Fee Abatement

Fee abatement is a federal contracting control that limits the fee payable under certain non-competitive contracts with former public servants who receive a pension. It is not a general price reduction applied to every procurement. It applies to a specific kind of supplier in a specific kind of contract.

Government of Canada documents describe a fee-abatement formula that determines the maximum fee payable during a one-year fee-abatement period. The formula applies when the successful supplier is a former public servant receiving a pension under the Public Service Superannuation Act. CanadaBuys guidance for buyers presents the formula as a cost-control measure.

How the fee-abatement formula is defined

A Government of Canada solicitation for a supply arrangement defines the fee-abatement formula as the formula used to determine the maximum fee payable during the one-year fee-abatement period. The definition ties the formula to a successful respondent who is a former public servant receiving a pension under the Public Service Superannuation Act. The request for supply arrangement for enterprise contact centre services is one example of a federal document that carries this definition.

The federal Supply Manual describes the same idea in negotiation terms. It refers to using a fee-abatement formula to determine the maximum fee for certain former public servants who have been retired for less than one year.

Where the rule applies: non-competitive contracts with individuals

Archived Treasury Board contracting guidance states that the one-year fee-abatement period applies to qualifying non-competitive contracts with an individual. The rule is therefore tied to contracts for the services of a former public servant, awarded without a competitive process.

Competitive contracting is treated differently. Archived Treasury Board guidance states that competitive contracts may be awarded without applying the fee-abatement formula.

Fee abatement is separate from ordinary bid-price reductions, liquidated damages and service-level credits. The Canadian sources place it only in the setting of contracting with former public servants.

Optional use under current Treasury Board policy

Treasury Board Contracting Policy Notice 2019-01 states that the requirement to apply the fee-abatement formula was removed and that its use remains optional, as appropriate. CanadaBuys says the same in its buyer guidance: use of the formula is optional and may serve as a cost-control measure for non-competitive contracts.

Departments still refer to the measure. The Department of National Defence addresses it in DAOD 7021-2 on post-employment. That directive states that a former DND employee receiving a pension under the Public Service Superannuation Act, a lump-sum payment or an early-departure allowance may be subject to fee abatement. A Crown-Indigenous Relations and Northern Affairs Canada audit likewise notes that contracts are subject to Treasury Board contracting policy on applying the formula.

What fee abatement means for a supplier

Check each solicitation and contract rather than assuming fee abatement applies. Because use of the formula is optional, the specific document governs.

• Disclose whether the proposed individual is a former public servant and whether that person receives a qualifying pension or other specified payment, where the solicitation or contract asks.
• Look for a fee-abatement clause or a definition of the fee-abatement formula in the solicitation and the resulting contract.
• If you are a qualifying former public servant, or are proposing one, expect the fee to be capped or reduced during the applicable period.
• Price and invoice in line with the contract's fee-abatement provisions.