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Standing Committee on Government Operations and Estimates



Tuesday, December 1, 2009

[Recorded by Electronic Apparatus]



    We have quorum. I call the meeting to order.
    It's 3:30 and we have to start our meeting so that we can get through this very important issue of procurement.
    Welcome to Mr. Minto, Madam Trombetti, and Madam Brisebois.
     Today the committee is going to be listening to the procurement processes and issues around the procurement process.
    Do you have opening remarks, Mr. Minto?
    We will have opening remarks and then start with the rounds of questions.
    Mr. Minto, the floor is yours.
    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.
    Thank you, Mr. Minto. We'll go to the first round of questions.
    We'll have Ms. Hall Findlay for eight minutes.
    Thank you, Madam Chair.
    Thank you very much, everyone, for being here.
    In an earlier life, I used to do a fair bit of work for a number of companies that would bid on government contracts, both here and in different provinces, and in particular in the United States. We were all very struck by the significant difference between the transparency of procurement processes in the United States and the transparency we have here. I note that a fair bit of your report talks about the work in alleviating concerns, especially among people who have lost bids or who have not won bids.
    Pardon my ignorance about the role of the office, but if you're the ones who are hearing these complaints and are having to deal with this lack of transparency, are you in a position to recommend changes? Have you looked at comparative processes in the United States?
    As an example--I pull this off the top of my head--the State of Washington publishes responses to RFPs. The content of them is actually disclosed. I know that here in Canada it's much more protected and they are kept confidential, but there's a real air of disclosure in the United States.
    Do you look at those as comparisons? Are you recommending that we have a greater level of transparency? I open it up because I remain very struck by the difference in our approach here compared to what I've seen in the United States.
    Thank you, Madam Chair.
    Let me just start by explaining that the mandate given to our office is a very progressive mandate. Let me start by saying that. It's quite different from an audit mandate. We are not auditors who go in after the transaction and come back and report deficiencies.
     Our mandate really is to strengthen the system and we are very proactive that way. The practice review part of our mandate really is the preventive part. We go in and try to analyze and resolve problems before they become big issues.
    The questions you have raised, each one of them, are of great interest to us. This year we did five practice reviews.
     Let me give you the example of supplier debriefings, which is part of our annual report. We were struck by the fact that while everybody agrees that the debriefings for suppliers on why they won or did not win a contract are very good and benefit both the suppliers and the government, there was a great deal of frustration on both sides.
    Suppliers weren't getting information they thought would be of any use to them. In many cases, they weren't even aware that they could get a debriefing. On the other hand, government people, when we talked to them, agreed that it was a good idea, but they had been advised that anything they said could and would be used against them in a court of law.
    I read that in your report and in the larger report. My question wasn't so much about the people involved in the government in terms of procurement being able to feel freer to disclose information, or about the suppliers not even knowing about the process. My question is a larger one. I think those two problems relate to a fundamental lack of transparency in the RFP process.
    I actually wanted to ask another question about the events, contracts, and award notices, so I don't want to belabour this. I just want to know whether you are looking at some of these other practices that seem to me to be much more transparent and more effective.


    Let me close just by saying that yes, we are, and we have done some research on a number of topics that we think would be of interest to the government. We've already given them the results for one of those. We compared standing offers to order practices in the U.S. We have two or three research projects on the books right now and we hope to have the information.
    Thank you.
    On the advance contract award notices, there is a significant concern--and I guess this also comes from my experience--about establishing the opportunity for a sole-source contract, because a supplier, the one heading it, is in effect the only supplier capable of meeting the specs.
    The first thing that comes up is whether the specs have been written specifically for a single supplier. We know that that happens a lot. Even just recently, in the Royal LePage relocation contract--I don't know if you were involved in that at all--that allegation was made. We also know that it happens a lot.
    What are you doing to address that particular challenge? Because I, for one, think that's a very important challenge to government transparency and its procurement approach.
     Madam Chair, if I may say so, not just in ACANs, but in every facet of government procurement, it is the duty of the government to ensure that a fair and transparent process happens.
    Now, how are we doing that? Every report that we're doing looks at fairness. Fairness is procedural fairness. They have a responsibility to ensure the specs are not wide, so it's not just fairness in the contract award process, but in pre-contract award. We are looking at—
    Oh, absolutely, it's in establishing the specifications themselves.
    Yes. That's where you would....
    On the ACAN process, you noticed that one of the issues we've raised with everybody here is that there's a lack of documentation in the files for anybody to get any firm conclusions if the ACAN was really necessary. Should you have invoked one of those section 6 exceptions to get to an ACAN? Then the decision is not supported by good documentation.
    Let me just say that this is not a new issue. For 30 years, almost any audited report that I've read has raised exactly that issue with government procurement: a lack of documentation.
    It sort of begs the question: if it keeps getting raised, are we doing much to actually address it?
    What we did this year was try to find out why it is happening. There were two explanations we got this year. One was resource constraints. People said they didn't have enough time to do the transaction and asked, “Where do we find the time to do the file?”
    The second one was on the issue of technology. As you know, with the use of technology, information management is raising a whole series of new issues. How do we translate that into the paper file? How do we do this stuff? People need some training in this, but there's no time to give them training because everybody's doing transactions.
    But with respect, neither of those answers the question about really making sure that specifications aren't tailored in order to give preference to certain bidders. You're right when you say it's not just the ACAN. It would be any procurement process. On the ACAN, I think, because that's a specific heading, only one supplier can meet it.
     But on those concerns about resources, I don't know that it actually answers the question, really, in the sense that it's an approach rather than “gee, we don't have enough people to do it” or the technology is not the right one. I just want to know that there's a process that's trying to improve that concern.
    I think the processes are as Parliament has set out. There's the CITT that people go to and complain if they become aware of this stuff. There are the judicial reviews. There's our office that has now been established where we can do this stuff.
     I agree with you completely: the fact that somebody has resource constraints.... We would never accept that a constraint should override the basic fundamental principle of procurement. We don't accept that.
    Now, for the smaller contracts, for which we have the authority to do investigations, we are doing them, but this is our first year. Actually, we've been in business for six months and we're very proud of what we've done in six months. Give us some time. We take note of what you're saying.
     I have the same issues. My issues are no different.
    I understand. I appreciate that very much.
    Thank you.
    Thank you very much.
    We'll go to Madam Bourgeois.


    Thank you, Madam Chair.
    Mr. Minto, ladies, good afternoon. I thank you for being here with us today.
    As you can see, I have apprised myself of your report which I find extremely interesting. According to what I read, the position you occupy was created “by amendments to the Department of Public Works and Government Services Act, enacted pursuant to the Federal Accountability Act [...]”. That initiative was taken by the current Conservative government in the wake of the sponsorship scandal.
    I would like to know, Mr. Minto, to whom you report.



