Contract

A contract is a legally binding agreement between a contracting authority and a contractor or vendor to procure goods, services or construction. Public Services and Procurement Canada (PSPC) defines it as a binding agreement entered into by a contracting authority and a contractor to procure a good, service or construction.

The federal Code of Conduct for Procurement uses the same idea in plainer terms. It describes a legally binding agreement between Canada and a vendor to provide goods or services to the Government of Canada. For a supplier, the contract is the point where a bid becomes an enforceable commitment.

How the Supply Manual defines a contract

The CanadaBuys Supply Manual glossary states that a contract is an agreement between two or more persons that creates an obligation to do or not do a particular thing. The key feature is mutual legal obligation. The buyer commits to what it has agreed to do, usually including payment, and the contractor commits to deliver what was specified.

The same glossary explains that, under the Government Contracts Regulations, the federal meaning of contract includes construction contracts, goods contracts and service contracts entered into on behalf of Canada by a contracting authority.

The three kinds of federal contract

• Goods contracts: agreements to supply physical products or equipment.
• Service contracts: agreements to perform work or provide expertise.
• Construction contracts: agreements to build or modify a work.

Federal contracting authorities use these contracts to acquire goods, services and construction. The Treasury Board procurement policy framework covers all three and seeks best value for the Crown.

Standing offers, supply arrangements and purchase orders

Not every procurement document is a contract. PSPC guidance for suppliers states that a standing offer is not itself a contract. A contract arises when Canada issues a call-up against the standing offer.

A supply arrangement works the same way. The same guidance notes that a supply arrangement does not by itself legally bind either party. The resulting procurement action creates the contractual obligation.

Purchase orders are different. A purchase order states the buyer's requirements and price, and once it is accepted it becomes a contractual agreement. The CanadaBuys buyer's guide on choosing a method of supply sets out how these instruments relate to one another.

Obligations after the contract is awarded

Once a contract exists, the supplier must comply with its terms and conditions. That means delivering the specified goods or services and meeting the required standards and timelines. It also means following contract-administration requirements such as progress reporting, delivery, invoicing and payment procedures.

The Supply Manual identifies contract administration as including progress monitoring, delivery follow-up and payment action. Suppliers should expect the buyer to check performance against the contract throughout its term.

What a contract means for a supplier bidding on Canadian public contracts

Check what you are actually winning. A standing offer or supply arrangement gives you a place on a list, but it does not guarantee work. Revenue starts only when a call-up, purchase order or other contracting action creates a contract.

Read the terms and conditions before you bid, because they become binding obligations if you are awarded the work. Plan for reporting, invoicing and delivery requirements from the start. You can find current solicitations on CanadaBuys tender opportunities.