Sole Source Contract

A sole source contract is a contract that a procurement authority awards directly to one vendor without running a competition. NATO defines sole source as a procurement method that permits the authority to award to a vendor without competition, and sets it apart from competitive bidding (NATO procurement policy).

The buyer solicits and negotiates with only one supplier. A NATO acquisition entered into after soliciting and negotiating with only one source is described as a sole-source acquisition (NATO Bi-SC procurement regulations). In Canadian federal practice the same idea is usually called non-competitive procurement.

Grounds NATO recognizes for awarding without competition

NATO's procurement policy lists the circumstances in which a direct award can be justified. These are urgency, interoperability with existing capabilities, cost or schedule savings, obsolescence, contract extensions, and a determination that only one vendor can meet the requirement (NATO procurement policy).

NATO also requires governance control over the method and negotiations with the identified vendor to secure best value. A direct award does not remove the buyer's duty to negotiate terms and pricing.

The UK government describes NATO sole-source procurement as an exceptional method. It may be requested for extreme operational urgency or for commonality with previously supplied equipment (UK guidance on NATO procurement).

How Canadian federal buyers use non-competitive procurement

In Canadian federal procurement, sole-source contracting is a form of non-competitive procurement under the Government Contracts Regulations. Public Services and Procurement Canada lists the circumstances where it may be used (PSPC procurement process overview):

• a pressing emergency where delay could harm the public interest;
• contracts below prescribed monetary thresholds;
• circumstances where competition is not in the public interest, such as national security; and
• situations involving one known supplier, including copyright, licence or patent considerations.

The CanadaBuys Supply Manual tells contracting officers to document and justify reliance on the regulatory exception for a sole-source goods or services contract. The justification must explain why the goods or services can be supplied only by a particular supplier and why no reasonable alternative or substitute exists. Exclusive rights and an absence of competition for technical reasons are among the grounds identified (CanadaBuys Supply Manual, Chapter 3 annexes).

Sole source compared with related terms

• Single-source acquisition: a contract entered into, or proposed, after soliciting and negotiating with only one source.
• Non-competitive procurement: the Canadian federal term commonly used for awards made without an open competition.
• Sole-source award: the resulting contract or award made to the identified supplier.
• Limited or restricted competition: a method that invites more than one supplier, which is the key difference from sole source.

NATO's Support and Procurement Agency publishes planned sole-source award notices on its business and project opportunities page. One example is a notice for spare parts for AN-FPS117 and AN-TPS77 radar systems.

What a sole source contract means for a supplier

A sole source opportunity generally means the buyer has identified you as the intended or potentially capable source instead of inviting a normal competitive tender. You still have to negotiate contract terms and pricing, because NATO expressly requires negotiations with the identified vendor to ensure best value.

On the Canadian federal side, the contracting officer must document the exception relied on and justify it. Suppliers with exclusive rights, patents, licences or unique technical capabilities should be ready to state those facts clearly. Suppliers who are not the named source should watch for planned sole-source notices, since these signal a buyer's intent before an award is made.