Government-Wide Review of Procurement - Final Report

January 2005

**Executive Summary (PDF - 119Kb)

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Executive Summary

Table of Contents

• Foreword
• Introduction
  • Governance
  • Objectives, Scope and Process
    • Objectives
    • Scope
    • Limitations
    • Process
• Data Gathering & Perspectives
  • Previous Government Studies
  • Private Sector as Purchasers
  • Supplier Perspectives
  • The Public Service Perspective
    • Expenditure Review Committee Survey
  • Other Jurisdictions
  • Socio-Economic Research
  • Academic Literature
  • Audits
• Analysis and Discussions
  • Themes and Areas of Interest
    • Governance of Procurement
      • Performance Measurement
    • Commodity Management
    • Supplier Management
      • Small and Medium Enterprises
    • Dispute Resolution
      • Bid Redress Mechanisms
    • Contract Management
    • Human Resources
    • Change Management
• Recommendations
  1. A Corporate Approach to Procurement
     The Management of Procurement
     Legislative, Regulatory and Policy Changes
     Procurement Responsibilities
  2. Commodity Management
     Sourcing
     Procurement Tools
  3. Working with Suppliers
     Relationships
     Dispute and Redress Mechanisms
  4. Human Resources
• Conclusion
• Appendices
  1. Acknowledgements
  2. Concepts for Discussion (Concept Paper)
  3. Government-Wide Review of Procurement: Redesigning Canadian Procurement
     (presented at 2004 International Public Procurement Conference)
  4. Bibliography

Foreword

Following the release of our interim report, Concepts for Discussion, in September 2004, and the completion of data gathering, analysis and discussions, I am pleased to present the Final Report of the Parliamentary Secretary's Task Force, Government-Wide Review of Procurement.

This report outlines the distillation of our extensive research and analysis, and provides recommendations. As we conclude the work of this Task Force, we look forward with great excitement to the convergence of several related procurement reform initiatives being conducted both within Public Works and Government Services Canada and across government as a part of the Expenditure Review Committee process. In total, these transformations have the potential to make significant changes to the management of government procurement, producing improved effectiveness, efficiency, economy and government accountability for the benefit of all Canadians.

The Honourable Walt Lastewka, P.C., M.P.

Introduction

The last twelve months have marked an extensive review of the Canadian federal procurement system. Headed by Parliamentary Secretary, the Honourable Walt Lastewka, the Parliamentary Secretary's Task Force, Government-Wide Review of Procurement, was established to review federal government procurement and make recommendations for improving the system. This report outlines the work of the Task Force and sets forth recommendations. The recommendations centre on the following areas: a corporate approach to procurement; commodity management; supplier management; human resources; and change management. Section One provides an introduction to the work of the Task Force, and Sections Two and Three summarize the various data gathering activities and analyses conducted by the Task Force. Section Four contains recommendations for improving government procurement based on the data gathering and analysis both summarized herein and in the Task Force's Concept Paper, and the results of the discussion process based on the Concept Paper. Section Five provides some concluding thoughts on the challenges and opportunities related to the type of change contemplated.

Governance

The review began on December 12^th, 2003, when the Prime Minister named the Honourable Walt Lastewka as Parliamentary Secretary to the Minister of Public Works and Government Services (PWGSC) with special emphasis on procurement review. The Deputy Minister of PWGSC and the Assistant Deputy Minister of PWGSC's Acquisitions Branch established a Task Force to support Mr. Lastewka in his mandate. The Task Force was further supported by an interdepartmental committee of Directors General.

The Task Force was made up of members from PWGSC, the Department of Justice, the Department of National Defence and the Treasury Board Secretariat (TBS), as well as a private-sector consultant. Task Force members had a broad background in procurement and significant experience in the public sector.

The work of the Task Force was a government-wide initiative and included reviews of procurement objectives, activities, policies, legislation and management. The pan-government nature of the Task Force was reinforced by recognizing the work of the Task Force as one of the nine pillars of the TBS-led Expenditure Review Committee (ERC) process.

Objectives, Scope and Process

Objectives

The government is seeking a procurement system that is not only faster, simpler, and less costly, but also one that has strong ethical foundations, ensures value from a whole-of-government perspective and provides effective support for broad government priorities, governmental operational requirements and departmental programs. These objectives formed the basis for the Task Force's work. In reviewing the current system, and looking at best practices in procurement worldwide, the Task Force aimed to find a balance wherein procurement could be faster, simpler and more effective, and continue to provide the openness and transparency demanded by the Canadian public. Last, but certainly not least, the Task Force sought to make recommendations for a procurement system that demonstrates transparency, accountability and fiscal responsibility.

Scope

The Task Force's review addressed procurement at the government-wide level. In the broad sense, procurement is the strategic, proactive process of acquiring goods, services and construction from third parties in the best possible manner. This distinguishes procurement from a simple, transaction-based purchasing activity. The activities involved follow four phases.

1. The pre-contractual phase, which includes activities related to requirement definition and procurement planning
2. The contracting phase, which includes all activities from bid solicitation to contract award
3. The contract administration phase, which includes activities such as issuing contract amendments, monitoring progress, following up on delivery, payment, etc.
4. The post-contractual phase, which includes file final action (e.g. client satisfaction, contractor agreement to final claim, final contract amendment, completion of financial audits, proof of delivery, return of performance bonds) and closeout (e.g. completeness and accuracy of file documentation and adherence to file presentation standards)

The review was based on procurement by and for 98 departments and agencies (referred to in this report as "departments") listed in Schedules I, I.1 and II of the Financial Administration Act (FAA).

Limitations

This phase of the government's review of procurement did not include procurement by organizations listed in Schedule III of the FAA (Crown Corporations), or real property purchase, leasing and disposal.

The Task Force approached its review from a government-wide perspective. Accordingly, the scope of the review did not address the processes or perspectives of individual departments and agencies, such as DND, or those of specific clusters of departments aligned on particular issues, such as the Small Agencies Group. Further, the Task Force recognized that risk and complexity vary significantly across all government procurements, and therefore, chose not to look at specific examples of risk and complexity combinations such as those specific to Low Dollar Value procurement or to Major Crown Projects.

The Task Force concentrated its efforts on the government's overall approach to, and management of procurement. As a result, the Task Force did not consider individual policies or processes such as individual socio-economic benefit policies or approval processes within specific departments.

The Task Force examined the Purchasing Activity Reports, Public Accounts and the PWGSC common service procurement databases to garner as much information as possible on procurement government-wide. While a significant amount of information is available, it appears there are several important gaps, which limited the work of the Task Force. Primarily, it is difficult to gather sufficient detail at an enterprise or government-wide level. In addition, there is little information on procurement processes or outcomes, such as costs of the process, timeframes, or quality and performance of goods or services.

Process

The Task Force began its work with extensive documentary research, followed by initial interviews with key sources internal and external to government. Based on the preliminary research and analysis, the Task Force released a Concepts for Discussion document (Concept Paper) on its Web site in September 2004.

Submissions and comments were welcomed: through the Web site; meetings with staff and suppliers at PWGSC regional offices; meetings with supplier associations; speaking engagements; and international visits. Submissions to the Web site were received from individuals and organizations inside and outside of government across Canada. Regional offices of PWGSC arranged meetings in St. John's, Halifax, Montreal, Toronto, Edmonton, Vancouver and Victoria. In addition to meeting with suppliers in the regions, the Task Force met with key supplier associations in the National Capital Region as outlined earlier. Task Force members received feedback on findings presented at conferences, speaking engagements and meetings in Canada, the USA, the UK and Denmark.

