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Audit of WD Contracting Standards - January 2004
EXECUTIVE SUMMARY
In October 2003, the Audit and Evaluation Branch of Western Economic Diversification Canada (WD) requested BMCI Consulting Inc. (hereinafter referred to as BMCI) to conduct an audit of WD's contracting standards. The objective of this audit was to conduct an assessment of contracting practices in place at WD and their compliance with established Government policies and regulations. Weaknesses and best practices were to be identified and relevant recommendations presented. Specifically, BMCI assessed the adequacy of the management framework for the procurement function and processes in WD. The audit was conducted between October 30, 2003 and December 10, 2003.
In implementing its mandate, WD contracts for certain goods and services. These contracts represent a major portion of its operating expenditures of $48.3M for 2002-03. As reported in the Department's "Annual Purchasing Activity Report for Treasury Board Secretariat" for the calendar year 2002, the Department either directly or through Public Works and Government Services Canada (PWGSC) entered into 1,432 contracts with a total value of $4.918M or 10.2% of the operating budget.
BMCI found that the Department has already taken positive measures to further strengthen its contracting processes including the establishment of a Contract Review Committee (CRC) - a best practice. The Executive Committee created the CRC in December 2002 with a mandate to review all sole-source service contracts and amendments to these contracts. The creation of the CRC has provided a formal challenge mechanism in the review of these contracts.
Opportunities exist for further enhancements to the contracting process. Departmental processes for procurement do not fully facilitate its efficient and effective management within the objectives and frameworks set by the Treasury Board and the management framework of the Department. The Departmental standards for contracting are generally appropriate but their application needs improvement. BMCI has made a recommendation that could lead to broadening the CRC mandate to include all contracting processes. BMCI has also recommended that a risk assessment of the various contracting options being used be conducted to establish areas requiring additional executive oversight.
BMCI found that the roles and responsibilities of the participants in the contracting process are neither documented nor clear to all concerned. BMCI has recommended that the roles and responsibilities be documented and that consideration be given to making the documentation available to all employees through the Department's Intranet site along with checklists to guide employees through the contracting process.
In reviewing the contracts entered into by WD, or by PWGSC on behalf of WD, it was observed that there were many low dollar contracts for what appeared to be similar types of work. In most instances, these contracts were entered into through competitive processes. While seeking contractors through a competitive bidding process is commendable, it is not always the most efficient process for low dollar contracts. BMCI has suggested that the Department investigate the possibilities and potential for entering into standing offer and/or supply arrangements covering some of its forecast needs over a two year period. BMCI is aware of one such arrangement that the Department has put in place for audit, evaluation and consulting services and considers this a best practice. This supply arrangement has been used effectively by Headquarters and a number of regions.
BMCI understands that in the past the Department has had contracts with characteristics of employer/employee relationships. BMCI was informed that these have been dealt with and no such contracts were encountered in the sample of contracts it reviewed.
In conclusion, while WD has already taken important steps to strengthen its contracting and procurement processes, opportunities still exist to even further enhance these processes.