Audit of the Contracting Function
Informatics Services Branch
Canadian Intellectual Property Office (CIPO)
As of January 6, 2000
Executive Summary
Background
The Audit and Evaluation Branch (AEB) was asked by the Canadian Intellectual Property Office (CIPO), through the Assistant Deputy Minister, Operations Sector, to include an audit of the contracting function of the Informatics Services Branch (ISB) as part of the 1999-2000 AEB Plan. The objectives of the audit were to determine whether the:
- tendering process used in the award of ISB contracts was in compliance with the contracting policy and regulations of the Treasury Board Secretariat; and
- ISB contracting function is being managed economically, efficiently and effectively in a manner that promotes the achievement of best value and the attainment of ISB's strategic management objectives.
The scope of the audit included a sample of six contracts covering the 1997/98 and 1998/99 fiscal years. The sample mix included the following types of contracts: two non-competitive, two competitive through CIPO, and two competitive through PWGSC. The audit focussed on the following three stages of the contracting life-cycle: needs definition and screening, tendering and contract delivery. Audit findings relating to each of the stages are described below.
Risk Management Workshop
Overall, the findings leading to the recommendations of this audit confirm the risks and controls identified in the action plan that was produced during the Risk Management Workshop – May 1999, relating to the two information technology (IT) management objectives developed at the workshop. These objectives are as follows:
- management of IT will be based upon and aligned to CIPO's business and financial objectives; and
- maintenance of existing and investment in new information technology will support the attainment of CIPO's strategic objectives and delivery of world class intellectual property (IP) services.
Overall Assessment
The tendering processes associated with the six sample ISB contracts examined were, in general, in compliance with the contracting policy and regulations of the Treasury Board Secretariat. ISB Management strives towards awarding and managing its contracts in a cost-effective manner in the pursuit of achieving best value. The quality of the contract file documentation does not, however, consistently demonstrate achievement of these objectives.
Stage 1 – Need definition and screening
This stage focuses on defining the program need and screening out requests for goods and services that are unacceptable, unduly expensive, or unnecessary, so that ISB buys, with integrity, only what it needs.
Finding
- The need associated with the six sample contracts examined was appropriately vetted by ISB Management while establishing its priorities for the 1997-98 and 1998-99 fiscal-years. The preparation of the 1997-98 and 1998-99 Long-Term Capital Plans also enabled the CIPO Executive Committee to exercise a review and challenge function.
- A vision of information technology management was documented by ISB in a Long-Range Strategic Informatics Plan (LRSIP) in May 1998. The LRSIP has not been formally approved by the CIPO Executive Committee nor has it been revised to reflect the organization's forecasted financial situation. Decisions were, therefore, made during the 1999-2000 Business Planning exercise to reduce operational, maintenance and capital budgets without the benefit of an approved and up-to-date long-term vision of information technology management. This did not provide the best forum for screening IT project proposals.
Recommendation #1
We recommend that the Chief, Operating Officer (COO) ensures that the:
- LRSIP is updated to reflect the corporate strategic vision, its current fiscal realities and stakeholders' interests;
- existing LRSIP resourcing strategy, consisting of a mix of full-time equivalents and contracted resources, is updated;
- CIPO Executive Committee approves the revised LRSIP and its associated resourcing strategy; and,
- approved LRSIP is used as a basis for screening and approving information technology project proposals as part of the business planning process and used throughout the fiscal year, along with the long-term capital plan, for screening and approving information technology projects.
Finding
While some progress has been made during the past six months, a documented framework to effectively integrate CIPO's financial, business and information technology planning efforts remains absent. Senior management's expectations should be clearly articulated as to the: activities to complete, key milestones to achieve, outputs to produce, description of roles and responsibilities of participants, composition and mandate of committee(s) structures for stakeholder representation and criteria for evaluating, prioritizing and approving information technology project proposals.
Recommendation #2
We recommend that the COO ensures that the planning efforts of ISB, product line managers and the Planning, Finance and Administration (PFA) Branch are better integrated by documenting a financial, business and information technology planning process, educating stakeholders, and monitoring closely its application. The defined process should be based on the input from all stakeholders to promote its "buy-in".
Stage 2 – Tendering
This stage focuses on the extent tendering practices are open, fair and promote the achievement of best value.
Findings – Competitive contracts through CIPO and PWGSC
- Overall the request for proposals (RFPs) issued for competitively tendered requirements were of high quality. The mandatory and rated criteria were well described as was the basis of their evaluation. Evaluation 'guides' were prepared with discipline to encourage a consistent assessment of the proposals by the individual members of the evaluation team.
- The quality of the contract files could be improved. The evaluation of proposals by individual members could not always be located. When on file, the basis of the points assigned to the rated criteria was not always evident. Negotiations in situations when only one valid bid was received was short on documentation. The outcome of the review of both the RFP and the draft contract conducted by the Finance Procurement Officer and the ISB Chief, Budget and Financial Management generally did not make its way to the contract file.
- There is some confusion as to the respective role, responsibilities and authorities of CIPO Finance and ISB personnel vis-à-vis the contracting process. In addition, ISB Responsibility Centre (RC) Managers have been delegated full contracting authority since there is no progressive dollar threshold of authorities. As a result, this limits the number of projects where the ISB Director and Deputy Directors formally review and challenge contracting decisions made by staff. However, in an attempt to strengthen this process during nine of the past twenty-four months, the ISB Director highlighted that he was to approve all Branch expenditures.