The remaining work consisted of continued research and analysis based on the Concept Paper and the feedback received. This final report represents the completion of the mandate and activity of the Task Force.

Data Gathering & Perspectives

The review involved an extensive exercise in data gathering and analysis. This included the following activities.

• Reviewing previous government studies on procurement
• Interviewing 17 major private sector purchasers to understand their procurement practices and gain insight into best practices government could either adopt or adapt
• Meeting with eight trade associations representing government suppliers and obtaining information from five more
• Obtaining views and suggestions from more than 250 public servants
• Analyzing other government procurement approaches
• Conducting research into the use of procurement as a tool for socio-economic policies and programs, including discussions with seven program departments and reviewing 176 cases submitted for consideration of potential socio-economic benefits to the Procurement Review Committee
• Participating in the TBS-led Expenditure Review Committee survey, with questions to departments on their perspectives on the current procurement environment
• Consulting with academics from four countries
• Obtaining information from more than 35 other academic sources;
• Reviewing 112 audit reports
• Identifying and reviewing 23 Acts of Parliament & Regulations and 69 government policies related to procurement

The remainder of this section provides a summary of the information gathered from these stakeholders and sources, while the subsequent section presents an overview of the analysis of this information.

Previous Government Studies

The government has conducted several reviews of procurement, dating back to 1962.

• The Royal Commission on Government Organization (Glassco)
• The Lambert Commission
• The Neilson Task Force on Program Review
• Increased Ministerial Authority and Accountability
• The Renewal of the Public Service in Canada
• DND/PWGSC Procurement Reform
• Supply Business Process Renewal

The Task Force has found that many of the points raised in previous studies remain relevant and worthy of consideration. In some cases, they have led to significant changes that now provide the foundation for further improvement, in other cases, recommendations have been accepted, but implementation has been difficult and only partially successful.

Private Sector as Purchasers

The Task Force interviewed 17 major private sector corporations made up of multiple, diverse divisions, to understand their approach to leveraging procurement for their own purposes. Recognizing that government is, and must be, different from the private sector, business solutions are not always government solutions. The government can learn from the private sector, especially in light of new reporting requirements for publicly traded corporations, and adapt solutions without necessarily adopting them in whole.

The companies talked about common themes: the challenge of succeeding in an increasingly globalized marketplace; the need to be closely attuned to internal customer needs, demands and expectations; and the constant pressure to provide the best possible return for shareholders. They see procurement as a corporate function for the company, not for individual divisions or profit centres. It is widely accepted as a business line in itself, with close management attention, and a corporate commitment to continuous improvement.

The Task Force heard repeatedly of the benefits of managing procurement strategically at a corporate level, driven by long-term master contracts within which the corporation works closely with its suppliers to achieve constant improvement in both overall costs and operational effectiveness. Companies emphasized that doing business with them is a privilege, not a right. Suppliers have to work hard to earn and maintain that privilege - and in the corporate environment they do not get there through wide-open competition. Significant benefits accrue when the corporation enters into long term strategic alliances with a limited number of suppliers, for example, the sharing of business information, and a joint commitment to continuous improvement of performance and results.

N : generally no /none
Y : generally yes
M : Mixed
L : limited /some

The columns in Figure 1 show the themes raised by private sector purchasers and the degree of consistency both between the Government of Canada and the private sector, and between the various firms. Although the government functions in a different environment than the private sector, there is much that can be modified to fit the government's needs. The competitive nature of the private sector means that innovation and best practices are the basis for survival, and the government can benefit from the knowledge and experience of large companies.

Savings reported, both through the interviews and in other research, by private sector purchasers as a result of improved procurement management and processes, range from five to thirty-five percent.

Supplier Perspectives

With more than 67,000 potential suppliers registered with PWGSC alone, and more than two million individual businesses in Canada, it has been impossible for the Task Force to engage in broad information gathering with individual suppliers. As an alternative, it sought the views of 13 industry associations whose members are suppliers in key commodity areas to the federal government. In addition, a number of suppliers participated in discussions organized by the PWGSC regional offices.

Individual suppliers are concerned about: the slowness of procurement; the complexity of the procurement system; the lack of standardization; inconsistencies in government approaches; the lack of standardization in what the government buys; reluctance of the government to pre-qualify potential bidders; and delays in government approval processes. Many have commented on the lack of strategic government/supplier relationships and an apparent lack of fairness and transparency. They see government procurement focusing too much on inputs, tasks and specifications rather than outcomes. They suggest that the government find ways to use competition more effectively, coupling this with requests to: (1) recognize quality suppliers; and (2) make competing worth the cost to companies by having only qualified companies compete against each other. Many note that without useful supplier performance information, it is difficult for prime contractors to know which potential sub-contractors may cause a bid to be disqualified. Suppliers also point to the lack of criteria by which poor or superior performance is evaluated, as well as the lack of a satisfactory dispute resolution mechanism. Finally, some suppliers are seeing the result of a lack of in-house (government) understanding of industry as a hindrance to conducting better procurement.

Figure 2 depicts the summary of issues raised by the supplier associations during the initial round of discussions.

Figure 2: Supplier Association Research

Following the release of the interim report/concept paper, these and additional associations were invited back to provide additional comments. During this second round of meetings, the original associations interviewed, as well as additional associations, provided feedback.

The Public Service Perspective

The Task Force sought input from across the federal public service. Emphasis lay with the procurement community, where approximately 250 public servants from numerous departments took the time to provide comments and suggestions throughout the review process. The Task Force received feedback from the public service through a number of vehicles.

• The Material Management Institute (MMI)
  • Focus groups
  • The National Workshop
  • The Western Conference
  • Break-out sessions
• TBS-led Expenditure Review Committee survey responses
• Task Force Open House for PWGSC Employees
• Meetings with staff in the regions (set up by regional offices)
• Submissions to the Parliamentary Secretary's Web site
• Special submissions such as those of both TBS and DND

Concerns and confusion about PWGSC as a common service provider and the procurement roles and responsibilities of TBS and PWGSC led to many suggestions that the government standardize procurement policies and procedures across the whole of government, and designate a single source of legal advice on contracting. Public servants would like to see a move to more results-based procurement, using competencies and capacities as key supplier selection criteria, and relying less on detailed product or service specifications. Such change would reflect, be supported by, and require greater recognition by government of the specialized expertise involved in procurement. To that end, public servants would like to see recognition of procurement specialists as professionals, based on a professional designation and an external training process (university/college) for procurement specialists.

Many of the concerns raised by those in the public service have been addressed in the recommendations of this report.

Expenditure Review Committee Survey

The Task Force was involved in the TBS-led ERC survey of all departments. The purpose of the procurement and contracting component of the survey was to obtain information from departments on the nature and processes of procurement, both within their organizations and when they utilize PWGSC as a common service agency, and to seek their input on potential areas for improvement. As of November 18^th, 2004, 52 departments had submitted their final responses.

The questionnaire sought qualitative input from respondents rather than strictly quantitative data. Questions were grouped into three main areas.

