Investigate

What We Did to Examine and Review Procurement Issues

Reviewing Supplier Complaints

In the 2014-2015 fiscal year, the Office received 34 written complaints from suppliers making allegations regarding some aspect of the contract award process. The allegations included such things as the process to award a federal contract had somehow been prejudiced and that established procurement rules had not been adhered to by a department. Interestingly, with all 34 complaints targeting some aspect of the contract award process, it is the first year where the Office has not received a complaint regarding the administration of a supplier’s contract with a department.

The Office’s treatment of complaints regarding the award of a contract is prescribed by both the Department of Public Works and Government Services Act (the Act) and the Procurement Ombudsman Regulations (the Regulations). The Act stipulates that in order for a complaint to be reviewed by the Procurement Ombudsman, the complaint must be from a Canadian supplier and must be about the award of a contract to which the Agreement on Internal Trade Implementation Act would apply if the value of the contract were not less than $25K for goods and $100K for services. The Regulations require the complaint to be submitted in writing and the submission must be made to the Ombudsman within certain timeframes. The Regulations require the Ombudsman to make a determination regarding whether a complaint falls within his jurisdiction and then to assess whether the complaint can be reviewed by ensuring the complaint is in compliance with all other mandatory elements stipulated in the Regulations. The Ombudsman is required to notify the supplier and the federal organization in question of the results of the determination and, at the same time, provide a copy of the complaint to the federal organization. The determination must be made within 10 working days of the complaint being filed. Diagram 5 provides a summary of the criteria used to make the determination and conduct the subsequent assessment.

The 10-day window provided by the Regulations is used by Office of the Procurement Ombudsman (OPO) to attempt to facilitate an informal resolution of the complaint. The Office continued to experience success in facilitating informal resolutions to written complaints resulting in some being withdrawn. In cases where the Office is unsuccessful in informally resolving a complaint that meets the regulatory criteria, the Regulations require the Ombudsman to review the complaint and provide findings and recommendations within 120 working days of the complaint being filed.

Of the 34 complaints filed in 2014-2015, 31 (94%) did not meet OPO’s regulatory criteria and a review could not be launched (e.g. contract value exceeded dollar thresholds; contract related to a Crown corporation; complaint pertained to the establishment of a standing offer), or the complaint was withdrawn (e.g. resolved through facilitation within 10 days). The remaining three complaints were determined to fall within the Procurement Ombudsman’s jurisdiction as they met all regulatory requirements and reviews of the award of the contracts were carried out. Of these three reviews, two were completed within 2014-2015 and one carried over to 2015-2016. An additional two reviews which were initiated in 2013-2014 were completed in 2014-2015.

Diagram 6 highlights the process followed.

Diagram 5

Diagram 6

Image Description

This diagram illustrates the process followed once the office receives a written complaint. When a written complaint is received, the Office of the Procurement Ombudsman (OPO) will: acknowledge receipt of the complaint within 12 working hours; work with the supplier to clarify the issue(s) and ensure OPO has the information required by the Procurement Ombudsman Regulations (the Regulations); Explain the process and timelines; and assess the complaint against the Act and Regulations to enable the Procurement Ombudsman to make a determination as to whether the complaint can be reviewed. If the complaint does not meet the Regulation, the Procurement Ombudsman must: provide the supplier and the federal department with a written determination and reasons for the decision; and provide a copy of the complaint to the federal department in question. If the complaint meets the Regulations, the Procurement Ombudsman launches a review of the complaint. OPO must: provide a notification letter to the supplier and the relevant department; provide a copy of the complaint to the department and request their comments; and review and analyse the relevant department files. For the release of the report, the Procurement Ombudsman must within 120 working days: provide the supplier with a copy of the final report; and provide a copy of the report to the department’s Minister and the Minister of Public Works and Government Services. As well, OPO will: provide a copy of the report to the deputy head of the department; post a summary of the review on OPO’s website and in OPO’s Annual Report (the supplier’s name or company name will not be made public).

Review of Supplier Complaint Summaries

The following section contains summaries of the four reviews where the complaint met the regulatory requirements for review. Two of these complaint reviews were carried over from the 2013-2014 fiscal year.

Of particular note among the four reviews conducted during the 2014-2015 fiscal year was the recalcitrance of a department in refusing to provide the Ombudsman with the information necessary to review one of the complaints. In this case, despite repeated attempts to obtain the information necessary for the conduct of the review, the department chose to provide redacted documents which it stated were “within the parameters” of the Privacy Act and the Access to Information Act. This deliberate withholding of information impeded the Ombudsman’s ability to execute his mandate as per subsection 12(1) of the Regulations. This represents the first complaint review where the Ombudsman was unable to assess the extent to which the fairness, openness or transparency of the department’s procurement process was prejudiced, as required by the Regulations.

