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General – Post Award
Operational services contracts require the ministry to issue a Notice to Commence Work. Prepare a Notice to Commence Work letter using the procedures and letter template in Chapter 18 of the Contract Management Manual.
Article 6 of the operational services contract (FS 1000) requires representatives of the ministry and the contractor to meet and jointly develop a work progress plan before work commences. Schedule A's for aerial fertilization, tree planting, surveys (optional), aerial herbicide application, ground herbicide application, and vegetation management - livestock grazing each contain additional subjects the work progress plan must address. If applicable, arrange with the contractor to hold the meeting at the work site. Jointly tour the work site to review work conditions, boundaries, and contract specifications. Take care to ensure that any detail discussed and included in the work progress plan does not change the original agreement. If additions or deletions to the original works are necessary, use a Change of Work (FS 601) form.
Consulting services contracts often require an initial meeting to iron out project plans and to confirm the project timetable and working and reporting arrangements. Other types of contracts do not require a pre-work conference, it being more effective to cover off some of the items usually dealt with at a conference over the telephone and by dealing with any other matters during the initial inspection of the project.
3.2.1 General Considerations
See Section 18.4 of the Contract Management Manual for a list of items that may be in the pre-work conference.
If there are more than a few items, prepare an agenda so that no items are overlooked during the meeting.
3.2.2 How to Negotiate
From the ministry's perspective, negotiations over the work progress plan should be firm but flexible. Negotiations must be firm with respect to meeting the fundamental contract requirements. Although the operational services contract states in Article 6 that the ministry and the contractor's representative shall "jointly develop a Work Progress Plan," this does not mean that the ministry gives up its rights elsewhere in the contract to specify what the contractor must do to fulfil the contract.
Flexibility facilitates getting the job done in a manner advantageous to both parties. Flexibility can exist in areas such as start and stop dates, crew size, production rates, etc. - provided these were not specified as "hard" items in the contract. Usually there can be a greater flexibility for contracts not involving a biological window than for contracts with such a window. Take care, however, to not be so flexible as to fundamentally alter the contract requirements. This can lead to the contention by unsuccessful contractors that they could have bid a lower price had they known the ministry would relax certain requirements. In extreme cases, the ministry could expose itself to lawsuit by an unsuccessful contractor for loss of profit opportunity due to unfair process.
If a contractor proposes a previously unidentified efficiency that necessitates a change in the contract specifications, it is acceptable for the ministry to also negotiate a lower contract price that at the same time increases the contractor's profit. The key is that there must be no change to the contract deliverables; the same result is achieved but at lower cost.
3.2.3 Guide to Completing the Work Progress Plan - FS 791B
The purpose of the Work Progress Plan - FS 791B is to document discussions that occurred at the pre-work conference and to provide a schedule for the completion of the individual treatment units. This form may be used for most silviculture operational contracts. Attach additional pages where necessary. The aerial fertilization schedule A itemizes a number of subjects the WPP must address that the FS791B does not specifically provide space for.
The numbered instructions in Table 9 below correspond with the numbers in Figure 7. Work Progress Plan - FS 791B.
Table 9. Instructions for completing the Work Progress Plan - FS 791B
3.3.1 Ministry Spending and Receiving Authority Responsibilities
The following are the responsibilities of the ministry spending and receiving authorities as they pertain to contract inspections.
The contract spending authority:
Receiving Authority (Ministry Representative)
The contract receiving authority (usually the person designated as the ministry representative):
There are four basic types of inspection:
The following sections provide a general overview of inspections. Later sections covering each silviculture contract type contain inspection procedures specific to each treatment activity.
Important: If the contractor's representative is not the contractor him or herself, a copy of all field correspondence must be mailed to the contractor at the address on the contract (in addition to the copy given the contractor's project supervisor in the field).
An "initial" inspection is, as the name implies, the first inspection undertaken after work commences. While it is most often conducted by the contract receiving authority, the ministry spending authority may also attend on larger projects.
