Message from the Procurement Ombudsman

It is a pleasure to submit the Annual Report for the Office of the Procurement Ombudsman (OPO). This report represents a summary of the activities undertaken by my office in the 2013–14 fiscal year.

This year has seen a marked increase in the number of contacts to my office. We received 501 contacts in 2013–14 compared to 369 in 2012–13. This 36% increase is attributable, in large part, to our sustained efforts to inform suppliers selling goods and services to the federal government that we are here to help those experiencing difficulty.

Commensurate with the increase in the volume of contacts has been an increase in the number of procurement-related issues being raised to us. This increase is to be expected as a supplier contacting my office often raises more than one issue. It is not unusual, for example, for a supplier to contact us to discuss an unsuccessful bid and, in the process, raise other issues such as the department's chosen procurement strategy, the clarity of the statement of work or perhaps the department's refusal to provide an explanation of the bid's shortcomings.

In the vast majority of cases, suppliers contacting my office are not doing so with the specific intent of filing a complaint. Most are simply looking for information or an explanation from an impartial, neutral third party. Consistent with the role of an ombudsman, we do our utmost to help these callers, some of whom are exasperated. Our goal is to deal with each individual and the issues they raise in a prompt, personalized manner while remaining unbiased and objective. What has become apparent in dealing with these business men and women is that it isn't necessarily the information we provide to them or our explanation of the procurement process or federal contracting rules that matter; what matters is hearing the facts from an independent source that has no vested interest in the issues being raised. We've found that it is often not a case of what is being said, but who is saying it that makes the difference.

As I have outlined in the body of this report, the vast majority of issues raised with my office are issues that have previously been reported and which are a source of continued frustration for suppliers. These include recurring issues such as the time and expense of preparing bids only to have them rejected for seemingly insignificant administrative reasons, the time and difficulty associated with obtaining security clearances or the ongoing perceptions of biased statements of work. Among these issues are two which have come up on occasion in the past, but were voiced repeatedly over the course of the year: the requirement for suppliers to carry liability insurance as a contract condition, and the perception that there are an escalating number of national solicitations that include a requirement for country-wide delivery capability.

We heard of the issue of liability insurance in Ottawa, at one of our first town halls of the year, and it was echoed throughout the year at other outreach events across the country. There is a sense among suppliers that departments are arbitrarily defaulting to requiring firms to carry insurance whether or not there is an established need. Government policy requires departments to assess the risks associated with each contract and to make an informed decision as to whether there is a risk-based need to require the supplier to carry liability insurance. The policy provides federal departments the discretion to include liability clauses in contracts if appropriate and warranted, such as for highly specialized services contracts in support of ensuring the health, safety and economic well-being of Canadians. The policy guidance acknowledges that excessive requests for liability protection may increase the expected cost to the contractor and may lead contractors to increase prices or refrain from dealing with the Crown. Accordingly, departments have the option of remaining "silent" on the insurance requirement. Where a department chooses to remain silent suppliers have the discretion whether or not to purchase liability insurance. In these situations common and civil law principles apply, meaning both the government and suppliers are respectively liable for losses and damages under their control.

Firms supplying services such as research, writing, editing and training are voicing concern about what they perceive as the burdensome and wasteful expense being created by departments' indiscriminate inclusion of the liability insurance requirement when their type of work involves little to no potential for liability.

The second issue is a sentiment expressed by suppliers, particularly those outside the National Capital region, of feeling "squeezed out" by the escalating number of national solicitations that include a requirement for country-wide delivery capability. Departmental officials point out that in this period of budgetary restraint it is more efficient to establish and manage single, national contracts as opposed to the numerous, smaller, regionally-issued contracts. While this may make good economic sense in a period of fiscal austerity, smaller firms, many who have for years supplied goods or services in communities across Canada, are feeling increasingly disadvantaged. Some have told us they are no longer able to compete for federal contracts. One supplier in Edmonton spoke of a solicitation which contained a requirement for firms to have offices across the country. She described this requirement as a barrier to continuing to do business with federal departments she has been doing business with for years. A supplier in Kingston was categorical in stating "these bigger contracts are disadvantaging smaller firms who don't have the resources to compete". While most business men and women see "the big picture," there is nevertheless a frustration by what appears to be a disconnect—on the one hand, the apparent steady shift by departments and agencies to national procurements, which, while the intent is to be more cost effective, are denying them the prospect of bidding on traditional business opportunities; and on the other, the government's desire to stimulate a healthy, vibrant small- and medium-sized-business community in all regions of the country.