A Mandatory Criterion Questioned

A supplier filed a complaint regarding a Request for Proposal (RFP) for services. The supplier raised two issues: 1) the importance and value added, in terms of contract performance, of the mandatory criterion requiring an association membership; and 2) his proposal was found non-compliant because the department’s interpretation of the criterion was overly restrictive.

With respect to the first issue, the Procurement Ombudsman concluded that jurisprudence has established that a department has the discretion to define its requirements to meet operational needs. The department provided reasoning for requesting membership in an association. The Procurement Ombudsman found no reason to question the reasonableness of the requirement.

With respect to the second issue, the mandatory criterion also stipulated that suppliers provide a certificate as proof of membership in an association, and identified one association as an example. On this matter, the Procurement Ombudsman concluded that by establishing the criterion as it did, the department had an obligation to declare the supplier’s proposal non-compliant and, in doing so, its interpretation of the criterion was not overly restrictive.

The Ombudsman further noted, however, that the requirement to submit a certificate may have been unnecessarily restrictive on suppliers who were exclusively members of the specified association which did not provide certificates at the time of the solicitation. In addition, the Ombudsman found that because the supplier met the other mandatory criteria and his proposal was priced lower than the awarded contract, the requirement to provide a certificate may have resulted in the department overpaying for the service.

As the department refused to provide OPO with access to all the required information associated with the award of this contract, the Procurement Ombudsman was unable to determine if the department, in conducting its evaluation of the bids, applied the criterion consistently to all bidders or in a way so as to intentionally disqualify the supplier. In so doing, the department impeded the Ombudsman’s ability to execute his legislated mandate. The Procurement Ombudsman was therefore unable to assess the extent to which the fairness, openness or transparency of this procurement process was prejudiced.

Was a Supplier Disadvantaged by an Unreasonable Criterion?

A supplier filed a complaint regarding the award of a contract for services. The supplier’s complaint was related to the evaluation of rated criteria (i.e. evaluated against a point scale instead of on a pass/fail basis). More specifically, the supplier took issue with:

• a certification requirement and its allocation of points;
• loss of points and inconsistencies; and
• the transparency of the process.

With respect to the first issue, the supplier contended that a rated criterion requiring a specific certification, and the corresponding allocation of points, were unreasonable. In his findings, the Procurement Ombudsman referred to jurisprudence which has established that a department has the discretion to define its requirements to meet its operational needs. The department provided an explanation of the need for the certification in the Request for Proposal (RFP). The Procurement Ombudsman found no reason to question the reasonableness or relative weight of the certification in terms of points allocated.

The supplier also raised an issue regarding alleged inconsistencies in terms of evaluation criteria between different RFPs. Specifically, the supplier questioned why the RFP in question required the submission of a report when previous RFPs for the same service did not. On this matter, the Procurement Ombudsman concluded that because the supplier did not submit the required report, the department could not, as per established procurement rules, award points for this element. In addition, the Procurement Ombudsman noted he does not have the legal authority, in reviewing suppliers complaints, to review questions related to inconsistencies across different contract award processes.

The third concern related to the overall transparency of the process. While the department provided the value of the resulting contract and the name of the successful supplier, the request for the total score and point breakdown of the winning bidder was denied. On this matter, the Procurement Ombudsman concluded that the department was not required to provide the winning supplier’s point breakdown as it needed to respect the winning supplier’s right to the confidentiality of specific information related to their proposal. Therefore, the Procurement Ombudsman found no evidence of a transparency issue.

As the issues raised by the supplier could not be substantiated, the review did not establish the necessary grounds for the Procurement Ombudsman to recommend remedy or relief as requested by the supplier.

Department’s Approach to Soliciting Proposals Was Not Consistent with Government Policy

A supplier filed a complaint regarding the award of a contract for services. The complainant’s allegations included that the department: conducted a competition to award a contract that did not respect the rules of a Standing Offer (SO) or Treasury Board (TB) policy; failed to identify the work activities to be performed; did not establish evaluation criteria; favoured a particular supplier; and failed to inform the complainant that he would not be awarded the contract and to provide the reasons why his proposal was unsuccessful.

Regarding the rules of the SO or TB policy, the Procurement Ombudsman concluded the SO in question was used to identify and invite suppliers but was not used to award the contract. By inviting multiple suppliers to submit proposals, the department initiated a competitive process and was therefore required to, but did not, adhere to the TB Contracting Policy. The Procurement Ombudsman also found the department did not provide suppliers with the required details regarding the work to be completed, nor did it establish or communicate the evaluation criteria to be used. Moreover, the department did not establish an objective basis for determining supplier capability to perform the work.