The initial inspection is important in that as well as getting the work off to the right start it sets the tone of the business relationship between the ministry representative and the contractor. If a pre-work conference has not been held, the ministry representatives should introduce themselves to the contractor's representative on site and review with him/her, as appropriate, the relevant items that are listed for a 3.2 Pre-Work Conference, Work Progress Plan.
Conduct the initial inspection with the contractor's representative in attendance, pointing out any observed deficiencies. It is important to establish early in the contract the standards of work expected by the ministry. (Refer to program manuals for assistance in this regard.) Also, it is less costly to the contractor to remedy a deficiency at once, as opposed to later when it may have been partly covered up by other work or the crew has shifted to another work unit.
Use the Camp Standards Checklist - FS 776A.xls when inspecting silviculture camps. Inexperienced inspectors who are unsure of how to make use of the form or how to conduct camp inspections should be accompanied and trained by experienced senior staff on their first several inspections. Deal with serious infractions that have health or safety implications by issuing a notice to comply. Then contact the Ministry of Health and/or WCB, advising them of the problems and if appropriate requesting they conduct an inspection. The regional planting specialist can also advise on how to best deal with specific infractions.
A "progress" inspection is one of (usually) a series of on-site inspections while the work is fully operational. It is normally conducted by the ministry representative (contract receiving authority). Some aspects of progress inspections, such as the taking of survey measurements may be undertaken by an implementation contractor.
During the early stages of the contract, progress inspections may be required daily, or even several times daily, until the competence and reliability of the contractor is established. Avoid lengthy intervals between progress inspections as this can result in what started as a relatively simple problem becoming much more complex, possibly requiring additional work and expense by the contractor for which the contractor may seek additional payment.
Conduct progress inspections on a random basis without prior notification to the contractor. Do, however, encourage the contractor to attend the inspection, but do not allow him/her to lead the site tour as the contractor may avoid going past substandard work. Inspections must be thorough; if an inspector has viewed a project and has not taken corrective action on an observable problem, the contractor has the right under contract law to conclude that the work is acceptable and to continue doing it in the same manner. Where necessary, specifically schedule subsequent inspections as a follow-up to ensure that instructions to the contractor were followed.
A "re-inspection" is where the contract provides the contractor with the right to request a re-inspection of the work, or remeasurement of the area, where he/she disagrees with the original inspection results or measurements. The contractor must provide notice within the time limits specified in the contract. Provisions regarding who bears the cost of re-inspection and which set of inspection results will be used are included in the contract.
Final (Payment) Inspection
The "final" inspection is a scheduled inspection conducted jointly with the contractor to determine whether or not the work is complete (or substantially complete) and is in accordance with the contract specifications. For many types of silviculture contracts quality inspection plots are established. Final payment to the contractor and release of the contractor from further contractual obligations in relation to the work normally results from a satisfactory final inspection. Any remaining deficiencies in the work are identified, and final instructions are issued to the contractor where necessary.
It is important that the final inspection be thorough, leaving no `loose ends.' Where instructions have been issued, or if the work is determined to not be complete, schedule additional inspections.
The final inspection is conducted by the contract receiving authority. On larger projects the ministry spending authority may also attend.
3.3.3 Failure to Commence Work
A contractor failing to start within the time specified in the Notice to Commence Work is in breach of contract. At this point, it is within the ministry's right to terminate the contract. However, normally the ministry representative should first attempt to contact the contractor to discuss the matter. How to deal with the situation depends on the nature of the work to be done and the reason for the contractor's failure to commence. If able to contact the contractor and the contractor's reasons for failure to commence are acceptable, it may be appropriate to agree on a new start date. This is an amendment to the contract that must be in writing. In this case, issue a new notice to commence work cancelling and replacing the earlier notice. Include in the covering letter the ultimatum that if the contractor does not start by the revised date the ministry will proceed to contract termination.
If not able to contact the contractor, or if the contractor's reasons for not starting are unacceptable, and/or there is some urgency to commence, then it is appropriate to terminate the contract. See 3.3.8 Contract Termination.
