Investigate

What We Did to Examine and Review Procurement Issues

Any Canadian supplier suspecting the award of a contract has been prejudiced or has not been awarded in accordance with established procurement rules and procedures can complain to the Procurement Ombudsman and request the matter be reviewed (i.e., investigated). Likewise, a supplier not in agreement with the administration of its active contract can ask for a review of the matter.

In addition, issues are occasionally brought to our attention that suggest the principles of fairness, openness or transparency (FOT) may have been compromised at a more systemic level. In these situations, and when the required regulatory parameters have been met, the Ombudsman has an obligation to examine the matter impartially and objectively.

In doing so, the Office's goal is to expose the facts, and where necessary, assist departments and agencies by recommending corrective measures to reinforce, or on occasion, restore the principles of FOT. The Office does this by reviewing supplier complaints as well as reviewing departmental procurement practices.

Reviewing Supplier Complaints

The Office's treatment of written requests for reviews of supplier complaints is prescribed by the Regulations. To be considered filed, complaints must be submitted in accordance with the requirements spelled out in the Regulations (e.g., within so many days, including a clear statement of facts). Complaints that are determined to have met these requirements must then be assessed against regulatory criteria (Diagram 5) within 10 working days. This assessment is undertaken to determine whether the Procurement Ombudsman has the jurisdiction to review the complaint. In addition to conducting the assessment, the Office utilizes the 10 working days to liaise with the complainant and department in an attempt to de-escalate and facilitate an informal resolution to the issues.

Of the 48 complaints filed with the Office, 43 (90%) pertained to the award of a contract (e.g., bid evaluation criteria, Statement of Work) while the remaining 5 (10%) pertained to the administration of a contract (e.g., payment, interpretation of a term or condition).

Of the 48 complaints, 42 (88%) fell outside the Procurement Ombudsman's jurisdiction (e.g., contract value exceeded OPO dollar thresholds, related to standing offers) or were withdrawn (e.g., resolved through facilitation within 10 days). In cases where the complaint fell outside the Procurement Ombudsman's jurisdiction, the Regulations require that we provide the complaint to the implicated department.

Assessments of the remaining 6 complaints determined that they met the regulatory criteria. The Procurement Ombudsman is required to review any complaint that is submitted in accordance with, and is determined to have met, the regulatory criteria. In these cases, the implicated department is provided with the complaint and requested to submit its perspective along with documents and records that pertain to the procurement which is the subject of the complaint. The Regulations provide the Ombudsman 120 working days as of the date of the complaint being filed to analyze the submitted material and provide findings and recommendations. The Regulations stipulate that any findings and recommendations are to be provided to the complainant, the Minister of Public Works and Government Services, as well as to the Minister of the implicated department. As a courtesy the Office also provides a copy to the deputy head of the department that was the subject of the complaint.

The following is a summary of the completed reviews of complaints, including one that was carried over from the previous year. The most common issue raised in the complaints reviewed by the Office is the manner in which a department has dealt with a supplier's bid. For example, how a department assessed the supplier's bid or perceptions the department utilized undisclosed criteria to assess the bid, changed the bid evaluation criteria or was inconsistent in its application of the criteria.

Diagram 5

Review of Complaint Summaries

Are Subject-Matter Experts Required to Evaluate Proposals?

A supplier complained its proposal for communication services was unfairly and unjustifiably eliminated. The complaint alleged the evaluation team:

1. failed to take into account all information in the proposal;
2. lacked the expertise to evaluate the proposal;
3. consulted amongst themselves; and
4. was not prepared to reverse its decision when presented with "clear evidence of unfairness," and that the sum of these concerns demonstrate incompetence or ulterior motives on the part of the department.

After a review of the matter, the Procurement Ombudsman concluded that the issues raised by the supplier could not be substantiated. While there was no evidence indicating whether or not all information in the proposal was considered by the evaluation team, it was concluded the complainant's proposal failed to meet one of the mandatory requirements. In addition, the review cited jurisprudence which held that evaluation teams need not possess subject-matter expertise in order for evaluations to be fair and reasonable. Clear evidence of unfairness could not be established and no information was found to indicate there was incompetence or ulterior motives on the part of the department.

