Contract conundrum

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This article was published 03/12/2022 (1254 days ago), so information in it may no longer be current.

After being the prime contractor for the Canadian military’s combat uniform needs for more than 50 years, Winnipeg-based Peerless Garments will be reduced to the status of potential sub-contractor for now.

That’s because last month a major 20-year, $3.7-billion contract for provision of more than 1,000 different items of combat clothing and footwear was awarded to a Quebec company, Logistik Unicorp.

Albert El Tassi, the longtime president of Peerless and Doug Good, the CEO of Peerless’s parent company, Unisync Group Ltd. do not quibble with Logistik being awarded the contract.

In fact Unisync/Peerless withdrew its proposal in May saying that pricing and assumptions were already “significantly eroded” as a result of rising interest rates, increasing cost of wages, reduced availability of workers and supply chain uncertainties.

Company officials are not second-guessing their decision to withdraw even after having spent millions of dollar preparing the bid that was formally submitted in August 2021.

But what they are left scratching their heads about is that the overall size of the contract awarded Logistik was almost four times larger than the contract Unisync/Peerless was awarded.

El Tassi said, “It’s mind-boggling. I don’t know how they got to $3.7 billion. We figured the ceiling on the contract was about $1 billion.”

Because they withdrew from the tender they will not be privy to the details of the contract for about six months.

A spokesperson for National Defence said, “The contract has not changed nor is it larger than what had been advertised. We can confirm that there is no added scope.”

Both El Tassi and Good figure there must be additional items that eventually were included in the tender, for example personal protective equipment.

But they are baffled at how it got that high.

Both El Tassi and Good emphasized that there is no sour grapes.

El Tassi called the president of Logistik to congratulate him when he heard Logistik was awarded the contract.

El Tassi said, “I know him well. I’m happy for him. I said we are available. He knows. We can work together. That will be no big deal.”

That is to say, El Tassi believes there is reason to expect that Peerless’s Winnipeg cut and sew operations — where it currently employs about 75 people — will get some sub-contract work from Logistik.

Since Unisync/Peerless and Logistik are the only two companies in the country with the capacity to bid on such a contract, the fact that it withdrew might cast Unisync/Peerless in a negative light with the Canadian Armed Forces (CAF), because of its desire to avoid sole source contracts.

Good said, “As a Canadian-owned public company we remain committed to pursuing future managed clothing opportunities with the various departments of government. We hope the decision to withdraw will not affect Peerless’s opportunities to participate in these large contracts. Peerless has been a major supplier of tactical garments to the Canadian Armed Forces for more than 50 years.”

While the two companies are competitors Unisync/Peerless had more success in winning combat uniform work and Logistik had more experience on the dress uniforms.

But the Quebec company had engaged with the CAF as a managed service supplier, warehousing all the items and shipping directly to the individuals and units as needed.

That same manner of third-party inventory management is now being applied to combat clothing and footwear as per this new 20-year contract.

El Tassi said the preparation for the tender took place before “things went haywire” with rising prices, wages and interest rates.

He said the hope was that the government would allow bidders to re-submit, allowing them to better factor in inflationary issues.

Because they needed sub-contractors to effectively lock in a price, Unisync/Peerless management felt it would not be fair to their sub-contractors to ask them to commit to pricing that they knew would be out-dated.

“It would have been unconscionable to ask our sub-contractors to commit,” said Good. “It might put some of those cut and sew operations out of business.”

As company officials seek further clarity about the details of this contract, El Tassi said Peerless will continue to bid on military work that comes up as well as police forces like the RCMP and OPP and Good said Unisync’s other divisions will continue to seek more uniform work with private sector companies which already include clients like Air Canada and Alaska Air.

martin.cash@freepress.mb.ca