Thank you, Madam Chair.
Madam Chair and members of the committee, thank you for inviting me and my colleagues here today, and for your continued interest in the work of my office.
This committee played a leading role in the design of our mandate and I consider the committee to be of the utmost importance in reviewing our work as well as in providing guidance. All of this, of course, is with a view to ensuring that we achieve our ultimate objective of strengthening fairness, openness, and transparency in public procurement.
With me today are Oriana Trombetti, the deputy procurement ombudsman, and Francine Brisebois, the principal responsible for the reviews of procurement practices in departments and agencies. Also present in the room is Isabelle Deslandes, the director of communications and corporate management. We will be delighted to discuss with you the results of our first year of operations and take note of any issues you may wish to raise.
When I last appeared before you on May 27, 2008, the committee members expressed a lot of interest in the steps we were taking to ensure that the office operates and is seen to operate in an independent manner and at arm's length from the government.
I am pleased to report that, to date, my officials have received all the documents and information requested from government to perform their duties. This has been made possible by the goodwill and professional courtesy shown by all deputy heads.
In particular, I’d like to thank the Deputy Minister of Public Works and Government Services and senior officials of Treasury Board, who have shown a great deal of personal interest in ensuring that the independence and effectiveness of my office is maintained.
We presented our annual report to the Minister of Public Works and Government Services on June 23. It was subsequently tabled in Parliament after the summer recess on September 28.
As noted in the annual report, our business model provides a collegial and cooperative approach to ensure the willing participation of suppliers, departments, and central agencies in the ongoing search for excellence in public procurement.
Our business model is less about following the rules and much more about doing the right thing. Procurement decisions should always take into account ethical considerations. The real question is not just what minimum actions government officials have to take to meet a narrowly defined policy requirement, but how those actions ensure that the principles of fairness, openness, and transparency are upheld.
Our approach has resulted in the building of strong relationships and networks, both with suppliers and with government officials, based on trust and mutual respect. We believe that this is because we have emphasized and demonstrated our knowledge, professionalism, and neutrality from the beginning. We have succeeded in building an atmosphere of trust.
Given the success of our collaborative approach, we intend to follow the same business model in the coming years. However, nobody should underestimate our determination to implement our mandate to its fullest extent and our willingness to change our approach should the situation require.
We have operationalized our mandate by setting up three lines of business: procurement practices review, inquiries and investigations, and alternative dispute resolution. The annual report highlights the work we have done in each one of these areas.
Procurement practice reviews are, for the most part, proactive and focused on early detection and prevention of problems. In many cases, they also highlight good initiatives and effective practices. Our reports include examples of the good practices currently being used by government departments. It is our intention to have a section on our website dedicated to the sharing of these practices. This should reduce the likelihood of duplication of effort and expenditure.
The subject of supplier debriefings has been raised with us on many occasions during our discussions with suppliers. Suppliers want to know why they lost a contract, as well as the strengths and weaknesses of their bid, so they can do better the next time. Procurement personnel are concerned that the information provided to suppliers could result in legal action. Our report tried to reconcile these two positions.
Suppliers clearly have the right to be told why they were unsuccessful. The fact that procurement personnel have adopted a risk-averse stance cannot override the suppliers’ right to receive information.
A safe zone for procurement personnel should be identified so they have a clear understanding of what a debriefing will and will not include, and they should be provided training. Debriefings will increase suppliers’ confidence that the procurement process has been open and transparent. Nothing bothers me more than hearing that a supplier has given up dealing with the government because of the perceived inefficiencies and perceived lack of fairness of the system.
We also reviewed the implementation of the rules relating to advance contract award notices, ACANs. During the three-year period covered by our review, ACANs accounted for approximately $1.7 billion in government expenditures.
An ACAN is a tool that was created in the early nineties to increase transparency by publicly announcing that the government intends to award a contract to a pre-identified supplier, or in other words, a directed contract. Our review indicated that in the majority of files there was inadequate documentation and market research to justify the use of ACANs.
The minimum 15-day publication period of the ACAN has become the maximum, and it may be insufficient for all potential suppliers to respond in a meaningful manner. We also noted that negotiations started with the pre-identified supplier before the closing of the ACAN. This may send the wrong message: that the government is actually not willing to entertain other proposals.
