Message from the Interim Procurement Ombudsman: Office of the Procurement Ombudsman Annual Report 2016-2017

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Lorenzo Ieraci Interim Procurement

Lorenzo Ieraci
Interim Procurement Ombudsman

It is an honour to present the 2016–2017 Annual Report for the Office of the Procurement Ombudsman—a report we’ve changed to make it easier to read on screen (whether computer, tablet or smartphone) and for which we’ve printed a minimal number of copies to decrease our environmental impact.

"My experience in 2016–2017 indicates that federal organizations seem increasingly willing to allow us to try to help resolve matters; something I hope will continue and expand in the future."

This report highlights the work undertaken by our Office from April 1, 2016 to March 31, 2017 (the 2016–2017 fiscal year), summarizes the reports issued, and provides examples of how we sought to help everyone who contacted our Office. In particular, I take pride in the work we did to quickly and meaningfully respond to questions that were raised to us, and to help Canadian suppliers and federal organizations resolve disputes. Our Office’s experience demonstrates that both suppliers and federal organizations benefit from working out disputes: it eliminates the time and energy associated with escalation within organizations, avoids costly and time-consuming litigation and allows both sides to get back to business. Page 21 of this report highlights examples where our Office was able to assist in addressing matters informally prior to launching our formal dispute resolution process. Those were instances where federal organizations actively engaged with our Office, thereby allowing us to help resolve disputes quickly. My experience in 2016–2017 indicates that federal organizations seem increasingly willing to allow us to try to help resolve matters; something I hope will continue and expand in the future.

In addition, this report highlights the views and feedback provided to us by Canadian suppliers and federal officials, whether they contacted us directly or through our numerous outreach efforts. Looking back on 2016–2017, and more specifically the discussions I had with both groups, there are three issues that stand out for me: federal procurement capacity, standing offers and the challenges of simplifying procurement.

Federal procurement capacity

The first, federal procurement capacity, is something I have heard about since I joined this Office in 2012. I noted in the past year that suppliers and federal officials were able to more precisely articulate the impacts that a lack of procurement capacity creates in and across federal organizations, and on suppliers trying to do business with them.

The issue of capacity is intriguing in that, unlike many procurement topics, it appears to generate some consensus among suppliers, procurement specialists and program managers. In the past year, it has become apparent to me through discussions with these groups that many (if not most) federal organizations do not have sufficient procurement staff or have staff that do not have the experience or knowledge needed to tackle the volume and complexity of federal procurement in a way that is fair, open and transparent. The impacts include delays during various stages of the procurement process, and concerns of an increasing reliance on non-specialists to undertake some procurements given the limited number of procurement specialists. In addition, suppliers invest time asking questions or obtaining clarifications as they are dealing with procurement staff who are not always fully knowledgeable about their given industry.

The lack of capacity results in experienced and knowledgeable procurement specialists being highly sought after, with federal organizations routinely cannibalizing staff from one-another. And the situation may get worse; data indicates that the procurement community has one of the highest percentages of staff eligible to retire in the next five years. Without a concerted effort on the part of all federal organizations, and more importantly a coordinated approach to recruitment and development of procurement specialists across organizations, capacity problems and associated impacts will continue to grow.

Standing offers

The second issue is standing offers, a topic this Office has raised on numerous occasions. While many of the concerns previously raised remain valid, I will focus on one particular element, namely that there are no guarantees of revenue for suppliers even once they have qualified on these tools.

Standing offers are procurement tools on which suppliers must qualify to provide goods or services to federal organizations on an “as and when required basis”. When a good or service is requested by the federal organization, that transaction (referred to as a “call-up” in procurement lingo) constitutes the contract. Standing offers are established to facilitate the procurement of frequently purchased goods or services. The purported attributes are that these tools should reduce paperwork, lower the costs of goods and services, expedite the procurement process and reduce the number of solicitations.

