The goal of government contracts is to gain access to services and acquire goods that help promote long-term regional and industrial growth and development. As Canada has a federal system, the procedures for selling vary among the municipal, territorial, provincial, and federal governments. The procedures for competitive procurements are common across Canada.
Anyone soliciting bids has a number of duties such as rejecting offers that fail to satisfy the requirements and evaluating bids based on disclosed criteria. They must also avoid bias and conflict of interest, ensure proper disclosure, and treat bids equally and with fairness.
Suppliers must certify that they have not paid contingency fees for the signing, negotiation, and solicitation of contracts. There are different types of certifications such as commercial-off-the-shelf software, software publisher, workers’ compensation, and rate of price certification. Other examples include Federal Contractors Program for Employment Equity Certification and former public servant.
Cost is considered reasonable when certain factors are taken into account. The cost should be considered necessary and normal to fulfil a contract or to conduct business. What is reasonable cost is defined by factors like contract conditions, regulations, local and provincial laws, arm’s length bargaining, and sound business practices. Factors that affect cost also include quality requirements, delivery schedule, and specifications of contracts.
In general, the contractor pays indirect and direct costs that are allotted or incurred, minus credits, if applicable. Direct costs refer to labor, material, and other costs, including gross salaries and wages. There are also indirect costs such as administrative and general expenses, period or fixed charges, fringe benefits, and indirect labor. Other examples include research and development expenses and indirect supplies and materials. When it comes to administrative and general expenses, these include things like postage, office supplies, office salaries and wages, and remuneration of corporate and executive officers. There are also public services expenses such as maintenance and operation of facilities and general assets, light, heat, and power.
While some costs may have been paid or incurred by the contractor in fulfillment of the contract, such costs are non-applicable, i.e. they do not apply to the contract. Examples are provisions for contingencies, provincial or federal income taxes less surtaxes and profit taxes, and losses on collection charges, bad debts, and investments. Entertainment expenses and penalties and fines are also considered non-applicable.
Only invoices that are in the contractor’s name are considered valid. They must also include details such as method of shipment, extension of the totals, deduction for holdback, and reference or item numbers. In addition, invoices must show details of expenditures such as subcontracts, fixed time labor rates, unit price, unit of issue, quantity, and item.
All contractors must comply with relevant provisions under applicable laws in fulfilment of the contract. They are required to gain and maintain all certificates, regulatory approvals, licenses, and permits to ensure proper performance of the contract. They must also supply copies of certificates, approvals, licenses, and permits to the Canadian government.
Finally, contractors must not use any tax exemptions, including commodity tax, ancillary taxes, and provincial sales tax. Tax is also paid on services and goods that are used in fulfillment of the contract. The contract price includes excise taxes, customs duties, and applicable taxes. In case the contractor is not a Canadian resident, then the government deducts 15 percent of the price that the contractor receives as per the Income Tax Regulations and Income Tax Act.