Review of Regulatory Functions and Compliance with the Department of Public Works and the Government Services Act and the Procurement Ombudsman Regulations

Presented by: Samson

March 2020

Review of Regulatory Functions and Compliance with the Department of Public Works and the Government Services Act and the
Procurement Ombudsman Regulations (PDF, 672KB)

On this page

1. 1. Context
2. 2. Objectives, scope and approach
   1. 2.1 Objectives
   2. 2.2 Scope
   3. 2.3 Methodology
   4. 2.4 Lines of enquiry
3. 3. Observations
   1. 3.1 Review of complaints
   2. 3.2 Alternative dispute resolution
   3. 3.3 Procurement practice reviews
   4. 3.4 Annual reporting
   5. 3.5 Other duties or function assigned by the Governor in Council or the Minister
4. 4. Conclusion
5. 5. Office of the Procurement Ombudsman response
6. Office of the Procurement Ombudsman Stakeholders contacted during the review
7. List of files selected by lines of enquiry

1. Context

The Federal Accountability Act was granted royal assent on December 12, 2006. The Act intended to increase transparency of government spending and establish clearer links between approved expenditures and their outcomes. The Federal Accountability Act amended the Department of Public Works and Government Services Act to provide for the appointment and mandate of a Procurement Ombudsman. The Procurement Ombudsman Regulations (Regulations) establish the position of the Procurement Ombudsman reporting directly to the Minister of Public Services and Procurement. The Office of the Procurement Ombudsman’s (OPO) mission is to promote fairness, openness and transparency in federal procurement.

The Department of Public Works and Government Services Act provides the authority for the Ombudsman to exercise his mandate as follows:

• Review the practices of departments for acquiring materiel and services to assess their fairness, openness and transparency and make any appropriate recommendations to the relevant department for the improvement of those practices;
• Review any complaint respecting the compliance with any regulations made under the Financial Administration Act of the award of a contract for the acquisition of materiel or services by a department to which the Agreement, as defined in section 2 of the Canadian Free Trade Agreement Implementation Act, would apply if the value of the contract were not less than the amount referred to in Article 504 of that Agreement;
• Review any complaint respecting the administration of a contract for the acquisition of materiel or services by a department;
• Ensure that an alternative dispute resolution process is provided, on request of each party to such a contract; and
• Perform any other duty or function respecting the practices of departments for acquiring materiel and services that may be assigned to the Procurement Ombudsman by order of the Governor in Council or the Minister.

Funding for OPO is approved by Treasury Board as part of Public Services and Procurement Canada’s (PSPC) appropriation, and consequently, OPO is subject to the legislative, regulatory, and most policy frameworks that govern PSPC. In order to facilitate the functioning of OPO, PSPC provides OPO with administrative and professional services support in the areas of compensation, finance and administration, human resources, corporate planning, access to information and privacy, digital services, and security and emergency planning. These services and associated fees are described in service level agreements between PSPC and OPO.

Nonetheless, implicit in the nature and purpose of OPO is the need for it to fulfill its mandate in an independent fashion by maintaining an arm’s-length relationship with PSPC. In the words of OPO:

“The Office of the Procurement Ombudsman is a neutral and independent organization of the Government of Canada that helps resolve contracting disputes between businesses and the federal government.

We investigate complaints and provide dispute resolution services to help parties get back to business when issues arise. We also review widespread federal contracting issues and provide recommendations on how to improve them.”

OPO is governed by several acts and regulations. The Federal Accountability Act, the Department of Public Works and Government Services Act, the Procurement Ombudsman Regulations, the Financial Administration Act, the Government Contract Regulations, the Treasury Board Contracting Policy, PSPC’s Code of Conduct for Procurement and a number of other acts, regulations and policies^{Footnote 1}.

2. Objectives, scope and approach

2.1 Objectives

The objective of this review is to provide assurance that OPO is operating in compliance with relevant sections of the Department of Public Works and Government Services Act and the Procurement Ombudsman Regulations, and is effective in delivering on its mandate as a neutral and independent organization of the Government of Canada that helps resolve procurement and contracting disputes between businesses and the federal government^{Footnote 2}.