    Madam Chair, I don't know if the position was created solely in response to the sponsorship issue, but I think it was created because almost everybody agreed that procurement, which in itself is supposed to be a means to an end to help government departments achieve their program objectives and the government achieve its operational objectives, was really becoming an impediment to that, and almost everybody agreed that there was an independent focal point needed to help.
    Now, who am I accountable to? It's an interesting question. In our own minds, I think we have three major stakeholders that we are accountable to. We are responsible to the minister, in the sense that I am part of the portfolio of the Minister of Public Works. I present my annual report to the Minister of Public Works and within 15 days he tables that in Parliament. That's the law. So the responsibility is there.
    In terms of accountability, we have suppliers and supplier associations, we have procurement officers in senior management departments, we have Canadians, through their elected representatives, and we have this committee in particular. We look to this committee to give us some sense of direction and we'll take note of their positions and your concerns. So really, we are accountable to a number of stakeholders.


    Your office has been fully operational since May 2008. In your report you say that you received some 200 complaints, 110 of which concerned the awarding or administration of contracts. If these calculations are accurate, 71 complaints concerned the awarding of contracts and 39 related to the administration of contracts.
    You add that “[...] complaints dealing with procurement issues constitute our core activity and are vital to the task of improving federal government procurement.” You also say this: “We are pleased to report that the team [...] has had to initiate only one formal investigation.”
    If you received 110 complaints but only carried out a single formal investigation, that means that according to you, the procurement process has no failings. I don't want to offend you, but one might wonder about the relevance of your office, since you only investigated one complaint. For my part I have a lot of trouble believing that as of May 2008, only one complaint was well grounded and that this reflects the current situation.


    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.



    Mr. Minto, if I understand correctly, you are a negotiator between the party offering the contract and the one who must execute it, that is the services supplier. I have no problem with the fact that you are the negotiator, insofar as that produces results.
    If I understand correctly, all contracts valued at less than $25,000 or $100,000 involve small and medium businesses. So your job is to negotiate between small and medium enterprises and Public Works and Government Services in certain cases. Moreover, according to your report, you have a right of oversight over four points. If they are not correctly executed by Public Works and Government Services, that is not your problem.
    So, are you are telling us that you do the work of Public Works and Government Services to the extent that you negotiate with small and medium enterprises to ensure that they really trust the government?


     You're not giving him time to answer.
    Ms. Diane Bourgeois: Merci. Je veux que ça soit clair.
    Thank you.
    Let me just clarify two issues. First, I don't negotiate. We facilitate. It's not a negotiating process at all. We do facilitate, though. Second, I am not the Public Works ombudsman. I'm the ombudsman for procurement of the federal government and I have a government-wide mandate. I don't report to the Public Works deputy minister; I report to the Minister of Public Works. So I think there's a nuance and a difference here.
    The important thing is that the departments have shown a lot of goodwill and a willingness to resolve the issues. In many cases when we have brought something to the attention of senior management, they've been surprised that there was even an issue there.
     What are the issues? For example, somebody phones us and says they were supposed to get their cheque 60 days ago, but they haven't got their payment yet, and what happened? We phone the department and they say they were doing a system change and something happened. The payment may be only $30,000 or $40,000—sometimes there are a lot of zeros behind the cheques in this town—and it's not a lot of money to a procurement officer, but to the supplier that may be all the money he makes this year, so we help speed up the process.
    As questions come along, you'll be able to clarify.
    Mr. Holder, for eight minutes.
    Thank you, Madam Chair.
    I'd like to thank our guest for being here today.
    I must say that it is exceptionally refreshing to hear your kind of commentary. From what I've heard you say, Mr. Minto--you and your colleagues--this collaborative and collegial approach is one that I think we could all take lessons in, both at committee and in the House, and also in much of the administration of government. It's certainly something that I would encourage all of us to listen to and hear loud and clear. I salute you and I honour the whole thoughtful approach you take. I think it's terrific.
    So please, let me say firstly, that I give my compliments to you, your colleagues, and all of your staff. I think what you've done in a fairly short period of time is very significant. I hope it becomes a model for how all of us pay attention to how government should work at all levels. Again, I give you my sincere compliments, and I quite mean that.
    There are a couple of things I want to clarify in my mind and I have some other questions as well. I know that Madam Bourgeois made a very important comment about one formal investigation thus far. You're going to have complaints and concerns expressed. You say that you don't negotiate, but that you facilitate. Can you talk more about your alternative dispute resolution system and how you deal with that, please?


    Madam Chair, let me just start by saying thank you for the kind words. It's the staff who do the work. We'll pass the message back to them. I'm sure it will be very encouraging to everybody.
    I'm going to ask Madam Trombetti to answer your question.
    Your question raises comments on two areas of our business line. We have an inquiries and investigations line that receives the complaints. This is where we act informally. We facilitate. We try to work with departments, demystify the process for suppliers, and ultimately resolve issues for suppliers.
    For the second line that you mention, the ADR line of business, our regulations are quite prescriptive in that we can provide ADR services where the interpretation of the terms and conditions of a contract are at issue. We are ready now to provide these services to suppliers. ADR services can be requested either by the supplier or by a government department.
     Right now we're offering three services to suppliers and government departments: a facilitation process, a mediation process, or a neutral evaluation process. So far, the uptake has been on the facilitation process. It is offered by the staff of our office.
    May I ask you on that, please, how many times have you had that intervention? Do you have those numbers?
    Yes: four times. In recent weeks we've seen an increase in the number of requests for ADR. We have made a concerted effort since September to go out to departments and supplier associations to make them aware of the service, so we expect that this line of business will grow.
     I heard a member opposite express a concern about what she felt was the fundamental lack of transparency in the procurement process.
    Mr. Minto, is that your experience? What would your review of that be?
    I think what I heard from people was a concern being expressed that there were some transactions in which there was a fundamental lack of that. That's no secret. I think if you look at the Auditor General's reports, at internal audit reports, and at other reviews that have been done over the years, transparency certainly has been an issue of concern.
     How do you improve transparency? How do you get to transparency? One of the ways you get to transparency is to have a well-documented file so that anybody coming in to look at that file can see how the decisions were made, if there was any interference, and how the evaluations were done. The lack of good documentation really raises questions about transparency, questions that are sometimes unnecessary, but it does raise them.
     I'm sure all members around this table were delighted to hear that your officials have received all documents and information requested from government. You said that in your formal comments. I think that is just fabulous and I know that they would all want to compliment all levels of government for doing that.
    But here's a more pointed question. You're relatively new. I think we would all agree that the approach you take is positive, refreshing, and important, but for people who have a concern, how would they know to come to you?
    Madam Chair, I'm relatively new, but I have 30 years of experience in the procurement business, with 28 years at the AG's office and a couple of years at Public Works. So I think I knew where to go and that's one of the reasons why we got off to a good start this year.
    How do people know? We've established what I think is an outstanding outreach program and communications program. We have a website, a 1-800 number, and a very easy form to fill out on our website if people have a complaint. We have some performance standards. We try to get back to people within 24 hours of them calling us. We try to provide a more substantive answer within 48 hours. Usually within 10 to 12 days we have resolved the matter at hand.
    One thing that does happen is that you get a lot of complaints in one area. For example, this year we were getting a lot of contacts from suppliers and supplier debriefings. We no longer think of it as a one-off; we think of it as a systemic problem and we move it to our practice reviews. We really feel that practice reviews are where we get the biggest bang for the buck, because that's where we go in and try in a proactive mode to prevent problems before they become big issues.


