Government Operations Committee on May 27th, 2008

[The Chair, Liberal, Diane Marleau]

Seeing that we have quorum, I'm going to call the meeting to order.

As the members know, we have before us today the Procurement Ombudsman, Mr. Minto, from the Office of the Procurement Ombudsman. With him is his assistant, Oriana Trombetti.

Mr. Minto has been before committees previously. He knows the procedure very well. As a matter of fact, I've met him before.

We'll give you 10 minutes, whatever time you'd like, to make a presentation, and then we'll open it to questions.

[Shahid Minto, Procurement Ombudsman, Office of the Procurement Ombudsman]

Thank you, Madam.

Good morning, everyone.

Members of the committee, thank you for inviting me here today.

I welcome the opportunity to discuss the mandate and activities of the Office of the Procurement Ombudsman. My colleagues and I are grateful for the confidence shown in us and look forward to the challenges and opportunities that lie ahead.

As you've introduced, this is my colleague, the deputy ombudsman, Oriana Trombetti. Ms. Trombetti is a member of the bar of Ontario and has been working with the federal government for several years, primarily with the Department of Justice, in positions of increasing responsibility. Prior to joining our office she occupied the position of general counsel and associate head of Transport Canada's legal services.

Madam, perhaps the best way to start is by telling you a little bit about myself. I am a chartered accountant and a certified fraud examiner. I have a master's degree in political science and a professional degree in law. I worked for 28 years at the Office of the Auditor General of Canada, including 14 years as assistant auditor general. During that time I had the privilege of working with and learning from four auditors general, including the current Auditor General, Sheila Fraser. I was involved in the audits of some 25 government departments, agencies, and crown corporations, and in the preparation of more than 100 reports, many of them related to government procurement.

In July 2005 I accepted an executive interchange assignment with Public Works and Government Services Canada to set up the risk management function. As chief risk officer, I was a member of the executive committee and reported directly to the deputy minister. I was not involved in day-to-day operations, but I managed the department's risk management, ethics, fraud investigations, and internal disclosure programs until September 2007.

After competing in a nationally advertised selection process, I was appointed Procurement Ombudsman designate last September. On May 5 of this year, following the coming into force of the Procurement Ombudsman regulations, I was appointed the Procurement Ombudsman by an order in council.

As you know, the Federal Accountability Act envisaged the appointment of a Procurement Ombudsman who would operate at arm’s length from government departments to promote fairness, openness, and transparency in federal procurement processes. The office’s mandate, as spelled out in the act, is fourfold.

First is to conduct reviews of the procurement practices of departments and agencies and develop recommendations designed to strengthen the fairness, openness, and transparency of government procurement. We intend to do some benchmarking and to identify and report on procurement best practices and success stories. This is the proactive part of our mandate.

Second is to respond to complaints from Canadian suppliers related to contract award and contract administration. For complaints regarding the award of contracts, our mandate is limited to contracts worth up to $25,000 for goods and up to $100,000 for services. There are no dollar-value restrictions on our ability to address complaints about contract administration.

The office is also required to establish an alternative dispute resolution process. This should enable the government and suppliers to avoid costly litigation when disputes arise.

Finally, the Governor in Council or the Minister of Public Works and Government Services may direct the office to perform any other duties or functions related to the procurement practices of government departments.

The mandate provided for in the act is further articulated in the regulations. While our mandate covers the vast majority of departments, under section 3 we are precluded from conducting procurement practice reviews or investigating complaints regarding contract awards or contract administration in respect of the Canadian Security Intelligence Service or staff of the Senate and House of Commons.

Under section 2, the Procurement Ombudsman does not have the authority to review complaints or offer an alternative dispute resolution process for problems that arose prior to May 1, 2008, the day the regulations came into force.

And since our mandate is linked to the agreement on internal trade, we have no authority to deal with certain complaints about contract awards relating to specific types of contracts or entities excluded from the agreement.

During consultations on the development of the regulations, we were advised by government officials that our mandate does not extend to the procurement of accommodations through leasing, lease-purchase, or outright purchase. Since then we have become aware that the CITT, the Canadian International Trade Tribunal, is examining whether its jurisdiction extends to leasing. This determination will obviously have an impact on our mandate. We are also seeking independent legal advice on this issue.