1. A general description of the respondent department's procurement organization
2. The views on the current procurement situation including
   • Objectives of procurement
   • Effects of legislation, regulations and policies on procurement
   • Processes and tools used in the procurement process
   • What works well or not, when PWGSC is or is not the procurement authority
3. Looking ahead
   • Changes that should be made to government procurement
   • Views on delivery of procurement by a common service organization
   • How to implement changes to procurement

Information provided by respondents was very detailed and informative. While some departments did provide positive feedback about PWGSC there were also indications that PWGSC needs to improve its service delivery in several areas, most notably timeliness and information feedback.

Other Jurisdictions

In its review of other jurisdictions, the Task Force examined, in-depth, the national jurisdictions of Australia, the United Kingdom, the European Union and the United States of America and looked briefly at Denmark, Germany, the Netherlands and the Czech Republic. The Task Force also reviewed practices in the sub-national jurisdictions of: the ten Canadian provinces; the states of New South Wales and Western Australia; and the province of Western Cape in South Africa. This examination was done through internal reports, literature reviews, Internet searches, country visits and consultant reports. Research focussed on the bid challenge mechanisms as they relate to international trade agreements and governance models used by the various jurisdictions. In the latter, emphasis rested on trying to find documented savings that may have occurred as a result of the many implemented procurement reforms, which have occurred, worldwide. Examples of these can be found in Figure 3.

Figure 3: Major procurement reform initiatives in other jurisdictions

Examples of Major Procurement Reform Initiative

Austrailia

- Government-wide review 1997

United Kingdom

- 1999 Gershon Report, Tackling the Improvement of Public Sector Procurement
- July 2004, Releasing Resources to the Front Line: Review of Public Sector Efficiency

European Union

- New single directive 2004/18/EEC to replace three directives

United States of America

- Reform '88 - created the Federal Acquisition Regulations (FARs)
- Federal Acquisition Streamlining Act, 1994
- FARs reissued 2001
- Services Acquisition Reform Act, 2003

British Columbia

- 2001 New Era

Ontario

- April 2003, major changes in response to Auditor General's 2002 Report

Quebec

- Numerous changes currently being contemplated

Prince Edward Island

- Regulations currently being republished

New South Wales

- Initiative underway to rationalize a large number of policy frameworks that have accumulated over the years

Socio-Economic Research

Canadian federal government procurement accounts for approximately one third of federal discretionary spending (i.e., excluding subsidies and other transfer payments and debt payments). As a result, any decisions made respecting government procurement have a ripple effect throughout the economy. Governments often try to manage these effects to maximize the benefits to society and the economy. Task Force research in this area drew from Canadian and other governments, research and service organizations, academic literature, and private sector publications. Issues raised coalesced around three main themes.

1. The choice of procurement or other policy tools to meet a stated objective
2. The effect of other policy objectives on the procurement process
3. The strategic balance between various objectives as determined by elected representatives

While individual socio-economic benefit programs have undergone various analyses and evaluations, there has not been a consistent basis for evaluation of either individual programs or the cumulative effects on the procurement systems. Further work remains to be done to examine the role of existing socio-economic benefit policies with impacts on procurement, and what policies may be necessary to protect the interests of small and medium enterprises. An International Trade Centre (UNCTAD/WTO) document entitled A Practical Guide for Assessing and Developing Public Procurement Programs to Assist SMEs, provides one example of a methodology to follow in the future analysis of procurement and socio-economic benefits.

Academic Literature

In addition to academic literature reviews on specific issues (i.e. other jurisdictions and socio-economic benefits), the Task Force found numerous educational institutes, books, journals, conferences and academics that focus on procurement, supply chain, business and government management. A well-known book from the UK (Best Procurement Practices by Erridge, Fee and McIlroy) and an equally well-known journal from the USA (Journal of Public Procurement edited byKhi V. Thai) were reviewed, contributor-by-contributor. Several universities' Web sites in the UK, Canada and the USA were mined using the Internet, as were many sites associated with procurement. Sufficient papers and articles were reviewed by this method to ascertain general themes in academic literature published mostly in North America and Europe, as well as from Australia and South Africa. The Task Force notes that Canadian research in public procurement has been limited but that it is garnering more attention.

Other sources, including presentations and hard copy articles held by the Task Force and PWGSC Acquisitions Branch Training were also used. Educational curricula from programs on public sector administration and procurement were consulted to confirm current academic emphasis. Although detailed, the academic review was not considered exhaustive. The repetition of themes indicated that the number of reviewed sources is statistically significant, and representative of current academic thought.

The academic field has noted the importance of procurement and conducted wide-ranging research into the nature and future of procurement in the public and private sectors. Four main themes emerged from the research.

1. Strategic management of procurement
2. Extensive standardization
3. Corporate procurement function
4. Extensive supplier development

These themes are consistent with those uncovered in other areas of review and with the findings from the Task Force interviews with private sector purchasing organizations.

Audits

The Task Force identified and reviewed a considerable amount of internal audit activity related to procurement. This activity takes place independently within individual departments. In April 2004, TBS published a Guide for Managers and Internal Audit: Monitoring Procurement and Contracting which provides broad direction to managers and auditors on key considerations they should bear in mind when monitoring the procurement function and providing assurance services.

The Task Force reviewed 89 procurement-related internal audits/reviews conducted in PWGSC and other government departments since 1996/97. Identified problems, and consequent recommendations for improvement, covered a broad range of issues, the most frequent relating to the following broad categories.

• Compliance with, or clarity of, contract regulations and policies
• Acquisition card usage and improved monitoring thereof
• Responsibilities related to contract administration/contract management
• Clarity of bid evaluation criteria and contractor selection methods
• Delegation of contract authorities
• Justification of decisions to not call for bids
• Need for procurement-related training
• Contractor performance issues

The Task Force also reviewed the more strategic perspectives of the Auditor General by reviewing 23 procurement-related audit reports. Some of the audits involved multiple departments, while others were focused on a single department. Recurring observations noted in the Auditor General's reports included the following points.

• The lack of clarity of roles and responsibilities - most often in the interface between PWGSC and its client departments and agencies
• Insufficient use of competition to meet government or public expectations
• The need for increased screening of requirements to separate "wants" from "needs"
• The need to improve compliance, and increase monitoring to ensure compliance, with government policies and regulations
• The need to improve performance reporting
• Value for money concerns relating to better results for money spent and achieving savings in procurement
• The need to provide enhanced recourse mechanisms for the supplier community
• The need to improve the time it takes to get suppliers in place to meet specific government operational needs

The recommendations included in Section Four of this report, address many of the observations noted by the internal audit organizations and by the Auditor General. The recommendations will also allow the government to demonstrate better results for money spent and support conclusions about whether procurement performance and supplier relations are improving.

Analysis and Discussions

Themes and Areas of Interest

During the research outlined in the previous section, the Task Force focused its analysis on several key themes. Research has shown that the private sector, public servants, suppliers and academics all focus on similar areas when it comes to best practices in procurement. An analysis of these has proved that many of them are relevant to public sector procurement and are possible to implement, at least in some form, for the Government of Canada. The analysis has produced findings along the following broad themes.