    I noted that your office was created in December, 2006. If people had a concern with respect to procurement or any concerns about the whole process, what was the process they followed before you existed?
    On the complaints side, I think people went back to the department they had a complaint about. That was the process. There was no independent forum, other than CITT, for the awarding of contracts. CITT, if you recall, has no mandate relating to contract administration. They look at the awarding of contracts.
    But the government is signing some very long-term contracts. You buy a submarine and get a 20-year maintenance contract, or you buy a computer system and get a 10-year contract with it. Over the life of these contracts, differences come up. That's where we add value. People come to us, whereas before they had no independent place to go.
    So as the new kid in school, as the interloper, as it were, how well have you been received by departments since you now have effectively usurped their role, especially in the area that's probably most sensitive, which is where somebody has a complaint? That's probably when I'm the most cranky, and if I'm a department, I might well be the most defensive. How do you believe you've been received?
    That's a food question.
    Let me just say that when we were created, the background for when we came in was that it was following the sponsorship era. The procurement community had taken a huge beating.
     Let me be up front about it. Morale was pretty bad. Initially when we went into departments, people were thinking of us as another policeman on the block. That's where we had to establish their trust and that's why it was so critical. We had to explain to them that we weren't there for public hangings. Our real job was to be part of the solution.
     We understood the problem. We had really knowledgeable professionals with us who understood procurement. Our issue was really how to make this better. I think the deputy ministers really embraced the notion. For everybody, procurement, which is a means to an end, had become a roadblock in good program delivery.
    I have to tell you that initially we had a lot of awkward questions from the people working there. Everybody thought it was their job to ensure fairness and they asked, “What are you doing in this business?” That has changed considerably. The supplier community was very, very supportive.
    Thank you.
    Mr. Martin, for eight minutes.
    Thank you, Chair.
    It's very nice to see you again, Mr. Minto.
    Let me begin by saying I can't imagine a person better qualified to take this role. I read in your CV that not only are you a chartered accountant, but you have a master's degree in political science and a law degree—those three together.
     I also note that much of your career was spent in the Office of the Auditor General, a truly independent officer of Parliament, and you operated within that framework. There's nothing independent about your job now in that you report to the Minister of Public Works. While I appreciate and accept the value of your ombudsman role, do you not find this limiting?
    Let me ask you a direct question. When Public Works looks at your office's reports, what comment do they have? Do they accept it at face value or do they bargain with you and negotiate with you as to what should and what should not go into your reports?
    Madam Chair, Mr. Martin can add to my experience that I've appeared before parliamentary committees, including his, many times, and it was a learning experience.
    Let me say that the one thing I learned at the AG's office is that in order to have credibility you need to have independence. When we started this office, that's where we started from. When I was interviewed for the job, that was my number one issue with the government: how will I get independence?
    The government has taken a number of steps to go that route. Let me explain. I was appointed through an order in council. I'm not an administrative ombudsman. I'm a legislative ombudsman. My mandate comes through an act of Parliament so nobody can change my mandate. If they don't like what I'm doing, they can't change it. It has to come back to Parliament.
    My budget, although included in the appropriations of the Department of Public Works, is really protected by Treasury Board. Public Works cannot change my budget. I do not report to the deputy minister at Public Works. He and I, equally, report to the Minister of Public Works.
    Let me explain what that reporting to the Minister of Public Works means in practice. What that has meant this year is that at the end of this year, once our report was finalized, we gave him our report and we explained to him what was in it. He tabled it in Parliament and that was the end of it.


    That's good for me to know. We have seen the problems that the Parliamentary Budget Officer is having with the independence of his office. There are subtle ways and overt ways to manipulate or pressure an office that's not truly independent, whether its budgetary or otherwise, so you can understand why we would ask this question, Mr. Minto.
    Given my limited time, though, I'll move on. One of the comments you made in your report to us today, on page 4, was, “Nothing bothers me more than hearing that a supplier has given up on dealing with the government because of the perceived inefficiencies and perceived lack of fairness in the system”.
    But let me tell you, Mr. Minto, we have heard suppliers as recently as a month ago say that very thing to us: that they've simply thrown their hands up in the air and have given up. They're fed up because they think it's a stacked deck. It's like some ring toss on a carnival midway; it's rigged against them.
    That frustrates me no end, too, because a lot of people in this town.... I'm more frustrated on behalf of the smaller operators who may come to you when that contract for $40,000 or $50,000 represents all they've managed to earn this year. Ottawa's full of people like that. Of the 350 or so people that have come to your office since you've been open, how many are telling you this? Is this something you have heard? Have you heard that people are ready to give up on bidding on government work?
    Yes, we've heard that. We've heard it in regional discussions with suppliers and we've heard it from supplier associations. You have to keep in mind that in our business every time a contract is awarded there is one winner, and there may be four losers, and the four losers are going to be unhappy. Some of them are going to be very unhappy, because times are tough.
    So the perceptions of the suppliers are not always well founded. For example, when we were looking at the question of debriefings, suppliers said many times that they didn't get a good enough debriefing. But when you investigate it, you often find that what they were really looking for was not why they didn't get the contract, but why somebody else did, and this couldn't be shared with them. So I think you have to temper the reports of suppliers with general experience.
    That's fair enough. There's a decent amount of sour grapes, but some of those people that came to you were angry that $1.7 billion went to ACANs, which means that they were sole-sourced, right? I mean, there weren't four bidders on those jobs; there was one sole-source person.
    A lot of those are in the immediate Ottawa area. The $25,000 to $100,000 jobs often go to people right in our backyard, and they seem to be going to a privileged few who are identified as pre-qualified or whatever you call it. Anyway, they're on the list and they don't have to go to any competition at all.
    I don't blame those people for being frustrated and angry when they watch $1.7 billion worth of work go to people who, I presume, are well connected. They're not necessarily well connected politically, just well connected with the people who are awarding the contracts.
    ACANs have been a subject of concern to all parliamentary committees for a long time. The Auditor General has written three or four chapters on it, I believe. I really think it's time to rethink that policy.
     There's no question that you increase transparency when you give public notice that you're awarding a contract to a particular person. But simply the fact that you've gone out and done a market test that confirms there is only one supplier doesn't make it automatic--
    It doesn't mean you're right. It doesn't mean you're correct.
    I'm just saying that maybe we should think about that. We've talked to Treasury Board and we've talked to people at Public Works about a rethink.
     When you look at the application of that policy, there are things that really bother us. For example, we've found files where people would put out a contract in ACAN for 15 days, but before those 15 days were up, they were negotiating with their preferred supplier. Now, what is the message you're sending out to the rest of the community?
    Let's suppose there is a challenge that is successful. What you've done is that you've violated the fundamental principle that all suppliers would have the same information at the same time.