2.2 Scope

The review assessed the regulatory functions of OPO which included reviews of complaints, alternative dispute resolution services, procurement practice reviews, and the tabling of an annual report. The review examined the internal controls in place for these regulatory functions and determined compliance with section 22.1 of the Department of Public Works and Government Services Act and the Procurement Ombudsman Regulations. The scope period included fiscal years 2016-2017, 2017-2018 and 2018-2019.

In conducting the review, the contractor identified sufficient, reliable, relevant and useful information to achieve the engagement’s objective.

2.3 Methodology

The execution phase of the review consisted of the following measures:

• Interviews with stakeholders within OPO (Appendix 1)
• Analysis of case files and supporting data from a combination of stratified random sampling and judgemental selection (see table 3.1).
• Review of relevant documentation, such as: standard operating procedures, quality control plans, process flow charts, control documentation, emails and departmental responses.

Throughout the engagement, Samson validated findings and potential recommendations with OPO.

Samson reviewed 30 sample files in addition to planning documentation and standard operating procedures, covering the three fiscal years 2016-17 to 2018-19. The files reviewed were as follows:

2.4 Lines of enquiry

The review of regulatory compliance investigated and provided support on the following requirements from section 22.1 of the Department of Public Works and Government Service Act, notably that the Procurement Ombudsman shall:

• Review the practices of departments for acquiring materiel and services to assess their fairness, openness and transparency and make any appropriate recommendations to the relevant department for the improvement of those practices;
• Review any complaint respecting the compliance with any regulations made under the Financial Administration Act of the award of a contract for the acquisition of materiel or services by a department to which the Agreement, as defined in section 2 of the Canadian Free Trade Agreement Implementation Act, would apply if the value of the contract were not less than the amount referred to in Article 504 of that Agreement;
• Review any complaint respecting the administration of a contract for the acquisition of materiel or services by a department;
• Ensure that an alternative dispute resolution process is provided, on request of each party to such a contract; and,
• Perform any other duty or function respecting the practices of departments for acquiring materiel and services that may be assigned to the Procurement Ombudsman by order of the Governor in Council or the Minister.

The review also assessed whether supporting regulations included in the Procurement Ombudsman Regulations as they relate to section 22.1 of the Department of Public Works and Government Services Act have been respected.

3. Observations

The Office of the Procurement Ombudsman has robust processes and procedures in place to ensure compliance with legislative authorities. Our observations and recommendations are formulated in accordance with the evaluation system described below:

3.1 Review of complaints

Samson reviewed the control framework around the review of complaints process and observed the following:

• OPO maintains an in-take manual which provides guidance to OPO employees on the steps, processes, and procedures undertaken to respond to complaints received. The manual includes templates, questionnaires and guidance to enable the consistent review of complaints in line with legal compliance requirements.
• OPO’s review of complaint process is structured and formal peer review is performed on all files.

Samson reviewed 15 files for the coverage period in scope. During the Review of Complaints (RoC) review, Samson observed the following:

• In 5 files, the complaints received met the requirements of the Regulations and the Procurement Ombudsman was required to perform a review. In these cases, a full RoC was performed in accordance the requirements set out in the Regulations.
• In 10 files, limitations to the scope of authority of OPO prevented the office from officially pursuing the complaints. This led to suppliers being left to work directly with the purchasing department to resolve their issues with informal assistance from OPO. Example of limitations include:
  1. Contract value over the monetary threshold
  2. Excluded service under the Canadian Free Trade Agreement
  3. Contract not yet awarded
• All files were communicated to the concerned department, as information only if beyond the scope of OPO.
• We have noted that OPO has faced challenges in obtaining necessary information in a timely fashion from some departments in 2 of 5 files reviewed where a full RoC was performed. This is partly due to the fact that OPO does not have a mechanism to enforce the provision of required information.
• We have noted that the informal efforts undertaken by OPO for 7 files out of the 10 that did not meet the requirement for a mandatory review have led to a resolution. Although these files did not meet the requirements for OPO to launch a full RoC process, OPO was able to help the suppliers informally to resolve their issues. We consider this to be an effective alternative.

