This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide.
Legislative Hearings on the Broader Public Sector Accountability Act, Queen’s Park, November 22, 2010
The following deputation was presented by Paul Emanuelli in the Ontario Legislature on November 22, 2010 to the Standing Committee on Social Policy as part of the legislative consultation process prior to the third and final reading of Bill 122 (An Act to increase the financial accountability of organizations in the broader public sector):
I would like to thank the committee for the opportunity to speak today. I have had the benefit of reviewing the Office of the Auditor General of Ontario’s October 2010 Special Report: Consultant Use in Selected Health Organizations and its findings and recommendations relating to health sector procurement in Ontario. I have also had the benefit of reviewing the text of Bill 122. I am here to speak in support of the Honourable Minister’s attempt to enhance the probity and transparency of government procurement in Ontario and to offer some suggestions regarding the implementation of good governance measures for public procurement. My comments will focus on two main points:
First of all, we need to be more proactive in dealing with compliance with our public procurement rules. There are far too many examples where tendering infractions and the systemic mismanagement of public funds are only discovered through costly litigation or through after-the-fact audits. We need a clearer operating system that provides proactive guidance to public institutions through the creation of uniform rules.
Secondly, there are many international examples we can draw from to help inform our good governance standards to help ensure that we keep pace with other jurisdictions.
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The Need to Be Proactive With Clear Uniform Rules
We are falling behind in Canada when it comes to establishing clear and uniform public procurement rules. I have circulated copies of The Laws of Precision Drafting: A Handbook for Tenders and RFPs. In this handbook I attempt to give guidance to procurement professionals on how to properly draft their procurement documents, taking into account case law, policy, and statutory developments across a broad range of Commonwealth countries. This project evolved from my main text, Government Procurement, which consolidates over a quarter century of Canadian case law. After having completed these two projects I can draw two interrelated conclusions:
- First of all, when it comes to public procurement, Canada appears to be the most litigious jurisdiction in the English-speaking world. Our courts have occupied the field faster and with greater penetration than any other Commonwealth country. That evolving jurisprudence has created a risky and often unpredictable operating system for public procurement. I offer the February 24, 2010, Journal of Commerce article entitled “Supreme Court’s Tercon ruling may force new approach to contracts” as just one recent example of the legal uncertainty inherent in our current tendering system.
- Secondly, relative to other Commonwealth countries, we do not appear to be responding to our past mistakes by implementing effective and consistent remediation measures. We are falling behind the UK, Australia, and Africa. For the most part, our procurement operating system lacks a statutory spine. Public institutions are left to their own devices, forced to interpret complex and often contradictory case law rulings, and navigate a murky patchwork of treaties, directives, and guidelines to develop and implement their own operating rules.
The absence of a clear and uniform operating system is one of the primary reasons why we have so much litigation and why we have so many after-the-fact audit findings. We need to be better at learning from past mistakes and taking a proactive approach to the creation of good governance measures.
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Drawing from International Examples to Address the Auditor General’s Findings
Rather than re-inventing the wheel, if we want to address the issues raised in the Auditor General’s Special Report, I suggest that we consider the wealth of examples available from other jurisdictions that have experienced similar challenges. Drawing from the Precision Drafting handbook, I will offer you four examples of how other jurisdictions are dealing with the issues raised by our Auditor General:
- The Auditor General’s Special Report speaks to instances in which: (a) there was a lack of advanced planning and approvals with respect to certain contracts; (b) there was a lack of transparency with respect to both contractual objectives and evaluation criteria; (c) higher-priced consultants were given preferred treatment in the procurement process; and (d) contracts exceeded the original cost estimate or were extended without competition. To address similar issues, Ghana’s Public Procurement Act 2003 compels advanced planning by making it a statutory requirement to disclose contract requirements and contract evaluation criteria, including weightings, in public tenders. To draw on another example, the European Parliament’s Procurement Directives, along with the UK Regulations which are based on those Directives, create clear statutory rules requiring the disclosure of contract award criteria, including the disclosure of any non-price factors that will inform contract awards. These examples can help inform the creation of clear standardized rules for public procurement in Ontario to help guard against unclear award criteria, unclear contract requirements, and the cost overruns that often result from that lack of initial clarity.
- The Auditor General’s Special Report speaks to some procurement processes where suppliers were provided with insufficient time to respond to the tender call. Australia’s Commonwealth Procurement Guidelines 2008 and the European Parliament’s Procurement Directives both allow for tighter posting timeframes where institutions have provided pre-notice of intended procurements as part of their annual procurement plans. These rules create a clear protocol to help take pressure off the day-to-day tendering cycle by entrenching proactive planning into the procurement process.
- Bill 122 speaks to lobbying by public institutions. However, as the Gomery and Bellamy reports have detailed, when it comes to government procurement, we have significant issues arising from the lobbying of public institutions. The Auditor General’s Special Report notes a number of instances where Local Health Integration Networks failed to obtain conflict of interest declarations from their consultants. This deficiency requires clear remediation to help guard against procurement improprieties. Kenya’s Public Procurement and Disposal Act 2005 establishes clear rules against inappropriate conduct within the supplier community, including a ban from government contracts for up to five years for those suppliers who have breached the statute. We should consider implementing similar measures so that our conflict of interest protocols are supported with meaningful sanctions against suppliers who contravene our ethics rules.
- The Auditor General’s Special Report speaks to the number of consulting contracts that are awarded without competition, particularly in the hospital sector. The United Nations Model Law on Procurement of Goods, Construction and Services provides a broad range of recommendations regarding the use of various procurement formats, including prequalification protocols, that can help alleviate the urgency that leads to many non-competed contracts. Malawi’s Public Procurement Act 2003 also provides clear rules regarding the assessment of a contractor’s qualifications and serves as an example of the types of factors that can be standardized to help provide guidance to public institutions in the prequalifying of suppliers.
In Summary
In summary, I would like to conclude by reiterating our need to proactively establish clear and uniform good governance rules. We have many international best practices to draw from in the creation of a clear operating system for our government procurement operations.
