Public Accounts Committee on March 24th, 2009

[The Chair, Liberal, Shawn Murphy]

Thank you very much.

We're now going to start the second round, colleagues, and we're going to go to Ms. Crombie for five minutes.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Thank you, Mr. Chairman.

It's nice to see you again, Madam Auditor General.

I think my question is to Public Works and Government Services Canada. I apologize for missing the first part of the meeting, as I was called away.

I want to go back to the sole source suppliers and contractors, which are, by definition, awarded typically in specific areas. You've probably already discussed planning, design, renovation, restoration, architecture, engineering, and so on. I want to understand the process better and why it would not be in the public interest to solicit competitive bids in those specific areas.

[François Guimont]

I was simply going to start by saying that this is out of the regulations we have and the guidance we take from the Treasury Board. I don't want to start putting it on someone else, but those are essentially the parameters we're given to execute. This is not a policy set by the department. That's the point I want to make. I'll say that a priori.

I find that, frankly, sole source probably has its purpose. It's quite obvious from the guidance or parameters or regulations that have been set. You can see that this $25,000 threshold is pretty low, and it has been $25,000 for quite a few years. It goes back to 1982 or 1986; I forget. It has not been augmented. The point I'm making is that there is obviously a feeling that for anything above that, competition is important. People should have a fair shake to see and get the contract, yet you want to give some flexibility for smaller-value work so it can go more quickly.

It's the balance, Mr. Chair, between process and getting the outcome. That's the first point I would make.

The other parameters were probably simply set, again, to provide for some flexibility. If it is unique, if it's an emergency, you can sole-source. We have been given some flexibility--not only us, but the departments, because they have authorities as well--but the bar is high, because a priori, people want to be able to say that there has been a transparent, open, and fair process and that people had a chance to bid.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Is there a preferred supplier list, and how do you become a preferred supplier? Are these contracts ever sent out to open bid? Do the same contractors always bid? And finally, what makes you eligible to bid?

[François Guimont]

We have various procurement tools. We call them that. I don't want to bore you with the terminology, because it can be pretty technical, but you probably have heard of something called a standing offer. If it's a standing offer, if I just give you that as a for instance, it says so: standing offer.

So it's a group of companies. There was a pre-competition, so people were selected based on parameters and criteria. People put their names forward, the names of the companies, and they made the list for certain things--goods or services, for example. They also provided a list of prices, meaning that they have promised to give that good or that service at that amount of dollars. Normally we have a standing offer for a period of time, so it is static in time.

So you've made the list. It's a pre-competed instrument. For me, as a taxpayer and as an administrator of the public purse, I know that the value will be a fixed value for a period of time. Now, it may vary. It may be for three years or one year. We can have a price refresh if we feel that it's fair to do so.

When you are on the standing offer list, you do not have a contract with the government. You have been pre-selected. So that's good. You've made a list. And on behalf of Public Works or another department, another department can have access to the company for that purpose at that price. It's a quick, fair, transparent, and above-board way of getting an outcome or product, good, or service. I'm just giving you that as a for instance.

We have different instruments like this that exist. There are not a whole bunch, and it's always the same principle. Whether we call it a supply instrument, a standing offer, or a contract with task authorization, the principle is the same. What is the purpose and what are the selection criteria? A competition is run, people make the list, and then people can access the list for work to be done or goods to be obtained.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Okay. I have just a couple of more questions.

[Sheila Fraser]

Could I just add, Mr. Chair, that we have an exhibit in the audit report, exhibit 3.1, that outlines the various procurement approaches?

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Also, how much authority or decision-making ability would someone on contract have?

[François Guimont]

It varies, and there's no simple answer. Let me explain.

It varies between goods and services. As an example, going from memory, the delegation between our minister and the department for services is up to $2 million to that department, to that minister. That delegation to that department can be brought down. And it's the same thing for our minister. He has a right to sign for certain contracts, as an example, of up to $20 million for a contract. Above that threshold, he has to go to Treasury Board.

The highest instance for approval of contracts or sub-elements of a contract is the Treasury Board. The second highest element is the minister. After that, it's me, and it goes down. As you go down, the number goes down, and there's a point where it doesn't go down anymore. There's a level where, if you are not one of the 1,700 managers and you haven't been trained and certified, you cannot have a delegation, because you can't exercise contracting authorities under the Financial Administration Act.

That's the way it works, and the numbers vary. It's all prescribed, and certain things are fixed between the Treasury Board and the minister. And within the department, a minister can exercise a delegation down. The same thing applies to me; I can give a delegation, or I can withdraw a delegation.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Ms. Crombie.

Mr. Kramp, for five minutes.

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

Thank you, Mr. Chair.

Welcome to all.

I think we can honestly say that there should be some sincere thanks and gratitude to both levels of participants here. Obviously, at the urging of the Office of the Auditor General and with the adherence of Public Works and Government Services, it's a clear demonstration that government should work and can work. I appreciate the fair comments of my colleagues across the floor. Even though I sit on the government side, I can assure you that if this were a damning report, I would join the chorus of criticism as well. But congratulations to all.