Pursuant to Treasury Board policy, an ACAN process is deemed to be competitive. As such, procurement personnel can award the contract using the same level of contracting authority as if there had been a full competition.
Let me use an example to illustrate this. Non-competitive contracting authority for services contracts is limited to $100,000 for most departments, whereas fully competitive contracting authority is limited to $2 million, a twentyfold increase. We believe the higher delegation dilutes risk mitigation strategies and may encourage unintended behaviour.
While we recognize that ACANs strengthen transparency, we also wonder whether the prescribed ACAN process is still relevant. We believe it's time to re-examine the application of the policy.
Public works has put in place mandatory standing offers to purchase common goods and services. In our view, achieving operational efficiencies is important, but it is also incumbent upon the government to ensure that suppliers' rights to access government business are preserved.
One of the most significant observations relates to the usage of data for monitoring and managing standing offers. Particularly troubling is that 30% of the usage data produced by government departments is unreliable because it could not be reconciled with any active standing offers. This undermines Public Works' ability to assess the effectiveness of the standing offers and support decision-making.
Suppliers are required to submit regular reports on the contracts against their standing offers. These reports are not being used by the government. This reporting requirement puts what appears to be an unnecessary burden on suppliers and results in extra costs.
The use of mandatory standing offers continues to attract a lot of concern from the supplier community. We intend to continue the examination of this subject in future reviews.
Now I would like to speak to you about the second line of business, which responds to supplier concerns related to individual commercial transactions.
The inquiries and investigations team is the supplier community’s first point of contact with our office. In our first year, we were contacted 355 times.
With respect to the 62% of contacts that were procurement related, we assisted suppliers in demystifying the procurement process and facilitated the resolution of procurement issues and concerns through dialogue and collaboration. In every instance, suppliers and procurement personnel have expressed satisfaction with our efforts.
Our team of procurement specialists has spent many hours talking on the phone and discussing issues face to face with suppliers, supplier associations, and procurement personnel. Under our business model, we encourage suppliers to discuss the issues with us and allow us the opportunity to help resolve them as quickly as possible through informal means. Only if this does not work do we proceed with a formal investigation.
Suppliers need a quick resolution to their problems and have little interest in long drawn-out investigations. Deputy ministers have dedicated senior liaison contacts with whom we have established good working relationships. This has enabled us to assist in resolving issues in an efficient and timely manner. We believe that our efforts are contributing to improving the relations between the government and its suppliers.
The third line of business is the provision of alternative dispute resolution services. Our independent ADR services level the playing field for suppliers who often had limited options of recourse in the past.
Suppliers have questioned the usefulness of dispute resolution services that are offered by the same department with which they are having a contractual dispute. Many suppliers cannot afford the cost or time associated with enforcing their rights through a formal court proceeding. Some suppliers have told our office that they choose to absorb the loss and make a conscious decision not to do business with the federal government in the future.
Our office has worked closely with the Department of Justice to establish our program, and I am pleased to report that we are now in a position to offer independent ADR services.
In closing, I would like to recognize the outstanding efforts of my staff in establishing the office and ensuring that the concerns of suppliers and procurement personnel are addressed in a timely, neutral, and professional manner. Now that the office is established, we can focus on our core operational work.
I can share with the committee that we are working on our next round of practice reviews. We expect to respond to an increasing number of contacts from stakeholders seeking our assistance both for resolving issues and for our ADR services.
Finally, we will continue with our outreach initiatives, which to date have produced excellent results.
We are here to improve fairness, openness, and transparency and to strengthen the confidence of Canadians in public procurement.
Again, thank you for inviting me here today. We welcome any questions the committee may have.
Madam Chair, that's a fascinating question. it really requires a little bit of explanation.
We have a business model which says essentially that we would work in collaboration with all the stakeholders: the suppliers and the procurement community. We would rather do things in a collaborative manner than through confrontation. The fact of the matter is that the regulations put out following our act have a very deeply prescribed, regulated, legalistic way of doing investigations. If we were to do all investigations this way, it would take us months.
