Audit report

Contracting management

Dated: May 2002

Objectives

The audit objectives are to independently review, assess and report on:

• the adequacy and appropriateness of the control framework implemented;
• the extent of compliance of the contracting process with the Government Contracts Regulations and the Department's policies; and
• the adequacy and reliability of the information system used for management decision-making relative to the contract administration activity and the extent to which the available information is used.

Scope

The scope of the audit encompassed the contract management activities of the Procurement Management Unit.

As part of this audit, we reviewed the following:

• the method of procurement (competitive versus non-competitive process) for high dollar
• value contracts;
• call-ups against a standing offer;
• the control process over contract management; and
• the filing system maintained by the Procurement Unit.

Background information

The government's procurement contracting policy objective is as follows:

"The objective is to acquire goods and services in a manner that enhances access, competition and fairness and results in best value or, if appropriate, the optimal balance of overall benefits to the Crown and the Canadian people."

The policy statement further describes that government contracting will be conducted in a manner that will:

• Stand the test of public scrutiny in matters of prudence and probity, facilitate access, encourage competition, and reflect fairness in the spending of public funds;
• Ensure preeminence of operational requirements;
• Support long-term industrial and regional development and other appropriate national objectives;
• Comply with the governments obligations under the North America Free Trade Agreement (NAFTA), the World-Trade Organization-Agreement on Government Procurement (WTOAGP) and the Agreement on Internal Trade (AIT).

The principles of accessibility, competition, fairness, transparency and best value lie at the core of government contracting policy. An equal opportunity must be provided for all firms and individuals to compete, provided that they have, in the judgement of the contracting authority, the technical, financial and managerial competence to discharge the contract and meet, when appropriate, objectives established by overall national policies or as required under the NAFTA, the WTOAGP and the AIT.

Audit results

The Passport Office has in place the Procurement Unit which provides services for the purchase of goods and services for the organization. Roles and responsibilities of the Procurement Unit are well defined in the Financial and Administrative Services Directorate (JWF) and consist mainly to ensure compliance to the Treasury Board Contracting Policy.

The Passport Office has met the Treasury Board requirements on monitoring of contracting activities. An annual report on all contracting activities was provided to Treasury Board, and as part of the Passport Office Audit Plan, an audit on contracting activities was requested by Executive Committee.

The Procurement Unit is presently in the process of defining the roles and responsibilities of its activities within the organization. Over the past, some tasks of the contracting process such as negotiating with the supplier or the contractor, were transferred at the responsibility center level ending up with minor involvement of the Procurement Unit. This situation was brought to the attention of management and actions were initiated to restate the position of the Procurement Unit.

The Passport Office has a framework where all contracting activities are processed with due diligence by the personnel in place. However, improvements to the contracting process for major contracts will strengthen the controls on an area with high level of activities and large dollar value.

The following is a brief summary of the key matters that emerged from the audit:

• A clear identification of requirements, specifications and estimates prior to bids and contract award would enhance access, competition, fairness and produce optimum results.
• Amendments to contracts to be used only in the best interest of the organization with appropriate supporting documentation.
• A contract Review committee would ensure compliance to the regulations governing contracts and will provide adequate and reliable information to be used for management decision making.
• Monitoring for payments and settlements.
• Clearly definition of roles and responsibilities of the Procurement Unit and greater involvement in the planning, coordinating and monitoring contracting activities.
• An update of the Contract Policy would provide guidance in its application.
• An established contract's file would provide a complete audit trail containing decisions, approvals, amendments important when answering questions and evaluating results.

Management response

After been informed of the preliminary results of the contracting audit, the following measures were put in place to correct the situation

Presently, resources have been assigned with the following mandate:

• Determine the role and responsibilities of the procurement unit.
• Up date the contracting policy.
• Develop desk procedures for staff of procurement unit.
• Develop a guide with the summary of the contracting process and the role and responsibilities of users.
• Propose a training plan on contracting for administrative staff.

Staffing positions will be filled up to answer operational requirements of the procurement unit.