There's not a lot here that I'm going to go on about, other than a few small points I would like a little bit of clarity on. Perhaps you could give some guidance on these.

If there is an occasional blip, when something isn't done right and it's either in error or in breach of a contract and the government hasn't been well served by it, how do you decide when and where to try to seek recompense from a person who has unduly taken advantage of the government? In other words, when do you get involved legally? Do you have a threshold on which you act if you've lost $25,000, for example, or if a contractor has not been in accordance with his contract, and you've overpaid by $100,000? Where do you try to get the money back, and what process do you use?

[François Guimont]

Thank you for the question. I will give a two-level answer.

The first and very direct one is that following the work we carry out, if an audit of the contract shows that the billing was done inaccurately, we will take action to recoup the money. That's just the way it is. If, for instance, we have paid a consultant for work done, which was asked for and was carried out and we're satisfied with it, but the authority for it was not very clear, we're not going to recoup that money. The work was done and value for the crown was obtained, but the vehicle or instrument was wrong. Then that's our problem and we'll try not to do it again.

When we need to recoup the money on the basis of over-billing or something that was wrong, we will do it. Obviously, if the work was done and things were done correctly, the legal advice we have is that we have no case to go back to it.

The other point I would make is in terms of the performance of companies. We do have a vendor performance policy. The vendor performance policy, which is publicly available, essentially guides us in terms of behaviour. In the same way as contractors are expecting a certain behaviour from public servants, and can expect it and can get it, we are also expecting certain behaviour from contractors, for two reasons: the protection of the crown's interest and, secondly, a level playing field. A contractor should be contracting and behaving correctly vis-à-vis the terms and conditions of a contract and deliver what it ought to be delivering. The vendor performance policy, therefore, allows us to take measures against the company if need be, based on the performance of that company vis-à-vis the contract.

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

And the threshold? Obviously you're not going to spend $100,000 in legal fees on a $10,000 contract. Or would you? I'm just wondering if there is some level.

[François Guimont]

No, not in the vendor performance policy. Frankly, I understand your point. The way we would look at it is on a one-off basis, but frankly, I would never diminish or ignore the value of also giving a signal. The quantum is important, but it's also to be understood, outside and inside, that situations that are not correct will not be ignored.

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

If you had an unscrupulous contractor and obviously had dealings that were not satisfactory, is that contractor eliminated from future bidding?

[François Guimont]

I will go back to the earlier point I made, Mr. Chairman, that the vendor performance policy allows us to take measures, including barring of a company for a period of time. It has been done in the past for certain contracting activities. It's not only about forbidding a company from operating; there can be other measures as well, but it can go as high as barring or preventing the company from operating for a period of time.

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

Thank you.

On another point, one of the things we've heard about every now and then, of course, is a contract changing in nature a number of times. Then, of course, the extras come in at a huge cost overrun. In cases like this--and obviously the contract amendments or the proactive disclosure would have to come out--what's the current state of the policy regarding proactive disclosure for contracts that have this kind of variance?

[François Guimont]

Thank you for the question.

This element has been picked up by the Auditor General, and rightly so. A new disclosure policy came out in 2004. Before that, we were disclosing against another policy. We were doing it, but no question about it, there was confusion in the department on the requirement to disclose task authorizations versus the full value of the contract. People knew they had to disclose the value of the contract above the threshold of $10,000. That was understood.

What was not clear in their minds was whether they had to, against that contract, disclose the task authorizations one after the other. Some people did. The majority did not. That's been clarified with the Treasury Board. We're now compliant with full disclosure of the task authorizations, the amendments, and the full value of the contract.

[The Chair, Liberal, Shawn Murphy]

Thank you, Monsieur Guimont.

I believe the Auditor General has a comment to make on that.

[Sheila Fraser]

Just to add to that point on contract amendments, it was interpreted, I think, under the policy that they did not have to be disclosed, and departments were not disclosing them. Subsequent to this, that has been changed and contract amendments are now being disclosed.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Kramp.

Monsieur Desnoyers, cinq minutes, s'il vous plaît.

[Luc Desnoyers, Bloc, Rivière-des-Mille-Îles, QC]

Thank you, Mr. Chairman.

Your report states:

In three cases, there was evidence indicating that the contractor who was awarded the contract had been involved in developing the search criteria and had written the statement of work for the contract. In one of the cases, the department used the services of a consultant to assist in developing the request for proposal while, at the same time, the consultant was subcontracted to the firm that bid on and was awarded the contract.

Do we know the value of that contract? Can you tell us that?

[Tedd Wood, Principal, Office of the Auditor General of Canada]

Mr. Chair, the second contract has an original value of $16 million.

[Luc Desnoyers, Bloc, Rivière-des-Mille-Îles, QC]

Were there any other contracts of that kind with high values? We're talking about three contracts.

[Sheila Fraser]

When we raised that case, the department did a search and review of all contracts to ensure that there were no other similar cases. Perhaps our deputy minister can talk about that.