The Procurement Ombudsman does not have the mandate to overturn or change any government decision. However, we can and we will make recommendations. In my view, this is not a weakness, but a source of strength. We will succeed only if we can convince our stakeholders that we are neither lobbyists for suppliers nor apologists for the government.

Ultimately, this means we have to gain the confidence and trust of both the supplier community and public servants involved in the procurement process. To do that, we need to be seen as independent, neutral, professional, knowledgeable, and a helpful office that responds quickly to supplier complaints and makes practical, doable, and affordable recommendations designed to strengthen the procurement practices of government departments.

Since my appointment last September, my colleagues and I have been working to create such an organization. I am pleased to report that we are now ready to carry out the full extent of our mandate. We have assembled a strong, multidisciplinary team with expertise in procurement, investigations, review, and communications. We have developed standards, practices, methodologies, criteria, benchmarks, and performance measures to ensure that our work is done with due care and rigour and will stand the test of public scrutiny.

We also intend to post the result of our work on our website so that suppliers and the procurement community can benefit from lessons learned.

My colleagues and I have also developed a business model and technology-based links that will enable full and easy access to our services by suppliers. Particular attention has been paid to ensure accessibility by small and medium-sized enterprises.

Government procurement rules are complex, and suppliers, especially small and medium-type enterprises, frequently do not know who to contact or how to proceed when a problem arises. They may not understand procurement and contracting jargon. In the worst case, they may not believe the explanation they receive from a department or agency due to a lack of trust. They may also be concerned that lodging a complaint will hurt their business down the road. These are issues that can and should be addressed through a proper complaint-handling process. Our philosophy is that suppliers have a right to complain when they believe something has not been done properly, and their complaint should be fully and independently investigated. Good complaint handling can transform and improve the procurement process, making it more transparent to Canadians.

Our intent is to create a strong quality assurance function to ensure that investigative and practice review reports and recommendations are based on sound factual evidence and meet the highest professional standards. Through these and other actions we hope to be seen as an independent, neutral, professional organization that will carry out full and impartial investigations.

To help lay the groundwork for good relations and gain the trust of stakeholders, we have met with about 25 deputy ministers to date, as well as with several representatives of the supplier community. We have also met with ombudsmen from the federal and other levels of government to learn about their operations and best practices. It is important that duplication and overlap with other procurement oversight bodies be avoided. To that end, we have held a number of meetings with officials of the Treasury Board Secretariat and the Office of the Auditor General, and we have consulted with the Canadian International Trade Tribunal. In addition to confirming that our roles and mandates are distinct but complementary, these meetings have enabled us to establish a solid basis for future business relationships with these organizations.

There is one last issue we would like to touch upon today, and it is a key one. How do we ensure that the Office of the Procurement Ombudsman operates, and is seen to operate, in an independent manner and at arm’s length from the government?

The government has already taken a number of steps to ensure the independence and viability of the office. As mentioned earlier, I was selected through a nationally advertised competitive process, and the appointment was made through an order in council. In addition, reasonable start-up and operational budgets have been provided. The Federal Accountability Act stipulates that the ombudsman will submit an annual report to the Minister of Public Works and Government Services, who in turn is required to table our report in Parliament within 15 days.

As required by the act and regulations, upon finalization, we will provide copies of our reports relating to procurement practice reviews and complaint investigations to the Minister of Public Works, as well as to the ministers of the relevant departments. However, we are not an officer of Parliament and we were not set up as a separate entity under the Financial Administration Act.

The Office of the Procurement Ombudsman receives its funding through a Public Works appropriation. As a result, the Deputy Minister of Public Works has accountabilities for the management of public funds, property, and human resources, and his role as chief accounting officer extends to the office. To ensure the independence needed by the office to carry out its operations, a memorandum of understanding has been signed by me and the Deputy Minister of Public Works and Government Services. This MOU clearly identifies and respects our distinct roles and responsibilities.

