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Collaborative Procurement

Autor:   •  March 16, 2018  •  1,865 Words (8 Pages)  •  461 Views

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SMT will award the contract to complete the modernization of the railcars, a number of variables need to be considered in order to make the most appropriate decision for the public funds. These variables can be summarized by considering the following two questions when assessing the multitude of options available:

• How will the awarding of the contract affect the citizens of Montreal and Canada as a whole?

• Which option will provide the most value and provide the largest return on investment?

A: Analysis

Through the identification of the causes, there are a number of options available for SMT to pursue. The two core options are:

1. Sole-Source to Bombardier

2. Competitively bid the contract

Sole-Source to Bombardier:

This option would have the SMT complete a direct award to bombardier and enter into negotiations with them.

Pros:

There are many Pro’s to this option, Bombardier has a large Canadian presence and their manufacturing facility in La Pocatiere, Quebec, is awarded this work, would provide ~ 4600 employees full time work for the next 8 years. This manufacturing facility also and utilizes 50 local suppliers with an annual spend of $250 million. This generation of revenue for the province is not only economically beneficial; it is also a public relations success. Due to the SMT being largely publically funded, this would be seen as a success and would provide support from the taxpayers to both bombardier and to the SMT. This could also be a negotiating technique that could be used by the SMT to reduce costs and share of the financial risk with Bombardier. Some of the risk mitigations would be reduced affect by government policies, and less sensitivity to changes in currency. In addition to the local benefits, Bombardier is a leader in the industry and has completed similar contracts, successfully, in the past. They offer a good corporate socially responsibility plan and have proven themselves to be a leader in environmental and product and social stewardship.

Cons/Risks:

Though there would be many benefits locally to sole sourcing to Bombardier, there would be some cons/ risks as well. Bombardier has less annual revenue and are not as industry specific as their counterparts, Alstom. These could lead to having a lesser product, and/or missing out on a more innovative product. Sole sourcing a major contract could also be an issue as it is in violation of the public sector procurement policies and could expose the government to questioning by the public.

Competitively bid the contract:

The second option is for the SMT to competitively bid this contact. This would involve creating the tender, sending invitations for Alstom and Bombardier to bid, reviewing the proposals, and awarding based on the criteria created.

Pros:

The major Pro of this option is that it would align with the current policies and procedures of the Canadian public procurement. SMT would be assured that they received the best possible price and explore all opportunities to receive the best product. They would also allow themselves to gain transparency and would likely have a better understanding of which company could provide the most value and provide the highest return on investment.

Cons/Risks:

Though competitively bidding this contact would be the most transparent way to ensure value for the tax-base, there could be adverse effects on the Quebec and Canadian economy. If Alstom is awarded the contract, there could be a potential loss of 5,600 jobs and >$250 million in economic benefits to the province. This local impact cannot be ignored and the savings from choosing an international company, would have to outweigh the economic befits of hiring a Canadian based manufacturer. Competitively bidding would also expose, if Alstom was selected, the SMT to risks regarding the exchange rate and changes to government policy. If there were to be changes in the relationship between the French and Canadian government that increased tariffs or limited the availability of trade, there could be detrimental impacts on the metro as a whole.

Decision:

The decision made is to competitively bid the contract for the modernization of the 336 railcars. However, a caveat must be put into place to mitigate some of the risks regarding the local implications of not awarding this work directly to Bombardier. The main caveat is to include on the evaluation, a major weighting that measures the impact to the Canadian economy and how many Canadian jobs will be created, directly and indirectly, through the award of this work. Due to the nature of the business and the size of this contact, this is a fair addition to the weighting criteria, and as long as the bidder are aware of the requirements and evaluation, it will still promote fair and open competition to ensure the best value is being received for the tax payers. This decision is in Canadian best interest and it aligns with the public sector policies to tender all work of this magnitude. If Alstom is the successful bidder, they will need to provide justification for their impact on the Canadian economy and if the savings and the product being offered offer more value that the 5,600 jobs, a reasonable and justified decision can be made to forgo the opportunity with Bombardier. However, if Bombardier is able to provide a similar product and price, and is able to justify their impact of the Canadian economy, a fair and open decision can be made to execute the contract with Bombardier and will give the SMT the option to evaluate the decision with all of the information at

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