On the issue of favouritism, the Procurement Ombudsman concluded the department had, in fact, considered awarding the contract to the complainant. Nonetheless, the chronology of events suggests there was a predisposition to award the contract to the lower-cost supplier before the complainant’s proposal was received.

Based on these findings, the Procurement Ombudsman recommended the department pay compensation to the complainant in accordance with the Procurement Ombudsman Regulations (see Diagram 7). The department agreed with the Ombudsman’s recommendation and took immediate action with regard to the settlement.

Diagram 7

Was a Supplier Disadvantaged When a Department Misplaced a Proposal?

A supplier filed a complaint about a department misplacing their proposal and then evaluating it after the contract had been awarded to another supplier. The supplier further complained that the department failed to follow standard evaluation procedures by not separating the technical from the financial components of the proposal during the evaluation process. The supplier requested compensation for expenses incurred in preparing the proposal.

For proposals to be treated fairly and equally, they must all be evaluated prior to the award of the contract. In this instance, the supplier’s proposal was not evaluated until after the contract was awarded. Accordingly, the Procurement Ombudsman found that the department’s evaluation process did not respect the principle of fairness.

The Ombudsman further found that although the department originally misplaced the supplier’s proposal and assessed it after the award of the contract, this neither prejudiced the supplier’s proposal nor did it directly result in any loss. The review of the complaint did not establish the necessary grounds to enable the Procurement Ombudsman to recommend compensation to the supplier.

Reviewing Departmental Procurement Practices

All procurement-related issues raised by suppliers and federal officials are documented and tracked. On a regular basis, the number, source and nature of these issues are analyzed to determine if patterns can be detected and if they are systemic in nature within a department or the procurement process.

In cases where the analysis provides the “reasonable grounds” required by section 4 of the Regulations, the Procurement Ombudsman launches a review of the practices of department(s) for acquiring materiel and services. Practice reviews examine the consistency of departmental procurement practices with applicable policies, procedures and the Financial Administration Act in order to assess the fairness, openness and transparency of the practices. Where warranted, the reviews highlight good practices as well as recommend improvements.

Last year, the Ombudsman established the required “reasonable grounds” to launch three reviews. The Office also conducted a follow-up to reviews undertaken to determine what action the federal organizations involved had taken in response to recommendations contained in OPO’s reports. The following are summaries of the three departmental procurement practice reviews and the follow-up review completed in 2014-2015.

Review of Departmental Procurement Practices Summaries

Natural Resources Canada

Through its ongoing monitoring of issues, the Office noted a disproportionately high number of contacts raising issues regarding Natural Resources Canada’s (NRCan) procurement practices. As a result, the Office undertook a review to determine whether NRCan’s procurement management framework ensures the department’s procurement practices are consistent with applicable procurement laws, regulations and policies and allows NRCan to respect the principles of fairness, openness, and transparency.

The review found that NRCan’s procurement management framework is aligned with procurement related legislation and policy requirements and that there were no major gaps. The Ombudsman’s report noted good elements from a governance perspective, particularly the oversight and monitoring entities. Nonetheless, the report found the mandate of the oversight and monitoring entities could be further broadened. The current approach is primarily focused on monitoring and oversight of contracts processed by NRCan’s central procurement unit; other groups with delegated contracting authority are not monitored as actively. In addition, the current approach does not explicitly focus on contracts valued at less than $25,000, which is a risk given the volume of these types of contracts.

Accordingly, the Procurement Ombudsman recommended the department:

• take appropriate measures to enhance its monitoring and oversight regime commensurate with senior management-sanctioned risk tolerances for the full spectrum of NRCan procurement; and
• build on the existing good quality control and assurance practices by taking the necessary measures to ensure these are applied consistently and to all sectors of the department procuring goods and services; regardless of procurement type and monetary value.

In response to the review, the department agreed to continue to focus its efforts on strengthening monitoring, oversight and quality control of contracts.

Employment and Social Development Canada

In June 2013, OPO received an anonymous letter alleging conflict of interest and unfair advantage pertaining to several Information Technology (IT) contracts awarded by Employment and Social Development Canada (ESDC) to one IT company. The Procurement Ombudsman determined that reasonable grounds for the allegations of conflict of interest and unfair advantage cited in the anonymous letter did not exist. However, an analysis of publicly available information as well as an analysis of 11 contacts about Employment and Social Development Canada received by OPO since 2008, resulted in several findings which pointed to potential systemic issues within Employment and Social Development Canada’s procurement practices.

Accordingly, the Office undertook a review to determine whether the procurement practices used by Employment and Social Development Canada to acquire IT company services were consistent with relevant policies and procedures, the Financial Administration Act and regulations made under it, and the principles of fairness, openness and transparency.

