Sole Source Justification

A sole source justification is the formal written explanation, with supporting evidence, that a contracting officer and client department prepare when a contract is awarded to a single supplier without a competitive bid. In Canadian federal procurement it explains why an exception to the Government Contracts Regulations (GCRs) was invoked. The exception most often used is 6(d), which applies when only one supplier is capable of performing the work.

The justification is not the same as sole source procurement. Sole source procurement is the method: the buyer contracts with one supplier. The justification is the mandatory record of why that method is lawful and appropriate. It sits in the procurement file, where auditors and review bodies can examine it later.

The TB7 questions and GCR exception 6(d)

The GCRs require contracting authorities to solicit bids, then allow four circumstances for contracting without competition: a pressing emergency, expenditures below set limits, cases where soliciting bids would not be in the public interest, and cases where only one person is capable of performing the contract. The Department of Finance Canada internal audit of procurement describes these exceptions and the documentation they require.

When exception 6(d) is invoked, Treasury Board requires responses to seven questions, known as the TB7. The CanadaBuys Supply Manual, Annex 3.1, titled Treasury Board questions for sole source and effective April 19, 2024, directs contracting officers and client departments to answer them. Every question must be considered and answered, and the file must confirm where a question does not apply. The questions cover topics such as:

• whether the contract is linked to a previous procurement and strategy
• whether competition is feasible or affordable
• whether the vendor holds exclusive intellectual property rights
• whether legal or regulatory considerations preclude open competition
• whether alternative sources exist and why they are unsuitable
• whether the price is reasonable

How federal departments record the justification

The archived Chapter 1 annexes of the Supply Manual state that when exception 6(d) is invoked, the client must complete a sole source justification and provide a letter along with responses to the seven questions in Annex A of Treasury Board Contracting Policy Notice 2007-4. The justification and the responses must be kept in the procurement file.

The Finance Canada audit explains that the seven questions apply when only one supplier can perform the work and the contract value exceeds $25,000 for goods or $40,000 for services, with special thresholds for architectural and engineering services. The same audit notes that the justification supports transparency, accountability, value for money and oversight. It also describes the Procurement Request Form, which requires the sole source justification where one is needed.

What audits have found in sole source files

Audits show that the justification is tested in practice. The Finance Canada audit found cases where the sole source justification was not specified on the request form, and cases where supporting documents were missing, including quotes, Treasury Board question responses and statements of work.

The National Research Council audit of procurement and contracting reviewed files involving sole source decisions. Six of thirteen did not contain sufficient and appropriate documentation. Three of those had been reviewed and incorrectly approved by the Contract Review Committee. In two cases a sole source strategy was used where an existing standing offer was the appropriate method, so the rationale for sole sourcing was invalid.

How allied and NATO buyers justify single-source awards

Allied jurisdictions apply the same idea. The U.S. Department of Justice COPS Office Sole Source Justification Fact Sheet defines sole source procurement as procurement through solicitation of a proposal from only one source. It requires written approval from the COPS Office for sole source procurements above $250,000, and a justification must explain which permitted circumstance applies and what makes the vendor unique.

The Government of Canada's guide to navigating NATO procurement explains that sole source procurement on NATO Security Investment Programme projects requires the specific agreement of the Investment Committee. It is granted only if the Host Nation makes a compelling case, for example extreme operational urgency or commonality with previously supplied equipment.

What it means for suppliers bidding on Canadian public contracts

Suppliers do not write the federal justification, but the buyer's answers depend on facts the supplier holds. Exclusive intellectual property rights, the absence of suitable alternatives and price reasonableness are all questions the buyer must answer on file. A supplier that can document these points clearly gives the client department a stronger basis for a direct award.

Suppliers should also expect that a sole source award will be examined later. Where an existing standing offer or another competitive vehicle covers the requirement, auditors have found sole source strategies invalid, and a direct award may not stand.