In 6 files, the supplier had previously made a similar complaint with the purchasing department but felt the need for support in resolving their issue. OPO was helpful in re-establishing communication between the supplier and the purchasing department and effectively supported suppliers and purchasing departments in continuing discussions.

The Review of Complaints was handled within the confines of the legislative authorities. While limited in their authority to formally pursue the resolution of complaints, OPO has consistently demonstrated a willingness to support the federal procurement process by informally assisting complainants in resolving their issues with departments and agencies.

3.2 Alternative dispute resolution

Paragraph 22.1(3)(d) of the Department of Public Works and Government Services Act (the Act), requires the Procurement Ombudsman to ensure that an ADR process is provided, if requested and agreed to, by the parties to a federal contract. Section 23(1) of the Procurement Ombudsman Regulations (the Regulations) requires the request for ADR services to pertain to a dispute on the interpretation or application of a contract’s terms and conditions. Samson sought to confirm the existence of a control framework around the conduct of Alternative Dispute Resolution activities to ensure that a mechanism exists to provide consistent ADR services.

Samson observed the following:

• OPO maintains a 5 year ADR plan which identifies risks and outlines the organization’s ADR communication, service delivery and risk response strategies.
• The ADR process has established standard operating procedures and guidance documentation to enable consistent application of regulations and responses in line with legal requirements.
• The ADR process maintains a review process, through which the framework’s core controls are identified and reviewed for improvements.
• OPO personnel receive regular and appropriate ADR training.

Having conducted a review of the control framework, Samson reviewed 11 files for the coverage period in scope and during the ADR review, Samson observed the following:

• In 7 files, the purchasing department declined to participate in the ADR process through OPO to resolve matters internally.
• In 2 of the above files, we found no evidence that a formal communication was sent to the complainant informing them that the ADR process had been declined by the purchasing department.
• In 3 files, the request for ADR was withdrawn by the complainant within 10 days of being filed as the issue was resolved with the department informally. We consider this to be an effective alternative.
• In 1 file, all parties accepted to participate in the ADR process, which was underway at the time of this review.
• Difficulties in obtaining complete and timely information from departments were also identified during interviews with OPO personnel, creating challenges in executing on the mandate of the organization.
• Interviews with management of OPO also identified limitations on OPO’s authority to follow up on the mediation undertaken internally by purchasing departments.

The ADR Process was handled within the confines of the legislative authorities. The process being voluntary and large departments relying on their internal dispute resolution process, OPO’s role is often limited to reinforcing the nature of a dispute and bringing it to the attention of the purchasing department. There appears to be a redundancy in the services provided by at least one department (i.e. Public Services and Procurement Canada) and OPO for dispute resolution.

3.3 Procurement practice reviews

Samson sought to establish the existence and adequacy of a control framework around the conduct of PPRs. To assess if the methodology and procedures used to conduct procurement practice reviews can be reasonably expected to allow OPO to form an opinion on the procurement practices of federal departments and agencies in line with its legal mandate and to assess if adequate managerial controls around the conduct of PPRs exist.

Samson observed the following:

• OPO applies the principles of risk-based planning to the development of a 5-year comprehensive PPR Practice Review Plan. This risk information informs the allocation of resources and selection of agencies and departments in the Procurement Practice Review Plan^{Footnote 3}.

  For example:

• OPO monitors results of internal and external audits of procurement across departments and agencies to identify the frequency of audit activities and select areas not reviewed in recent years.
• OPO maintains and evaluates complaints/departmental contacts data sets to identify patterns, and risk themes as part of the PPR process.
• OPO develops a government-wide map of procurement assurance coverage.
• OPO provides departments and agencies selected for a PPR with a clear outline of what to expect and communicates this information transparently to client departments^{Footnote 4}.
• OPO has established a framework for the conduct of procurement practice reviews, this framework including the relevant standard operating procedures (SOP), flow charts and the delineation of roles and responsibilities. The framework is reviewed with adequate frequency and outlines assurance activities.
• PPR process maintains a concurrent review process, through which the framework’s core controls are identified and reviewed for improvements.