Did the Department Adhere to the Terms and Conditions of a Standing Offer (SO)?

A supplier filed a complaint concerning the award of two federal contracts using a Standing Offer (SO). The supplier alleged the following:

1. the department conducted a competitive process which was not allowed under the provisions of the SO;
2. the department did not provide enough details for suppliers to be able to identify all activities to be performed under the contract; and
3. the department did not respond to a request for a debriefing to discuss the unsuccessful proposal.

Following a review of the case, the Procurement Ombudsman concluded that although there is no wording in the SO that explicitly permits or prohibits a competitive process, the manner in which the department solicited and compared bids constituted a competitive process. Accordingly, the selection of a supplier based on undisclosed criteria compromised the fairness and transparency of that process. In addition, the SO required the department to provide suppliers with additional information such as details of the work activities to be performed and a description of the deliverables to be submitted, and there was no evidence this additional information was provided. Based on these findings and in accordance with subsection 13(1) of the Regulations, the Ombudsman recommended payment of compensation for bid preparation costs.

Diagram 6

Supplier Whose Bid Was Wrongfully Rejected

A supplier filed a complaint alleging a department had deemed its proposal non-compliant for not meeting the mandatory education requirement of having a secondary school diploma, despite having demonstrated the proposed resource held both Bachelor of Arts and Master of Arts degrees.

During the course of the review the department acknowledged the wording of its solicitation might have caused some uncertainty for bidders, and offered compensation equal to 10% of the value of the contract. The department further acknowledged the merits of the complaint and that the contract would have been awarded to the supplier, but for the mandatory education requirement. Based on the department's acknowledgements the Procurement Ombudsman terminated the review and recommended payment of compensation for lost profit.

Department Did Not Indicate the Basis of Selection to Award a Contract

A supplier filed a complaint regarding the award of a contract by a department using a Standing Offer (SO). The supplier alleged the department:

1. improperly conducted a competitive process;
2. failed to indicate the basis upon which the contract would be awarded;
3. did not provide enough details for suppliers to be able to identify all activities to be performed under the contract;
4. provided an unfair advantage to the winning supplier by writing directly to them; and
5. failed to communicate the result of the process to unsuccessful suppliers.

Upon review of the available information, the Ombudsman found that although bids are not normally solicited under SOs when an individual requirement arises, the particular SO in question contains no wording that explicitly permits or prohibits the Project Authority from conducting a competitive process and provides the Project Authority discretion to accept or reject proposals.

The department requested and considered proposals from SO holders, evaluated the proposals and utilized price as the determining factor. As this approach to awarding the call-up constitutes a competitive process, the department had a responsibility to, but did not, inform suppliers of the basis on which it would select the winning supplier. Based on these findings and in accordance with subsection 13(1) of the Regulations, the Procurement Ombudsman recommended payment of compensation for bid preparation costs.

Excessive Criteria for the Work to Be Done?

A supplier filed a complaint regarding a Request for Proposal (RFP) for research services. The supplier alleged the department unnecessarily restricted competition by including experience criteria which were excessive for the work to be done.

The Procurement Ombudsman found no evidence to suggest the department unnecessarily restricted competition. The department demonstrated a legitimate requirement for the experience requested in the RFP, as well as how the required experience was directly relevant to the work to be conducted and the operational requirements of the department.

Reviewing Departmental Procurement Practices

The Regulations require the Ombudsman to review the practices of a department for acquiring goods and services where there are "reasonable grounds to do so…". Accordingly, the Office utilizes various means to identify potential systemic or high risk issues that could bring into question the fairness, openness and transparency of federal procurement practices including:

1. the development of a three-year procurement practice review plan; and
2. the assessment of issues brought to our attention concerning specific contracts or departments and agencies.