We have also taken additional steps to ensure our independence. For example, following discussions with the Department of Justice, we have made arrangements to acquire our own legal advice. We prepare and issue our own communication packages without pre-clearance from the government. We are also responsible for all our internal audits and our own risk management. All services provided to us under the terms of the MOU with Public Works will be at our request and will be on a fee basis.

Madam Chair, members of the committee, as you can see, this is a unique situation. While we have a great deal of flexibility on administrative matters and complete independence on program issues, we are a part of the executive branch. However, we are confident the provisions of the Federal Accountability Act and the procurement ombudsman regulations, supplemented by the MOU and the other measures I mentioned, will allow us the required independence while respecting other realities.

In closing, I'm greatly encouraged by the support we have received from the supplier community and by the fact that senior government officials, including those of Public Works, Justice, the Treasury Board Secretariat, and PCO, have demonstrated a lot of goodwill in providing strong support for the setting up of the office.

The task before us is challenging but not impossible. The Government of Canada, after all, does spend several billion dollars annually on goods and services and enters into approximately 400,000 contractual arrangements each year. My colleagues and I feel truly honoured and privileged to be part of this ongoing effort to help strengthen the confidence of Canadians in the fairness, openness, and transparency of government procurement.

We would welcome any questions the committee might have at this time. However, I should advise that our mandate is to implement the sections of the Federal Accountability Act and related regulations. We do not have a policy-making role. Therefore, we may not be able to answer questions about policy, about the development of the Federal Accountability Act, or the procurement ombudsman regulations. Aside from commenting on the operational aspects of the regulations, our office was not involved in any policy discussions, and consequently we cannot speak to them.

Thank you very much.

[The Chair, Liberal, Diane Marleau]

Thank you, Mr. Minto.

We'll go to Mr. Holland.

[Mark Holland, Liberal, Ajax—Pickering, ON]

Thank you very much, Madam Chair, and thank you very much, Mr. Minto, for appearing before us today. Congratulations on the work you've done so far.

I do think the work your office is undertaking is extremely important, but I do have some concerns. We know there are a number of companies that have dealings with the federal government that have concerns about procurement. Some of those have been shown to be quite valid. We know we have a lot of small and medium-sized businesses that are finding it very difficult to access the federal government and participate in the procurement process. They feel they're being left out. That comes to the point you identified towards the end of your presentation as being key, which is on the independence of your office. Certainly, I would have liked to see your position being one of an officer of Parliament, but unfortunately that's not the way it was set up.

My concern is that you're going to be operating under the minister. I understand there's a memorandum of understanding, but given the fact that you're under the minister and you're within Public Works, how do we get around the fact that a lot of people who have procurement concerns are going to look at this and say that the person they'd go to with complaints is in the same department they have concerns about? In other words, you're under the same minister as the department they're complaining about. How do we get around that? How can you assure people your independence will be in place?

[Shahid Minto]

Madam Chair, it's a question we've been obsessed with from day one, ever since September 10, when I was appointed. Our first task was to ask, how do we have not just the optics of being independent, but also be truly independent? If we are going to gain the trust of suppliers, they have to see us as being independent and we have to act in a manner that's independent.

Let me just correct one small thing. I do not report to the Deputy Minister of Public Works; I report to the Minister of Public Works and the deputy reports to the Minister of Public Works. And the Minister of Public Works has a unique responsibility in our system for the procurement of all goods and services across the government.

Now, the reality of life is that the money we receive does come through a Public Works appropriation—$5 million is about what we receive. Public Works does over $2.2 billion in appropriations. For practical purposes, it really did not make sense for us to have a totally separate vote on an appropriation. It didn't make sense for me to set up and use money for administrative purposes, to have a payroll section and an accounts payable section. I can use the services of Public Works, but we will use them at our request, at our discretion, and we will pay for each one of those services. So the administrative side is an issue. So the administrative side is an issue.

The second thing you have to remember as far as resources are concerned is that if you want to influence or control anybody's work, practically speaking, you have to control their resources. If you can control the resources and the budgets, you can do that.

