What is March Madness?

Anyone who has been involved in buying goods and services for the government has probably heard of “March Madness”.  This refers to the kind of purchasing that can happen in the last quarter of the fiscal year – for most government offices, this is between January 1st and March 31st.

All government entities have budgets for the fiscal year, which are usually based on what was spent in previous years as well as any upcoming projects or capital items that have been approved.  However, some budget line items are hard to predict as the need fluctuates.  For example, a government office may unexpectedly need a new contract template, and therefore spent more on legal advice than budgeted.  For this reason, most government offices are careful in their spending during the first three quarters, just to be sure that they have enough room in their budget for such unexpected expenditures.

By January, however, government offices review what’s left in their budgets.  If there’s room, many will turn their minds on how to spend the remaining budget dollars.  Often, these purchases where planned all along, but as they are not critical to operations, they decided to wait to the last fiscal and to purchase only if the budget allows.  Other times, an expected expenditure didn’t happen, and now the government office has budget dollars it did not plan to have; as there are always goods and services they would like to purchase but can’t as their budget won’t stretch that far, this can be a perfect opportunity to acquire them.

Pitfalls of Last Quarter Spending

However, there are pitfalls when making such purchases.  Remember that the goods and services that you buy must be received in the current fiscal year in order to paid through this year’s budget.  Refer to the Core Policy and Procedures Manual, Chapter H Financial Reporting which states:

The cost of goods and services must be recorded as expenses in the year received. Goods received or services rendered after March 31 are new fiscal year expenses regardless of when the order was placed. 

In addition, you need to follow your organization’s policies on how to select a contractor – it’s generally not sufficient to direct award a contract solely because you don’t have time for a solicitation process.  Many government staff think that purchases under $25,000 can be direct awarded simply because of the dollar value, but this is not the case.  In fact, the Core Policy and Procedures Manual says (see CPPM 6.3.2 (b) 4):

Goods acquisitions with an estimated value less than $10,000 must be awarded using a competitive process that is appropriate to the value, complexity and profile of the business opportunity, unless the conditions for direct awarding apply

and (see CPPM 6.3.2 (c) 6):

Any service or construction opportunity, or supply arrangement for the supply of service or construction, with an estimated value of less than $25,000 should be competed to the extent reasonable and cost-effective

This combination of requirements can cause the following problems:

• Direct awards that don’t meet policy (see the guidance available on BC Bid Resources for Direct Awards);
• Solicitation processes that are posted for a very short period, giving vendors insufficient time to respond (see BC Bid Resources Sufficient Time Posting Guidelines);
• Solicitations that have unrealistic delivery dates; and
• Contract delivery dates that can’t be met.

Avoiding These Pitfalls

So how do you avoid these pitfalls?  Here’s some advice that may help:

• Follow the guidelines on how long to post on BC Bid, noting that Invitations to Quote do not need as much time as a Request for Proposal would need (refer to Select a Solicitation Process and Template Guidelines for information on when to select what process).
• For those goods and services that fall below the threshold for posting, a simple form emailed to three or more vendors will generally work, although you do need to expressly state how you will evaluate the responses.
• When buying goods, use specifications that meet your needs and are also standard goods that multiple vendors have in nearby warehouses – do not expect that something can be shipped from overseas or a custom product built and delivered to you within 4-6 weeks (most vendors require 8-12 weeks for shipping from overseas, and even longer time frames for custom goods).
• Remember that the delivery date is a specification in price-based solicitations – you can’t accept a bid proposing a later date unless you expressly allowed for this in your solicitation (which means that your lowest price may not arrive before fiscal year end).
• Be realistic on what services can be delivered by March 31^st.
• Consider a phased approach to the services, where phase one is preliminary deliverables that are possible within the current fiscal year, and phase two is an optional continuation of the work, if you get the budget approved for next year. However, for the purposes of applying Trade Agreements, the total value of the contract includes the optional phase two delivery.

Have questions about public sector procurement?  Contact me at liz@buschprocurement.ca.