3.3.4 Overview of Progressive Contract Compliance Process
Obtaining contract compliance is normally handled in a progressively more severe manner as follows:
Lower level steps may by omitted where there is a significant and immediate threat to workers, property, the environment, or to the successful completion of the contract.
Figure 8 shows an overview of the contract compliance process. Each of the steps is further described in the sections following this figure.
Figure 8. Overview of the contract compliance process
The verbal or written warning is the first step in the progressive contract compliance process.
When to Use
Issue a verbal/written warning when:
Deal with each occurrence on an individual basis considering its nature and the assessed degree of severity.
Examples of situations where a verbal/written warning is appropriate are the early detection of:
Examples of contract infractions of a minor nature include:
Issue a warning immediately after observing a contract violation or a potential violation, preferably after first discussing the matter with the contractor. Be certain that the warning is not perceived by the contractor as "advice", which may be accepted or rejected by the contractor without consequence.
Where a ministry inspection report form is available for a specific activity, use the space provided on the form for giving written instructions to the contractor. If there is no space provided on the form, write the instructions separately on an FS 242 Form, attach it to the inspection form, and give a copy of both to the contractor.
Guide to Preparing a Written Warning
The numbered instructions in Table 10 below correspond with the numbers in Figure 9. Example of a Written Warning.
Table 10. Instructions for writing a warning using form FS 242
3.3.6 Notice to Comply
Issue a Notice to Comply when:
Other items that should be addressed include:
Assessments for Contract Non-Compliance
Some silviculture contracts provide for assessments in the event of contract non-compliance. Such assessments are not normally applied when a first warning is issued (i.e., a verbal or written warning) but are nearly always applied after a Notice to Comply is issued.
Figure 10. Example of a Notice to Comply
3.3.7 Suspend Work Order
Issue a Suspend Work Order when:
An order may be made with respect to all or parts of the project.
Use an FS 242 form to issue the Suspend Work Order, clearly noting the reason for the order together with reference to earlier warnings having been issued (if relevant).
Other items that may be included are:
Figure 11. Example of a Suspend Work Order
Terminate the contract when the contractor has failed in an essential aspect of the contract and all avenues to correct the problem have been exhausted.
Reasons for contract failure considered to be the fault of the contractor include:
If the cause of the contractor's failure was not within the contractor's control, terminate the contract without penalty to the contractor (normally the matter is discussed with the contractor and the contract termination is by mutual agreement).
Reasons that may not be the fault of the contractor include:
Once the decision has been made to terminate, prepare a contract termination letter using Figure 12. Notice of Contract Termination, below, as a template. Edit the template so that italicized wording, boxes denoting optional text, and undesired optional text is deleted or replaced so that none appears in the issued letter.
Once the letter is signed, the Ministry Representative should inform the contractor verbally of the termination. Send the termination letter by courier or double-registered mail. If by courier, require the courier package be signed for at the contractor's address.
Table 11 lists follow-up items after a contract is terminated.
Figure 12. Notice of Contract Termination
Chapter 21 of the Contract Management Manual covers contract amendments and changes in work but has not yet been issued. The following presents a brief coverage of the subject on an interim basis until the Contract Management Manual chapter is issued. It only addresses changes to operational services contracts.
3.4.1 Choosing a Form
All contract amendments must be documented in writing. There are two approved forms for amending a ministry contract. Ministry policy stipulates that only these forms shall be used. The forms are:
Use Table 12 below to assist in determining which form to choose. If unsure of which form to use, use the contract amendment form, which is more versatile.
Inadvertent use of either form for the wrong type of change or amendment is not a problem. Both forms are supplemental contracts and equally serve to amend a previously signed contract. The desired result is still achieved provided the change or amendment is properly written and executed.
If a change involves both an increase in work and a change in the work specifications, do not issue both a contract amendment and a change of work order. Use one or the other form based on whichever is the more significant change. For example, if there is a significant increase in the work along with a relatively minor change in a work specification, use the change of work order form to cover off both amendments.