    That's right. It's a good point.
    Right? You're already negotiating with somebody who has inside information.
    As a development of that, I'll come back to the earlier question of people giving up. Yes, they find it frustrating. You have somebody you want to go to, they say, and they don't have a chance. Why should they bother? It costs them money.
    You can have a very brief question, Mr. Martin.
    Thank you very much. Did you say I can have one?
    Actually, you can't. We got into this and your time is up.
    Perhaps I could just close with a comment, though. I think it's worth noting for the committee that it is a recommendation, both verbally and in writing, that we revisit this ACAN process, not only the application of it but the policy itself, as well as the application. It may be the root of our problems for the small suppliers who have been frustrated and coming to us.
    That's fair enough. Thank you.
    We'll go to the next round of questions.
    Madam Foote, for five minutes.
     Thank you to our witnesses for appearing here today. We really appreciate having you here.
    I want to speak to the mandatory standing offers to purchase common goods and services. I read through your presentation here and listened to you speak. You said that in your view “achieving operational efficiencies is important but It is also incumbent upon the government to ensure suppliers rights' to access government business”.
    You also said, “One of the most significant observations relates to the usage 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”. From my perspective it's pretty damning to say that 30% of the usage data could not be reconciled with any active standing offers.
    Then you go on to say, “Suppliers are required to submit regular reports on the contracts against their standing offers”. However, as you point out, “These reports are not being used by the government”.
    There are two points there that I'd like to have you address.
    You say, “This reporting requirement puts what appears to be an unnecessary burden on suppliers and results in extra costs”. You say, “The use of mandatory standing offers continues to attract a lot of concern from the supplier community” and you intend to continue the examination of this subject in future reviews.
    The fact that you've made this observation.... From my perspective, these are two serious issues. I'd like to know what it is you intend to continue to examine and whether or not you actually have any teeth to deal with this issue.
    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.


    I'd just like to add that it is very important to have the usage report, to have the history of the usage of the standing offer, as well as the forecast for future years, in order to actually assess whether the standing offer is an efficient method of supply and whether it is worthwhile to renew or extend the standing offer. So by not having accurate or reliable information, or by not using reports that suppliers are using, we're just questioning how well the department can make the decision in assessing the standing offer, this method of supply.
    Thank you.
    Monsieur Nadeau, pour cinq minutes, s'il vous plaît.


    Thank you very much, Madam Chair.
     Ladies, Mr. Minto, good afternoon to you.
    I would like to ask you some questions about the $25,000 and $100,000 contracts. If I understand correctly, a contract of less than $25,000 does not necessarily have to be advertised publicly, and may be negotiated directly between the public servant responsible for a file and the suppliers. Is that an accurate picture of the situation?


    I think there are exceptions provided to the fundamental principles of competition. For contracts under $25,000, that's one of the exceptions. You can invoke an exception, but I would just add that it's not automatic. You need to have a reason to go to this contractor and you need to have documentation to support why you went to this one and not somebody else.


    Very well. So that is the case also for construction contracts of less than $100,000?


    That's for services.


    I am the member for the Gatineau riding, where a debate is ongoing concerning goods and services contracts in the region. We know that the City of Ottawa obtains about 98% of contracts and that the City of Gatineau gets about 2%. So we feel that there is unfairness in that regard. I am talking here about contracts awarded on the basis of merit.
    However, in order for small and medium businesses in Gatineau to have a better awareness of opportunities, must they know who the public servants who review the files are, or is the normal process to simply make an offer in reply to a call for tenders from the federal government?


    One of the things we're looking at for the next year is the whole regime around the rules for contracts under $25,000. One of the things we'd like to explore is how those possibilities are publicized, so that everybody has a chance to know they exist. Perhaps MERX can do something on that for contracts under $25,000. We haven't gotten to that work yet.
    The honest answer to your question, sir, is that I really have not done enough work to give you a proper answer on that. Perhaps the people at Public Works would be in a much better position than I would be. We haven't done enough work to give you a full answer on this.


    I'm going to tell you about something. At a certain point, in a federal building on the Gatineau side, the Office of Small and Medium Enterprises was moved from the sixth floor to the ground floor to attempt to find a solution to this inequity. I think that more needs to be done than simply moving an office. I don't want to present a caricature the situation, or play on words.
    I met with people from the Gatineau Chamber of Commerce and they want to know about the opportunities. On the one hand, there is the matter of obtaining the contracts. On the other hand, when a contract is not awarded to a company—and here I am still talking about small and medium businesses that make up the vast majority of businesses—how can the information process be improved? Businesses see that they don't obtain contracts but they don't know why and sometimes the situation is repeated in other cases.
    What could you suggest in this regard, Mr. Minto, to see to it that our small and medium enterprises do not get discouraged before the vast apparatus that constitutes the federal government?



