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Increased Procurement Thresholds & Local Preference - Procurement Officials Questionnaire


On June 1, 2020, the Minister Responsible for the Public Procurement Agency (PPA) announced increased procurement thresholds, as well as a local preference provision, to the Public Procurement Regulations. These measures have been introduced to allow for more opportunities to direct business to local suppliers through a limited call process and by enhancing local competitiveness.

PPA is reviewing procurement legislation, regulations and policies to enhance local preference in order to further support Newfoundland and Labrador businesses. As part of this review, PPA seeks to obtain the views and perspectives of procurement professionals. This questionnaire seeks to provide an opportunity for procurement professionals to provide feedback and insights into these measures.

It should take approximately 35 minutes to complete this questionnaire.

If you would prefer to make a written submission, please send to the contact person listed below.

Mailing address:     Mark Drover
                               Public Procurement Agency
                               30 Strawberry Marsh Road
                               St. John's, NL 
                                A1B 4R4

Email: markdrover@gov.nl.ca

The collection of information is under the authority of the Access to Information and Protection of Privacy Act, 2015, for the purpose of collecting public feedback on how to enhance local preference in procurement. All feedback will be considered as officials prepare recommendations. Any personal information that may be received will be governed in accordance with the Access to Information and Protection of Privacy Act, 2015 and will only be used for the purpose of informing this project.

If you have questions about how this information will be collected, used, or disclosed, please email markdrover@gov.nl.ca or call (709) 729-0358.

Introductory Questions

Local Preference

Local or regional preference in procurement is a competitive benefit given to vendors or suppliers that are determined to be ‘local’. Globally, governments have long used selective purchasing arrangements, typically via policy and legislation, to encourage economic growth and development in local economies. Local preference can be applied in a number of ways, the most common of which include:

  • preferring local suppliers in the case of a tie;
  • choosing local suppliers when bids fall within a prescribed percentage of a non-local bidder; and
  • providing reciprocal preferences, such as the reduction of barriers found in the Memorandum of Understanding – Atlantic Trade and Procurement Partnership.

The goal of applying local preference in procurement is to leverage government spending on goods and services in order to support local businesses. Local preference approaches must be balanced against public procurement principles, including fair competition and seeking best value. Jurisdictions must also comply with applicable trade agreements, which limit the dollar amount for procurement preferences.

Local preference may also consider the different impacts on rural and urban businesses and communities. Local preference has long been used to support rural economic development, however rural businesses are often at a disadvantage due to size and geographic constraints.

Local preference provisions in procurement policy provide a number of benefits to local economies, residents and the businesses that operate within them, but they also can have a number of disadvantages. Keeping government spending in the local economy helps support businesses and, by extension, local employment. However, some of the disadvantages of local preference policies include increased costs, forgoing best value options, and causing reciprocal responses from other jurisdictions (i.e. other provinces) where local businesses currently compete. 

A core issue that all jurisdictions with local preference policies face is determining exactly what constitutes ‘local’. Does a business simply need to be registered within a jurisdiction? Should it be locally owned and operated? Must it have a storefront? Should it employ a certain number of local residents? The idea of ‘local’ exists somewhere on a spectrum, and its definition has important implications for any local preference policy.

A local preference provision has been added to the Public Procurement Regulations. This provision mandates an allowance of ten per cent for local suppliers for all procurements, to the maximum permitted under the Canadian Free Trade Agreement.

This means that when a local and non-local vendor are bidding, a ten per cent discount is added to the local bidder’s price prior to evaluating.

For example,

A municipality requests bids for a contract to supply goods. Non-Local Company A submits a bid of $50,000, while Local Company B submits a bid of $55,000. Before evaluating, the bid for Local Company B is reduced by 10 per cent, or in this case by $5,500. Local Company B would be awarded the contract as its evaluation price is now $49,500 and it is now the low bidder.

These thresholds to which local preference have been added are as follows:

  • Municipalities, local service districts, academic institutions, school districts and health authorities:
    • $105,700 (goods);
    • $105,700 (services); and
    • $264,200 (construction).
  • Crown corporations:
    • $528,300 (goods);
    • $528,300 (services); and
    • $5,283,200 (construction).
  • Departments, agencies and all other public bodies:
    • $26,400 (goods);
    • $105,700 (services); and
    • $105,700 (construction).

Increased Procurement Thresholds Questions

In addition to local preference provisions, the Provincial Government has recently increased the thresholds at which open calls for bids are required. This will result in increased opportunities to direct business to local suppliers via a limited call process.

The procurement process in Newfoundland and Labrador affects all public bodies including municipalities, health authorities, school boards, academic institutions and government departments and agencies, as well as businesses throughout the province. Under the procurement legislation, the previous thresholds for all public bodies were:

  • $10,000 (goods)
  • $50,000 (services); and,
  • $100,000 (construction)

The new increased thresholds at which an open call for bids is required vary depending on the procuring body, and are as follows:

  • Municipalities, local service districts, academic institutions, school districts and health authorities:
    • $105,700 (goods);
    • $105,700 (services); and
    • $264,200 (construction)
  • Crown corporations:
    • $264,200 (goods);
    • $264,200 (services); and
    • $264,200 (construction)
  • Departments and agencies and all other public bodies:
    • $26,400 (goods);
    • $105,700 (services); and
    • $105,700 (construction)

As an advantage, increasing thresholds provides flexibility for a more efficient procurement process and also provides additional flexibility to direct business specifically to local enterprises. A disadvantage, however, is that the procurement may only be directed to a limited numbers of suppliers; therefore, all potentially qualifying suppliers may not have an opportunity to bid when the procurement is not openly advertised. A limited call process is also less transparent than an open call process.