Table 12. Guide to choosing a contract amendment form
3.4.2 Important Considerations!
Before considering a change to a contract, check the following items.
Contracts Guaranteed by a Performance Bond
Amend contracts guaranteed by a performance bond with caution. It is a condition of the bond that if the contract is materially increased or decreased, the surety must be informed and consent to the changes. Inform the surety company if a contract amendment or change of work order will encompass one or more of the following:
The courts have ruled that decisions on materiality rest almost exclusively with the surety. Failure of either party to notify the surety of any of the above proposed changes could render the bond invalid. Therefore, provide a copy of any change of work order or contract amendment to the surety under the above circumstances. However, do not report minor changes or amendments, since nominal price or material adjustments are quite common in contracting.
Amendments That Increase the Contract Price Above Policy Limits
Ministry policy requires the approval of the ministry responsibility centre manager where a contract amendment increases the total contract value by more than 25% if the original contract value was less than $100,000 or 10% if the original value was $100,000 or more.
Contract amendments that would increase the total contract value to $100,000 or over may also be subject to Treasury Board approval requirements and may be subject to the Agreement on Internal Trade.1 Check with the local finance section or appropriate program managers before entering into negotiations on such contracts.
3.4.3 Negotiating and Preparing a Contract Amendment - FS 600
The most common contract amendments are extensions in time, changes to a contract specification, or adding a term. Each of these are addressed in the following sections.
Extensions In Time
Contractor Responsible for the Delay
If the contractor is considered responsible for not having met the contract completion date, assess whether a contract extension is in the best interests of the ministry. Reasons for not extending the contract include:
In addition to not extending the contract, hold the contractor accountable for having missed the contract completion date. Mechanisms for this include:
If the contract is to be extended, consider not only holding the contractor accountable for having missed the contract completion date as above, but also ways to ensure that the work is completed by the extended deadline. Mechanisms to accomplish this include:
While a contract amendment must be agreed to and signed by both parties, if the contractor will not agree to any of the above changes when they are deemed necessary by the ministry to ensure performance, do not extend the contract.
Where the contractor is responsible for the delay, the contractor cannot claim for losses associated with the delay.
Contractor Not Responsible for the Delay
If the contract completion was delayed for reasons beyond the control of the contractor, such as adverse weather or fire closures, consider extending the completion date using a contract amendment form (FS600). Make the extension for the number of days affected by adverse conditions. If work cannot re-commence until the following season, consider extending the term to allow work to continue in the next season. If the next season is in a new fiscal year, follow procedures in "Fiscal Year End Considerations," below.
If the delay is not the fault of the contractor, the contractor might submit a request for an increase to the contract price. Judge each case on its own merits. Normally it is up to the contractor to carry insurance to cover such risks. However, if the delay has been directly the fault of the ministry, it may be appropriate to negotiate an increase in the project price. Before agreeing to an increase, ensure that additional funds are available, and obtain all required approvals.
A contract may be extended past the fiscal year-end of March 31st, provided:
The appropriation clause is derived from the Financial Administration Act and effectively causes termination of the contract if funding is not made available by the Legislature or Treasury Board in the next fiscal year. If this occurs, immediately notify the contractor to suspend work. Make payment only for work satisfactorily completed up to the date the suspend work order was issued. Do not pay for a reduction in total work.
Example of Amendment Wording
Following is an extract of the FS 600 contract amendment form showing the suggested wording of an amendment to the contract term. In this example, the contract is being extended to March 31, 2002. Note that the amendment wording is shown in a script font; in an actual amendment, use an Arial or similar font.
Changing a Performance Standard
Negotiating With the Contractor
A performance standard is ordinarily changed when it is discovered during performance of the work that the specified standard is inappropriate. A change may also be required when new program standards are introduced after a contract has been issued.