    Madam Chair, we consider SMEs to be a very important constituent for us and one of our objectives is to find ways to assist them.
     We are not lobbyists for SMEs. Let me just begin by saying that. Our job is not to get them business. Our job is to level the playing field. I think most SMEs don't want to be given handouts or business just like that, but they want a level playing field so they can compete. We are not apologists for the government, but we're not lobbyists for SMEs.
    There are two things that I would say. One is to try the Office of Small and Medium Enterprises, OSME. Their job is to facilitate and to make it easier for SMEs to get business. That is their mandate. Their main mandate is to help small businesses get more business. That's not my mandate, because then I would become a lobbyist for them. I have to be in a neutral position.
    The second thing is that if you look at our chapter on debriefings, that was the heart of what we were trying to say. Please tell people why they haven't got those contracts. Explain to them how they can do better next time.
    The reason we were given was that “we'll get sued if we do that”. What we asked was why we didn't just create a safe zone, explain to people that you can talk within these rules, and that's the end of it.
    Thank you.
    Mr. Warkentin, for five minutes.
    Thank you, Madam Chair.
    Mr. Minto, I appreciate your coming to our committee today. We appreciate the work you do.
    One of the things I have often been concerned about is the structure of RFPs, and I'm wondering if you could tell our committee if businesses of any size are concerned about this.
    At one point, we heard from a group of people who were bringing forward what they thought was an innovative product. They felt it was leading edge. They felt it was something the government could utilize. However, when they went to seek the RFP that would have been the entrance for their particular product, they found that the RFP was so prescriptive that it didn't allow them to even bid.
    Do you find that people complain about that? Do you find that is a concern of businesses?
    We've had people come to talk to us about the complexity of the RFPs. We've had people say they didn't really understand the requirements. We've had people tell us that there are too many mandatories in it. We've had them asking why we need all these mandatory requirements just for the RFP and saying that maybe they could be rated requirements other than mandatories.
    One of the projects we have on our books for next year is to look at the whole procurement strategy, and that procurement strategy includes the requirements for an RFP. We have people working on that now. I'll be in a much better position to give you some additional information when they finish the report.
    I'd appreciate that. I'd be interested to hear if you find that there is as much concern as there was in this one company, especially as it relates to the high-tech sector. This person I am speaking of actually had what they felt was an innovative product. It was something that would have revolutionized the systems that governments use. What they found was that the RFP was very prescriptive for what they felt was an antiquated system. They felt they were being cut out from being a leader of innovation within the government.
    I know you're not rules-based and that you are actually fairness-based. That may give you the latitude to consider this as you move forward. I would just be interested to hear about it as you proceed to look at that, and I know you will.
    We'll take note of your concerns and the issues you've raised. We'll put them into our planning hopper and see what we can do.
    In terms of reviewing files, you spoke about the fact that a well-documented file is a file that's good for you, and I can understand that. In my own office, I know, I have certain staff members who are excellent at taking notes as they relate to case files, and I have those who are not so good at note-taking. However, at the end of the day, I keep them both around because they both are good at what they do and they get the job done.
    In the case where you find there are not adequate notes or sufficient notes, are there other types of interviews or different mechanisms that you're able to undertake to evaluate whether an appropriate process has taken place, or do you depend on or will you continue to require departments to take better notes?


     I really think that “better notes” is trivializing the issue, with due respect, sir.
    With due respect, sir, good records help the government defend a contract against challenges. Many cases have gone to CITT, and review backs this. There wasn't an audit trail. There wasn't a trail of how you got to this decision. You could not demonstrate fairness in front of a court without a good file. We're not looking at petty little documents. We are not looking at tons of documents. We're looking at essential documents.
    Poor documentation raises questions about the integrity of the process and raises questions about patronage, and many times totally unnecessary questions about patronage.
     This is taxpayers' money. What people do in their own businesses is their business, and that sort of thing, but this is taxpayers' money.
    Remember: public servants move. They go. They retire. They go to another job. They do something else. The file remains. The next person coming in may not have a clue about what happened, so we have to demonstrate that we have used taxpayers' money wisely and fairly.
    I appreciate that. It sounds like an issue that we at this committee maybe should consider.
    Is it department by department where this needs to be enforced, or is there an overall policy that departments have to adhere to and that they're not adhering to? What is exactly the case here? I guess it depends on what type of documentation you're looking for.
    Madam Chair—
    I'm sorry, but your time is up. You were asking so many questions and I had forgotten how wonderful it was to ask questions. Sorry.
    Thank you, Madam Chair.
    Go ahead.
    Madam Chair, the documentation we're talking about relates to the procurement process.
    Now, there are more than enough rules on the books that require procurement processes. Please, nobody come out with any more rules; there are lots and lots of rules. Plus, all the trade agreements, the rulings, and the courts have all made it very clear.
    We tried to do two things with our annual report this year.
     First, we put out some good practices. Some departments have some really good practices relating to procurement and we put them out so that others who may not have those practices can benefit from them.
    Second, we put out some recommendations, but the recommendations we are making are not just to the departments we looked at. We're hoping that the recommendations we make will be used by everybody else, by those we didn't even look at, who will say, “Hey, does this make sense to me or not?”
    The accountability for good documentation, just like accountability for running a department, rests with the deputy minister. We've spoken to most of the people around the block and I think they accept what we are saying.
    Really, the question you have to come back to is this: are there enough resources to do the job and what is the most important part of the job they want to get done?
    Thank you.
    Madam Hall Findlay, you're going to be magnanimous and give your time to me. Is that what you're saying?
    Well, I did notice that you seemed to have some curiosity, so I would be more than happy to donate my time to the chair.
    Thank you.
    I'm just following through on what Mr. Holder asked you about alternative dispute resolution. You said that in the six months you've done one investigation and four ADRs. How many issues have you resolved informally?
    I would have to go back and say probably more than 150.
    I think the question around the table, in listening to everybody, is that the sole-sourcing under $25,000 is a critical issue. You've stated that a person has to write down the reason for sole-sourcing, but who goes in and audits that reason? Who goes and spot-checks the reason?
    I have been in the procurement business in government and I know it's the comfort zone of utilizing that person, so how do we go about ensuring fairness? Because the small and medium-sized enterprises that are creators of jobs need that. How do you justify that $25,000?
    You just told Mr. Warkentin that you wanted no more rules and regulations. How do we go about making it more efficient?


    The bottom line is really that these are the issues that are not resolved through additional regulation. These are issues that are resolved when you have a culture that says we have to be accountable for our actions and ethical considerations are just as important as legal considerations in procurement.
    But in your report you stated that there are times when the departments themselves lack the competencies. So they go to PWGSC and say, “Do 20% of the contracts valued up to $14 billion”. So there is that lack of competency, but they may be risk-averse in the department. They are probably very risk-averse, and as Mr. Martin put it, it's who you know.
     So if I've dealt with you as a contractor and I'm comfortable that you will not let me down and you will deliver it, then I will not choose somebody else. How do you get that mindset changed, the mindset of a bureaucracy that has been doing it for 35 years without anybody...? The Auditor General has been complaining about this as well. How do we do that?
    I started by saying, Madam Chair, that almost every audit report has drawn attention to this stuff. From an audit perspective, I think it is largely incumbent on internal audits and on the Office of the Auditor General doing audits. I don't do audits. I do reviews--
    So the internal audits...?
    But we do take note of your issue here. We are going to see what we can do with our plans for future years to see how we could contribute.
    Should the Comptroller General be the person who would be reviewing departments, not the Auditor General? Because she does a lot of other work. The Comptroller General has been there in part to ensure that internal regulations are complied with. We don't need more regulations. Can we call on the Comptroller General, who is the chief internal auditor, to have a look at this?
    My understanding is that all internal audits are supposed to be done based on a risk-based plan. What are the risks to the organization? If they identify procurement under $25,000 as a high-risk area, they should be doing internal audits in that area.
    How risk-averse are the departments and the procurement officers in the departments?
    I'm trying very hard not to give government-wide opinions. We've only been in business six months. I really don't want to go back to my previous experience and start giving opinions.
    In the departments we visited this year, if you look at each one of our reports, there is some issue of being risk-averse. Nobody wants to do briefings or they'll be sued. Well, sorry, but your discomfort can't override the supplier's right to know. I think it's this balance that we have to find somewhere.
    You've been here six months. Are there any other governments that have procurement ombudsmen? Is there a process by which a peer review could be done in the long term?
    Madam Chair, that's one of the first questions we asked. I'm not aware of any jurisdiction that has a procurement ombudsman within the private sector or in government--not in the provinces, not in Australia.
    Everybody has ombudsmen. For example, in Ontario there is one ombudsman who looks after everything.
    But this is a very specialized thing. It came out of a specialized situation.
    What we have done is set up a program evaluation framework. That was one of the first things we did. We said that at the end of three years we will do a program evaluation of what we do. If we find that we are not adding value, then we should take our money and put it elsewhere in the procurement process.
    That's fair enough. Thank you.
    We'll go to Mr. Gourde for five minutes.