The money we have received is in a special arrangement with Treasury Board. The Department of Public Works cannot access our funds; they cannot reduce our funds. We can't, and will never, go to the Department of Public Works to ask for money. If we need more money, we will go to Treasury Board. So there is a third party looking at the resources.

The MOU we signed with the Deputy Minister of Public Works states very clearly that it is the intention of the Federal Accountability Act that we operate at arm's length. It respects all of those things.

The critical things on which we wanted to have independence included the legal function, as we wanted to get our own legal advice. We did not want to go to the same people who were giving legal advice to the department on procurement.

We clearly wanted to have our own communications function. It may just so happen at some stage that one of our reports, or something, may be critical of the government. So we could not be in a situation where that report had to be pre-cleared by the government. We have made those arrangements.

And we'll do our own auditing.

So we have a great deal of flexibility on both the program side and....

Now, as far as reporting to the minister is concerned, let me just clarify that. The law states very clearly that there are points on which we have to interact with the minister. One, we have to give him our annual report. Then within 15 days he tables my report in Parliament. It's not his, with due respect to the minister.

The second issue here is that when we finish our complaint review and the report is finalized, we will send him a copy and we will send a copy to any other minister who is concerned. That's how it works. Similarly, if we do a practice review, when it's finished we will give a copy.

On a day-to-day basis, there is no interaction with the minister. We are fully and completely accountable in deciding what to do, where to do it, when to do it, and how to report it.

So I think that in the totality of things, given the reality that we are not an officer of Parliament, given the reality that we weren't set up as a separate organization under the Financial Administration Act, this is perhaps the best we could do.

[Mark Holland, Liberal, Ajax—Pickering, ON]

I appreciate that, and I understand that you're going to have limitations, given how the office was created, and that you have to work as best you can within those limitations. I think it is unfortunate that it was set up the way it was, because I think you're constantly going to have to be fighting that. I appreciate the answer you gave; I think it's very sincere, but it's something you're going to have a continual effort at, because I've already heard this; people are concerned that if they have concerns about Public Works and procurement, they have to go an individual who works under the auspices of that same department.

The other concern I have, and to which I could maybe turn for a second, is the recent revelation that there are certain areas that are going to be left out of your mandate, CSIS for one and Parliament for another. I think this was a development of great concern for a number of us, because there doesn't seem to be a great deal of logic behind it. For example, with CSIS, we could apply the same logic to the Department of National Defence. Why, if there are secrecy concerns with respect to these contracts, wouldn't those be equally present within the Department of National Defence?

I'm wondering if you can speak to those exemptions. Were you aware of them before they were recently revealed to us? What are your feelings about those limitations on your office?

[Shahid Minto]

Let me start by saying that the reason the exceptions are there is really a policy issue and not an issue on which we were consulted. The exceptions are not contained in the Federal Accountability Act, as debated in Parliament, but in the regulations that were made later.

[Mark Holland, Liberal, Ajax—Pickering, ON]

Just stop for a second. So you were not consulted at all on them. Was this a surprise to you, when you found out recently that these exemptions—

[Shahid Minto]

The regulations were put out for public debate; they were published somewhere in the middle of December. We commented on them strictly from how we would operationalize the regulations. A separate interdepartmental committee was set up to look at the policy and legal aspects. So we were not asked, and it was not our business to comment on the policy aspects.

You mentioned the DND stuff. What we intend to do for DND is ensure...the people who were handling these transactions in DND are public servants also, and the way DND protects itself is making sure they have the appropriate security clearances and the training.

[Mark Holland, Liberal, Ajax—Pickering, ON]

I appreciate that you don't want to comment on the policy aspect. You were able to comment on it when there was this process, but you weren't advised in advance of this decision.

My concern is that if you're going to have independence from the government, if you're going to have the opportunity to fully exercise your duties, is this not a first example of how the government is placing restrictions on your ability to do your job? I can't make any sense of this. Isn't this an opportunity to say that if you're going to be an independent officer, you need to be able to have a full rein here to be able to look into areas of concern and to be able to examine all elements of procurement?

