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ARCHIVED - Internal Audit and Evaluation Division - TBS Contracting Process


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1. Executive Summary

Background

The government strives to create an open, fair and transparent federal procurement system that is accessible and attains best value for tax dollars spent.  The current direction in government includes strengthening Public Sector Management; part of the strengthening involves tightening measures to control costs to ensure the government has the flexibility to meet the priorities of Canadians and ensure that there is adequate disclosure so that the Canadians are better able to hold their Government to account. 

Treasury Board Secretariat's (TBS) contracting processes are key management processes supporting its role and mandate.  During the fiscal year ended 2003/2004, TBS had 2,900 active contracts with an approximate value of $61 million.

This audit was identified in the risk based audit plan that was approved by the TBS Internal Audit and Evaluation Committee.

Audit Objectives and Scope

The objective of the internal audit of the TBS Contracting Processes was to provide Secretariat management an independent audit of the TBS contracting processes vis-à-vis policy requirements and to identify areas for improvement.   

The scope of this audit focused on assessing the TBS contracting processes from initiation of contract request through to contract closure including financial controls, monitoring, contract management and reporting.  The audit assessed procurement approaches available to TBS fund centre managers ranging from non-competitive contacting for less than $25,000 to large competitive contracts.

Observations and Recommendations

During the course of the audit, we found that there was no effective senior management planning and oversight function providing a corporate and longer term view of contracting.  We also found that there was not a standard approach to contracting practices across the Secretariat.  The higher-level observations and recommendations are summarized below.  Detailed findings and recommendations are included in section 3 of this report.  The management response to the detailed recommendations can also be found in this section.

The report's observations and recommendations are layered; supporting a change in culture and management responsibility for contracting, flowing down to specific operational adjustments that should be made.

Roles and Responsibilities

  • Roles and responsibilities of the key stakeholders in the contracting process were not well defined to provide strong management oversight across TBS.  There were gaps and overlaps in who should have been ensuring compliance to policy and monitoring the contracting process.
  • There was minimal oversight by TBS management of contracts where there was a policy requirement to use Public Works and Government Services Canada (PWGSC). 

We recommend TBS adopt a strengthened centralized model for procurement and contract management.  Roles and responsibilities of all key players need to be refined to strengthen controls, monitoring and oversight activities. 

We recommend that there be controls in place to ensure that there is a senior level review for contracts greater than $10,000.

We further recommend that TBS management oversight of contracts processed through PWGSC be strengthened to include mandatory approval of contract and contract amendments by the TBS Contract Review Committee.

Policies and Procedures

  • There were no internal TBS contracting directives to complement the government.wide contracting policy.
  • There were a number of compliance issues with the Treasury Board Contracting Policy in the area of contract administration and documentation.  There were also control deficiencies over contract approval and amendment processes. 
  • Approval of invoices was not always timely.
  • Contract closure did not follow a consistent approach.  There was incomplete documentation on file.

We recommend that TBS adopt their own contracting directives to be used in conjunction with the government-wide TB Contracting Policy.

We recommend that contract oversight and review be strengthened and clarified.  The compliance role, primarily the responsibility of Material Management Section needs to be strengthened by improved contract approval and amendment processes, and reporting and monitoring of contracts.

We recommend that contract documentation and closing processes be standardized and tools and checklists adopted to assist TBS fund centre managers to ensure contracts have been completed and value delivered.

We recommend that the controls in place to support the verification of financial signing authorities for Section 32 and 34 of the Financial Administration Act (FAA) be strengthened.

Planning

  • There was a lack of long-term planning for procurement and contracting.  Time horizons for most fund centre managers were short term with no focus on the larger strategic picture.  There was also a lack of adequate contract planning by fund centre managers with respect to the time required to process a procurement request.

We recommend that contract planning should be included as part of the annual business planning process and done with enough lead time to meet business needs.

We recommend services required on a frequent and ongoing basis across TBS should be identified and considered for consolidation or supply arrangements that may result in better value and less administrative burden.

Reporting and Monitoring

  • Fund centre managers and material management staff did not have the tools necessary to monitor or control vendor performance and must rely on informal methods.
  • There was a lack of key performance indicators for contracting and procurement against which to measure performance.  Systems did not provide timely financial information and lack information for TBS-wide contract management.

We recommend a systematic approach to monitoring vendor performance be implemented to improve control and management of suppliers. 

Contracting Practices

  • There was a high volume of transactions that used non-competitive approaches with minimal monitoring and management by TBS of the effectiveness of these contracts.  Contract amendments were significant in number when the non-competitive approach was used.
  • We found instances where, although policy was followed on an individual basis, examined as whole, or in subsets, there were contracting practices that raised questions.  For example, amendments are allowed according to the policy, however, multiple amendments to non-competitive contracts leads to the question of whether the contract ought to have been originally let competitively (for a higher value).  Similarly, while the policy allows for non-competitive contracts when less than $25,000, multiple non-competitive contracts for the same service and/or to the same vendor may have indicated a larger competitive contract could have been done.

We recommend that TBS establish key performance indicators to be used to assess contracting and procurement performance (e.g. number of contracts by vendor, by procurement method, number of contracts amended).  Organizational-wide oversight of the TBS contracting processes needs to be measured and monitored.