Recommendation #3
We recommend that the COO, in consultation with all stakeholders, ensures that CIPO adopts a concise user friendly contracting guide, educate users and monitor closely its application. The guide should focus on defining the role, responsibilities and authorities of stakeholders, the minimum activities to perform, the outputs to produce and the documentation to retain. The Contracting for Services Bulletin (POL 005), issued by the Comptrollers Branch on December 8, 1999, should be consulted and tailored, as necessary, to meet CIPO's needs.
Recommendation #4
We recommend that the COO re-examines, in consultation with ISB Management and PFA representatives, the authority levels delegated to Branch personnel and assess the extent they result in sufficient review, challenge and approval of contracting decisions at the ISB Director and Deputy Director levels while, at the same time, promoting efficiency in operations.
Finding – Non-competitive contracts
The non-competitive contracts examined were properly justified in accordance with the conditions specified in the Government Contract Regulations. Generally, their associated statement of work (SOW) was well described. However, deliverables could benefit from a more detailed description. Contract files were not always complete. Evidence of the request for proposal (RFP), the company's response, the RC Manager's review of the proposal and of the negotiations undertaken was not consistently found on file.
Recommendations #5
We recommend that:
- ISB Management ensures that deliverables are more clearly described in a contract's Statement of Work in order to facilitate effective contract administration; and
- recommendation three above also applies to non-competitive contracts.
Stage 3 – Contract Delivery
This stage focuses on the extent to which contract administration practices ensure that the supplier delivers what was agreed, when it was agreed, and for the price agreed.
Finding
A contract administration framework (CAF) identifies planned activities to be performed to promote achieving best value during the delivery stage of the contract life-cycle. A CAF was in place for all sample contracts reviewed. Its degree of formality varied amongst the sample contracts reviewed. In one particular case, the CAF was documented and subject to review by ISB Management. This was a positive practice. The audit team noted that such a formal approach was not adopted on the largest contract subject to review (i.e. approximately $225,000 in monthly expenditures). This is not to say that ISB officials are not effectively administering the contract. Rather, it is simply difficult to conclude on the appropriateness of the CAF given that it is not evident which specific activities were planned, at the inception of the contract, to be undertaken to assess the quality of each specific area of contractor performance.
Recommendations #6
We recommend that the COO:
- ensures that a CAF is formally documented by the ISB for all current and future significant contracts based on appropriate stakeholder consultations. The CAF should highlight whether there is a risk that particular aspects of performance, as defined in the contract, will not be subject to adequate quality control given current resources levels;
- ensures that the CAF is reviewed by the Information Technology (IT) Committee; and
- approves the CAF, based on the recommendation of the IT Committee, and receives periodic status reports as to its effectiveness.
Finding
Three contracts reviewed dealt with the maintenance and enhancements to the Techsource and Intrepid systems. The associated CAFs varied greatly. The CAF applied to contracts related to the Intrepid system was much more detailed. Although there is no one way to administer a contract, the audit team did not expect to see such a wide variation in the respective CAFs given the similarity in the nature of the services provided. There is, therefore, likely some efficiency issues that deserve ISB Management's attention.
Recommendation #7
We recommend that the COO ensures that the CAFs associated with contract(s) for the maintenance and enhancements services related to the Techsource and Intrepid systems are reviewed for purposes of identifying best practices and potential efficiency improvements.
Finding
ISB Management has endeavoured to develop a solid professional relationship with contracted resources to assist in achieving best value. ISB staff, however, have commented that decisions made by ISB Management, based on close consultation and input from the contracted resources, were not always transparent in their mind. This is not to say that the relationship established between ISB Management and its contracted resources is inappropriate. It has, however, adversely impacted the morale of a small number of ISB staff that the audit team interviewed.
Recommendation #8
We recommend that ISB Management become increasingly aware of the staff sensitivities surrounding relationships it fosters with contracted resources. Decisions should, to the maximum extent possible, be made and communicated in an open and transparent manner as a means of better managing staff sensitivities.
Finding
Contract amendments were in, general, properly justified and exercised within delegated authority levels. The quality of the documentation with respect to price support and the negotiations undertaken could be improved. Although certification of services rendered in accordance with Section 34 of the Financial Administration Act (FAA) was exercised by an individual with appropriate authority, the supporting detailed account verification was not consistently evident.
Recommendation #9
We recommend that the COO coordinates the development of:
- a concise user friendly contract administration guide, educate stakeholders and monitor closely its application. The focus of the guide should be similar to the one described under Recommendation 3 above; and
- a procedure to show that there is adequate evidence of the detailed account verification performed in support of the certification under Section 34 of the FAA.
Management Action Taken (January 2001)
Further to the audit report, ISB and PFA reviewed the recommendations put forward and then developed an action plan checklist for the nine recommendations presented. In particular, the roles and responsibilities of PFA, ISB, the Comptroller, the PFA Committee, the IT Committee and CIPO Exec were noted.
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Date Created: 2000-01-06
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