While these attributes (if materialized) would be of benefit to federal organizations and suppliers, they come at a higher risk to suppliers. Suppliers must invest time and energy to submit proposals to qualify on these tools. While this is a standard element of procurement—suppliers have to prepare proposals for any solicitation, and there is no guarantee they will win the resulting contract—qualifying on a standing offer does not mean that suppliers have “won” a contract... because it is not a contract. Therefore suppliers who qualified on standing offers have no guarantee they will obtain any work as 1) with the exception of mandatory commodities, there is nothing requiring federal organizations to actually use the standing offers they have established, and 2) if organizations do use standing offers, there is no certainty that a given supplier will obtain work. But here’s the rub: if they want the business, suppliers need to be ready to provide the goods or services within very short timeframes; I have seen many standing offers with a 72-hour turnaround time. That means suppliers need to make investments in inventory (for goods) or ensure they have access to quality resources (for services) to be able to deliver quickly. All this with no guarantee of business or revenue.

In addition, suppliers have often told me that they must compete and qualify on multiple tools across multiple federal organizations to deliver essentially the same goods or services. These suppliers are, more often than not, small and medium-sized companies eager to obtain work from federal organizations, so they actively work to qualify on as many tools as possible. And once they have qualified? They play the waiting game and hope they will get a call-up… and hope the federal organization will not choose to obtain the good or service using an approach other than the standing offer they have qualified on.

There are potential solutions to some of these concerns—for example, creating a government-wide centralized repository of all standing offers issued by federal organizations, which could result in a decrease in the duplication of these tools across organizations. More fundamentally, however, there is a need for research and analysis to determine if the purported benefits of standing offers are actually materializing. Because if they aren’t, then federal organizations need to carefully consider why they are placing higher risks on Canadian suppliers through these tools.

Challenges in simplifying federal procurement

In the last year, I became aware of a number of initiatives being explored by federal organizations to modernize and simplify federal procurement. As federal organizations move forward with these initiatives, my hope is they will keep in mind that procurement not only needs to be simplified, but also has to be clear and compre-hensive. This would ensure suppliers bidding on federal opportunities have a clear understanding of what is expected of them, both in terms of submitting a bid and of the work that will be required once the contract is awarded. To do so, procurement documents developed by federal organizations need to be comprehensive and under-standable by most Canadians or, at the very least, suppliers within a given industry.

One of the concerns I routinely hear from Canadian suppliers, in particular small and medium-sized companies, is that federal procurement is complex. Many point to federal solicitations that often number dozens, sometimes hundreds, of pages as examples. And in some cases, suppliers had not realized these documents do not actually include standard instructions or general conditions, which are incorporated by reference. That means the documents are not only much longer, but also that suppliers have to access websites to see the totality of what they are committing to when submitting a bid and, if they are ultimately successful, signing a contract. Many suppliers I spoke with have described the text in solicitations and contracts as being legalistic and, in some cases, incomprehensible. Often, they claim that the clauses or references they point to were written by lawyers for lawyers.

Federal officials, on the other hand, point to the fact that documents are very detailed because federal organizations must fully and accurately disclose the details of the procurement process and the resulting contract. This is a principle established in court and tribunal decisions and reinforced in reviews undertaken by our Office. Federal officials have told me informally they don’t want to make solicitation and contract documents overly detailed, but that they have no choice in order to respect this principle and protect their organization from procurement-related challenges.

The conundrum, therefore, is to develop procurement documents that are clear and simple enough for the suppliers within a given industry to use while ensuring these documents are sufficiently detailed and precise. This will not be an easy task. But since Canadians were ingenious enough to, among other things, invent the snowblower, discover insulin, build the Canadarm and create the poutine, then it is not surprising that suppliers expect their government to find ways to simplify federal procurement.

Moving forward

Moving into 2017–2018, our Office will continue to listen to all those interested in federal procurement. We will also continue to assist Canadian suppliers and federal organizations in resolving their issues, concerns or disputes as quickly and informally as possible. After all, our Office’s motto is “we are here to help”. We hope Canadian suppliers and federal organizations will increasingly give us the opportunity to do so.

Lorenzo Ieraci
Interim Procurement Ombudsman

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