• Governance of Procurement
• Commodity Management
• Supplier Management
• Dispute Resolution
• Contract Management
• Human Resources
• Change Management

Governance of Procurement

In both public and private sector research, the Task Force found that procurement is critical to an organization's overall performance, and so should be managed strategically at a corporate level. This allows for commonly understood objectives, plans and priorities. Some of the elements critical to effective governance are clear objectives, baseline indicators and detailed, regular reporting at all levels. Clear roles and accountabilities, as well as clearly articulated and communicated objectives for government-wide procurement, are critical to achieving savings and avoiding costs. Aspects of clear roles and accountabilities normally include the following elements.

• A focal point for accountability, responsibility and reporting for procurement government-wide. PWGSC, as the common service organization for procurement, would seem to be a logical choice for this role
• A clear distinction between setting high level, overall strategic objectives for procurement, including how procurement is to fit into the overall picture of stewardship (in the Canadian government, this role is normally played by the Treasury Board and TBS) versus determining how to meet those objectives, including responsibility for all necessary policies, guidelines, best practices, procedures and standard terminology, as would be expected from a focal point of accountability (such as the common service organization - PWGSC)
• Reciprocal responsibility of the procurement organization to support other parts of the organization in meeting their program objectives and of individual areas for the necessary planning and management to meet their broad objectives, including the need to identify procurement requirements
• A high-level forum to provide oversight and transparency on the management of procurement and the evolution of procurement best practices

This type of approach in the government of Canada would require changes to the legal and policy framework, such as providing PWGSC with the mandate to contract for services and construction, as it has for goods, and the ability for PWGSC to delegate that authority to departments where appropriate. A modified mandate should reflect the shift from a transactional process to a more strategic approach to procurement. This would also require changes to the Financial Administration Act to permit PWGSC to commit to a minimum volume of purchases on behalf of multiple departments to be charged to their appropriations.

Corporate-level management enables better analysis and provides for better-informed tradeoffs between individual and aggregated requirements, costs and socio-economic benefits. When procurement is managed corporately, the organization as a whole benefits. Even though, at times, there may be more constraints on procurement and some occasions where user departments may have to pay more, the corporate management of procurement benefits departments by allowing them to concentrate on their core duties more effectively.

Corporate management of procurement does not require the centralization of transactions. Rather, by providing departments with such tools as master contractual arrangements, standardized documents and efficient and effective processes to enable decentralized transactions, it allows for flexibility to meet individual needs while still meeting corporate-level objectives. This approach reflects a distinction between procurement activity and authority associated with establishing tools, and purchasing or spending activity and authority associated with using such tools and processes. An important focus of the entire process must be on assisting the user departments to attain their government operational objectives within the bounds of government procurement policy.

This recognition of the relevance and importance of procurement to the overall enterprise, in both the public and private sectors, is a relatively recent and evolutionary change. In the search for efficiencies, the organizations have given varying levels of priority to procurement as a corporate program in and of itself or as a governance area. In the last ten years, significant numbers of jurisdictions have initiated reforms. For the vast majority, there is little data or performance measure, either positive or negative, attesting to the outcomes of the reforms. The one very notable exception in this regard is the United Kingdom. There is ample data to conclude that the UK's initiatives have been very successful and there is much optimism that additional reforms will generate more savings.

The UK's Office of Government Commerce (OGC) reported £ 1.6B in value for money improvements over three years, which exceeded the £1B target. The UK's National Accounting Office audited the achievements and concluded that the £1.6B is a reasonable assessment. Figure 4 illustrates the value for money improvements realized by the UK.

Figure 4: Improvements and Savings

The UK is targeting a further £3B over the next three years, half of which is expected to come from Gateway Reviews. The target was established through the Public Sector Efficiency Review, released in July 2004, which concluded that significant scope exists for further procurement savings through better supply side management and further professionalization of the procurement function. The OGC will also assume a wider role as "coordinator" of procurement activity in the wider public sector and will establish "change agents" for commodities procurement.

Although the research of other jurisdictions did not uncover data to assess success or failure of reforms, trends can be discerned. It can be said with certainty that none of the jurisdictions reviewed depicts a completely centralized model. At the other extreme, only one jurisdiction could be described as entirely decentralized. Two examples of a solid corporate approach were identified. The remainder of the jurisdictions reviewed, including Australia, the UK, the USA and the EU would be characterized as hybrid models. They have many elements of a corporate approach, such as the policy function, with common objectives for government-wide purposes. Operational delivery, however, tends to be decentralized, but sophisticated jurisdictions do provide instruments and tools on a government-wide basis, usually for discretionary use.

The Canadian procurement system fragments procurement responsibilities into several dimensions: policy versus operations; delegations divided between goods and services; departments sometimes operating independently, sometimes opting for services provided by the common service organization (PWGSC) and sometimes obliged to accept mandatory services from PWGSC. As a result, authority and responsibility for government procurement is dispersed and roles and responsibilities of decision makers are unclear. The lack of central management of procurement and confusion over the respective roles PWGSC, TBS and departments has produced a challenging environment for decision makers. In moving to a corporate approach, many of the above issues can be addressed.

Performance Measurement

Fundamental to successful measurement of procurement performance is the need to relate measures and intended results to organization-wide objectives. As important as procurement performance indicators are for the procurement component of an organization, they must be continuously developed in the context of corporate objectives and used to manage the procurement activity towards results that advance overall objectives. The Auditor General has observed that improved procurement reporting would allow the government to deal more effectively with value for money issues from a government-wide perspective.

Many of the procurement performance measures currently used in the Canadian federal government tend to be process rather than results or outcome related. The Task Force was able to identify measurements used by other procurement organizations that were related to outcomes and explored the potential for new measurement tools. A frequent best practice for measurement systems is the "Balanced Scorecard", which measures, for instance, the outcomes of forecasting, strategy, sourcing and contracting. Regardless of scorecard variation, associated corporate procurement measures flow from a higher-level corporate framework, focusing on results related to the following issues.

• Employees
  • Professional development/certification
  • Organizational development, well-being and stability
• Users and Suppliers
  • Quality, satisfaction, and relationships
• Internal business process
  • Excellence, soundness, accountability, integrity, innovation and continuous improvement
  • Financial aspects
  • Costs of product and processes

Government Price Index

During the Task Force review, an innovative performance measurement tool was considered for internal development and use. The measure, termed the Government Price Index (GPI), would be a procurement price indicator for a representative sample or "basket" of goods and services to aid in monitoring prices on a historical basis. It would compare the cost paid by the government for this basket over time and reflect price movement. The GPI would assist in the demonstration of the value of the procurement function by providing one measurement of results; however, it would not be able to replace other performance measures and would have to be analyzed in concert with them. Further work and consultation on a GPI is being considered.

Commodity Management

Throughout the work of the Task Force, the term "commodity" has been used to apply to the full range of goods, services and construction, rather than the narrow, goods-focussed definition common in financial markets. This is consistent with existing usage in Acquisitions Branch (PWGSC) and in many international organizations. Even so, there has been a great deal of confusion over the definition of "commodity", especially in the private sector. In response to this, the Task Force suggests possibly moving to another commonly used term for the same concept, "category" management. For the purpose of consistency, the Task Force continues to use "commodity" rather than "category" in this report but recommends considering a gradual change to the new term.