When we consulted with suppliers, again and again people told us they had no interest in long drawn-out investigations. They do have a very deep interest in resolving the problems very quickly so that they can go out and manage their businesses.
When we talked to the public sector community and public procurement officers, it was the same thing. They have no time to spend on investigations. They would rather just say, “Tell us the problem and we can resolve it”.
So the business model we developed in collaboration with supplier communities was as follows. Look, we said, before you put in a formal complaint--because if you put in a formal complaint I have no choice but to do an investigation--can you give us 8 to 10 days to see if we can solve your problems?
In every case they have said that's a good idea. In every case they've come back to us and said, “Here's our issue, so can you do something about it?”. In every case we've gone back to the departments. We've phoned our liaison people. We've talked to the procurement community. In some cases--even last week I was doing this--I would go to the deputy ministers of various departments and say, “Do you really want us to do an investigation or can you help to resolve this matter?”
I can tell you that in 99.9% of the cases the matter has been resolved within two weeks. Everybody has gone on with their business and has been perfectly happy.
Remember: my objective in life is to strengthen the confidence of Canadians in public procurement. Every time you start a formal investigation, no matter what the result, there is a stigma attached. Every time you do a formal investigation there are people who are going to have to produce detailed records. Suppliers are not interested in that. Their main interest is to resolve the issue and that's what we do.
Madam Chair, I'll make an opening comment and then ask my colleague here to answer in detail.
The supplier community has expressed a lot of frustration with standing offers. It's not difficult to understand. For furniture, let's say you go from ninety suppliers to eight or ten suppliers. The question you to have to ask is, what happens to the rest? The answer we always get is, well, they should do joint ventures and come in, but it's not that simple. Why would anybody want to share their profits with somebody else?
These small suppliers are all across Canada. They have particular niches. They can do things very well in small areas, but they can't do it in all of the areas. When you do a consolidation and you do some bundling and you do a big contract, then the big guys can do most of it. The little things that these guys were doing they can do themselves, perhaps not as well, but they can do it.
We are really concerned about the unintended effects of this policy on the market. What are you doing to the small suppliers and how do we ensure that they get a fair share of their market? That's one issue.
The second issue we are concerned about is that in many of the standing offers we looked at the number one supplier has the right of first refusal. First, you go to number one, then you go to two, and then you go to three. Suppliers are telling us that in order to be two, three, and four, they always have to invest money to maintain capacity so they can respond.
In many contracts, especially IT or professional services contracts, they have a loose affiliation with subcontractors. The business goes to number one and he never says no, so all these people go up. These guys are investing money in maintaining capacity, but they have no business, right? The next time you come back for another standing offer they are going to say you should have done business so many times in the last five years. You couldn't have done that business, right?
So inadvertently.... I'm not saying this is deliberate at all, believe me. I think there are unintended effects going on that we would really like the government to look at. This is part of the usage data issue that you bring up. We're saying to look at the usage data, look at the call-ups, and look at what is happening in the marketplace before you plan the next standing offer.
I'll ask my colleague to respond.
Thank you. There are really two questions in this.
The first question is, if it's not in the public interest, why is there an ACAN? According to Treasury Board policy, the only time you should issue an ACAN is when you're willing to accept a challenge to that ACAN and you have another supplier who does that business.
But if there's an urgency and if it's not in the public interest, obviously you're not going to accept the challenge. The only time you should issue an ACAN is if, in your mind, there is only one person capable of doing the work, but you're not totally sure. But if there's an urgency and it's not in the public interest, then don't issue the ACAN.
This is the unintended effect. You issue the ACAN because you get higher authorities, so hey, let's issue it anyway. That's the first part.
At the end of the day, what do ACANs do? That is the issue to look at. As for what they do is, you start with the premise that there is only one supplier, but you are not completely sure. You go to the market and confirm that there's only one supplier, right? Just because you confirm that there's only one supplier, you're suddenly given additional authorities.
If you had started with the premise there's only one supplier for services and stayed with that, for most departments the authority would have been $200,000, but once you confirm that there's only one supplier, your authority goes to $2 million. So there's a built-in incentive to go the ACAN route. It's an unintended effect.
Thank you, Madam.