Opening Statement to the Standing Committee on Government Operations and Estimates

Ottawa, Ontario - December 1, 2009

Madam Chair, Members of the Committee, thank you for inviting me to be here today and for the continued interest that you have shown in the work of my office. This Committee played a leading role in the design of our mandate and I consider this Committee to be of the upmost importance in reviewing our work as well as providing guidance. All of this, of course, with a view to ensuring that we achieve our ultimate objective of strengthening the 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^th, 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 arms 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 good will and professional courtesies shown by all deputy heads. In particular, I'd like to thank the Deputy Minister of Public Works and Government Services Canada and senior officials of Treasury Board Secretariat who have shown a lot of personal interest to ensure the independence and effectiveness of my office.

We presented our annual report to the Minister of Public Works and Government Services on June 23^rd and it was subsequently tabled in Parliament, after the summer recess, on September 28^th.

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 "did you follow the rules" and much more about" did you do the right thing". Procurement decisions should always take into account ethical considerations. The real question is not just what minimum actions do government officials have to take to meet a narrowly defined policy requirement, but how those actions ensure the principles of fairness, openness and transparency are upheld.

Our approach has resulted in the building of strong relationships and networks based on trust and mutual respect with both suppliers and government officials. We believe that this is because we have emphasized and demonstrated from the beginning our knowledge, professionalism and neutrality. 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 services. 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 mainly 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 has adopted a risk-averse stance, cannot override suppliers' rights to receive information. A safe zone for procurement personnel should be identified so that 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. During the three year period covered by our review, ACANs accounted for approximately $1.7 billion of government expenditures.

An ACAN is a tool that was created in the early 1990's to increase transparency by publicly announcing that the government intends to award a contract to a pre-identified supplier – 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 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 not actually willing to entertain other proposals.

Pursuant to TB policy, an ACAN process is deemed to be competitive and, as such, procurement personnel can award the contract using the same level of contracting authority as if there has been 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 20 fold increase. We believe this process dilutes risk mitigations 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 is time to re-examine the application of the policy.

PWGSC 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 suppliers rights to access government business.

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. This undermines PWGSC's 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 their 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 very 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 relations between the government and 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 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 in ensuring the concerns of suppliers and procurement personnel were 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 would welcome any questions the Committee might have at this time.