Financial Capability Assessment

A financial capability assessment is an evaluation of whether an offeror or bidder has the financial resources and capacity to fulfil a procurement requirement and perform the resulting contract. In Canadian federal procurement, it is a qualification and evaluation measure applied to the supplier. It is not a technical or security assessment.

The CanadaBuys Buyer's Guide says that evaluating an offeror's financial capability verifies that the offeror has the financial resources to fulfil the requirement. The assessment can involve reviewing financial information requested by the contracting authority, including financial statements. Related terms include financial capacity, economic and financial standing, and financial evaluation.

What buyers verify when they assess financial capability

The CanadaBuys guidance states that offerors must have the financial capacity to meet contract requirements. It also notes that a financial analysis may be warranted during sourcing. The question the buyer is answering is simple: can this supplier carry the work through to the end of the contract?

The consequences are direct. Shared Services Canada's standard instructions for procurement documents state that Canada may reject a bid if, in Canada's opinion, the bidder lacks the financial capability to perform the work. A bid can therefore fail on financial grounds even when the technical response is strong.

Financial statements and certification requested from bidders

The same SSC instructions allow the contracting authority to request financial information during bid evaluation. The information requested includes:

• Audited financial statements, if available, or unaudited financial statements.
• Statements for the bidder's last three fiscal years, or for the period the bidder has been in business if that is shorter.
• At a minimum, a balance sheet, a statement of retained earnings, an income statement and the notes to the statements.

A bidder may also have to provide certification from its chief financial officer or an authorized signing officer that the financial information is complete and accurate. Bidders should confirm who can sign this certification before a solicitation closes.

When the assessment takes place

Timing depends on the solicitation and its clauses. The assessment can occur during bid evaluation, at sourcing, or at the award of a standing offer. A CanadaBuys standing-offer document states that, at standing-offer award, Canada may conduct a complete financial capability assessment of the offeror and request the financial information needed to perform it.

Public Services and Procurement Canada also lists financial capability as an evaluation or selection element, "if applicable," in its solution-based supply arrangement material. It is not a universal step in every solicitation, so each bid document needs to be read for its own requirements.

Energy-performance contracting: a sector example

Natural Resources Canada's qualification document for Greening Government Services Qualified Service Organizations requires potential bidders to demonstrate full financial capability for energy-performance contracts. Bidders can do so directly or through a financial institution. The document names recent and sustained financial performance, working capital and access to multi-year financing as relevant evidence.

What it means for a supplier bidding on Canadian public contracts

Keep current financial statements ready for at least the last three fiscal years, or for every year in business if you are newer. Make sure they include the balance sheet, statement of retained earnings, income statement and notes. Identify the officer who can certify the information as complete and accurate. Check each solicitation, standing offer or supply arrangement for a financial capability clause, since it sets when the buyer can ask for your information and what it can ask for. Responding promptly and completely to a request protects a bid that is otherwise compliant.