The review found that a procurement management framework was in place and that its application to the procurement of IT company services was consistent with applicable legislation, regulations, policies and guidelines. The services in the majority of files reviewed were procured and administered in compliance with the framework and no systemic issues within Employment and Social Development Canada’s procurement practices were noted. Areas for improvement were identified in the procurement management framework, specifically with regard to policies and direction in support of the administration of Task Authorizations, contract amendments and documentation requirements. A lack of a systematic, risk-based approach to monitoring was also identified.

The Procurement Ombudsman recommended the department continue to improve its procurement policies and practices in order to ensure consistent and compliant procurement practices for IT company services by:

• updating internal policies and guidelines in key areas relating to amendments, Task Authorizations and file documentation; and
• taking the necessary measures to ensure a senior management sanctioned risk-based approach to monitoring departmental procurement activity is applied consistently across the department.

The department accepted the recommendation.

Standing Offers and Supply Arrangements

OPO undertook a procurement practice review on the issuing of call-ups against standing offers and the awarding of contracts against supply arrangements. The objective of the review was to determine whether call-ups against standing offers and contracts against supply arrangements issued by selected departments and agencies were consistent with applicable sections of the Financial Administration Act and regulations made under it, the Treasury Board Contracting Policy, and the principles of fairness, openness, and transparency.

The review noted that Standing Offers (SOs) and Supply Arrangements (SAs) have been created with the aim of expediting the procurement process and reducing costs by leveraging the government’s purchasing power. Nonetheless, when verifying whether organizations used prices consistent with negotiated prices and rates, prices could not be verified in 25% of the files reviewed by OPO. This raised questions as to whether the cost reduction benefits of using these tools are being realized. The review found that as no central repository of all SOs and SAs in use by federal organizations is available, the actual number of tools and the associated total spending is unknown. In addition, the review found that there is no way of knowing whether duplicate or overlapping SOs and SAs exist. The review further concluded that while general procurement training exists and includes some information regarding SOs and SAs, training is neither available nor mandatory for all tools. Of the 92 contracts assessed by OPO as part of the review, 43 (47%) contained critical errors such as containing poor documentation which prevented OPO from determining whether the SO or SA was used as intended. Moreover, with the exception of one department, organizations had little, to no, monitoring of contracts issued against SOs and SAs. The lack of monitoring of contracts issued against SOs and SAs raises questions as to whether the use of these tools is receiving the appropriate amount of oversight.

2011-2012 Follow-up Review

Annual follow-up reviews are conducted to determine what action federal organizations have taken in response to recommendations contained in OPO’s previous procurement practice reviews. Follow-up reviews provide an opportunity to share information on improvements implemented in response to OPO recommendations which other departments and agencies could emulate. Information on these improvements also provides the Office with an indicator of the usefulness and relevance of its work.

In 2014-2015, OPO assessed action taken on recommendations contained in reports on procurement practice reviews conducted in 2011-2012 involving the Public Service Commission and Public Works and Government Services Canada. The following review reports were issued in 2011-2012:

• Review of Procurement Practices Related to Selected Advance Contract Award Notices (ACANS); and
• Professional Services (PS) Online

The Office was encouraged by the fact that the departments took action on all recommendations made in OPO’s 2011-2012 reviews.

Studies and Analysis

In other instances where OPO would like additional information, it undertakes exploratory research or analysis. This year, one topic fell within this category.

Alternative Dispute Resolution Analysis

Since opening its doors in 2008, OPO has received 37 requests for Alternative Dispute Resolution (ADR) services. In several instances, when invited to participate in OPO’s ADR process, federal organizations have declined citing other dispute resolution mechanisms available to them. This past year, the Office undertook exploratory research to follow up with those cases where the organization declined to use OPO’s ADR service.

The research focused on 20 ADR requests which met the requirements of the Regulations and had the potential to result in a negotiated agreement. Of these 20 requests:

• 12 requests (60%) to participate in an OPO ADR process were accepted by the federal organization. Of these 12:
  • A mutually agreed to settlement was reached in 11 disputes.
  • A mutually agreed to settlement was not reached in 1 dispute.
• 8 requests (40%) to participate in an OPO ADR process were declined by the federal organization. Of these 8:
  • A negotiated agreement was reached in 4 disputes.
  • 1 process was ongoing at the time the organization responded.
  • A negotiated agreement was not reached in 3 disputes. Of these 3:
    • 1 process resulted in litigation.
    • In 2 disputes, the supplier withdrew from the negotiation. In one withdrawal, the supplier cited the costs imposed by the federal organization as a factor in the supplier’s decision to withdraw from the negotiations.

Date modified:

2018-11-01