Request for Tender (RFT) for Printers

You have been retained as an arbitrator by the Procurement Department of City of London City of London, an energy company who had issued a Request for Tender (RFT) for photocopiers. Your responsibility is to listen to the situation and provide a binding resolution. Your decision will resolve this issue and will set precedence for future disputes.

The Printers RFT was issued as a cooperative procurement with City of London acting as the leading agency. Each of the agencies involved have their own budgets and have provided their usage information to City of London. Examples of these agencies such as London Police, London Fire, London Library, Internally, the Procurement Department reports to Finance and must consult with Director for final approvals on projects budget

Through their needs analysis, the Procurement Department determined that it would be best to award for one (1) year at time so that any technology changes could be captured in future contracts; the anticipated contract dates would be from April 1 to March 31. The group determined they needed the following five (5) category Printers, with combination of different features and various machine speed:

• Group
• Group 1 - Plain Bond Copiers
• Group 2 - Magazine-Finish Copiers (Glossy Paper Copiers)
• Type (Features)
• Type 1 - Copiers possess minimal features
• Type 2 - Copiers have two-sided copying capability
• Type 3 - Copiers have ability to reduce size of document
• Class (Machine Speed)
• Class 1 - Low-speed copiers
• Class 2 - Accelerated low-speed/Low-volume Copiers
• Class 3 - Intermediate-speed Copiers
• Class 4 - Accelerated Intermediate-speed Copiers
• Class 5 - High-speed Copiers
• Price Structures
• Annual Lease Cost
• Outright Purchase Cost

Suppliers were required to bid on all five (5) category units, there are two (2) price above structures which are lease or purchase that need to be quoted on for the City's considerations.

This is a major analysis job, especially when you are told that the RFT was issued to openly on the e-procurement system and 12 suppliers registered to bid. The Procurement Department intended to establish this contract by awarding to the lowest bidder, creating a single award, rather than award to more than one bidder.

A Potential Issue Arises

The RFT pricing was automatically posted on the e-procurement platform which allowed the bidders to instantly know who the lowest bidder was at time of RFT close. After the analysis was completed by the Procurement Department, the award was confirmed and the e-procurement platform was updated to reflect the award. One of the bidders, Nearox, who was a major participant and competitor in this field, filed a dispute requesting a formal administrative hearing to challenge the award of the copier contract to a single bidder. Nearox's submission quoted some units at a lower price than Golden Copier; they had also indicated that City of London would need to award to multiple suppliers as they could not provide all of the copiers indicated. Nearox's bid was disqualified which was deemed as non-complied by City of London's policy.

Golden Copier Company, the lowest and responsive bidder, disagreed with Nearox's attempt to delay the formal award and requested that City of London move forward with awarding to them and deal with Nearox later. They were anxious to receive the orders from the cooperative procurement group.

Nearox was following the dispute process outlined in City of London's procurement policy but even City of London's Finance Director wanted to move on and award to Golden Copier as it seemed very clear that Nearox was wrong.

Copier Background at City of London

Historically, copiers were supplied to the departments and agencies by multiple vendors, with pricing established by the Procurement Department. Just under five (5) years ago, the Procurement Department decided to solicit competitive bids for single year, to one single vendor for the general copiers. The Procurement Department's policy states that if one or more qualified bids within a category are received, a contract shall be awarded to the lowest qualified bidder; if, however, competitive bids are not received in a category, multiple awards may be issued to some or all qualified suppliers for that particular category only, at the discretion of the Procurement Manager.

Last year, the Procurement Department solicited competitive bids and awarded a contract to the single low qualified bidder for each category in which it received at least one qualified bid per category. In categories where no qualified bids were received, the Procurement Department chose to negotiate with the lowest-priced bidder from another category or with the non-qualified bidders. If the bidder agreed to withdraw the terms that qualified the bid, the Procurement Department would make a single award in the category to that particular bidder. However, if all bidders in the category refused to withdraw non-qualified conditions, no award was made. This process was deemed unsuccessful, as no multiple contracts were made on the current contract.

Three Different Views

To further the discussion around the dispute here is the view from the three parties involved - Nearox, City of London's Procurement Department, and Golden Copier Company.

The Procurement Department:

The Procurement Department cited seven (7) major issues to support its copier purchase decision through single contract competitive bidding, they include:

1. Single awards ensure fair competition and an equal advantage to all qualified suppliers desiring to do business with the municipality.
2. Competitive bidding that leads to a single award is reasonable since -
   1. The majority of the cooperative procurement department and agency needs can be satisfied by devising categories based upon machine-speed, copy volumes, and features
   2. Using bid categories based upon machine-speed ad feature, competing vendors can subsequently offer functionally similar equipment.
3. The market demonstrates that competitive pricing is available on copiers. Therefore, by competitively bidding the copier term contract, City of London is assured the benefit of lower, competitive pricing.
4. Single awards promote uniformity and standardization in the terms and conditions in municipal contracts for copiers. Multiple award contracts promote numerous and confusing conditions, since each supplier would use its own standard contract.
5. Single award contracts ensure the agencies have maximum compliance with its maintenance and service conditions. This avoids the duplication of maintenance and service provisions contained in individual supplier's catalogues.
6. A single award permits the user department or agency acquiring the copier to readily identify the lowest priced copier with the features and speed required by the user department or agency.
7. The terms and conditions in the RFT document supported the Procurement Department's decisions.

Nearox

Nearox'sview maintains that the proposed system of single vendor awards for copiers did not promote the efficiency and economy of the cooperative group purchase. Nearox felt that the Procurement Department should enter into multiple-vendor-award contracts with each qualified bidder and allow for testing and approval of copiers. Nearox supported it view with four (4) major reasons:

1. Copiers are not interchangeable. Differences among copiers make acquisition based solely on the direct costs of copiers unreasonable, uneconomical, and inefficient. Nearox believes a single vendor award system requires its copiers and the competition's to be compared as equals regardless of any dissimilarities or differences that may exist.
2. Copiers vary not only in terms of price but also in terms of quality of copies produced, dependability, service experience, and capabilities of suppliers to provide necessary follow-up after acquisition. Nearox claims these criteria are deemphasized under a single award approach and can properly evaluated and acted upon only through a multiple award system.
3. User departments and agencies have a wide variety of circumstances and needs that affect their copier requirements. These needs are best known only to the user departments and agencies, which have no significant say under the single award system.
4. The single award approach has superficial appeal because of apparent cost savings. However, when it is realized that copiers are not all alike, it is evident that the apparent savings are unrealistic, since no yardstick on cost savings can be established.

Golden Copier Company

The Golden Copier Company view reasoned for dismissal of the Nearox dispute arguing that according to their interpretation of the policy:

1. The Procurement Department had no discretion to decide on a multiple vendor award contract, rather than a single award contract.
2. The public policy strongly favoured single vendor award contracts and such contracts were required except:
   1. When competitive bids were solicited and none received
   2. In the case of an emergency
   3. If the item to be acquired was to be a single-source commodity.

Questions:

1. Identify who is the author for this Case Analysis
2. Identify the issue
3. Analyze the issue
4. Identify and analyze City of London's options
5. Explain what the arbitrator's decision is and why they are making this decision
6. Suggest options for avoiding or reducing the issues in the future