PACC Committee Report

PURPOSE

To respond to the Eighth Report of the Standing Committee on Public Accounts (SCOPA), in reference to Chapter 8 of the April 2002 Report of the Auditor General of Canada – Other Audit Observations - Health Canada and Public Works and Government Services Canada, regarding Government contracting rules and regulations related to the Canadian Health Network.

CONTEXT

In April 2002, the Auditor General presented to Parliament a review of the processes by which Health Canada created the Canadian Health Network and identified areas in the procurement process that required correction and/or improvement.

The Standing Committee on Public Accounts considered this Report at its meeting of May 30, 2002, at which it heard testimony from the Auditor General and senior officials of Health Canada and Public Works and Government Services Canada (PWGSC). Subsequently, on December 12, 2002 the Standing Committee on Public Accounts published its Eighth Report.

The Government of Canada carefully considered the Standing Committee’s Report and appreciates the contribution of the Standing Committee to ensuring that government procurement is carried out effectively, fairly and in the public interest. PWGSC is committed to achieving the best possible value for the taxpayer in each of the 40,000 contracts it delivers annually, and will continue to give careful consideration to comments concerning procurement decisions.

RECOMMENDATION No. 1

That Health Canada submit interim reports to the Standing Committee on Public Accounts that assess the status of its action plan developed in response to Chapter 8 of the April 2002 Report of the Auditor General of Canada (Other Audit Observations – Health Canada and Public Works and Government Services Canada). The interim reports must make reference to the plan’s milestones, expected results, and target dates, and be submitted at six-month intervals, beginning in April 2003 until such time as implementation has been completed.

RESPONSE

Health Canada agrees to submit interim progress reports on the action plan to implement its contract management framework. The first interim progress report will be forwarded by the Department to the Committee after the Government has tabled its response to the Eighth Report of the Standing Committee on Public Accounts, and thereafter at six month intervals until the action plan has been completed.

RECOMMENDATION No. 2

That Public Works and Government Services engage the services of an entity outside government to conduct a thorough review of its role in contracting.

RECOMMENDATION No. 3

That at the conclusion of this review, Public Works and Government Services Canada submit a report to the Committee outlining how it proposes to clarify its role in the contracting process.

RESPONSE TO RECOMMENDATIONS Nos. 2 and 3

The Government of Canada believes that the objective of the Committee in making these recommendations can be achieved through a range of measures which have already been initiated since the Auditor General’s report and are presented below.

In its Report, the Committee noted the possibility for tension between the two key roles of PWGSC - to provide services in response to client department needs, and to preserve the integrity of the contracting process. The Committee’s rationale for recommendations 2 and 3 was “ ... that PWGSC needs to review these two functions carefully with the goal of clarifying them and, if possible, eliminating any contradictions between them.”

PWGSC has taken significant steps in this regard. In November 2002, a comprehensive reorganization was initiated. This reorganization of the Department’s resources will support a new service delivery model that is designed to provide integrated and seamless service to its clients, while ensuring concurrently that legislative, regulatory and policy objectives are achieved. It is paramount that the policy and legal framework for contracting be respected at all times.

The reorganization provides a significant opportunity to improve communications and advanced planning by PWGSC and its federal client departments and partners, so that better and more cost-effective public services are provided. The new Operations Branch is mandated to meet client needs quickly and efficiently, while respecting the federal governance framework and policy objectives. An important dimension of the new organization is the creation of Operations Branch client service teams. These teams will be working with their client departments from the earliest stages of developing procurements. This will provide PWGSC and its clients with the ability to understand all of the operational and contracting dimensions of possible new initiatives, and to develop the most effective approaches to procurement in a timely manner. This early interaction and cooperation is a key to minimizing the possibilities of contracting problems observed by the Auditor General.

