This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In the fall of 2013, The Procurement Office released its first due diligence survey to public institutions across Canada. Based on the proprietary Snapshot Review process used to conduct compliance reviews of client institutions, the survey was created to help institutions assess how they measure up to our broadly recognized due diligence standards and how they compare to other organizations. The responses were overwhelming, with feedback received from hundreds of public institutions from across Canada.
The Procurement Office then conducted follow-up surveys for the following four years to collect a total of five years of data to measure compliance trends across Canadian public institutions from 2013-2018.
Survey responses across Canada were roughly proportionate over the five-year survey period, with Western Canada accounting for about one-third of responses, Ontario providing about half of the responses, and Atlantic Canada providing just over ten percent of responses.
Survey responses across Canada were also roughly proportionate by sector over the five-year survey period, with senior-level governments and agencies accounting for about one-third of responses, municipal entities accounting for about one-third of responses, and educational institutions and the health sector accounting for the final third of responses.
The data provided an understanding of how purchasing institutions assess their procurement operations according to 24 due diligence indicators, providing an in-depth snapshot of the state of the practice across Canada in the following eight target areas: (i) institutional governance; (ii) project governance; (iii) forms and formats; (iv) document drafting; (v) bidding risks; (vi) contract management; (vii) training; and (viii) innovation.
Respondents were required to identify whether they complied with the applicable procurement standard by selecting from the following options:
- Strongly Agree
- Agree
- Somewhat Agree
- Somewhat Disagree
- Disagree
- Strongly Disagree
- Don’t Know
The following discussion summarizes some of the most significant trends identified from data collected over that five-year period.
Target Area 1: Institutional Governance
In year one, for Institutional Governance, organizations reported their strongest results for complying with open competition duties (by publicly tendering opportunities and avoiding restrictive specifications), but scored weaker when assessing their integrity indicators (internal conflict of interest and bias avoidance practices), and much weaker (with 65 percent saying “Somewhat Agree” or worse) on whether their current accountability controls measure up to emerging due diligence standards (e.g. broader institutional governance frameworks).
Similarly, in year two, organizations also reported their strongest results for complying with open competition duties, but again scored weaker when assessing their integrity indicators and much weaker (60 percent saying “Somewhat Agree” or worse) on accountability controls.
These same trends held true in year three, with open competition compliance once again ranking at the top of the three categories (with a slight overall decline), and a marginal improvement in confidence with accountability controls. However, year three also saw a significant drop in the numbers of “Strongly Agree” for integrity indicators (33.3 percent down to 24.2 percent).
These same trends remained stable in year four, with organizations reporting their strongest results in complying with open competition, but scoring weaker when assessing their integrity indicators and accountability controls, and year five saw a continuation of these trends.
Target Area 2: Project Governance
For Project Governance in year one, a majority or organizations reported “Strongly Agree” or “Agree” when it came to the use of clear project requirements and formats (e.g. scoping and use of appropriate tendering formats), but were less confident with their project approval and review processes and with the proper definition of roles and responsibilities on project teams.
However, in year two, this dropped, with only a minority of organizations reporting “Strongly Agree” or “Agree” when it came to clear project requirements and formats. They were also less confident in year two with their project approval and review processes and defining project roles and responsibilities.
Year three saw a continuation in the downward trend in confidence levels relating to the use of clear project requirements and formats, while confidence levels for approval and review processes remained static and confidence levels for defining project roles and responsibilities saw a notable decline.
Year four and five saw a further continuation of the downward trend, with only a minority of organizations reporting “Strongly Agree” or “Agree” with meeting standards across the three due diligence indicators in Project Governance.
Target Area 3: Forms and Formats
For Forms and Formats in year one, over 70 percent of organizations responded “Strongly Agree”, “Agree” or “Somewhat Agree” when asked if they promote awareness of format use, regularly update their tendering templates, and use a range of flexible, non-Contract A formats. However, a significant minority (29 percent) responded “Somewhat Disagree” or worse when asked those same questions about managing legal risks in their tendering templates.
For Forms and Formats in year two, responses were nearly identical for awareness of format use, but slightly weaker for overall confidence levels for both template content and range of formats. A significant minority (31 percent) continued to respond “Somewhat Disagree” or worse when asked those same questions about managing legal risks in their tendering templates.
Year three saw no improvement in confidence levels for managing legal risks in the use of tendering formats. In fact, the negative numbers increased slightly from prior years, with a growing minority (32 percent) responding “Somewhat Disagree” or worse in all three Forms and Formats due diligence indicators.
