It’s no secret that defence procurement in Canada is not without its problems, notably at the high end of the value spectrum with major capital programs. For the most part, the private sector’s dealings with the Department of National Defence, the Canadian Coast Guard and Public Safety Canada – each of which purchases military and paramilitary goods and services – are unobtrusive, quietly out of the headlines.
Each year, through the Public Works and Government Services (PWGSC) buyandsell.ca website, thousands of contracts are awarded to small- and medium-size enterprises (SMEs) on behalf of various federal departments. With the enormity of workload in terms of sheer numbers, there can be issues at this end of the value spectrum, which is where a call to 1-866-734-5169 may come into play.
When that toll-free line rings in the Office of the Procurement Ombudsman (OPO) in Ottawa, it will be answered by one of the roughly two dozen staff who may be on hand on any given day, and that person effectively becomes the case manager to help address that company’s contract issue. The organization can review the contracting practices of nearly 100 federal organizations, and prides itself in the fact that there is no runaround or passing the buck typical of many bureaucracies or, indeed, out in the private sector.
The current Ombudsman, Frank Brunetta, appointed in January 2011, has a Master’s Degree in Public Administration from Harvard University. He is the second since the Conservatives provided for the OPO through their 2006 Federal Accountability Act. He previously was Assistant Deputy Minister of the Departmental Oversight Branch of (PWGSC).
Brunetta inherited an operation put in place by Shahid Minto, a former Assistant Auditor General, who got things off the ground in 2008 after two years were spent on ensuring that the necessary regulations and other parts of the OPO machinery were in place. However, day-to-day operations fall to the Deputy PO, Lorenzo Ieraci. With a Master's degree in Public Policy and Public Administration from Concordia University, Ieraci is a former Senior Director at (PWGSC), where he managed a national team of forensic accountants.
“The Government of Canada wanted to promote fairness, openness and transparency in federal procurement,” Ieraci told FrontLine, explaining that when they introduced the accountability legislation, the Conservatives were trying to address deficiencies in the mechanism whereby suppliers of goods and services could have complaints against departments and agencies resolved. Previously, suppliers that were unhappy with the award of a contract basically had two options. If it involved a major contract subject to an international trade agreement, they could approach the Canadian International Trade Tribunal. However, if it was a relatively small contract (less than $25,000 in goods or $100,000 in services) they didn’t have that option. “Suppliers could take it up with the department they were having a problem with – sometimes that worked, sometimes it didn’t – or they could take the government to court, which takes a lot of time and effort.”
While a number of oversight organizations such as the Office of the Auditor General looked at procurement before 2008, there wasn’t one dedicated to procurement. As Minto pointed out in his statement upon releasing the OPO’s 2010 report, an ongoing litany of complaints underscored the need for an impartial middleman. Proper documentation seemed to be the biggest stumbling block to efficiency.
“Despite all the legal and operational requirements and the numerous calls for proper documentation of files from internal audits, the Auditor General and others, this problem persists and it is troubling,” Minto said after two years heading the Office. “Lack of essential documentation on files raises questions about the integrity of the procurement process. Many of these questions could be avoided or quickly answered with proper documentation.” Poor communications from government was a major headache for the private sector. Minto also said that all too often, the government's first response to a complaint has been to deny any responsibility. That unnecessary denial tended to lead to delays and a breakdown of trust and respect between the government and its suppliers.
“The Procurement Ombudsman is legislated to do a number of things, but our activities are guided by three pillars: educate, facilitate, and investigate,” Ieraci says. “When we speak with suppliers, we acknowledge that there’s nothing more frustrating than dealing with a large organization where you keep getting the runaround. When you call somebody, you have to tell them the story all over again. When people contact us, whether they walk in, call us or send us an email or a fax, the person who answers your call stays with you until the issue’s addressed. When they call, they actually get a person, or if they get our answering machine, we call them back within one business day. That makes a big difference. And the fact that we will give you our name and phone number […] really resonates with suppliers who often don’t have time to deal with a huge bureaucratic machine.
“We try to avoid that kind of runaround. We use our three pillars to get the job done. We use our educate pillar to share information; the vast majority of suppliers want problems to be resolved as quickly and as painlessly as possible. […] Often there’s a bit of a misunderstanding between suppliers and department officials; the rules of the game are different.”
To explain, Ieraci recounts how his father sold air-conditioning systems in Montreal for four decades. Most of his business was sealed with a handshake and he knew that if he delivered a good product and good service, the reward was repeat business or referrals. “The rules of the game are different when you deal with departments; Just because you’ve done something well or delivered a product or a service well is no guarantee that you’re going to get the next contract. Departments are required to complete contracts over $25K.”
It seems that a lot of suppliers simply are unaware of that, but understand when somebody in the OPO explains it. For example, federal procurement can be affected directly or indirectly by one or more of 15 statutes and 35 policies. While it’s important to clear up any misunderstanding, Ieraci says some of the same can be said in reverse. “A lot of the time, federal officials might not be aware of the impact of their decisions on suppliers, especially small- and medium-sized companies.”
A key element of the OPO’s educate pillar is a series of “town hall” meetings with current and prospective suppliers. There have been nearly two-dozen across the country, many of them in the National Capital Region with its large numbers of suppliers registered to do business with the government. There’s another coming up in September at which suppliers will again be encouraged to air their concerns, which the OPO then shares with the government entities, which do not attend.