The Canadian government has traditionally managed its procurement on a purely transactional basis. The Acquisitions Branch (PWSGC) is structured along commodity lines designed to foster expertise in specific commodities and has been successful to the extent possible in a reactive, transactional environment. The nature of the existing transactional environment leaves little time and few resources to focus on a strategic understanding of the full range of demand and supply forces at play in the market place or to develop a consistent, dynamic procurement plan to maximize value to the government and Canadians.

One hurdle to overcome in moving to commodity management in the federal government is the current approach to planning and information. Both are focussed on a transaction level and are rarely coordinated beyond the business unit or department. Commodity management, as part of an enterprise-wide, corporate management model, requires that common data and information must be available and accessible for use in planning, management and oversight at various levels and across departments.

Moving to a more planned commodity management model will allow procurement professionals to move beyond the constraints of the current environment to achieve more effective results based on risk, complexity, performance and cost. Through the creation of Commodity Councils, stakeholders at all levels can be engaged. Commodity Councils would be made up of representatives from the procurement organization, clients, suppliers, and departments with responsibility for socio-economic benefit programs to determine the best procurement approach for the specific group of goods or services. This will mean better procurement decisions as the councils will have knowledge of the demand and supply factors of specific markets, market forces and vulnerabilities, and better knowledge of internal needs and fluctuations. Within a consistent overall commodity management framework, ^Endnote [i] there will be both tools and approaches tailored to respond to the different requirements for various types of commodities and situations, ranging from common goods and services to highly complex procurement and Major Crown Projects. These will consider the impact of geographic, company size and socio-economic factors relevant to the given commodity.

The following example of how commodity management works reflects what the Task Force heard from some of the large, private sector procurement organizations. Commodity plans are developed jointly by the procurement area and internal users; once a commodity strategy is established, only the procurement area has the legal right, on behalf of the corporation, to sign contracts subsequently issued under the guidance of these plans. Responsibility centre managers continue to manage their organizations and operations, by having complete liberty within their allocated budgets to make whatever purchases they need using the contracting vehicles established collaboratively by the procurement professionals. It is the role of the procurement professionals to ensure that adequate tools are in place to respond to both corporate needs for overall efficiency and day-to-day operational requirements, including rapid and appropriate satisfaction of exceptional needs. As plans evolve year after year, exceptions are incorporated into the plans, to ensure that these requirements support the larger, corporate objectives.

Supplier Management

Supplier management is a vital part of any procurement system. Relationships with suppliers can be mutually beneficial and the private sector has shown that having intimate knowledge of industry and suppliers is vital. Just as the private sector feels that doing business should be seen as a privilege and not a right, so too should the government.

Private sector procurement organizations work with significantly fewer suppliers and make use of prequalification, including some industry-wide recognition. Pre-qualifying suppliers based on performance history, professional standards, business or other core requirements will help speed up the procurement process and ensure that the government is working with high-quality suppliers.

Supplier performance measures are also important in managing procurement and are critical in managing operations. Private sector organizations use rigorous supplier performance measures to monitor performance proactively, quickly identifying problems and resolutions, and in many cases, helping to develop suppliers, thereby ensuring better current and future value for money. Suppliers' performance should have a bearing on future business and common performance standards, and measures for suppliers are necessities.

Along with supplier performance, performance incentives, the sharing of innovation costs and savings, and business guarantees are keys to developing more effective, and properly valued, relationships with suppliers. By cultivating better relationships and developing better understanding within government of industry characteristics and practices, procurement will become both smarter and better. Although major companies have reduced their supplier base in many cases, this does not have to be the tactic in creating better government-supplier relationships. Aggregating the demand does not necessarily mean aggregating supply, and a corporate, government-wide approach to managing procurement does not necessarily mean centralization, but a move towards increased standardization and accountability. Effective commodity management, based on the perspectives of a range of stakeholders, will mean mutually beneficial procurement for both government and supplier.

Small and Medium Enterprises

Small and medium enterprises are of vital importance both in government procurement and the economy as a whole. It is important to promote opportunities for small and medium enterprises to participate fully in the procurement process and to grow as businesses, while ensuring that procurement is conducted in the best interest of all Canadians.

The Task Force, government buyers, end users and suppliers all agree on the need to ensure that small and medium enterprises, especially those located outside of central Canada, are not excluded from procurement under a government-wide management approach. The Task Force notes that there are already several initiatives, in PWGSC and elsewhere in government, designed to meet the needs of small and medium businesses. These include Contracts Canada seminars, making government procurement policies available on the Internet and through public libraries and changing the pricing strategy for the government's electronic tendering service to make it free to suppliers. There is more that can be done.

In providing a level playing field for all suppliers, especially small and medium enterprises, to participate in government procurement, the Task Force has found that commodity management will play an important role. With a move to commodity management, based on the full spectrum of supply and demand factors, it will be possible to ensure that not only are needs of small and medium enterprises considered throughout the procurement system, but also that the measures taken to address these needs are suitable to the risk, complexity and characteristics of a given industry. Commodity councils will include representation to ensure the interests of small and medium enterprises are fully considered.

Again, aggregating demand to manage the government's side of the equation does not, and should not, automatically mean aggregating supply from a single supplier. Full consideration will be given to the nature and size of suppliers in a given industry and the best way to address needs of both clients and suppliers. For those circumstances in which the best option for Canadians is to seek large contracts that may pose a barrier to small and medium enterprises, the Commodity Council will determine the best ways to protect the interests of small and medium enterprises and ensure that they have access either through consortia or through a percentage of subcontracts.

Dispute Resolution

Disputes related to procurement tend to belong to one of two types: disputes related to the bidding and contract award process; and disputes related to performance within a contract. A robust, government-wide approach to resolving both types of disputes is essential to the government's ability to manage its procurement effectively. Recognizing that the first point of dispute resolution needs to be the parties directly involved, there is also a need for formalized dispute resolution channels. For disputes related to the bidding and contract award process, Canada has several obligations arising from trade agreements. For disputes not covered by these agreements, a coordinated approach is critical to the ability of both the government and suppliers to use contract performance as a meaningful management tool.

Bid Redress Mechanisms

Suppliers and government officials alike expressed the opinion that determinations from Canada's bid challenge authority, the Canadian International Trade Tribunal (CITT), have produced a risk-averse and more costly procurement system. The Federal Government vested CITT with bid review authority pursuant to obligations under international and internal trade agreements to establish an impartial and independent review body.

The intent of the bid review obligation is to provide a quick and inexpensive method to handle complaints. While the Canadian process is quick and inexpensive from a bidder's perspective, unexpected CITT determinations have caused the procurement system to slow and the government to incur unanticipated costs, which have arisen in at least two areas.

1. CITT determinations have led procurement officials to become very cautious thereby incurring costly delays
2. Although all the trade agreements provide for limited tendering (e.g., North American Free Trade Agreement [NAFTA] Article 1016), CITT has ruled, on occasion, against invoking these legitimate provisions. Consequently, to avoid challenges, officials compete requirements where competition is unnecessary and inappropriate. Competition for competition sake is both costly, lengthy and does not generate value for money

No other jurisdiction with identical or similar trade agreement obligations has imposed upon itself the type of burdensome and onerous approach that Canada has. A review of the systems in Australia, the UK, the USA and the EU reveals many differences to the Canadian system. These differences are surprising given that Canada is a signatory to the same agreements as the UK (World Trade Organization - Agreement on Government Procurement [WTO-AGP]) and the USA (WTO-AGP & NAFTA) and that the Australian and EU arrangements have very similar provisions.

