Office of the Procurement Ombudsman Response to ADR

Note to File
Office of the Procurement Ombudsman
Response to ADR – Research and Analysis Report

Background

In 2012, the Office of the Procurement Ombudsman (OPO) launched an independent, third-party Formative Evaluation to assess whether the Office had been implemented as intended. As part of the recommendations, the Formative Evaluation directed OPO to undertake the following:

  • Additional analysis should be undertaken to increase the extent of the use of Alternative Dispute Resolution (ADR) processes, such as making it compulsory for government departments to participate in an ADR process once it has been requested by a supplier.

To contextualize the recommendation, the Formative Evaluation further stated:

  • This investigation should examine whether departments should be able to decline participation in an ADR process once it has been requested by a supplier as this reduces the effectiveness of this method of resolving procurement disputes. In addition, it should examine the steps required to increase the awareness and use of ADR processes as this is a useful method to resolve disputes because it is less time consuming and costly than legal methods for small and medium sized business.

In response, OPO developed an action plan to address the recommendations of the Formative Evaluation. As part of the action plan, OPO sought the services of an external service provider to undertake analysis on increasing the use of OPO ADR services. The objective of the engagement was for OPO to obtain the results of research and analysis conducted that would serve to increase the use of ADR processes by the OPO, and to determine the feasibility of making OPO ADR services mandatory.

Findings of the ADR – Research and Analysis Report

The Report submitted by the consultant to the OPO provided: 1) suggestions to increase the use of OPO ADR services, and 2) a potential approach for making OPO ADR services mandatory.

1) Increasing the Use of OPO ADR Services

In the Report, the consultants made a "number of suggestions in order to increase the use of OPO ADR services by both suppliers and federal organizations". These can be summarized as:

  1. Establish a roster of approved mediators and arbitrators to ensure impartiality in the resolution of disputes and secure the trust of federal departments and suppliers alike.
  2. Establishing an oversight body in charge of setting up and maintaining the roster of mediators and arbitrators, and of monitoring the effectiveness of the process.
  3. Establishing a mediation/arbitration mechanism, whereby the dispute resolution can encompass a relatively simple two-step process.
  4. Limiting the time spent on mediations and arbitrations in order to save disputants time and resources. For example:
    1. Mediations: disputes involving claims under $100K are limited to three hours.
    2. Arbitrations:
      1. Disputes involving claims under $25K require written submissions of less than 20 pages. Arbitrations are not to be appealed.
      2. Disputes involving claims over $25K but under $100K require written submissions of 20 pages as well as a ½ day of oral submissions. Total time limit of two days.
      3. Disputes involving claims over $100K require full-fledge arbitrations.
  5. Implementing standard contracts including provisions that call for mandatory mediation and/or arbitration.
  6. Preparing standard agreements to govern the mediation and arbitration processes.

OPO Response 1

OPO has carefully considered the suggestions provided.

Regarding the suggestions about standard contracts (#5), OPO had already initiated activities to address this. More specifically, the Minister of Public Works and Government Services has signed a letter encouraging Cabinet colleagues to direct Deputy Ministers to include clauses on OPO services, including ADR services, in solicitation documents, regret letters and contract clauses. The letters were sent to Ministers on June 18, 2013. Standard contract clauses, which will be sent directly by the Procurement Ombudsman to Deputy Heads, include making OPO the mandatory dispute resolution service provider.

Regarding suggestions #1-4, OPO has decided not to move forward on these suggestions at this time. The suggestions focus on processes to expand our ADR offering of in-house facilitation services by establishing an external roster and approach to provide independent mediation and arbitration services. The resource requirement to establish such a roster and approach currently far exceeds any benefit likely to be derived, particularly given the low number of ADR requests OPO receives on an annual basis (approximately 3-5 per fiscal year). More importantly, our analysis indicates the limited use of OPO ADR services is not due to perceived issues of independence with our current offering of in-house facilitation services (as suggested by the consultants) but rather a lack of knowledge on the part of suppliers of the availability of this no-fee service. It is for this reason that OPO will continue to focus on outreach with suppliers, and ensuring suppliers and federal officials are aware of OPO’s ADR service. Should the number and types of ADR requests increase dramatically; the OPO will re-assess suggestions #1-4.

Regarding suggestion #6, OPO already has a standard agreement for facilitation services. Mediation and arbitration have not yet been requested from suppliers or departments and agencies. In an instance where such services are requested, the OPO will develop a standard agreement based on the existing template.

2) Making OPO ADR Services Mandatory

In the Report, the consultants provided a potential approach for making participation in OPO ADR services mandatory for a department when requested by a supplier. This can be summarized as follows:

The OPO should consider setting up a process similar to the British model (outlined in the report) that could lead the Minister to establish standardized and uniform ADR processes in procurement contracts or frameworks, including the option to have recourse to OPO ADR services. Such change could be made either through legislation, regulation or mandated standard operative procedures. This process could start with the OPO conducting a review of the adequate or satisfactory use of intra-departmental ADR by some of the principal federal departments that engage in it.

In doing so, the review could focus on which internal ADR processes, if any, have resulted in long delays and in major dissatisfaction on the part of some supplier. This would allow the Procurement Ombudsman to assess the fairness of the internal ADR processes. If there is a finding of a need to standardize and make uniform across the government ADR processes in the interests of "fairness, openness and transparency", then the Procurement Ombudsman could consult with the Minister [of Public Works and Government Services] to suggest following the British model. In particular, the Ombudsman could suggest the option to use OPO ADR services whenever suppliers express concerns in relation to the department’s practices for acquiring goods and services, which can be seen to include their ADR processes. This would allow the Minister to make the required changes, either through legislation, regulation or mandated standard operative procedures.

OPO Response 2

OPO has carefully considered the potential approach provided, and has decided not to pursue this approach for the following reasons:

  1. The Office has obtained a legal opinion stating conducting a procurement practice review of ADR processes would not fall within the mandate of the Procurement Ombudsman. In summary, the opinion indicated ADR is not a practice "for acquiring materiel and services" as stated in Section 22.1(3)(a) of the Public Works and Government Services Act. While the Report challenges the legal opinion, the Office would be open to criticism or a challenge in Federal Court on the appropriateness of undertaking a procurement practice review on ADR; a risk the Office is not prepared to take at this time.
  2. The suggestion to make OPO ADR services mandatory is premised on a potential finding of a practice review on ADR processes (i.e. "if there is a finding of a need to standardize and make uniform across the government ADR processes…"). OPO does not conduct practice reviews with a pre-determined outcome. Given suggested approach, and the fact that a finding of a practice review would be the "trigger" for the recommendation, conducting a neutral practice review (whether actual or perceived) on ADR processes would be difficult.
  3. OPO will pursue different approaches to try and increase the use of ADR services, and has developed a 12-point action plan in support of this objective. One of the actions is asking departments and agencies to include standard clauses in their contracts making OPO the service provider in instances where contractual disputes arise. Another action is OPO will initiate discussions with the Department of Justice (and other organizations as required) to try and find ways to increase the use OPO ADR services.
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