Depending upon the nature of the change, negotiations may be required with the contractor. The best approach is to verbally discuss the matter with the contractor. Ordinarily, the contractor will be receptive to any change, as he/she wants to do the best possible job. If the change does not cause any increase in the contractor's cost, and the contractor agrees, proceed with the a contract amendment. If the contractor disagrees with the change, either from a technical or monetary standpoint, negotiations may be required.
Example of Amendment Wording
In this example, the colour of flagging tape for a survey strip line is being changed from blue to multi-colour because it was discovered after the contract was issued that a mining exploration crew has run strips through the area using blue flagging.
Changing the Contract Price
Negotiating With the Contractor
A contract price must not be changed without just cause, especially contracts awarded through competition. Usually the reason for a price change will be directly associated with a change in the contract requirements. Such price changes are dealt with in other subsections.
Example of Amendment Wording
In the following example, the ceiling price of a consulting services contract is being raised by 15% from $62,700 to $72,105.
Adding a Term to an Option to Renew Contract
Negotiating Price and Term
Option to renew contracts are described in "Creating Multi-year and Multi-activity Contracts." The additional work periods which may be included in the contract should have been specified in the information to bidders and in the contract at the time the competition was held.
Extend the term of the contract by changing the contract ending date. If the contract consists of active and inactive work periods, as is the case of most silvicultural activities, include the dates of the active work periods in Schedule A of the contract. While the ending date of the contract extension and the dates of the additional active work period are determined by the ministry, the price of the additional work will be subject to negotiation. (It is not subject to negotiation in a multi-year contract where the original contract bid price was fixed for all years.)
The price of the additional term should not change substantially in favour of the contractor as other contractors may complain of unfair or preferential treatment. As a guideline, if the initial contract term prices were unit based, the same unit prices should be used in the additional term. It is acceptable to negotiate an adjustment for inflation where it has exceeded three percent over the preceding term.
If the initial contract term price was lump sum or fixed price, and the work to be done in the next term is substantially the same, the same price should prevail. If there is more or less work than in the previous term, negotiate the price based on a percentage increase or decrease to the work, keeping in mind that a contractor's overhead usually increases as a percentage of the cost when the work goes down and decreases as the work goes up.
If there is no agreement with the contractor on the price of the additional term, the work may be competitively awarded upon expiry of the original term of the contract. The contractor is under no obligation to agree to an additional term and may decline without penalty.
Example of Amendment Wording
Following is an extract of the contract amendment form (FS 600) showing the suggested wording for adding a second contract work period. In this example, a 2nd season is being added to an implementation contract. To accomplish this, the term of the contract is extended continuously to the end of the second work period, Schedule A is amended to add a second period during which the services must be provided, and Schedule B is amended to increase the contract ceiling price to pay for the increase in services.
3.4.4 Negotiating and Preparing a Change of Work Order - FS 601
Increase in the Work
Negotiating With the Contractor
When the change encompasses extra quantities of work units already specified in the contract, attempt to negotiate the extras at the same or a lower price than that specified in the original contract. Usually the contractor's overhead as a proportion of unit cost is reduced with an increase in the number of units, and the ministry should benefit from this (through lower prices) as well as the contractor (through greater profit). However, other factors may enter into the negotiations that must be taken into consideration. For example, the contractor may claim that the extra work will actually reduce profit as he/she has other work already lined up elsewhere at better prices. The bottom line, from the ministry's perspective, is that the price agreed to should not be more than a fair market price that could be obtained through competition, with some additional allowance for the cost and time delays associated with conducting a competition.
When requesting prices or quotations for proposed extra work, confirm that the contractor's written or verbal offer includes all overhead, profit and other things necessary to completely incorporate the changes into the contract work, exclusive of the federal Goods and Services Tax (GST).
Example of Change of Work Wording
When dealing with lump sum-based extras, use the term "price" (rather than "cost") on the change of work order because it is more conclusive in its legal interpretation. "Cost" generally implies the actual amount the contractor paid to acquire the labour and materials, while "price" is the amount the contractor will charge the ministry for the fully completed extra work.
