The Need for Qualifications-Based Selection (QBS) in Ontario Webinar Recap

On May 26, 2021, OSPE hosted a panel discussion on the Need for Qualifications-Based Selection (QBS) in Ontario. The purpose of the event was to introduce the audience to the processes, mechanisms, benefits and challenges associated with QBS.

OSPE CEO Sandro Perruzza moderated the panel discussion, outlining OSPE’s recent advocacy work on behalf of engineers that QBS should become a best practice in Ontario, as procurement agencies will use QBS to select engineering firms based on their credentials, previous performance, and availability to do a project over low-fee bidding structures. Further, QBS protects the public interest over the life cycle of the project, including design, construction, operations, maintenance, and eventual upgrading or decommissioning. This best practice has been mandated by law in the United States since the 1970s (The Brooks Act), and more recently, in the city of Calgary and the province of Quebec. Unfortunately, QBS is not yet a common practice in Ontario.

Featured panelists included:

Limitations associated with price-based competition

“Currently in the industry, price-based competition is commonplace,” John D. Gamble, CET, P.Eng., said. “When bidders get more points for providing a lower price, they are not fully interpreting the scope of the work” Ken Kozakewich, P.Eng., further explained that the price could potentially take a dominant role, leading to a lack of evaluation on technical components and previous experiences. From Kozakewich’s experience in a price-based competition: “firms would give you the minimal acceptable scope, minimal standards, and a minimal number of assigned staff, leading to unacceptable risk.” Consequently, the references of proposals are not appropriately defined during the initial stage. The lack of definition creates overruns, claims, scope changes, and spending extra time and capital on projects. All of which further causes a lack of quality and innovation. Therefore, there is an emerging need to find long-term solutions in construction, operation, and maintenance by incorporating a proper selection of consultants.

Another issue on the price-based selection market is that the industries do not like to “show their hands,” since they only want to be qualified solely for the proposal according to what the owner asked for. When it comes to the next stage, the industry could potentially withdraw due to the mismatching in the initial scope. Further, some firms face additional risks associated with lower pricing, further scope changes, and loss of collaborative work with clients on the best solution.

QBS procurement overview and benefits

John Gamble, P.Eng., emphasized that QBS is about “focusing on the best possible outcome with the resources available.” In contrast to price-based competition, QBS brings the counsellor and owner to a mutual understanding of a complete picture of public interest centered on timely delivery, fiscal responsibility, quality and innovation. The focus should be on leveraging investments for better outcomes, on the counter side of spending minimal amounts of capital.

The process typically involves six steps: 

  1. Identifying the needs of the owners. Owners indicate the baseline of the requirements, experiences and skills needed, along with the outcome and general expectations.
  2. Obtaining expressions of interest from the bidders to shortlist and filter the viable candidates
  3. Conducting an interview with the shortlisted bidders to further test and understand their alliance with the qualifications, culture and vision
  4. Selecting the preferred candidate through an internal discussion
  5. Holding a discussion of terms, including a budget, and timeline with the preferred candidate
  6. If the discussion fails, contact the next ranked candidate until a mutual understanding of the requirements and scope become well understood

Gamble also believes that the key is “making fees match the project outcome and expectations.” He also provided quantitative evidence that 70% of cost escalation was reduced and 93% of clients expressed higher satisfaction with consultants selected using QBS. Even though the initial consulting could sometimes be more costly, the long-term saving will be much higher with better, predictable outcomes. QBS also helps the client understand their projects since it selects a reasonable and qualified person to interpret the Request for Proposal (RFP) and discuss the actual needs to minimize the probability of missed opportunity. Erin Bird, P.Eng., further emphasized the importance of allocating adequate capital on hiring a consultant partner and developing innovative designing ideas since the expertise in such stages is essential in determining the scope and reaching the desired goal on such a project. Plus, the cost of consulting and designing is also significantly lower than the operational and capital costs. Therefore, there is no reason to save a dime and risk the considerable assets of the project.