Having conducted a review of the framework, Samson reviewed 2 files for the coverage period in scope and during the PPR review, Samson observed the following:

• Per section 4 (2) of the Procurement Ombudsman Regulations, OPO may request that a department provide any document or information necessary for the review. In 1 file, OPO encountered significant difficulties in obtaining required documentation to perform its PPR. Furthermore, logistics and security protocols made it impossible for OPO to transfer files via encrypted USB keys. This had significant impact on the ability of OPO to efficiently manage its resources and deliver effectively on its mandate.
• Per section 5 (a) (iv) of the Procurement Ombudsman Regulations before making recommendations, the Procurement Ombudsman shall consider the potential impact that the recommendations could have on the government’s operations or resources. We found no documented evidence that these discussions had taken place in both files reviewed. During interviews, management confirmed that these considerations are made during meetings, prior to issuing recommendations to the Minister and the reviewed organization.

Recommendations

1. OPO should consider the adoption of a secure file transfer mechanism, secure File Transfer Protocol (FTP) site, or other means to provide a safe and secure approach to transfer large amounts of data between organizations with incompatible systems.
2. OPO should consider holding formal meetings with agenda items to document considerations concerning the potential impact OPO recommendations could have on government’s operations, and OPO should consider keeping records of the topics discussed in relation to considerations of legislated criteria.
3. OPO may wish to review how to reduce redundancy in ADR service provision where such duplications exist and improve collaboration with other departments for the improvement of their services.

3.4 Annual reporting

Samson reviewed 2 annual reports and conducted interviews with relevant stakeholders for the coverage period to ascertain the controls surrounding the process through which the reports are produced and to ascertain the reports’ compliance with tabling timeline requirements set out in legislation. Samson observed the following:

• Each of the years in scope, an annual report was delivered to the Minister’s office within 4 months of the fiscal year end.
• OPO engages in a multi-step review and data validation process in the production of annual reports.

Annual reporting was found to be compliant in all aspects to the legislative authorities.

3.5 Other duties or function assigned by the Governor in Council or the Minister

Through interviews with employees of OPO, Samson did not identify any other duties or function that were assigned to the Procurement Ombudsman by order of the Governor in Council or the Minister.

No further work was performed on this line of enquiry.

4. Conclusion

Based on the evidence found during our review, we have found that OPO has a robust set of processes and practices in place to support compliance with legislative authorities.

We have also noted two minor areas of improvement:

1. OPO should consider the adoption of a secure file transfer mechanism (secure File Transfer Protocol (FTP) site or other) to provide a safe and secure media to transfer large amounts of data between organizations with incompatible systems.
2. OPO should consider holding formal meetings with agenda items for the potential impact recommendations could have on government’s operations and keep records of the topics discussed in relation to considerations of legislated criteria.

In addition to our compliance review, we have noted that OPO’s effectiveness is often limited due to the voluntary nature of departmental collaboration, in particular for RoC and ADR activities as OPO does not have the legislative authority to compel departments to produce relevant documents.

Based on our review, suppliers appear to appreciate having recourse to an independent, arms-length entity in the review of their complaints. Informal dispute resolution conducted by OPO as well as formal ADR services provide the supplier community and departments with a cost-effective means of redress in cases where the parties agreed to participate. In several cases where OPO was involved, we were able to confirm the organization can offer effective services.

3. OPO may wish to review how to reduce redundancy in ADR service provision where such duplications exist and improve collaboration with other departments for the improvement of their services.

5. Office of the Procurement Ombudsman response

Overall, OPO accepts and agrees with the review’s findings and recommendations, and will continue to look for ways to improve the efficiency of its services to Canadian businesses and federal departments.

OPO would like to extend its thanks to the review team at Samson for their work on this project.

Office of the Procurement Ombudsman Stakeholders contacted during the review

By title:

• A Procurement Practice Review Manager;
• The Business and Corporate Services Manager;
• The Director, Communications and Corporate Management;
• The Director, Procurement Inquiries & Reviews;
• The Deputy Procurement Ombudsman; and
• The Procurement Ombudsman.

List of files selected by lines of enquiry

Annual reports

• 2017-2018 Office of the Procurement Ombudsman Annual Report
• 2018-2019 Office of the Procurement Ombudsman Annual Report

Date modified:

2021-02-10