In last year's report I mentioned my office was continuing to pursue recommendations stemming from two studies, an assessment of our outreach program as well as an independent formative evaluation carried out on the effectiveness of the Office.

As I alluded to earlier, significant progress has been made in implementing the formative evaluation recommendation for a more robust outreach program to reach a larger number of suppliers and inform them about the services we offer. This includes such things as targeted town hall meetings with suppliers in key locations across the country, presentations to Chambers of Commerce, meeting Members of Parliament and their constituency staff, participating in events organized by provincial business networks and municipal economic development organizations, developing a social media presence and creating new means for suppliers to contact us. Judging from the increase in the number of contacts to the Office, the program appears to be working. Whether by telephone, letter, e-mail, website or in-person at one of our outreach events, more than 1000 suppliers took the time this year to share with us their issues and experiences in selling goods and services to the federal government.

Another element to this targeted approach to informing suppliers of my office's existence included referencing it as a recourse mechanism in departmental and agency procurement documents. To promote this initiative, in June 2013, the Minister of Public Works and Government Services wrote to her Cabinet colleagues encouraging them to work with their deputy heads to include information related to the Office in key procurement documents (namely solicitations, resulting contracts, and regret letters informing suppliers they have been unsuccessful in bidding for a contract) issued by federal departments and agencies falling within their portfolios. It is important to remember that in establishing the Procurement Ombudsman position, the Government of Canada provided Canadian firms supplying goods and services to federal departments and agencies with an impartial authority, one that is independent of the organizations doing the purchasing, to receive and help resolve issues and review complaints. Accordingly, suppliers doing business with the federal government have a right to know an impartial authority exists: an authority which is independent of the department or agency they are dealing with, so that they can make an informed decision on how to pursue their issues. As mentioned earlier, ensuring suppliers are aware of the Office and are provided the opportunity to make this decision has been the impetus of our sustained outreach efforts and was a key consideration in this particular initiative.

In terms of the two remaining formative evaluation recommendations, one dealt with my office's mandate, the other with our dispute resolution service. I will start with the mandate recommendation.

After identifying that a "significant number of suppliers" indicated the mandate of the Office should be expanded to better address the needs of small- and medium-sized businesses, the evaluation recommended we assess the advantages and disadvantages of expanding our mandate to include complaints of higher dollar-value, and measures requiring departments to address the recommendations made in our reviews. The assessments have been completed. The independent assessment found no persuasive reason for changing the monetary thresholds that underpin the Procurement Ombudsman's mandate. This assessment concluded the original policy rationale, namely that my position fills a gap in the federal dispute resolution system for contracts, remains compelling. The second assessment found no compelling reason why the Procurement Ombudsman's recommendations should be mandatory as such authority would be inconsistent with the status of an ombudsman.

The formative evaluation also identified a concern from within the supplier community that departments are able to decline participation in my office's dispute resolution service when it has been requested by a supplier. The evaluation recommended we determine if participation could be made mandatory. An independent assessment found the voluntary participation in our mediation service is in keeping with the principles of alternative dispute resolution.

Looking to the year ahead, I am committed to continuing with our efforts to raise awareness of our services amongst both the supplier and federal procurement communities. Of particular importance will be promoting our dispute resolution service which has great potential to help suppliers and departments but is largely unknown and underutilized. As it is reasonable to expect these efforts will result in a continued increase in the number of suppliers contacting the Office, I am equally committed to making the necessary organizational adjustments to enable us to maintain an exemplary level of responsiveness to suppliers and government officials who turn to us for help.

Frank Brunetta
Procurement Ombudsman

Date modified:

2018-11-01