The National Capital Commission’s impossible contract for a new HQ
The National Capital Commission (NCC) is on the brink of an exciting project that will present an opportunity to conserve and restore an excellent work of modern architecture. The NCC’s move to new headquarters at 80 Elgin St., a prime site in downtown Ottawa, could create a climate-responsive space for staff and the public to experience the transformative power of good architecture. This is a positive move by the NCC. Acquiring the British High Commission building means the NCC will own its own building instead of leasing. This gives it the opportunity to animate the public realm in ways its current leased space does not.
Unfortunately, the NCC’s request for proposal (RFP) process is unlikely to achieve its goals. A flawed procurement model transfers legal, financial and professional risk in unacceptable ways while valuing low effort and minimal services for low fees from a pointlessly small pool of bidders.
The NCC has hired a third-party property management firm to manage its RFP. An initial request for expressions of interest in the fall of 2022 created a pool of interested firms. While positive, there was no indication of the scale of the project nor the eventual criteria for the project RFP. On receiving the full RFP, short-listed firms may well find themselves excluded from the project.
Since being published, the RFP has been amended with six addenda encompassing more than 200 questions. Contracts have been changed, the scope of services revised and in some cases there have been revisions to revisions.
Minimum criteria include submitting examples of having worked on three architectural projects worth at least $20 million, of which at least one must be a recognized heritage building and two must meet a zero-carbon building standard or similar. Similar conditions for engineering consultants apply.
In addition to pages related to experience, the additional information to be submitted includes things such as corporate resumes, write-ups of how the bidder understands the project, how it is going to approach the project and, of course, professional fees. In addition to a fixed fee for the work, calculations for hourly rates, unit rates for meetings and presentations, as well as other breakdowns must be submitted. In the end, 17 separate fee items must be tabulated and submitted as a final scored number.
While this is all a laudable goal, it is unlikely that there are more than a handful of projects like this in the whole country. Putting together a team of professionals who have this experience, and who have worked together on these projects, effectively limits the pool of talent eligible for this work to a handful of parties. It may even limit this work to a single firm once all factors are considered. It would be easier, faster and more honest if the NCC simply asked the few firms who have done this work before to give them a fee proposal.
Originally written to reward companies promising the lowest fee, the price of services is now based on a prorated methodology; but that counts for only half the total score and won’t likely change the end result. The firms that score highly on technical merits all likely have similar or nearly identical experience, approaches and consultants. That means they will have similar technical scores. Because the lowest fee gets the most points, the lowest fee will still decide the winner.
These are standard problems with RFPs. The real concern with this one is the contract. The RFP includes an outdated standard 22-page client-architect agreement but adds 20 pages of contract changes. Some of the changes include revisions to definitions of laws, as well as changes to definitions of standard terminology. Oddly, the NCC was prepared to engage with an architect using a bare-trust numbered company (one that has legal ownership but no duties or obligations and responsibilities) and thus creates higher risk for bidders.
This, too, was amended. It remains odd that the NCC, a federal Crown corporation, is using an Ontario-based client-architect agreement rather than the standard federal contract used by other agencies and departments for federal work. The most egregious contract issue, however, is what is commonly called the “right of set off.” The NCC requires that the bidder agree that the cost of any changes in the construction, regardless of the source of the change, can be deducted from the architect’s fee, at the sole discretion of the NCC.
The NCC can choose at any point in the project to decide that any change is “a failure of the architect to perform any of its obligations under the contract” and deduct the full cost of this change from the architect’s fee. This includes any legal costs associated with doing so.
In effect, the NCC is demanding that bidders agree to be financially responsible for all extras before even accepting the project. A successful bidder who is “judged and juried” in this case is put in a position of having to litigate to be paid, regardless of any responsibility on the part of the NCC.
Suppose that during construction, a hidden condition on this 50-year-old building is uncovered and it turns out to have a $2 million repair cost. If $2 million of the architect’s original fee is all that is left for reviewing the construction, the NCC can decide this is the architect’s fault and to withhold further payments to cover costs that are its responsibility as owners.
How would the rest of the project be serviced if there were no fees to do so? The architect would have to litigate to be paid while continuing to provide services to the project.
This also means that the NCC doesn’t need to carry a contingency budget because “all extras can be deducted from the architect.” Normally, a client carries a contingency budget for extras. This is especially true when renovating a 50-year-old heritage building. There are going to be extra costs along the way and smart clients are prepared for this.
While it isn’t the intent, the way the clause is worded gives the NCC unlimited power to decide. This unequal balance of power isn’t in the public interest. No one should be expected to sign a contract that is inherently unfair.
In instances of egregious error or negligence, an insurance claim could be filed and the NCC would have to show that the architect was negligent. If the courts found that the architect was indeed at fault, insurance would pay for the claim.
How could this be different?
To begin, the NCC could open the acceptable criteria to a broader pool of talented firms. There are many firms that have similar and relatable experience, or that could form collaborative teams that can demonstrate relevant experience in achieving positive results.
Second, the NCC can adopt a qualifications-based selection process. At the least, this would allow for a disclosure of the budget for the project (including the budget for professional services) and allow firms to bid on their skills and abilities alone.
This has been the only legal model of procurement in the U.S., on federal and state public sector projects, for more than 40 years. It is also the procurement model supported by the Federation of Canadian Municipalities, the Association of Consulting Engineering Companies, and numerous other groups. It saves money, time and delivers innovation.
Third, the NCC can take all of the supplemental conditions off the table and revert to using an industry standard, unaltered contract. The NCC may want to make suggested changes to the agreement, but each change should be a negotiable point with the successful bidder. That allows for a fair and transparent discussion on the meaning of changes and an equal understanding of risk, and risk transfer.
Given the extent of changes, revisions to the scope of work and deliverables, not to mention all of the potentially conflicting directions provided by the amended RFP, it would make sense for the NCC to reset this entire process. Between the original 200-plus page document and the 325 or so of pages of changes, questions and clarifications, there is confusion, conflict and miscommunication on what the NCC wants for its new building, and how to get it in a fair and equitable way.
A poor RFP like this sets the stage for equally poor RFPs for other NCC properties such as 24 Sussex Dr., which urgently needs renovation, not to mention the hundreds of other properties the NCC manages, let alone official residences and nationally significant addresses.
Failure to make substantive changes to the RFP will result in the NCC having a smaller talent pool to choose from, fewer creative ideas to achieve its goals and reduced opportunities to achieve excellence. It continues a tradition of mediocre buildings. It will mean a confrontational contract model open to extras, claims and endless contractual interpretations, setting the stage for a complex construction rife with accusations, extra costs and, inevitably, lawsuits. The public interest is not protected if there is a possible loss of insurance coverage and we, the public, end up on the hook for failures driven by a broken procurement process.
Editor’s note: Architects DCA, the company led by the author, was interested in bidding on this project but decided that the restrictive criteria and, more particularly, the contract conditions and basis of award made it a risky project not worth pursuing.