Government Operations Committee on Dec. 1st, 2009

[The Chair, Liberal, Yasmin Ratansi]

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?

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

I do, Madam Chair.

[The Chair, Liberal, Yasmin Ratansi]

We will have opening remarks and then start with the rounds of questions.

Mr. Minto, the floor is yours.

[Shahid Minto]

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.

[The Chair, Liberal, Yasmin Ratansi]

Thank you, Mr. Minto. We'll go to the first round of questions.

We'll have Ms. Hall Findlay for eight minutes.

[Martha Hall Findlay, Liberal, Willowdale, ON]

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.

[Shahid Minto]

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.

[Martha Hall Findlay, Liberal, Willowdale, ON]

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.

[Shahid Minto]

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.

[Martha Hall Findlay, Liberal, Willowdale, ON]

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.

[Shahid Minto]

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—

[Martha Hall Findlay, Liberal, Willowdale, ON]

Oh, absolutely, it's in establishing the specifications themselves.

[Shahid Minto]

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.

[Martha Hall Findlay, Liberal, Willowdale, ON]

It sort of begs the question: if it keeps getting raised, are we doing much to actually address it?

[Shahid Minto]

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.

[Martha Hall Findlay, Liberal, Willowdale, ON]

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.

[Shahid Minto]

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.

[Martha Hall Findlay, Liberal, Willowdale, ON]

I understand. I appreciate that very much.

Thank you.

[The Chair, Liberal, Yasmin Ratansi]

Thank you very much.

We'll go to Madam Bourgeois.

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

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.

[Shahid Minto]

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.

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

Fine.

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.

[Shahid Minto]

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.

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

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?

[The Chair, Liberal, Yasmin Ratansi]

You're not giving him time to answer.