Supplier Financial Capacity Evaluation

Supplier financial capacity evaluation is the assessment of whether a prospective supplier has sufficient financial resources and financial viability to fulfil a procurement requirement and perform the resulting contract. Public Services and Procurement Canada (PSPC) describes the activity as verifying that the offeror possesses the financial resources to fulfill the requirement, as set out in the CanadaBuys guidance on evaluating an offeror's financial capability.

The term names a procurement evaluation activity rather than a single standardised acronym. Related terms include financial capability, financial capacity, economic and financial standing, financial viability, financial review, financial opinion and financial evaluation. In Canadian federal procurement, offerors must have the financial capacity to meet the requirements of the contract they are seeking.

How PSPC evaluates an offeror's financial capability

In Canadian federal procurement, the activity is handled by procurement officials and, where required, by PSPC's cost and price analysis function. CanadaBuys instructs officials to consult cost analysts to determine what financial information should be requested and which clauses should be included in the solicitation.

A financial analysis may be conducted during sourcing. A formal financial review of an offeror may also be initiated at any stage of the contracting process when it is considered necessary. The CanadaBuys offer evaluation guidance sets out both steps.

Where financial capability appears in federal solicitations

PSPC supply-arrangement guidance lists "financial capability (if applicable)" as an element of the bid solicitation, alongside evaluation procedures, basis of selection and certifications. This appears in the guidance for task and solutions professional services and for professional audit support services.

The software as a service arrangement works on an ongoing basis. PSPC evaluates technical and financial submissions as they arrive, and suppliers that do not meet the financial requirements may be asked for additional documentation or clarification, according to the qualifying supply arrangement page.

Individual solicitation documents can also reserve Canada's right to examine an offeror's technical, managerial and financial capabilities and to request information about the offeror's legal status. Examples appear in a CanadaBuys request for proposal and in a solicitation and contract document.

Financially weak suppliers and contracts that are exempt

Where Canada must contract with a financially weak supplier, CanadaBuys guidance says the risk should be reduced through financial security, based on a cost analyst's recommendation.

Financial-capability assessment is normally not required for certain contracts. These include:

• generally available commercial goods or services selected through competition
• contracts involving educational institutions or Crown corporations
• contracts with government departments and agencies
• services of individuals
• specified Industry Canada assistance contracts

The exceptions are listed in the same CanadaBuys guidance.

Economic and financial standing in NATO procurement

In NATO common-funded procurement, the corresponding concept forms part of a supplier's economic and financial standing. NATO's Procurement Policy for Common Funding requires a declaration of eligibility from a NATO nation. That declaration certifies the vendor's economic and financial standing, alongside its legal and regulatory competence, technical and professional capacity, and security risk.

What it means for a supplier bidding on Canadian public contracts

Read the solicitation for its financial-capability clauses and supply the financial information and supporting documentation it specifies. Be ready to answer clarification requests and any formal financial review, which can be initiated at any stage of contracting. If the solicitation sets financial-capability or financial-security conditions, you must satisfy them. The exact evidence required depends on the procurement and the clauses in the solicitation.