1. Three-Year Procurement Practice Review Plan

Development of a three-year procurement practice review plan includes, but is not limited to, analyzing the following:

• Supplier complaints received by the Office;
• The number and nature of issues identified by suppliers, federal officials, professional organizations, and parliamentarians through OPO outreach activities; and
• Government priorities and initiatives in relation to these issues.

The issues are sorted into a list of initial topics which are assessed by a multi- disciplinary team of procurement, communications, and quality and risk management specialists. Risk-based assessment criteria are applied to each topic and the largest procuring departments are contacted to obtain their views on potential risks to the procurement system.

In 2013–14, the three-year procurement practice review plan was reviewed by an external advisory committee comprised of a representative of an industry association representing small Canadian businesses, a legal expert in the field of procurement and a former senior public procurement official. The committee reviewed the topics and confirmed the soundness of the plan.

Prior to execution, other oversight bodies are consulted regarding the proposed topics to ensure the Office's planned reviews do not overlap or duplicate their planned work.

2. Issues

It is not uncommon for the Office to obtain information, sometimes anonymously, alleging abuse or mismanagement in the awarding of contracts by a department. In these cases the information made available to us along with any publicly available information on the subject is analyzed to assure ourselves of the veracity of the issues. Where there are reasonable grounds to believe the fairness, openness and transparency of the procurement process may have been compromised, a practice review can be initiated.

In some cases our preliminary assessment of the situation revealed the department or agency was in the process of auditing or investigating the matter. In these cases the review was put on hold consistent with paragraph 4(1)(d) of the Regulations which requires the Ombudsman to take into consideration "the observations or findings of any previous audits or assessments". In other cases, our assessment determined the Procurement Ombudsman did not have jurisdiction to proceed with a review. The following is a summary of a completed review and reviews which were put on hold or terminated due to lack of jurisdiction.

Review of Departmental Procurement Practices Summaries

Dental Services

The Office received several complaints regarding the contracting practices of the Manitoba Region of the First Nations and Inuit Health Branch (FNIHB Manitoba), Health Canada, with regard to the provision of dental services. Analysis of the complaints revealed potential systemic issues which established the necessary reasonable grounds to launch a review.

The review found the following:

1. FNIHB Manitoba is operating in a unique contracting environment. For example,
   • the demand for dental services exceeds the availability of dentists;
   • some communities are remote and designated as "fly-in" which can impact the scheduling of services; and
   • dentists may not be aware of the government electronic tendering service as a source of contract opportunities in the federal government.
2. Some of FNIHB Manitoba's procurement practices differed from both government-wide and Health Canada procurement policy requirements.

Among the Procurement Ombudsman's recommendations was that the department:

• take appropriate steps to ensure that employer-employee relationships are not created; and
• confirm whether Treasury Board approval is required prior to the release of future solicitations for dental services.

The department accepted the recommendations.

Persistent Allegations

The Procurement Ombudsman, along with a number of other federal organizations, received anonymous letters alleging contract abuses, irregularities, fraud and kickbacks at a federal organization. The Procurement Ombudsman sought additional information from the organization to assess the authenticity of the issues raised. The organization responded by providing detailed information of various activities undertaken to address the allegations. In addition, the organization indicated an audit was being undertaken by an external party regarding the contracts at the centre of the allegations. The Procurement Ombudsman put the review on hold until the results of the audit, expected in 2014–15, are available.

Transcription Services

A procurement stakeholder raised concerns regarding the procurement practices of a federal organization in acquiring transcription services. The Procurement Ombudsman wrote to the organization to obtain information and responses to the concerns raised. The organization's responses and supporting information were assessed against the Regulations to determine if the Ombudsman had jurisdiction to launch a review. Although the assessment revealed the Ombudsman did not have the authority to review the matter, it was brought to the attention of the deputy head who was encouraged to ensure adherence to the contract terms and conditions.

Subsequently, the same stakeholder brought additional information forward suggesting similar issues may have been occurring with the same supplier on a much broader scale in other departments. While an assessment of this additional information once again revealed the matter fell outside of the Procurement Ombudsman's jurisdiction, as a precautionary measure, the Office undertook research of publicly available information to identify all federal departments and agencies that had contracted for these services. The Procurement Ombudsman wrote to the deputy heads of these organizations alerting them to this potential issue and reminding them of the importance of ensuring that the terms and conditions of all contracts are respected.