    Thank you very much Madam Chair. I would like to congratulate Mr. Minto and all of his team. I think that your office was set up in December 2006 and we are now in December 2009. So the office has been in existence for some three years now.
    Do you have enough resources to do all of the work expected of you or would you like to have additional resources?


    Thank you, Madam Chair. Just for the record, I was appointed ombudsman designate in September 2007. I know the act was passed in 2006, but there was no ombudsman at first. I was only appointed as a designate.
    Then the regulations were prepared and it was in May 2008 that I became the ombudsman. Really, what that meant was that I and a summer student or two were trying to find paper, accommodation, and books, and setting up rules. It wasn't until September of last year that we began operations, just for the record.
    On the subject of funding, my view is that we have been provided a reasonable budget to do what we're doing. The one part of our business for which we have not asked for funding and for which none was provided initially is alternative dispute resolution, because nothing had been set up. We have that set up. We'll see how that goes. If that business expands a lot, we can always go back and ask for more money.
    I think the operation has to be not just effective but also affordable. I'm very conscious of that. The system has to be able to absorb that. I'm not unhappy. I think a reasonable budget has been provided.



    Thank you. You adopted a business model that is based on cooperation and not confrontation. Why did you make that decision?


    If you recall, I said that we were set up at a time when the procurement community was totally demoralized. They had been the subject of hearing after hearing, with headlines in the newspapers. A deluge of new rules had been sent out by the centre to respond to this crisis. The number of transactions had improved tremendously, but the resources had not improved.
    On the other side, we met with the supplier communities. They were being faced with these consolidation buys, standing offers, and new arrangements that they thought were threatening their businesses.
    It was in that atmosphere that we had to create an office that everybody could respect and deal with and that could share their concerns. We had to create this trust. It was on that basis that we went with this collaboration model.
    Let me say that it has worked quite well. We've had absolutely no problems. But on the other hand, please rest assured that if we do have problems, there's no problem in changing our approach. We'll do anything that needs to be done to implement your mandate.


    If Government of Canada suppliers call you to point to problems relating to the awarding of certain contracts, how does that work? They talk to you, you talk to the people from the department and you call back the suppliers to give them advice?


    First, we made it very easy for the suppliers to get to us. We have electronic ways for them to get hold of us, but we always advise them to go to the department first. If they cannot resolve their issue with the department, they can come back to see us, and we'll see what we can do. That's how it works.
     Then we ask them to please not put in a formal complaint yet, because that takes me into a very legalistic procedure and we ask if we can just help them resolve their issue. Almost every time, they say, “Yes, that's the way we'd like to get it done.”
    Then we use our contacts in the departments. We go to the departments and explain to them exactly what is happening and what they've overlooked if they are at fault. It's not that the department is always wrong. Many times the issue is not with the department; it's at the other end.
    That's how it works. People have been very appreciative of this approach and it seems to be working fine.


    Ms. Bourgeois, you have five minutes.
    Thank you, Madam Chair.
    Mr. Minto, I want to come back to the question I asked you in the beginning concerning small and medium businesses and the role of your office.
    I listened to your answers. You are an ombudsman, but mostly a negotiator, a facilitator. You try to see to it that small and medium businesses don't get too mad at the government and you see to it that they can do business with the government. Moreover, you also try to see to it that Public Works not be seen in too bad a light in the awarding and administration of contracts.
    Personally, this bothers me a great deal. You have had some 110 complaints that draw my attention. Those 110 complaints were from small and medium businesses that were not satisfied with the awarding and administration of contracts. That's pretty peculiar.
    You say that in your report you specified, and this was heard on CBC news, all of the difficulties that small and medium businesses face. Of course, there is a trust issue, but there is also the problem that derives from the fact that Public Works staff is not able to answer them, to inform them, or to award and manage contracts properly. You must admit that this is a somewhat unusual situation.
    What do you think of this? As ombudsman, are you going to spend your time negotiating and facilitating the work?



    Let me go back to a very important issue. Unlike other ombudsmen, we are not dealing with personal grievances. We are dealing with commercial transactions. Two parties have either signed, or are about to sign, a commercial contract, and that contract gives both parties rights and obligations. I am not going to be a lobbyist or an apologist for either party.
     My role is to be neutral and come across as a neutral person. My job is not to make Public Works less daunting to anybody or get more business for any SME. My job is to make sure the playing field is level and the procurement process is done in a fair, open, and transparent manner, and whatever it takes to get the job done, we will get that done.
    You talk about not getting enough debriefings. We have a chapter in here that came out of the concerns that the small and medium enterprises expressed to us again and again that they were not getting the debriefings.
    The big companies really don't care about debriefings, to be honest with you. They have enough lawyers and they have experts in the field? It's the small guys who need guidance and who need somebody to help.
    On your assertion that Public Works cannot manage contracts, I'm sorry, but I'm not there yet. I think there are a lot of very dedicated public servants in Public Works and other government departments working very hard under very difficult circumstances to produce the results they're producing.
    I think one of the things they would really like from this committee is some appreciation of the effort these public servants do put in. There are so many transactions now and so few people, and they've come through such a tough time. But I think that's one of the things the committee would perhaps get to hear from get into systemic issues. And hey, let's show some respect for the work these people are doing, because they are trying hard.


    Let's move on to another topic. As concerns the Advanced Contract Award Notifications, in order to enter into a contract without soliciting bids, there are four exceptions possible.
    You list the exceptions in your report: pressing emergency; estimated contract value under specified dollar thresholds; not in the public interest to solicit bids—I would like you to explain to me when a bid solicitation would not serve the public interest—and only one supplier capable of performing the contract.
    Your office is almost exclusively focused on the fourth exception in its report, but according to a report from Public Works and Government Services, only 7% of the Advanced Contract Award Notifications lead to the submission of a statement of capabilities by the business, and only half of those are accepted.
    Ms. Bourgeois—
    So how can you explain that there are only 7%? Is that a way for the government to give preference to certain companies, according to you? Can you explain under what circumstances bid solicitation would not serve the public interest?
    Ms. Bourgeois, please wrap up.
    This is very technical.