In the following example, an additional block is being added to a planting contract for a total price of $19,548. The last treatment unit on the existing schedule B was unit F, so the new unit is added as unit G. Schedule B is amended accordingly (showing a new contract total price) and is attached to the change of work order, along with a project map showing the unit boundaries and any other necessary planting details.
Figure 13. Example of a change of work order for an increase in work
Decrease in the Work
Causes of a Decrease
The five common causes of a decrease in the work are:
Negotiations Not Appropriate
There is no negotiation over compensation or a price change when the reduction in work is related to either the 1st or 5th cause listed above. These are both provided for in the operational services contract form - the first under clause 10.01 (d) (assuming the spending authority elected clause 10.01 (X) when the contract document was prepared) and the 5th under clause 12.10 (no funding is also provided for under the Financial Administration Act).
With respect to cause #2 above, the possibility of this event should have been anticipated at the time of contract award and the contract styled accordingly so that no compensation is payable. In the case of cone collection, for example, the contract for helicopter hire would be based on an hourly rental, while cone pickers would be hired on an hourly or daily pay basis.
Negotiating With the Contractor
Negotiations with the contractor may involve the following:
Clause 10.01 X of the operational services contract contains compensation provisions for a reduction in the work. The formula is that the ministry pays 15% of any short-fall below 90% of the original contract price, provided the reduction in work was not due to any cause over which the province has no direct control (e.g., Act of God, unsuitable weather, natural disaster, labour dispute).
If there are no provisions for compensation in the contract, approach a contractor's request for compensation carefully. Contact a ministry contract administration specialist for advice, as the ministry must guard against setting precedents, and if compensation is payable, must ensure it is fair and equitable. Normally, the risk of a reduction in work is assumed to be the contractor's. Where this risk has been assumed by the ministry through a contract provision for compensation, in addition to being fair, one of the major reasons for doing so is self-serving. In activities where reductions in work are a fairly common occurrence, contractors will bid higher prices to compensate for the risk. By including a compensation clause, the ministry is in effect insuring the contractor against this risk and should receive lower bid prices in return.
Example of Change of Work Wording
In the following example, two treatment units (TU's) are being removed from a spacing contract. In this hypothetical case, a recent file check by the ministry representative found a previously-approved stand management prescription for these areas is no longer valid. As a result, TU C is being removed in its entirety. This unit was bid as a lump sum price. Only 5 ha of a 20 ha TU D (25% of the area) is being removed. It was bid at a price of $1,400/ha. Because the contractor had started work (on TU A) and no substitute for the deleted areas could be found, compensation is payable under the contract for the reduction in work. Total contract value was $46,547.
Figure 14. Example of a change of work order for a decrease in work
See 3.3.2 Inspections.
Other than for tree planting, use the Contract Payment Certificate - FS 606 for all silviculture operational services contracts. Instructions for completion of this form are included with the downloadable document (the document must be `protected' for the instructions to display at the bottom of the screen when each form field is entered).
3.7.1 Entering Information in RESULTS
Upon contract completion, spending authorities shall ensure contract details are recorded in RESULTS. Doing so meets all ministry silviculture record-keeping requirements. Refer to RESULTS manuals and on-line instructions/help for data requirements and procedures for data entry.
The RESULTS system also contains a contractor performance record subsystem. To have this information available to all districts on the RESULTS system, it is critical that the "Maintain Projects" screens are fully filled in for all silviculture projects. Contractor performance records should be updated particularly when there has been a failure to meet all the conditions of the contract. Entering performance into RESULTS will allow other Ministry staff access to performance records for contractors bidding on other Ministry work.
1 All of the provinces, Canada and two of the territories are parties to the Agreement on Internal Trade. The new territory of Nunavut is not. The objective of this agreement is to reduce and eliminate, to the extent possible, barriers to the free movement of persons, goods, services and investments within Canada and to establish an open, efficient and stable domestic market.
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