Canada's authority is most comparable to the USA in that the USA has, like Canada, a single, independent bid review authority. The USA uses primarily the Government Accountability Office (GAO) for its NAFTA complaints. The GAO has put significant limitations on the scope and content of any review (a bidder must, for example, demonstrate actual prejudice before it can complain, unlike Canada). As well, in its decisions generally, the GAO takes into account the reasonableness of the government actions in relation to the procurement and does not award damages for lost profit, allowable under the trade agreements, as Canada does.

It is the standard of reasonableness used by the GAO that contrasts most strikingly with the CITT. CITT rulings appear to be based on a standard of correctness within the context of trade agreements, not reasonableness in the wider context of procurement. This standard is also inappropriate because CITT decisions can only be subject to review by the court if they are found to be patently unreasonable. It is noteworthy that in the USA, the former General Services Board of Contract Appeals did not use a standard of reasonableness and lost its authority to hear bid protests after 10 years of what most would consider disruptive decisions.

Canada is the only jurisdiction subject to the review of an authority responsible for both an internal trade agreement (Agreement on Internal Trade [AIT]) as well as international agreements. The lower thresholds of the AIT, together with the inexpensive and rapid complaint process, mean that the CITT entertains more complaints than other jurisdictions. Further, CITT has awarded costs only in favour of suppliers, until it was ordered by the Federal Court in May 2003 to be more even-handed. This situation is exacerbated by the AIT being enforceable only against the federal government and not against the provinces and territories.

The CITT decisions have, on occasion, overridden the contracting authority's use of the public interest rationale and government operational requirements. Dispute resolution mechanisms in other countries do not appear to have this authority.

That the federal government of Canada would interpret its obligations more onerously than any of its other trade agreement partners, internally or externally, seems unnecessary and inappropriate, more especially since the extent of the obligations are not demanded nor shared by the trading partners but arise internally within the federal government.

Contract Management

The importance of good contract management throughout the contracting process is self-evident. Consistent application of good contract management protects the value that the contract was intended to deliver and aids suppliers in achieving the outcomes they proposed. When these contracts are broader, or for longer terms, they provide both more flexibility to address contract management issues as they arise and the need for increased vigilance.

Contract management goes hand in hand with supplier management. Effective contract management means better relationships and better management overall. To achieve these outcomes, common contract performance measures and management processes are key. All parties (the end user, contracting authority and supplier) need timely involvement in, and information on, contract issues. Monitoring is of vital importance for timely identification of management issues and resolution and resolution of problems.

Human Resources

Employees are one of the most important resources that any organization enjoys. This point was highlighted not only by staff, but also by suppliers and supplier associations. Many public servants have experience and knowledge that can be capitalized on to make procurement better. Procurement has evolved to become a sophisticated and complex process. It follows that individuals involved in procurement have developed appropriate operational skills and professional designation commensurate with their responsibilities in the existing environment. It will become increasingly essential, when hiring or promoting individuals, to consider factors such as analytical skills, business knowledge and acumen, a strategic mindset, as well as "softer skills" such as good communication and interpersonal relationships.

As the skills necessary for procurement evolve, it may become necessary to require public servants entering the procurement profession to have an appropriate level of education or training, such as a professional designation. Further, individuals already in procurement may need to be encouraged and supported to improve their knowledge and qualifications by additional formal, informal and on-the-job training.

The primary learning centre within the public service is the Canada School of Public Service. In addition, the Treasury Board has endorsed a Professional Development and Certification Program for the Procurement, Materiel Management and Real Property Community. This program is designed to deliver training opportunities that provide standardized core and function specific knowledge and skills to this community. The Canada School of Public Service, with PWGSC and the TBS are the logical entities to develop and coordinate provision of additional training opportunities.

The classification of procurement positions may need to be reviewed to reflect the competency profiles related to the more sophisticated and professional role that will be expected. In addition, future admission to or advancement in the procurement function may be based on the new competency profiles.

In the shorter term, concerns about loss of qualified employees resulting from retirements and transfers could be addressed by using part time or casual employment as currently provided for in the Public Service Employment Act. Secondments and mentoring arrangements are also available techniques to diminish the lack of knowledgeable resources. Longer term solutions to concerns regarding the loss of qualified employees could come from improved training and development opportunities within the public service, combined with more general government-wide efforts at recruitment to address the known problems associated with the aging public service population.

Change Management

Changes of the magnitude contemplated in this report call for a culture change; therefore, change management must be a carefully considered element of implementation. Poorly planned, resourced and controlled change management is both counter-productive and inhibits future change efforts. Task Force research has shown that key areas critical to successful change management include communications, governance, strong leadership, goal setting and clear definitions. Properly done, these efforts will create momentum, justify entry costs, make use of government-wide information management technology and aid in establishing meaningful deadlines. In the context of changing Canadian federal government procurement two of these factors are paramount: the communication of a culture change and governance in the form of strong leadership.

Those affected, from the procurement and user department sides, must be engaged in the change process and need to be able to see how to succeed. Barriers must be broken down, and the changes must be reinforced at all levels through consistent communication. Consistent messages delivered throughout the implementation period will reduce the risk of failure by minimizing the chances for misunderstandings and increasing acceptance.

The governance of the change is also of vital importance. An implementation plan, clearly stating the government's intentions to achieve certain goals, will help focus and guide changes. While the statement of intention does not in itself guarantee buy-in, it will give direction to those who will be engaged in, and affected by, the changes. Two key aspects of governance are having a visible leader and ensuring that stakeholders have a clear role in shaping the implementation. This can be achieved through involvement in planning and establishing performance measurements and rewards.

The degree of transformation contemplated in this report would require a culture change, not only within PWGSC, or even the federal government. All participants in the federal procurement system would be affected and would need to be involved in refining the details of implementation. PWGSC, the central agencies and other departments would need to work together on short and long term initiatives over the next five or more years.

Figure 4: Implementation Timeline

Figure four illustrates that initial efforts lay the foundation for future work, the bulk of the effort occurs over three subsequent years, and that the emphasis in the final phase of implementation is on consolidating efforts and finalizing transition to the new environment. Suppliers and potential suppliers of all sizes would need to provide input on proposed changes across the spectrum of risk and complexity involved in each industry. Experts in successful procurement transformation and commodity management would need to be engaged to help relieve pressure on procurement professionals as they continue to meet the procurement needs of the government throughout the transformation process.

Successful implementation would require investment to ensure that changes can be made appropriately and at the right time. Implementation cannot take place all at once; it would need to roll out in waves, to allow a manageable pace of change and to make the modifications to the implementation plan that are a valuable and necessary aspect of any change of this magnitude.

Beyond initial change management, continuous improvement is based on having a system in place to make positive continuous changes. The Task Force sees a need for continuous improvement to satisfy user needs and to meet government-wide goals of quality, best value and timeliness.

Recommendations

The following recommendations are based on the full scope of Task Force activities: the data gathering; analysis; the Concept Paper; and the input received during the discussion period that followed the release of the Concept Paper. Together, the changes proposed have the potential to save the government between $2 billion and $3 billion over the next five years without reducing the quantity, quality or timeliness of the goods and services the government uses to provide its programs and services. Such savings does not come without cost. It is estimated that $100 million would be required over the same five-year period to put in place the revised processes and systems proposed for the new procurement environment.