About year ago, the OPO received a call from a prospective supplier who had been approached by a department to bid on an $18,000 contract. The supplier explained that the amount of time and energy to provide information and documentation required by the department would have amounted to $7,000 – just for submitting a proposal! The caller suggested that, with this kind of cost, he might not bother to bid even if he was guaranteed the contract. The OPO brought the situation to the attention of the department which then decided to adjust its requirements. “We are able to resolve that kind of situation or at least help to inform people about a lot of the issues or problems on an informal basis.”
But when issues can’t be resolved so easily, the OPO turns to its second pillar, facilitation, a kind of shuttle diplomacy. “We find that sometimes – with both the suppliers and federal officials – it’s not what is being said that has an impact, but who says it,” Ieraci explains.
The Procurement Ombudsman is required by regulation to provide a voluntary dispute-resolution service. Turning to its in-house mediators, the OPO tries to bring the two parties together in a bid to work things out, but the process is voluntary. “We can’t force anybody to the table; nor can we force anybody to stay at the table.” It helps that the discussions are without prejudice; if they collapse, nothing that was said or done can be used in a court of law. “We make sure that the representatives of the department and the supplier are actually decision-makers, so they have the authority to sign a legally-binding agreement at the end of the session.”
Today, it has become almost standard practice for many federal contracts, and the sundry documents leading up to them, to include a non-disclosure agreement which, in theory, could preclude either side from reaching out to the OPO. But they do, often as a last resort. “In those instances, we set the ground rules for the dispute resolution discussion and hold it in a neutral location, usually our boardroom,” Ieraci says. “We have no vested interest or predetermined outcome; what we really want is to help them to come up with an agreement that will help both parties resolve the issue.”
How effective is the OPO dispute-resolution approach? How does 100% sound? Mind you, only about a dozen disputes have reached that stage in the past six years, which tends to underscore the OPO’s need to heighten awareness of what it can offer. Although they may not be aware of its specific mandate, many federal bureaucrats do know about the OPO. It remains a challenge in the supplier community, most of which are focused on securing and getting repeat government business. Ieraci suggested that they have the same attitude to the OPO as to insurance: “if they need us, they’re glad to know we’re here and will call us, but they really hope they never have to deal with us – and we’re okay with that. We just want to make sure that people know we exist, that they at least have the option of giving us a call and that we want to try to help them.”
The OPO motto, “we’re here to help”, was central to Brunetta’s last report to Parliament, for 2012-2013, in which he highlighted three issues raised by suppliers: rejection of bids for seemingly insignificant administrative reasons; shortcomings in supplier debriefings; and challenges with security clearances. “I am hearing growing support for a more reasoned and balanced government-wide approach to replace the current binary ‘all or nothing’ treatment of bid evaluation,” he wrote of the bid-rejection issue.
On the debriefings, he noted that “many suppliers who have invested time and money in preparing their bid consider being given the opportunity to understand the shortcomings of their bid not only a good business practice, but the right thing to do.” As for concerns about security clearances, he suggested that the difficulties encountered by prospective suppliers effectively limited the supplier pool to companies already doing business with the government.
The OPO’s dispute-resolution service has no fiscal threshold; it can involve small contracts worth only $1,000 or large ones of $2 billion or more. Realistically, companies at the upper end tend to have in-house legal counsel, however, early OPO involvement can reduce the risk of an unsatisfactory resolution before the lawyers need to get involved.
Ieraci mentioned a recent case where the department’s representative was government counsel. “They were reluctant to participate in our dispute-resolution process for various reasons, all legitimate,” Ieraci recalls of the OPO involvement and subsequent mediation. “But in less than a day, the supplier and department came to a mutually agreeable solution. Consider the time and energy that would have been spent by both parties preparing for court, going to court and the costs associated with it. In the end, the government’s lawyer was glad they had participated in the process.”
It might comfort suppliers to know that although the OPO is not their advocate, neither is it an apologist for the government. “We’re there to bridge a gap and facilitate dialogue,” Ieraci says. “But there are times when issues are brought to our attention that require us to investigate – our third pillar.” The OPO occasionally is tipped about systemic issues within a department or agency, a clear opportunity for more openness and fairness. “In those cases, we do a Departmental Procurement Practice Review. Are they following the rules? Are they following the trade agreements? Are they doing what they’re supposed to be doing?”
Although these reviews are not audits per se, the OPO applies auditing principles and methodologies to ensure rigour, drawing on the expertise of people formerly with the Office of the Auditor General as well as others steeped in the procurement process from having been in other departments such as (PWGSC).
The OPO also reviews specific complaints regarding the award or administration of federal contracts, with a mandate that limits completion of an investigation and presentation of its finding to 120 working days. “It’s not extremely quick,” Ieraci concedes, “but it’s faster than going to court.” Once that element of the review is completed, the OPO can not only recommend how departments or agencies can amend their practices but also, where the department is clearly at fault, can recommend compensation of up to 10% of a contract’s value.
Ieraci is quick to point out that the OPO takes pains to explain to suppliers that it can’t always address their issues or resolve complaints to their satisfaction. For instance, a couple of years ago, a supplier alleged that something was “really wrong” in a department that he had satisfactorily serviced for three years. He suspected that his client wanted to place the contract elsewhere and he wanted OPO assurance that he would get it. “In that case, we were able to resolve the issue, but not to his satisfaction,” Ieraci says. “We explained that the department must follow the rules, it has to compete the contract.”
It’s clear that the procurement process is a complex machine that the government has finally acknowledged is in dire need of an overhaul even though much of it still functions smoothly. It’s equally clear, however, that the OPO, although a relatively young organization, has become an important cog in the process.
Ken Pole is a contributing editor at FrontLine Magazines.
© FrontLine Magazines 2014