Program Review Services

The Office received allegations suggesting favouritism in the award of a contract by a federal organization. While the complaint about the award of the contract could not be reviewed as it had been submitted past the deadlines prescribed in the Regulations, the assessment of the complaint determined there were reasonable grounds to review the procurement practices of the department.

During the process of planning the review, the Office became aware of a recent audit by the Office of the Comptroller General (OCG). The OCG made findings related to procurement and in response, the organization developed a Management Action Plan. The review of the organization's procurement practices will be reconsidered once the organization has implemented its Management Action Plan.

"Blacklisting"

The Office was informed by a company that it had been "blacklisted" or "barred" from obtaining contracts by a federal organization as a result of previously having filed a complaint against it with OPO. The complainant indicated that the company had previously been regularly invited to submit bids for contracts, and had routinely won contracts to provide services to the federal organization. The complainant claimed that this changed after complaining to the Office.

In an attempt to assess the merits of the allegation, the Office contacted the organization and provided it the opportunity to provide its perspective and supporting evidence.

The OPO assessment of the evidence revealed the federal organization's spending in the type of consulting services provided by the complainant had substantially declined between 2009–10 and 2013–14, resulting in a reduction of business for all suppliers involved in providing this service. Evidence supported the organization's assertion that significant changes to its program were the primary factor in the reduced need for consulting services. No evidence was uncovered to substantiate the blacklisting allegation.

Studies and Analysis

While the assessment of issues brought to the Office's attention is intended to determine whether there are reasonable grounds to launch a procurement practice review, it can also lead to other actions. In some instances, the Office may undertake an exploratory study or analysis. This year, an analysis on vendor performance was completed.

Vendor Performance

One of the issues repeatedly brought to the Office's attention is vendor performance. This was the subject of a 2009–10 study and was highlighted in the Message from the Procurement Ombudsman in the 2011–12 Annual Report. Departments and suppliers alike have been questioning why suppliers known to provide inferior goods or services continue to obtain government contracts. Given the persistence of the issue, the Office analyzed some of the measures used by other jurisdictions (i.e., United Kingdom, United States, and Province of Ontario) to address the issue of vendor/ supplier performance.

The analysis revealed three common themes across the above-mentioned jurisdictions. Firstly, vendor performance management is commonly part of a framework for mitigating risks associated with government procurement. The framework is generally designed to hold suppliers and public servants accountable for the procurement process and to determine minimum standards of supplier reliability. Second, contract performance history is only one of the components used to determine a supplier's reliability. In most cases, governments also take into account factors such as whether there is a criminal record or history of fraud. Finally, vendor performance management measures invariably include the following components:

1. the creation of a repository of supplier performance history;
2. the option to temporarily deny contracts to a supplier; and
3. the importance of continuously improving supplier performance and the relationship between suppliers and government purchasing orgaizations.

Examples of vendor performance measures in the above-mentioned jurisdictions include:

• In the United Kingdom, suppliers are assessed in accordance with past performance. If a supplier has delivered in a satisfactory manner, they receive a certificate of performance which is accessible to all government organizations.
• In the United States, agencies are required to submit an electronic record of contractor performance to a government-wide repository. In addition, a contract cannot be awarded before the supplier has been evaluated based on seven criteria, two of which are the supplier's integrity/ethics and performance history.
• In the Province of Ontario, Infrastructure Ontario (IO) has developed the Vendor Performance Program (VPP) which evaluates vendor performance at the end of the contract by means of a scorecard. Suppliers are then designated an overall performance rating. The VPP also outlines escalation procedures for vendor performance issues that arise during the term of a contract, including notices, infraction reports and suspensions.

OPO's analysis indicates vendor performance is the combined responsibility of everyone involved in the procurement process, and that both public servants and suppliers are accountable for the effectiveness of government procurement.

Date modified:

2018-11-01