[Shahid Minto]

Madam Chair, I think we have to clarify one thing. Our job is to implement the mandate. The development of the mandate was done by Parliament and on a delegated authority basis by the government officials. We were not part of the process of the development of the regulations, and people who were in charge made a policy decision at that time that because we had to implement the mandate, they wanted to keep it separate.

[Mark Holland, Liberal, Ajax—Pickering, ON]

This is my point around exemptions. As opposition parties I think we were concerned with these exemptions. We're obviously going to have to try to push to get those exemptions changed. I understand that puts you in a difficult position. The concern I have around the office is that it places it in Public Works, and then we get restrictions like this. Important work needs to be done, but the walls are closing in on you and eliminating your ability to examine certain areas.

[The Chair, Liberal, Diane Marleau]

Thank you, Mr. Holland.

Madame Bourgeois.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Thank you, Madam Chair.

Good morning, Mr. Minto. I am sorry that I am a bit late.

I read your CV and I noted with interest that you have occupied various positions, some of which were with the Auditor General. This is why I put my trust in you.

I would like to come back to some questions my colleague put to you, because I really want to understand your role. If I understood you correctly, your office was created pursuant to the Federal Accountability Act. You have not received a full mandate to audit all the procurements that come through Public Works.

Am I right?

[Shahid Minto]

Let me try to clarify two things.

We are not primarily set up as an audit office. We are not going to do audits. We reserve the right in some cases where things look really bad to either ask for an audit or even do one ourselves, but our mandate is to do procurement reviews, which are significantly different from the auditing mandate. The auditing mandate, of course, is with the Auditor General of Canada and with the internal audit departments. They have to provide assurance based on audit-based methodology. We will be using something slightly different.

Do we have the mandate to look at every contract? The mandate, you have to remember, is split into three or four sections. As far as practice reviews are concerned, where we think we will have the most value, where we think we will prevent problems from happening, we have a complete mandate to look at any transaction of any nature, any contract, any practice, in any department, except the ones that are specifically excluded.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Nevertheless, if I understand correctly, there is already a limit beyond which you cannot go. You were clearly told that you cannot review the procurement of accommodations through leasing, lease-purchase or outright purchase. This excludes two huge items right from the start.

Am I right?

[Shahid Minto]

The limits we have, and specifically the limit Mr. Holland was talking about, that CSIS is excluded and that Parliament is excluded.... When the Federal Accountability Act was passed, one section of the Federal Accountability Act allowed the government to develop regulations that could limit the departments we could go to.

The Federal Accountability Act that was discussed specifically had an amendment in it, under which they were allowed to define which departments we could go to and which we couldn't go to.

The second issue to remember is that the CITT already had amended where people could go with complaints on the larger contracts--anything over $100,000 for services, anything over $25,000 for goods. So our mandate was to fill the void that was there, fill a gap that was there that the CITT could not cover. The limitation on the dollars we can deal with are only for contract awards; they are not for complaints about contract administration. In the proactive part of our mandate, where we will do practice reviews, there is no limitation except for the departments that are excluded.

I have to come back and say these are policy matters. Why were they there? Who thought of them? What was the discussion? We were not part of that, and I can't really comment on that aspect.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

I do find this rather peculiar. You say that this is a political issue. Let me give you an example: $122,000 for drafting the 2007 budget. Normally, had you been in that position, would you have had to review the awarding of this contract?

[Shahid Minto]

We would have looked at the awarding if there was no dollar limitation on us. We would have looked at the awarding of the contract if somebody had complained to us. It is not automatic that the ombudsman would look at every contract. We would look at contracts in response to complaints.

One part is when somebody says, “I didn't get this contract; These people got it and there was something going on”. The second part is we would do this proactive review in all government departments. We may take a contract like that, or any other contract, and say, “It looks like there's a systemic problem here. If they can do something like this in one contract, you'd better go and see if it's because of a system problem, a lack of training, or if there is some interference somewhere.” And then we would go back and look at the systems and processes for that department to see what went wrong. But it's over our dollar limit. Our dollar limit for services is $100,000. This is $122,000, so the complaint would go to CITT.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

I find it difficult to understand the extent of your powers. I feel that I have before me—and I mean no offence—an ombudsman who has been told to deal only with small ordinary contracts and not with anything beyond a certain limit, because this category requires full powers. Besides, your budget comes from PWGSC.