    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.


     Thank you.
    Mr. Martin for five minutes.
    Thank you.
    That's more or less where I wanted to go, Mr. Minto. In rereading your presentation carefully, I was kind of shocked to see that there's what could be a massive loophole that gives the government the right to give sole-source contracts up to the $2 million level, not up to the $100,000 level, by deeming them ACANs.
    Let me see if I understand you correctly. The advance contract award notices are deemed to have been competitive. In other words, the competition has been satisfied by doing a market survey or by a presupposition that there's only one person out there who can do the job. But that gives carte blanche to the government to give away contracts as high as $2 million, without any competition, to a preferred contractor. Do I understand that correctly?
     Madam Chair, yes, that is what we're concerned.... You see, sole-source contracts or directed contracts are considered high risk in principle, and the risk mitigation strategy that the government has is that it gives lower levels of authority to government officials. You have to go to Treasury Board or senior management to get approvals.
    Now, just because you've gone to the market.... And you've improved transparency, no question about it, but confirmed is only one supplier. You know, your authorities go up....
    Let me just apologize for a minute for not explaining that in addition to the annual report, we've produced five detailed reports. I would really recommend you, sir, to look at them, because in the case of Public Works, for goods, the authority goes from $2 million to $40 million.
    What? Under an ACAN?
    Under an ACAN, because ACAN is considered to be exactly the same as electronic bidding. There's nothing wrong with the deeming provision, by the way. The Income Tax Act has deeming provisions, too, but your authorities shoot up.
    Authority goes up to, I'm sorry, $40 million...?
    But also, on your labour market survey or the market survey that is mandatory, you say that the 15-day minimum has in fact become the maximum, in your experience.
    That's right.
    Even with a 15-day survey to see if there's anyone else qualified, sometimes the preferred contractor has begun the process of negotiations even within that truncated 15 days.
    What that says to me is that the system's out of control.
    What it says to me that we have to look at the application of the tools, because, really, something is wrong in the way the thing is working out.
    Mr. Martin, keep in mind that between fully competitive and ACANs, you do have limited tendering. Limited tendering is when you go out and invite three or more proposals. When you do that, your limits are much lower than what an ACAN limit is now. So you leapfrog the limited tendering rules, and you've gone into full competitive authorities.
    You see, this ACAN thing, I think, has flown under the radar, because most of us thought we were dealing with contracts of $100,000 or less. There was some concern, but you're telling me now that you can have contracts of $2 million to $40 million—


    That's Public Works' authority. But if you're doing the limited tendering or the traditional tendering, it would be $10 million. If you go out, do a market test, and do ACAN, it can be $40 million—
    Now we have very big contracts given away, then, on sole-source situations under a very flimsy survey to see if.... So how do we know we're getting the best possible value if we don't have a fair competition and three or more contractors bidding on it?
    Madam Chair, if I may answer that last question, I don't think you should assume automatically that every ACAN is a bad contract. I don't think you should assume automatically that just because you're going the ACAN route, there is something wrong with the transaction. But I think you've given up a very important risk mitigation strategy--
    --and did you really intend to do that?
    Only a few short years after the sponsorship fiasco, we've put in place a situation where that kind of abuse could still go on—in that case it was advertising contractors—with a preferred bunch of contractors. If nothing else, I think you've done us a great service by bringing this to our attention today in your otherwise comprehensive report.
    Madam Chair, I don't think this was done just after the sponsorship thing. I think these rules have been there for a while. They have been in place for many years, even before sponsorship.
    I'm only pointing out that this vulnerability still exists.
    To me, it does.
    You have about 20 seconds. Do you have any questions?
    Yes, I do.
    You point out that you believe this dilutes risk mitigation strategies and may encourage unintended behaviour. What is the unintended behaviour?
    “Unintended behaviour” refers to issuing an ACAN where no ACAN was necessary. For example, you know that it's not in the public interest to have a second bid, but you issue an ACAN and your authority goes up. Really, you should have never done that in the first place. You should have called it a sole-source contract and stayed within the limits assigned to you.
    I couldn't agree with you more.
    Mr. Anders.
    Mr. Minto, what would you say were some of the biggest surprises you've had in your job? Do you have any interesting observations you'd like to share with us?
     I was really struck by the number of people within the procurement community who are working so hard in such a difficult environment. There's just a plethora of rules out there and some of them contradict each other.
     They see themselves as being in a glass bowl. They see themselves as being held accountable for transactions that have gone wrong and that may or may not be their fault. Yet they're surviving and they're doing their best to provide service to the public. I was struck by that.
    I was struck by the suppliers' sincerity in trying to find a level playing field. Nobody came and asked us to tilt things in his favour. Nobody asked for an unfair advantage. Everybody said they wanted an open chance to compete. I was really struck by that.
     I was also struck by the unintended effects of some of the policies that are based on administrative convenience. I'm talking about standing offers and what happens there. Yes, there are not enough resources, and yes, it makes sense to consolidate purchases for some things, but does it make sense for everything?
    I was struck by the unintended effects in the market. I really am looking for some recognition for the public servants who are working hard and who are really trying to do a good job, especially in the procurement community. I think that lately they have been provided leadership, and lately people have been thinking of training. I looked at some of the training plans, and everybody's plan shows four or five days of training, but nobody gets more than a day or two simply because there are just too many transactions.
    In the years that I've been involved in procurement, the thing that most impresses me is how much technology has changed the business, how much easier it is now for suppliers to get to know about procurements through MERX and the websites the government maintains, and how much easier it is for a small procurement officer in a remote community to access a specialist sitting in Ottawa and get some advice. That's really helpful.
    That's a decent answer.
     What would you say is the most interesting acquisition that you've had to deal with? Was there a file that took you by surprise? Was there something that you thought was unusual in a government acquisition?
    Are you talking about recent experiences? I'm not going to go back to what I saw at the AG's office.
    No. Just tell us about whatever you think was interesting.
    I'd have to say the most interesting things are the things that you least expect. Recently we looked at a situation in which somebody had asked for a change-management expert with 35 years' experience. How could that possibly help?
    I remember looking at one file some time ago where there were 3,600 mandatory requirements. My God: 3,600 mandatory requirements. That is designed to keep people out rather than bring people in. Who's going to monitor that? That was fixed.
     It's little things that take you by surprise. The vast majority of the government contracts go through with no problems. The vast majority of the government contracts happen without any issues. That's the thing I want to come back to.
    Mistakes are going to happen. People in general—and this committee in particular—have to stop beating people up. That's what creates the risk-averse environment. We have to look at systemic issues. Individual mistakes will happen.
     I have a chapter on CORCAN in my annual report. There was a significant error. Mistakes happen. But as soon as we brought it to the attention of management, they did everything necessary to fix it and we all moved on.
     Some risk tolerance would help. You cannot afford an error-free, risk-free environment. It can never happen. Let's just accept that we are human beings and that people are doing their best. That's what I'd like to say.