QBS practices in US legislation: The Brooks Act

Gilboe, who has experience working in the US, believes that the first thing that people need to understand during the procurement process is the specific qualifications. “The details can be summarized into defining current situations, scenarios, waiting for the decision, and risk probabilities,” Gilboe said. Gilboe also indicated that the government has overly used the QBS process in the US as a weapon of social equalization. For example, some of the RFPs are only open to small businesses, veteran-owned businesses, or businesses from specific zip codes with economic disadvantages. Thus, QBS should not exclude groups but find the most qualified group using the criteria that needs to be weighed as a decision or probability. The Brooks Act is excellent regarding its simplicity and interpretable property.

From Gilboe’s experience in the energy sector QBS usually consists of two parts:

  1. Qualification proposals screen companies that are eligible to enter the financial proposal phase.
  2. Eliminating the bottom-feeders who try to win the bidding through internal manipulation.

Gilboe also mentioned that some legal and ethical codes do not allow engineers to make competitive bids in Canada. Consequently, there is a need for firms to demonstrate qualifications on other factors rather than money. He suggested incorporating more defined, measurable and evaluable factors for better comparison and ranking during the evaluation process, for example, the history of change orders. The content of Request for Information (RFI) and RFP should be used to target the exact group you want to reach, the process and the outcome instead of focusing on the law itself.

Due to formal adversarial processes happening in some municipalities in Ontario, firms have a low tendency on bidding on the municipal projects. QBS could potentially help the municipality move those infrastructure projects forward.

Implications in the City of Calgary and other municipalities in Alberta

“The city of Calgary has been practicing QBS for over 40 years, exclusively for engineering and architectural work” Erin Bird, P.Eng., said. She also indicated that price is not considered in the procurement outlines, nor the specific engineering and architectural terms and conditions from a professional liability perspective. During the selection process, Calgary does have general prequalification categories for different scopes of work. If there is a big project which requires specific knowledge, they will need a project-specific prequalification. Bird also mentioned that if fees are too high, they’ll go back to Council to get approval to negotiate. If everyone says it’s too high, they will cancel the procurement, re-evaluate the project, or obtain more funding. Kozakewich added that he had also seen numerous infrastructure projects using similar approaches in Edmonton and other municipalities in Alberta, where they are not trying to focus on the lowest bid but to focus on the scope of work and qualifications. The difference is that price is usually still one of the qualifications in those municipalities, and it could take up to 30% of the evaluation.

According to Bird, there are also challenges associated with QBS. For example, some of her colleagues joining from the private sector have no understanding of why the price is not considered during the procurement process. Another area of confusion is how to measure the budget if the price is not considered. Bird indicated that they have an estimation of the value assigned for the design portion. They conduct an internal discussion on allocating the budget before bringing the project into the market. The main idea is to establish mutual understanding and agreement. Further, they conduct market research, collect proposals, and evaluate based on their criteria. From a legal perspective, exclusion of price does not illegalize QBS procurement since QBS is still competitive, so it’s within contract law. Municipalities also provide debriefs to explain why firms did not get the project and the evaluation criteria.

Next steps

Some critical considerations regarding the potential implementation of QBS in Ontario from the panel discussion:

  • Adequate investment is needed during the consulting and designing stage to minimize future scope changes, risks and maximize mutual agreements’ outcomes
  • Incorporating well-defined, measurable and evaluable factors for bidders is important to showcase their qualifications and provide better comparisons and ranking during the evaluation process
  • The content of RFI and RFP should be used to precisely target the group with the best qualification match without excluding qualified groups
  • A thoughtful discussion on the project scope with consulting firms, contractors and bidders is necessary to avoid under-scoping and wasting time, capital and resources.

OSPE will continue advocating for the use of QBS for the procurement of engineering services. By adopting QBS as a best practice, the government will select engineering firms based on their credentials, previous performance, and availability to do a project over low-fee biding structures. 

Want to learn more about QBS? 

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