The downward trend continued in year five, where a high percentage of organizations showed weak levels of confidence in using forms and formats, responding “Somewhat Agree” or worse when asked if they use flexible formats (57 percent), regularly update their templates (44 percent), or promote awareness of format use (46 percent).
Year five saw some improvements, as over half of organizations showed confidence for format range and template content, with 58 percent and 59 percent of respondents answering “Strongly Agree” or “Agree”, respectively. However, those numbers dropped to less than half, with only 47 percent feeling strongly about promoting an awareness of format use.
Target Area 4: Document Drafting
For Document Drafting in year one, 89 percent of institutions responded positively (“Strongly Agree”, “Agree”, “Somewhat Agree”) when asked whether their solicitation documents were easily readable. However, only 78 percent responded similarly when asked whether their institutions clearly define drafting roles and responsibilities. That number dropped to 72 percent when asked whether they properly defined their internal drafting process.
For Document Drafting in year two, the overall combined confidence numbers for “Strongly Agree”, “Agree”, and “Somewhat Agree” dropped slightly (from 89 percent, 78 percent, 72 percent in year one to 86 percent, 71 percent, 69 percent in year two), with the most significant decreases in “Strongly Agree” responses.
Year three also saw slippage in the Document Drafting category, with drafting process flow, drafting roles and responsibilities, and document readability all seeing minor drops in positive responses and corresponding slight increases in negative responses across all categories.
By year four, a high percentage of institutions showed low confidence levels, responding “Somewhat Agree” or worse when asked if they had a properly defined drafting process (63 percent), clearly defined drafting roles and responsibilities (61 percent), and clear documents (42 percent).
In year five, these mixed results continued, with 65 percent of responses as “Somewhat Agree” or worse for drafting process flow. However, when considering drafting roles and responsibilities and document readability, organizations were more confident, with over half responding with “Strongly Agree” and “Agree” to establishing proper practices in those areas when compared to drafting process flow.
Target Area 5: Bidding Risks
For Bidding Risks in year one, 60 percent of organizations said they “Strongly Agree” or “Agree” that they properly scope their procurement documents, and 75 percent responded the same about the transparency of their evaluations. However, that number dropped to 48 percent when it came to protocols for meeting material disclosure duties.
For Bidding Risks in year two, those numbers dropped, with only 52 percent of organizations saying they “Strongly Agree” or “Agree” that they properly scope their procurement documents, and only 70 percent responded the same about the transparency of their evaluations. That number dropped to 43 percent when it came to meeting material disclosure duties.
Year three showed weaker confidence levels for contract scoping, but a slight improvement for material disclosures. Responses trended weaker and to the middle for evaluation defensibility, with “Strongly Agree” responses declining and drifting to “Agree”, while “Somewhat Agree” responses increased thanks to a slight decline in more negative responses.
By year four, 53 percent of organizations said “Strongly Agree” or “Agree” to properly scoping their procurement documents, while 68 percent of organizations said the same about the transparency of their evaluation rules. That number dropped to 44 percent for material disclosure duties, continuing the downward trend from the year one numbers.
In year five those trends remained steady, with a slight improvement for material disclosures since most organizations reported “Strongly Agree” or “Agree” for their contract scoping, evaluation defensibility processes, and material disclosures duties.
Target Area 6: Contract Management
In year one, Contract Management contained the weakest confidence levels of any survey area, with most institutions responding “Somewhat Agree” or worse to all questions. Only 48 percent stated that they “Strongly Agree” or “Agree” when asked if they had clear, post-award scope management practices. That number dropped to 46 percent for clearly defined contract administration structures and sank to 29 percent for vendor performance tracking.
Contract Management also reflected the weakest confidence levels in year two, with most institutions once again responding “Somewhat Agree” or worse to all questions. “Strongly Agree” or “Agree” responses dropped to 40 percent for scope management, remained at 46 percent for contract administration, and dropped to 27 percent for vendor performance tracking.
In year three, Contract Management saw a slight increase in all categories in “Strongly Agree” responses. However, this did not offset an overall downward drift towards more negative responses given that the “Agree” and “Somewhat Agree” responses declined across all three categories.
These trends continued in years four and five, with Contract Management reflecting the lowest overall confidence levels, with a majority still responding “Somewhat Agree” or worse to all questions in both years.
