Governance gaps

From the February 2020 print edition

While purchasing institutions tend to focus their attention on managing the tendering process and dealing with external supplier issues, they often overlook their internal challenges. This review of recent public audits highlights widespread systemic weakness in procurement governance across Canada and underscores the need to bolster institutional governance to ensure the proper stewardship of public spending.

In its August 2019 report entitled Trudeau II Report, Canada’s Conflict of Interest and Ethics Commissioner determined that the Prime Minister breached the Conflict of Interest Act by attempting to influence the criminal prosecution of SNC-Lavalin, a large Canadian engineering company charged in 2015 for allegedly bribing Libyan government officials. As the report summarized, the Prime Minister made multiple attempts to influence the Attorney General into revisiting the independent prosecutor’s decision to proceed with the criminal prosecution of SNC-Lavalin, a prosecution that put the company at risk of losing future contracting opportunities. While the Prime Minister justified these actions as an attempt to save jobs, the scandal betrayed a profound lack of appreciation of the importance of depoliticized decision-making in areas closely connected to government contracting.

The City of Ottawa also faced recent procurement governance challenges. In its November 2019 report entitled Audit of Stage 2 Light Rail Transit (LRT) Project Procurement, the City’s Auditor General made a series of recommendations for improving procurement practices in major projects. The Auditor recommended that in the future more training be provided to evaluators before participating in major projects. The Audit also recommended a clearer delegation of authority, noting concerns raised by members of City Council over their lack of involvement in the process. As with the federal interference scandal, the Ottawa report highlighted the importance of clear procurement governance practices.
Similarly, in a 2019 report entitled eHealth Saskatchewan—Mitigating Vendor Influence and Related Conflicts of Interest, Saskatchewan’s Provincial Auditor raised significant concerns regarding conflicts of interest in eHealth Saskatchewan’s procurement processes. As the report detailed, these conflicts included employees accepting all-expense-paid trips from vendors, along with a recurring failure to declare conflicts when involved in specific procurement processes. The Auditor General recommended that the agency bolster its conflict of interest practices given the self-evident lack of appropriate institutional safeguards.

Recent audits have also raised concerns over the violation of open tendering rules. In its July 2019 report entitled BC Distribution Branch Directly Awarded Contracts, the Auditor General of British Columbia found that the government failed to follow open tendering rules and repeatedly engaged in improper direct contract awards. The government also failed to properly document the reasons behind those awards and failed to document whether it sought appropriate legal advice before making those awards. Similarly, in its 2019 annual Report to the Legislative Assembly, the Auditor General of Prince Edward Island found weak procurement oversight practices, including improper sole-sourcing and unauthorized expenditures. The audit found that one-third of the reviewed contracts should have been put to open tender but were improperly sole-sourced, and that in 97 per cent of tested transactions, the employee who signed off on receipt of goods lacked designated signing authority.

Finally, questionable contract management practices have also been uncovered. In its May 2019 audit entitled Transportation and Infrastructure Renewal: Selection and Quality Management of Bridge Projects in Central and Western Districts, the Auditor General of Nova Scotia found that the province failed to prioritize projects based on the condition of its bridges and often failed to inspect bridges after the completion of maintenance projects. Similarly, in its June 2019 report entitled Phase Two: Construction Contract Change Management Controls Should Be Strengthened, the Toronto Auditor General found over one-third of 90 reviewed change orders were caused by design errors made by City consultants and that City staff repeatedly failed to hold those consultants accountable for those errors. Further, in its April 2019 report entitled Ensuring Value for Money for Tree Maintenance Services, the Toronto Auditor General concluded that City contractors may have been paid for doing no work, with GPS records showing that instead of attending locations where City trees were planted, crews went to other locations including coffee shops, plazas, residential houses, and streets with no trees.

As these recent audits illustrate, the governance gaps in government procurement run deep, impacting a wide range of public institutions across all stages of the procurement cycle. In the future, government institutions need to double down on their procurement oversight or risk being the next public audit case study.

Paul Emanuelli is the general council of the Procurement Law office. Paul can be reached at [email protected]