Right of First Refusal

A right of first refusal (RFR) is a procurement arrangement in which a specified supplier, organization or ranked offeror must be offered a requirement first. Only if that party declines, or cannot meet the requirement, may the buyer approach someone else. In Canadian federal standing offers, this usually means contacting the highest-ranked offeror first and moving down the ranking only when the preceding offeror refuses or is unable to perform.

In Canadian federal procurement, an RFR works in two ways. It is a way of allocating work among suppliers under a standing offer. It is also a procurement preference created by policy, legislation or a modern treaty. The sections below set out how each version works and what it asks of suppliers.

How ranked standing offers apply the RFR method

The Office of the Procurement Ombudsman describes RFR as one method of allocating work under a standing offer, alongside proportional allocation and exclusive rights. Work is allocated this way without a second-stage bid competition. The details are in the Ombudsman's review of standing offers.

Several Government of Canada examples show the same sequence:

• Office ergonomic assessment services: the identified user contacts the highest-ranked offeror in the applicable region. If it can meet the requirement, a call-up is issued. If not, the user contacts the next-ranked offeror. See the PSPC commodity page.
• Translation services: the Office of the Procurement Ombudsman records that the department contacts the highest-ranked standing-offer holder first, then the other holders in order if necessary. See the Ombudsman's 2023 review.
• Optical scanning and digitization: call-ups are made on an RFR basis when the highest-ranked offeror cannot fulfill the need, and participating organizations must document this. See the PSPC commodity page.
• Plumbing and heating supplies: PSPC has described an intention to issue one standing offer per zone while remaining open to issuing multiple standing offers on an RFR basis. See the PSPC commodity page.

The Corps of Commissionaires and guard services

The best-known federal RFR covers guard services. PSPC states that the Corps of Commissionaires has had the exclusive right to supply guard services to federal departments and agencies on a sole-source basis since 1945, using the RFR mechanism. If the Corps refuses the work, PSPC manages regional master standing offers for commercial guard-service suppliers. The preference began in 1945 and was intended in part to support employment for veterans. The PSPC guard services page sets out the arrangement.

A Government of Canada evaluation states that the guard-services RFR applied to departments listed in Schedules I, I.1 and II of the Financial Administration Act, including the Canadian Armed Forces. It also applied to Crown procurement contracts covered by the Government Contracts Regulations and Treasury Board contracting policy. Organizations outside those schedules were exempt and could use other private-sector providers. The evaluation gives the full scope.

Treaty-based and CORCAN rights of first refusal

The Treasury Board Directive on the Management of Procurement addresses RFRs that arise from modern treaties, also called Comprehensive Land Claims Agreements. Where a modern treaty provides an RFR for a procurement, the procurement may not be subject to trade agreements, or may be set aside from them. The buyer must still solicit bids from the parties the treaty designates as holding the RFR. The directive contains the requirement.

Correctional Service Canada applies an RFR to its CORCAN program. Its financial directive requires officials to provide CORCAN with an RFR for goods, construction services and other services that CORCAN may provide, and to retain written documentation.

What a right of first refusal means for your bid team

What an RFR asks of a supplier depends on the procurement document, so read the standing offer or solicitation closely.

• If you hold the RFR, respond promptly when the buyer calls and confirm whether you can meet the stated requirement.
• If you are ranked lower, expect the opportunity only when higher-ranked suppliers refuse or cannot perform.
• Expect buyers to follow the stated order and, where required, document refusals or inability to fulfill the requirement.
• Where a treaty creates the RFR, designated suppliers must be included in the solicitation, and the work may sit outside trade agreement coverage.

Your ranking in a standing offer therefore affects how much work reaches you, so it is worth competing hard for a top position.