    Thank you.
    Ms. Hall Findlay for five minutes.
    A couple of times you've mentioned you'd like to see some recognition of the hard work that public servants do. There have been a number of times in this committee when we've asked questions of people in different departments. I think that sometimes we try to acknowledge the hard work of people who work in the civil service, but sometimes we don't do it enough, so I appreciate your reminding us of that need.
    We have also another job, though, and that is making sure that the government spends its money effectively. Can I ask you a couple of questions about your budget? We have the statement of operations from the year ending March 31, 2009. I want to make sure I'm connecting the dots. This is an office that now has 22—
    There are 24 people.
    Can you tell me what your budget is for this fiscal year? I know we have the numbers somewhere, but your statement of operations in the fiscal year ending March 2009 has operations totalling $3,222,000. Can you tell me where you are now for the year ending in 2010?
    Let me start by saying that in that budget you looked at, everybody realized that we were going to have a stump period; it was not a complete year by the time I was appointed and everybody else came in. So the budget was $3.2 million for that stump period; they knew that we'd only be working for part of the year. The budget for this year, this—
    Excuse me. Could I just ask something? I'm a bit confused. You said you started in May of 2008.
    But we didn't get our people hired until September or October, so there was no point in having a lot of money that we weren't going to spend.
    So what is your budget now that you're up and running?
    It's $4.1 million.
    Is that for year?
    That's right.
    Do you expect to increase staff?
    We'll vary between 24 and 28, somewhere in that range, depending on the nature of the work we're doing. In some cases, we may bring in specialists for short terms. I think we're at a comfortable place now.
    One of the line items shows a payment to the B.C. ombudsman for a case management system. What is that?
    We wanted a system that would track complaints: when a complaint comes in, how many days it takes us to resolve the complaint, how long it takes us to do a practice review, and how long it takes us to do an ADR. We wanted to come back to you next year with some definite performance numbers. This was going to be a business system.
     When we went to the private sector, we were told that it would cost between $750,000 to $1 million to develop a system. I happened to know that the ombudsman of British Columbia had a similar system, so I went out to see them and they agreed to sell it to us for $50,000.


    I note that the 2010 budget for the Parliamentary Budget Office is half of yours, at $2.1 million. I say that because it happens to be a personal concern of mine. It's not a reflection on your office.
    No, but could I just--
    It's a reflection on our view of the importance of that office, too, and I'm just noting the differences.
    Could I make a clarification that you may want to check into? For us, in order to maintain our independence, we insisted that Public Works do the processing of our day-to-day financial payments.
    Yes, I see that total.
    But we pay them. It's not done for free. We want to be independent of them. It's on a cost recovery basis. We pay them for that. So to make comparisons with other offices, other ombudsman offices, you have to make sure that we're comparing apples with apples. We pay for our accommodation and admin costs.
    That's a fair point.
    I'm just curious. I see that you have finance for $67,000; HR, $137,000; and information technology, $209,000. So for your office, even though it was a stump period to set up and run, over $200,000 in IT for an office that only has 22 or 24 people seems like a very big number. Am I...?
    Actually, it's not a lot where IT costs are concerned, but you have to remember that speed at which you're set up is where you get a lot of set-up costs. We had to get new wiring done. We had to buy all our equipment new. The government does this on a cash basis, of course, so all our initial purchases of equipment are reflected here.
    Having been in business for many years, I think that seems like a very large--
    Well, for 24 people you get 24 computers. You're not going to buy them every year, but you do have to get them in one year.
    Thank you.
    We will have a last question because the bells will start ringing at 5:15.
    Mr. Holder.
    Thank you very much.
    Again, thank you to our guests.
    I'm just noting that set-up of $200,000 for IT costs. I trust the procurement process was fair; I can only imagine that was the case.
    Voices: Oh, oh!
    Mr. Ed Holder: When I think about 24 computers and the systems associated with that, I'm sure it was done appropriately.
    Mr. Minto, you said a couple of times that you hoped this committee would express sincere appreciation to the public servants for the work they do. I'd like to compliment Ms. Hall Findlay for saying it, and I think I certainly speak for other members around this table when I say that they're the unsung heroes.
    We're the ones who get the profile—sometimes good, sometimes bad--but particularly with respect to the procurement process, please take that back to your folks. Perhaps it's not always said, but it's certainly understood that there's great respect for the work they do. I need to share that with all of you.
    I have a question. You seem like an accountant with personality, which is kind of interesting--
    An hon. member: Coincidence.
    An hon. member: Excuse me?
     Well, no. That would suggest there are at least two in the room like that and it strikes me that--
    Some hon. members: Oh, oh!
    Mr. Ed Holder: This is a tough committee, sir.
    On a more serious level, have you felt any interference from Public Works or any other department in terms of your ability to do your job?
    Let me say this, holding nothing back: absolutely not. Let me also say that that our view is that we wouldn't put up with any. Our other view is that I am being paid and my staff are being paid to influence the government and we want to make sure we influence them in a positive way.
    We are also being paid to make sure we don't let them influence us in any way at all, and that has not happened. We have worked with complete independence and we've had total respect for our mandate.
    Madam Chair, I'm very sensitive to the timeframe, so I'll simply end by again expressing to witnesses our appreciation for the work they do.
     I think the testimony you provided today was honourable, forthright, and helpful to this committee.
    Thanks to all of you.
    Thank you very much.
    Do you have any closing remarks?
    We're very encouraged by what we've heard today. I'm taking this as an endorsement of the way we do business. I'll pass that message back to the troops and I'm sure they'll be appreciative.
    Thank you so much.
    Don't leave your chairs, members. I just need to do some committee business and let the committee know that on Thursday we have the Treasury Board estimates. The minister will be here for the first hour.
    In the second hour we were going to review the draft report, but we haven't received the information we wanted from Infrastructure Canada. We want to be fair in putting in the dollars that were spent and we have some conflicting reports regarding schedule H, so we are requesting that Mr. Forster help us out so we can finish the report.
    So if anybody has any problems, with Mr. Forster, the deputy minister of Infrastructure, coming for the second hour, we're going to ask him to clarify some things, and we can then finish the report.
    Also, we'll have to vote on supplementary estimates for Treasury Board, PWGSC, and PCO, so come prepared for that.
    Are there any questions?
    Thank you very much.
    The meeting is adjourned.
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