consider expected project life span.
  4. Convert, as best as possible, non-quantifiable considerations to quantifiable ones.
  5. Describe all the assumptions clearly.
  6. Apply the assumptions to each option / alternative.
  7. Use benchmarks and other reasonably accurate figures from prior experiences.

Cost Benefit Analysis Templates

The following templates have been establishedto assist you with this process:

  • Cost Benefit SummaryTemplate;
  • CostBenefit Viable AlternativesTemplate;
  • CostBenefitfor Client Implications (Non-Quantitative) Template.

The following Cost Benefit Justification form has been created to help profile standard types of issues for when the Ministry has no option but to contract out. The object of the form is to help eliminate unnecessary workloads in creating documentation and justifications for contracting out while still satisfying the Core Policy requirement of having put thought into the "contracting out" process.

  • Cost Benefit Justification
  • Next Step: For complex projects, complete a business case; otherwise, seek necessary approvals to go to market

Business Case

Depending on the complexity of your procurement requirements, a detailed business case may or may not need to be developed. Where substantial changes to business processes and/or technology are involved, the development of the business case will require a detailed and thorough analysis that might require weeks or months to prepare. The detail in the business case will vary according to the magnitude of the project.

  • Access the Business Case Templateto complete this task

Business Case Checklist

The followingchecklisthas been created towalk you through the process of putting together a business case and providesinformationon best practices:

  • Business Case Checklist

Business Case Template

A business case ensures that there are adequate resources to administer and control the contract. It should provide an in-depth analysis of the background of the idea, including who it will affect or impact, the opportunities this initiative could provide, any associated problems by doing it or not doing it, the options available, the pros and cons of each option, the risks and cost/benefit of each option and specific recommendations.

Developing a business case lends both structure and discipline to the planning process. It also helps to ensure that the planned project fully supports the organization's business goals and priorities and that all costs and benefits have been identified. The following key components could be used for business case planning (other factors could be added dependent on the complexity of the business issue, problem or opportunity):

  • Background;
  • Strategic and Operational Considerations;
  • Evaluation Criteria;
  • Development of Options;
  • Strategic Risk Assessment;
  • Cost Benefit Analysis;
  • Recommendations and Proposed Implementation Strategy; and
  • Project Description.

The purpose of the business case is to ensure that the planned project fully supports the organization's business goals and priorities and that all costs and benefits have been identified.