On page 4 of your presentation, it says:

During consultations on the development of the regulations, we were advised by government officials that our mandate does not extend to the procurement of accommodations through leasing, lease-purchase or outright purchase.

This is important. Last year, we discussed lease assignments and leasing. These things are costly to taxpayers. We realize that the leasing will be more expensive for Treasury Board and for taxpayers than the cost of keeping our own buildings. Nonetheless, you do not have a mandate to look into that! This is really somewhat peculiar.

You say that you will try... In fact, on page 5 of your statement, it says, and I quote:

Ultimately, this means we have to gain the confidence and trust of both the supplier community and public servants involved in the procurement process.

This is not a joke! You have more or less power and you will try to gain their confidence. It might also be good to gain the confidence of parliamentarians.

I simply want a clear definition of your role. If your role is of no use, I want to hear it stated. If that is the case, perhaps the parliamentarians could eventually broaden your role.

[Shahid Minto]

Thank you, and thank you for raising this really very important question. It's a very important issue for our office, as to the limitations and extent of our mandate.

As a body that was created through an act of Parliament, let me say there are two kinds of ombudsmen. One, they are purely administrative appointments. They're appointed by either the minister or by a deputy minister through a policy declaration of that department. Second are the legislated ones.

My mandate is legislated, so it was discussed by Parliament. The regulations are made pursuant to the Federal Accountability Act, so it also has the same force as law. The mandate can't be changed readily, and it can't be interfered with once Parliament has approved it.

On the question of leases, when we had our discussions, and we were doing a consultation because we wanted to develop some systems and some processes of how we would deal with complaints relating to leases, we were told, and this is a really technical point, that the definition of procurement deals with the procurement of goods and services and construction contracts. Leases--the acquisition or procurement of accommodation through leases--were neither a good nor a service nor a construction contract, and therefore we had no jurisdiction over them. It was a technical definition.

Parts of our mandate mirror the mandate of the CITT. It's only recently that we have become aware that the same issue has gone to the CITT and they're considering the jurisdiction part. My understanding is that they will be providing a determination by about June 12, and we will follow that very closely because that will have an impact on us.

[The Chair, Liberal, Diane Marleau]

Merci beaucoup.

Mr. Kramp.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you, Madam Chair.

Welcome to both Mr. Minto and Mr. Trombetti. I don't think there's a parliamentarian in the House who doesn't welcome the opportunity to have these services of your office made available.

On a number of occasions we are all subject to concerns from either companies and/or citizens who don't feel they've had an opportunity to adequately either have their concern registered and/or have their request evaluated. As an example, I'm right beside the air transport capital of Canada, Trenton, and with the amount of appropriations and disbursements that go out of there, both the regular maintenance as well as capitalization, I've heard a number of concerns echoed and raised by both small and large....

I'm well aware, of course, that in the past we've had an avenue through the trade tribunal for our larger ones, whereas a lot of our small or medium enterprises didn't have this facility and/or the availability through which to echo their concerns, so I'm delighted to see this in place.

It is my understanding, obviously, that this is a role given to you--not given, but obviously earned by you and your staff--by Parliament. Is that correct? This is an act of Parliament.

[Shahid Minto]

The mandate was provided through the Federal Accountability Act and my appointment was through an order in council.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

The one thing I'm having a little bit of difficulty with--with the greatest respect to my colleagues across the table, and in particular the critic for Public Works--is that all of the regulations were posted for this in the Canada Gazette. There was ample time given--as a matter of fact, I understand that time was extended--for opportunities to comment or put in suggestions. I understand there were well in excess of 100 comments and suggestions for the designation and/or the purpose and the structure for this, including independent business associations, the Canadian Association of Defence...a multiple number of parties, and yet there didn't appear to be any deputation from our opposition across the floor with regard to the content.

Now we have a situation where they are not necessarily pleased with everything, but they didn't offer any comment on the original structure of that. Do you find that a little bit difficult to accept?