Vendor Performance Management Program – Summary and Implications

By Richard Wong and Corbin Devlin

Effective January 6, 2020, the Government of Alberta rolled out the Vendor Performance Management (VPM) Program to support the delivery of quality infrastructure projects on time, on budget and within scope, all while utilizing resources more efficiently. In essence, the VPM Program is designed to hold vendors accountable to poor performance or unacceptable behaviour, while providing incentives to improve performance and minimize the need for corrective measures. It does so by using vendor past performance information to acquire goods, services or construction, improve transparency, promote innovation, and ensure best value for tax-payers.

VPM Program Ratings and Evaluations

The VPM Program applies to a person, business or entity that has contracted with Alberta Infrastructure to provide goods or services. Contracts at or above $100,000 are subject to the VPM Program and are identified during the procurement planning stage. However, contracts may be opted out of the VPM Program, prior to the commencement of the procurement process, where the contract is deemed low risk.

Through performance evaluations, those subject to the VPM Program are provided an “Overall Vendor Performance Rating,” which will be used for future procurement. Inadequate performance will result in corrective measures and may result in possible suspension of bidding privileges if performance does not improve.

The Overall Vendor Performance Rating is calculated using a three-year rolling average of evaluations consisting of key performance indicators. The key evaluation indices are quality, management, schedule, cost and safety, and can be found in the VPM Program, published by Alberta Infrastructure here.

Evaluation criteria and the scoring guide for contractors can be found here. 

Evaluation criteria and the scoring guide for consultants can be found here.

Vendor performance is to be evaluated every six months and at the end of the contract term, subject to the following:

1. For contracts where the first key milestone or deliverable is provided after a period longer than six months, the first evaluation may be completed within two months of receipt of the first deliverable or completion of the first key milestone; and
2. For contracts that conclude at or before six months, one interim and a final evaluation must be completed.

An adjustment of 5% to 10% will be applied to the procurement evaluation final score, allowing past performance history to have an impact on selection of a vendor in the procurement process.

For the purposes of evaluation, a partnership or non-incorporated joint venture will be treated as a vendor in its own right, that is, the non-incorporated joint venture or partnership will be evaluated as if it were a single vendor with one set of vendor performance scores assigned for the contract. Those scores will then be assigned to each constituent vendor and will form part of its Overall Vendor Performance Rating. If a member of a joint venture is subject to a suspension, the joint venture’s proposal, tender or bid will not be considered.

In the case of an acquisition of one company or entity by another company or entity, the Overall Vendor Performance Rating of the acquiring company or entity becomes the Overall Vendor Performance Rating of the resulting single company or entity.

In the case of an amalgamation of two (or more) companies or entities, the average of the amalgamating companies’ or entities’ Overall Vendor Performance Ratings are used as the Overall Vendor Performance Rating for the resulting amalgamated company or entity.

Expected Outcomes of the VPM Program

Although the VPM Program is still in its early stages, the expected outcomes of the program include:

1. Facilitating ongoing, regular communication with vendors, ensuring clarity of expectations and quality performance;
2. Providing incentives to vendors to improve their performance;
3. Minimizing the need for corrective measures due to poor performance;
4. Enabling better decision making on bidder selection through a centralized repository containing vendor past performance information;
5. Holding vendors accountable for poor performance or unacceptable behaviour; and
6. Enabling Alberta Infrastructure to provide objective vendor references.

Review of VPM Program Results

Vendors have the right to request a review of evaluation results within 10 days of receiving the results. The score under review will not be considered as part of the vendor’s Overall Vendor Performance Rating until a final decision is issued by the Vendor Performance Committee. A Vendor Performance Committee consisting of senior leadership at Alberta Infrastructure will evaluate the vendor’s request for a review. Best efforts shall be made to issue a decision within 30 days of Alberta Infrastructure receiving an accepted request for review. The decision will indicate that the evaluation results be upheld or adjusted.

Implication of Results

The corrective measure and suspension process is triggered by inadequate evaluation results. An initial warning letter will be issued if the vendor receives an interim performance evaluation result of 2.5 or below, following which the vendor will be required to meet with Alberta Infrastructure to discuss and submit a corrective action plan. Bidding privileges may be suspended if, after completing the corrective action plan, the vendor receives less than 2.5 on a consecutive performance evaluation on the same contract.

Suspension of bidding privileges range from 18 months to 3 years. A first suspension, resulting from inadequate performance, will result in an 18 month suspension. A second or subsequent suspension of the same vendor will result in a 3 year suspension. Suspension of bidding privileges may be applied to any beneficial ownership that is affiliated with the vendor; and/or any related person of the vendor.

Additionally, Alberta Infrastructure will provide a performance-based reference, upon request, for a vendor’s completed contracted work, if the vendor’s contract was subject to the VPM Program.

More to Come 

Considering this, vendors engaged with Alberta Infrastructure should be familiar with the VPM Program and confirm whether or not they are subject to same. The VPM Program was implemented to provide security that tax-payers are getting what they pay for, while non-compliant vendors are sanctioned for poor performance. At this stage, however, it is too early to determine how vendors have been affected by the VPM Program. We will update you as more information becomes available and as vendors subject to the VPM Program become more engaged in the procurement and review process.