A. A Corporate Approach to Procurement

The Management of Procurement

A1.

The government should adopt a corporate approach to managing procurement, based on the best overall value for Canadians.

A2.

The government should establish a focal point for accountabilities related to procurement.

A3.

The government should clarify the roles of central agencies and common services in the management and delivery of procurement.

A4.

The government should consider the potential need for a body to provide advice and oversight to provide increased transparency on the management of the government's procurement process and insight on evolution in the procurement community of practice.

A5.

The government should evaluate the policy and the practice of using procurement to achieve socio-economic benefit program objectives. Criteria should focus on the following factors.

• Procurement as a policy instrument (as opposed to other instruments such as regulation or direct investment based on factors including a capacity and opportunity assessment of the intended beneficiaries and delivery model)
• The impact of potential requirements on procurement processes (including cost and effort)
• Consistency with overall objectives (priorities and consistency within a single policy as well as between policies)

Specific elements of these three factors would be expected to vary from program to program, with the risk, complexity and capacity of the policy goals and delivery mechanisms.

Similar evaluations should be required to support specific programs at inception and thereafter on a five-year or other cycle as identified at inception. Continued use of procurement as an instrument in support of socio-economic benefit programs or other policies should depend on these evaluations. Contracts containing socio-economic benefit provisions should clearly specify how the socio-economic benefit requirements will be passed down to subcontractors.

A6.

Departments should identify their procurement needs on an annual and ongoing basis. Departments' needs should be submitted either directly to PWGSC or channelled through TBS as a part of Strategic Investment Plans or other plans.

A7.

PWGSC should prepare an Annual Plan and Report on the government's procurement. The Annual Plan should outline the approach for future years based upon, and crossed-referenced to, the Strategic Investment Plans and other sources of information. The Annual Report should contain performance information on the government's procurement. The Plan and Report should be made public.

A8.

If procurement strategies receive approval in principle, through Strategic Investment Plans or other vehicles, PWGSC should have the authority to proceed with procurement and contract award, unless there is a change to the approved strategy.

Legislative, Regulatory and Policy Changes

A9.

The government should examine the legislative, regulatory and policy changes necessary for a more corporate approach to procurement. Elements of potential changes are addressed in this report.

Procurement Responsibilities

A10.

Where government-wide procurement tools and systems are available, their use should be mandatory and subject to continuous improvement. Requirements that cannot be met through these tools and systems should be handled in accordance with the applicable commodity management plan. Authority to use the tools should be widely delegated to departments, and within the tools, the only limitations on purchasing should be those associated with spending authority.

A11.

Where commodity plans exist, all transactional purchasing authority should be delegated through them in a manner appropriate to the specific commodities.

A12.

Where no established commodity plan or tools exist, departments should continue to exercise delegated authority.

A13.

Departments should continue to retain contract entry authority to address emergency procurements.

A14.

Authority to carry out procurement functions should be limited to identified procurement staff. All procurement staff, government-wide, should receive procurement functional direction from PWGSC. Over time, other reporting models should be considered to reflect the evolving environment.

A15.

The management and administration of contracts should be recognized as key responsibilities. Contracts should be administered and managed to ensure optimum value to the Crown, and the associated contract management activities and standards should be included in the commodity management plans.

A16.

Departments should designate a senior person (such as the Senior Financial Officer or other Corporate Service representative) to be responsible for identifying department procurement needs and for any procurement action taken by their departments.

A17.

Procurement performance standards should be established, including the data elements necessary for government-wide measurement and reporting.

A18.

Procurement data from all departments should be collected centrally and reported annually and as required.

B. Commodity Management

B1.

The government should manage its procurement of all goods, services and construction based on government-wide, commodity management planning, taking into consideration the total cost of ownership and the risks associated with any given commodity.

B2.

Commodity management plans should be developed in consultation with key stakeholders and based on all relevant factors that affect the cost of acquiring, managing and disposing of the commodity. Commodity Councils could be the means of consultation.

B3.

Commodity plans should receive approval of the appropriate senior authority. Commodity management plans relating to Major Crown or complex projects, or for commodities which are integral to the legislative mandate of a single department or small number of departments, should also require approval by the relevant Minister(s).

B4.

Commodity plans, or appropriate portions thereof, should be made available as public documents to ensure transparency.

B5.

The validity period of each commodity plan should be specified within the plan itself. Once approved, the plan should be followed for all transactions, unless significant changes in the procurement environment require a revisiting of the plan. Each plan should be reviewed annually but may be valid for a longer period of time.

B6.

Commodity plans should identify an exception procedure and any non-standard requirements must be justified in accordance with that procedure. Exceptions should be recorded, reported and used to refine the commodity plan.

B7.

Where indicated by the commodity plan, the government should make effective use of business guarantees (in terms of usage or business volumes). In cases where it is not possible or feasible to guarantee volumes in advance, contracts should provide for rebates or other means to achieve economies of scale.

Sourcing

B8.

The government should recognize that open competition is not necessarily the only measure of value, and, therefore, it should be replaced as the key performance measure. Each commodity plan should demonstrate which sourcing mechanism will achieve best value for money in procurement and adherence to the trade agreements.

• Open competition
• Competition between qualified suppliers
• Non-competitive or sole-source contracting
  

Procurement Tools

B9.

PWGSC should develop appropriate "standing offers" or other corporate procurement tools that fully reflect value for money and meet the needs of departments. PWGSC should ensure that these tools are readily accessible and easy to use.

B10.

Procurement terminology should definitely be standardized for use on a government-wide basis.

B11.

Standardized plain language documents should be developed to contribute to the simplification and efficiency of the contracting process.

C. Working with Suppliers

C1.

To speed up procurement, and where appropriate, a pre-qualification process for suppliers should be created. Pre-qualification criteria should include performance history, professional and industry standards, business management systems and/or other applicable core requirements.

Relationships

C2.

Where appropriate, commodity plans should identify the intention and objectives for strategic relationships with key suppliers. These relationships should be based on the capabilities of the suppliers rather than on specifications.

C3.

Suppliers' performance should have a bearing on future business. PWGSC should develop common performance standards and measures for departments to use when evaluating suppliers during and after the selection process and the life of the contract. Resulting performance data, collected by departments, should be reported to PWGSC in a timely manner.

C4.

Performance incentives, value engineering (i.e. sharing of innovation costs and savings), business guarantees, information sharing and other such approaches should be included in commodity plans and used to develop more effective relationships.

C5.

In developing performance measures, PWGSC should develop a methodology that will reward superior performance and penalize poor performance.

C6.

Where there are multiple, long-term contracts for the same commodity, there should be a strategy for re-distribution of work amongst the suppliers, based on performance.

C7.

PWGSC should publish a list of suppliers who have lost the capacity or ability to contract with the government.

C8.

PWGSC should designate the sole authority to communicate and enforce performance-based supplier sanctions government-wide and to revoke such sanctions. (This does not include international sanctions pursuant to the United Nations Act.)

Dispute and Redress Mechanisms

C9.

The government should consider reviewing the existing dispute resolution mechanism in light of the findings included in this report.

C10.

