Item - 2007.AU2.3

Tracking Status

This item was considered by the Audit Committee on April 13, 2007 and adopted without amendment. It will be considered by City Council on April 23, 2007.

AU2.3 - Improving the Procurement Process - Unbalanced Bids

Decision Type:: ACTION

Status:: Adopted

Wards:: All

Committee Recommendations

The Audit Committee recommends that:

1. The Deputy City Manager and Chief Financial Officer, in consultation with the City Solicitor, review the procurement process as it relates to tender bids which appear to be clearly unbalanced. Such a review to include:

a. the feasibility of including in tender documents a specific clause which prohibits the submission of bids which are clearly unbalanced; and

b. the establishment of specific criteria to be used in the determination of unbalanced bids.

Origin

(January 10, 2007) Report from the Auditor General.

Summary

During our various reviews on specific construction contracts, the issue of “unbalanced bids” has been identified by the Auditor General as a concern requiring attention by senior management. An unbalanced bid occurs in circumstances where a bidder on a contract places an unreasonably high price on certain items in a unit price contract and an unreasonably low price on other items within the same bid. Addressing concerns associated with the issue of unbalanced bids will improve the procurement process and further protect the City’s interests. We have discussed the issue of unbalanced bids with City Legal Services and it is clear that specific provisions within construction contracts require further review and analysis in order to clarify vendor and management expectations in regard to tender bids which are clearly unbalanced.

The intent of the recommendation in this report is to mitigate the risks associated with the award of unbalanced bids and minimize the possibility of additional costs to the City as a result of the award of contracts which are clearly unbalanced in terms of pricing.

Financial Impact

The recommendation will have no financial impact in the short term. In the long term, the recommendation will likely result in reduced construction contracting costs. Management’s response is attached as Appendix 1.

Background Information

(January 10, 2007) Report from the Auditor General - Improving the Procurement Process
https://www.toronto.ca/legdocs/mmis/2007/au/bgrd/backgroundfile-2635.pdf
Appendix A - Improving the Procurement Process - Management Response
https://www.toronto.ca/legdocs/mmis/2007/au/bgrd/backgroundfile-2636.pdf