Target Area 7: Training
For Training in year one, over 80 percent of organizations expressed overall confidence (“Strongly Agree”, “Agree”, or “Somewhat Agree”) in their procurement hiring standards and ongoing procurement training. However, that number dropped to 73 percent, with 60 percent responding “Somewhat Agree” or worse when asked whether there was broad organizational awareness of procurement-related legal risks. In fact, the overall higher confidence levels disguised the high number of relatively weak “Somewhat Agree” responses.
For Training in year two, only 77.5 percent and 79 percent, respectively, of organizations expressed overall confidence (“Strongly Agree”, “Agree”, or “Somewhat Agree”) in hiring standards and ongoing procurement training, and the overall confidence number dropped to 67 percent for broader organizational awareness.
In year three, the negative trends continued into two of the Training categories, with negative numbers increasing significantly for hiring standards and ongoing training, but improving somewhat for broader organizational awareness.
By year four, only 73 percent of organizations expressed overall confidence (“Strongly Agree”, “Agree”, or “Somewhat Agree”) in their procurement hiring standards, and that number sank to 67 percent for promoting broader organizational awareness, reflecting a continuing downward trend from the year one numbers.
By year five, organizations also showed weak confidence in ongoing procurement training, with 73 percent responding “Strongly Agree”, “Agree”, or “Somewhat Agree” when asked if they were being trained on industry developments and due diligence duties, a number that remained static and showed no improvements from the year one responses.
Target Area 8: Innovation
For Innovation in year one, 54 percent of organizations responded very favourably (“Strongly Agree” or “Agree”) when asked if their procurement operations received sufficient attention from senior management. However, that confidence level dropped to 41 percent when it came to technological innovations and sank to 31 percent when it came to effectively monitoring market conditions and maintaining commercially reasonable procurement practices.
For Innovation in year two, only 44 percent of organizations responded very favourably (“Strongly Agree” or “Agree”) when asked if their procurement operations received sufficient attention from senior management. That confidence level dropped to 31 percent when it came to technological innovations and further fell to 24 percent when it came to marketplace traction.
Year three saw an improvement over year two in favourable responses to senior-level attention (52 percent compared to 44 percent), but those numbers remained weaker than year one (54 percent). The same up-and-down trend held true for the use of technology (year one: 41 percent; year two: 31 percent; year three: 35 percent). Marketplace traction continued to score weakest in favourable responses, dropping from 24 percent to 23 percent.
By year four, only 46 percent of procurement operations said they “Strongly Agree” or “Agree” that they receive adequate senior management attention, while 41 percent said they properly leveraged technology and 31 percent said that they adequately tracked market conditions.
Year five also saw low confidence levels with technology, with only one third of organizations responding that they effectively leverage technology within their procurement cycle.
Most Significant Trends
In addition to the above-noted statistical trends, the data collected over the five-year period also reflected the following significant general trends:
- In general, overall confidence levels did not improve over the five-year period, which may reflect a greater degree of awareness of the due diligence standards that public institutions are required to meet in order to maintain compliant practices and may also reflect the fact that overall conditions have not materially improved across the Canadian public sector.
- Institutions generally expressed confidence in complying with some of the “hard” due diligence indicators that can be addressed through top-down measures (e.g. open competition policies, standard templates, evaluation criteria protocols, formal training), but they were less confident with some of the subtler, “soft” indicators, where compliance calls for more integrated governance across the organization (e.g. roles and responsibilities, approval and drafting processes, contract administration, internal accountability awareness). This shows that greater focus is required in establishing institutional governance frameworks that cut across organizational silos and enable a co-ordinated approach to procurement.
- Most organizations responded positively when asked whether they encouraged the use of flexible formats outside of Contract A to mitigate legal risk and increase the efficiency of their tendering processes. However, a significant minority continue to lag behind in the adoption of flexible formats. In fact, substantial concern remained across all years for properly managing bidding risks in the tendering process.
- Most organizations reported significant gaps in training, underscoring the reality of systemic capacity gaps within institutions. The identified lack of broader organizational awareness about public procurement compliance standards also highlighted these institutional capacity gaps.
- Technological innovation saw some of the most significant drops in confidence levels over the years, underscoring the fact that many institutions continue to lag when it comes to adopting new technologies to enhance their procurement processes.
Future Considerations
The How Do You Measure Up? survey results illustrate that much unfinished business remains within the Canadian public sector when it comes to ensuring compliance with prevailing public procurement due diligence standards. While the survey and results were focused on Canada, the overarching trends and areas for improvement have a global application. The ultimate question for all public organizations is whether institutions that are facing similar challenges globally are prepared to rise to that challenge in pursuit of good governance in the public interest?
