Contract Fee Limit Policy

The contract fee limit policy is a Government of Canada policy that limits the fees payable under federal contracts to former public servants who have received a lump-sum payment. It is named in the CanadaBuys Buyer's Guide, in the guidance on former public servants that contracting officers consult when they consider an award.

The policy applies to all former public servants who receive a lump-sum payment. That group expressly includes former members of the Canadian Forces and the RCMP. Its purpose is to control the fees paid through government contracts to people who have already received a workforce-adjustment payment.

Who the contract fee limit policy covers

• All former public servants who receive a lump-sum payment.
• Former members of the Canadian Forces.
• Former members of the RCMP.

The trigger is the lump-sum payment. A person's former status in the public service or in one of these two organizations is the starting point, and the lump-sum payment is the circumstance that brings the policy into play. The CanadaBuys guidance states this scope directly, and it applies the same rule to former military and police members as it does to other former public servants.

Link to the Workforce Adjustment Directive

In the Government of Canada's contracting guidance, the policy sits under the heading on former public servants and is linked to the Workforce Adjustment Directive. The connection explains the policy's purpose. When a public servant leaves under workforce adjustment and receives a lump-sum payment, the government limits the fees it then pays that person through a contract. The policy is a control on fees paid to individuals in that situation. It is not a general cap on profit or fees across all types of federal contracts.

When a fee limit does not apply

CanadaBuys states that contract fee limits generally do not apply when a contract is not specifically for the services of the former public servant. The test is therefore the nature of the contract. A contract awarded to a business for work, where the former public servant is not the specific person whose services are being bought, falls outside the usual reach of a fee limit. A contract written for the services of that individual falls inside it.

This is why the guidance treats the policy as an element to consider before award. The question of whether a contract is specifically for a former public servant's services is settled when the contracting officer reviews the proposed arrangement, not after the work begins.

Do not confuse it with other fee policies

The term is specific to the Government of Canada's treatment of former public servants. A similarly named U.S. Department of Energy rule, called the fee policy, addresses maximum fees in cost-plus-fixed-fee contracts. It is a different policy and has no bearing on the Canadian contract fee limit policy. The Canadian term is also not a NATO term.

What it means for a supplier

If you bid on federal work and propose an individual who is a former public servant, former Canadian Forces member or former RCMP member, check two things early. First, determine whether the contract is specifically for that person's services. Second, determine whether the person received a lump-sum payment. If both are true, expect the contracting officer to consider the policy before award, and confirm the applicable fee limit with the contracting authority. If the contract is not specifically for that person's services, a fee limit generally does not apply. Read the CanadaBuys guidance on elements to consider before award when you prepare your proposal, and make sure your staffing details are accurate.