This article is an excerpt from the 2020 edition of The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its 2019 annual Report to the Legislative Assembly, in the report section entitled “Procurement of Goods for Government Departments: Department of Finance”, the Auditor General of Prince Edward Island found weak procurement oversight practices in low-value contracts, including improper sole-sourcing and unauthorized expenditures. In fact, the audit found that one-third of the 33 reviewed awards should have been put to open tender but instead were improperly sole-sourced:
Of these 33 transactions, 11 totaling $250,000 did not follow the competitive process outlined in the Public Purchasing Act. In two cases, a sole source memo was provided but there was insufficient documentation to explain how the purchases met the exemptions of the Public Purchasing Act. In three cases, the rationale for sole sourcing was compatibility of supplies; however, appropriate authorization from the Deputy Minister was not obtained as required. In the remaining six transactions, the purchases were not publicly tendered nor did Procurement Services have authorized sole source documentation. In one of these six instances, the amount was over $10,000 which was also a contravention of the Atlantic Procurement Agreement.
The Auditor General also found that many smaller contracts were awarded without properly following required contracting procedures. For example, in 20 percent of reviewed transactions, there was no purchase order issued prior to ordering the goods in question, and that “the purchase order was generated after the goods were purchased by the departments”. The report also found that in 97 percent of tested transactions “the employee who confirmed the receipt of goods did not have designated signing authority as required under the Financial Administration Act” and that in 60 percent of tested transactions “procurement card purchases did not follow the competitive process required in the Public Purchasing Act.” While the overall expenditures involved in these contracts were relatively small, the failure to follow proper procedures in smaller transactions is often a signal of more systemic deficiencies in overall procurement governance within an organization. This audit therefore serves as a useful case study in illustrating the importance of implementing proper contracting practices at all transactional levels across a government institution.