There should be a robust government-wide approach to contract management, supplier performance and dispute resolution. For both contract award disputes and contract performance disputes, the procurement officer should remain the first point of contact to resolve disputes.

C11.

For disputes over contract performance, any additional measure to address particular circumstance should be reflected in the commodity plan and contract.

D. Human Resources

D1.

All individuals who exercise procurement authority should have appropriate procurement training reflecting the qualifications needed to make informed decisions related to procurement.

D2.

Individuals entering the procurement profession should not only have appropriate qualifications, but also appropriate capacity for growth.

D3.

Both formal and on-the-job training should be mandatory to contribute to better-qualified procurement specialists.

D4.

PWGSC should work with the Canada School of Public Service to provide the necessary training.

D5.

PWSGC should establish a centre of knowledge management to acquire, maintain, update, and make available for exchange, corporate procurement processes and associated information. It should be a small, but expert-populated, centre for procurement training development, career development, communications, lessons-learned, benchmarking and best practices, including the development, simplification, standardization and continuous improvement of procurement processes and tools not commodity specific.

D6.

The Public Service Human Resources Management Agency of Canada should examine the existing procurement classification to ensure they reflect new competency profiles. New competency profiles should reflect not only procurement abilities but also "soft skills" related to planning and strategic sourcing.

D7.

All new procurement employees should be hired based on the new and revised competencies.

Conclusion

The scale of change indicated above represents a groundbreaking transformation. With the necessary dedication and investment, this transformation can aid the government in meeting its expressed targets for savings in time, product costs and process costs to support the reallocation of funds to pressing priorities while maintaining integrity in program and service delivery.

The purpose of this review was to examine the current system from a whole-of-government perspective, and based on data and analysis, make recommendations to improve the system. Having the best procurement system is not just about saving money; it is about doing more with that money. That entails clarifying what the objectives of procurement are government-wide, eliminating overlap and duplication across the government and allocating and managing sufficient resources to ensure effective service delivery for the government as a whole. We have fully recognized the importance of information for decision-making. There is no way around it; good business decisions are based on good data. We must improve the data the government captures to save money and monitor the procurement system to ensure it is meeting its goals. The building and managing of relationships with suppliers is critical. We have to create a competitive environment that is fair for all involved. We have to seek out high-quality suppliers. We have to provide a satisfactory dispute resolution mechanism. And we have to move to a simpler, more standardized system and create better procurement tools. If a tool exists, it should be used. If a tool or process is not right, we should change it in such a way that it does work, that it becomes government-wide and that everyone uses it. As observed both by the Task Force and during the discussion period, significant work remains to determine how best to move forward for individual commodities and departments. The changes recommended by this review will be refined and implemented in the coming months and years, leading to a more flexible and collaborative environment, committed to continuous improvement for the benefit of Canada.

[i] Key Elements of Commodity Management Plans
for Goods and Services

Commodity definition

• What is included/excluded in the commodity? Why?
• What related commodities are/should be covered by separate commodity management plan(s)?

Baseline/Benchmarking

• Do we have baseline performance criteria for the acquisition of that commodity such as the price paid for the goods or services, throughput times, quality standards?
• Do other jurisdictions have performance standards (e.g. price, timeliness and cost of service)?
• How will we measure and meet these benchmarks?

History/Metrics/Environmental Scan

• Major departments use the commodity
• Do current issues affect the commodity (e.g. freeze, mad cow, SARS)?
• Is the commodity critical to program delivery/good government?
• Number/value of previous procurements
• Is it a recurring/one time project?
• Major problems encountered before
• Expected lifespan of commodity
• Projected 5 yr government needs
• Previous method(s) of supply
• Performance indicators for PWGSC (how long it takes us, how many people work on this, how much is it costing us)
• Performance indicators for departments (how many people work on this, are we getting feedback on performance)
• Performance indicators for suppliers
• Impact on other commodity management plans

Standards

• What standards apply to the commodity?
  • CGSB/CSA/ISO standards
  • Commercial or Crown specifications
  • Government wide standards
  • Procurement Templates

Best Value

• Define best value for the commodity
• What technical, price, risk and socio-economic issues are relevant to the application of best value at the commodity level?
• What are the evaluation criteria e.g., What are the mandatory and point rated criteria. What are the final selection criteria?
• If not lowest valid proposal, is best value well defined to justify a premium over the lowest responsive bid
• Is there more than one supplier because of capacity issue?
• What are the rules of attribution if more than one supplier?

Policy Issues

• Beyond operational requirements, are there benefits to this procurement (e.g. Export potential for supplier because the Canadian government uses commodity)
• Need to establish a Canadian supplier base?
• Socio-economic considerations
  • Employment Equity
  • Regional Considerations
  • Aboriginal Set Asides
  • WTO/NAFTA/AIT
  • ATI issues
  • Small and medium enterprise issues

Alternatives/options

• For how long will contracts be in place?
• What options should there be?
• Long contract period vs. frequent access to business vs. life cycle etc

Supplier Base

• Who are the suppliers (who, how many, how big, who are industry leaders, financial stability etc, seasonal/business cycle)?
• Government market share (Are we big enough to influence the market, who else buys from them, how do others buy, what prices do others get?)
• Is there a capacity problem?
• Trends in industry (e.g. new products, market changes, how often products are upgraded/updated, who leads or drives change, recent mergers, normal profit margin in industry)
• Industry associations (Is there one, how well organized are they, do they have codes of practice, other stakeholders or interest group?)

Best Practices

• Is our commodity management approach consistent with the best practices in other jurisdictions?
• Are there government specific issues that impede on best practices?

Contract Management Issues

• How will we manage risk?
• Do we have a Steering committee?
• Progress review meetings/reporting
• PWGSC and OGDs to agree on contract management roles

Savings/Success Criteria

• What have we achieved before?
• What will we achieve in this round?
• What might we achieve in the next round?

Other Jurisdictions

• Joint procurements with Provincial or municipal governments
• Procurements in support of programs delivered by provincial or municipal governments (e.g. vaccines)

Method of Supply Issues

• Solicitation tools (e.g. MERX, newspapers)
• Bundling issues (Have we bundled as many requirements as possible)
• Multiple deliveries (How frequent will the deliveries be, are there several delivery points across the country)
• Warehousing issues (Just in time deliveries or will items need to be warehoused)
• Standing Offers (Which type and why, how will data be captured?)
• Supply Arrangements (How will data be captured on usage?)
• Individual Contracts

Choices

• Are we limiting the choices to maximize the economies of scale (e.g. desk top computers configurations, PDAs, cell phones, office supplies and products)?

Risk Factors

• Project Management risks
• Procurement Risks including availability of specialized procurement officers
• Specification risks (Have we properly defined what we want?)
• Quantity risks (e.g. PWGSC acting as a reseller to OGDs to get volume discounts with a soft demand from departments or implications of insufficient quantities when requested)
• Quality risks (Will the product meet expectations, implications of poor quality on program delivery?)
• Price/value risk (Do we get best value?)
• Security of supply (Is there a shortage, import/export restrictions?)
• Contract Management Risk
• Ethics risks (open, transparent, accessible, fair)

Stakeholder Consultation

• Is there an interdepartmental working group on this commodity?
• Have supplier associations been consulted?
• Have the regions been consulted?
• Is there a buy-in on the business rules that will govern the methods of supply?
• Have departments documented their immediate and long term needs?