Another important result of the reorganization is the creation of the Acquisition Program Branch, which enables a longer-term focus on improving and renewing the enabling policy and administrative processes, including the supporting frameworks for risk management and quality assurance, program integrity and training initiatives. Work will be undertaken to provide operational managers with an improved ability to monitor and evaluate contracting activities in the context of client service and program integrity and, as appropriate, play a challenge role. The Branch will also expand existing training and certification programs for employees of PWGSC and for all government departments and agencies.

The Minister of PWGS is of the view that if the measures noted above do not achieve the desired results in delivering clarity in the roles of PWGSC, the Minister will consider whether to seek external analysis and advice.

In addition to these PWGSC initiatives, the Government of Canada is continuing its Procurement Reform agenda, by strengthening individual procurement-related policies, modernizing procurement processes, and renewing human resources. The latter area of activity includes the development of professional standards and a certification process for procurement officers (including professional development and training).

RECOMMENDATION No. 4

That Public Works and Government Services Canada develop and implement an action plan to address shortcomings identified in Chapter 8 of the April 2002 Report of the Auditor General of Canada (Other Audit Observations – Health Canada and Public Works and Government Services Canada). This plan should list actions, milestones, target dates, and expected results, and should be submitted to the Committee no later than 30 April 2003.

RESPONSE

The PWGSC Action Plan in response to this Recommendation is attached as Appendix 1 to the Government Response. PWGSC will submit a final report on the implementation of the Action Plan by December 31, 2003.

As noted, the reorganization of PWGSC will facilitate ongoing review of program performance and integrity, including a number of areas referenced in the Report.

In accordance with its Action Plan, PWGSC will monitor procurements to identify possible inappropriate use of ACANs, contract splitting and mis-coding. Where cases of non-compliance are identified, corrective actions will be taken. The implementation of PWGSC’s monitoring processes and corrective actions taken will be reported to SCOPA by December 31, 2003 as well as any additional measures that may be deemed necessary.

The Consulting and Audit Canada audit of possible overclaims by contractors has been completed and claims outside the scope of the work rejected. The total payments for all work carried out under the scope of the contract are estimated to be within the authorized amount.

RECOMMENDATION No. 5

That the Government of Canada develop clear, real, and verifiable consequences for non-adherence to the contracting regulations for goods and services, an outline of which must be in place by 30 April 2003.

RESPONSE

The government has specific measures to deal with situations of non-compliance with the regulations and policies and procedural requirements that apply to federal procurement. In this context, the Government of Canada already provides for consequences in legislation and policy in the event of a failure to comply with the Government Contracts Regulations or breaches of discipline or misconduct. This range of measures is provided so specific responses can be tailored to the circumstances depending on the nature of the problem. These measures are found in the Treasury Board Staff Relations Policy (Chapter 6), Contracting Policy (Section 4.2.3 and 12.1.3) and Policy on Losses of Money, Offences and Other Illegal Acts Against the Crown. They include oral reprimand, the recovery of funds, the revocation of authorities, and termination of employment, among others, depending on the seriousness of the circumstances. Sanctions are also provided for persons guilty of a list of offences in Part IX of the Financial Administration Act. Sections 80 and 81 regarding the indictable offences related to the disbursement of public money for both public servants and others, provide for a fine and imprisonment in the event that a review of the conduct of officials leads to a demonstration and conviction of willful intent to defraud the government.

CONCLUSION

The government is in agreement with the Standing Committee that a fair, open and transparent procurement process is essential to support the effective implementation of government programs and to achieve policy objectives. Prudence and probity in the process are equally essential.

The SCOPA Report highlights a number of areas where additional effort by PWGSC is required. PWGSC is committed to a service delivery model that will provide integrated and seamless service to its clients, while ensuring that legislative, regulatory and policy objectives are achieved. The government has already undertaken a number of steps, including: enhanced communications between procurement professionals and their clients; the government’s procurement reform initiative, policy and process streamlining; the continuing training of professional procurement staff; and continuing improvements to monitoring of program performance. The Action Plan outlines additional steps to be taken to respond to the Auditor General’s observations.

Appendix 1 — PWGSC Action Plan