ARCHIVED - Internal Audit and Evaluation Division - TBS Contracting Process

• Previous Page
• Table of Contents
• Next Page

This page has been archived.

2.  Introduction

2.1. 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.

TBS's Guide for Managers and Internal Audit: Monitoring Procurement and Contracting stipulates that procurement and contracting are elements that should be addressed within a department's overall management control framework (MCF).  The effective operation and implementation of a MCF depends on the requirements of the procurement processes, the governing statutes, regulations and policies, the training and development of departmental staff, public expectations, and the interpretation of what constitutes a fair and transparent procurement process.  In addition, depending on the size of an organization, the nature of its business and the complexity of the way in which procurement is used in its operations, the comprehensiveness and complexity of the MCF and its key enablers will vary considerably.  For example, the larger the department, the more likely that formal processes and procedures will have been put in place and will have been formally articulated. On July 28, 2004, the Internal Audit and Evaluation Committee gave its approval for the conduct of this audit.

2.2. Objective

The Treasury Board Contracting Policy states: "The objective of government procurement contracting is to acquire goods and services and to carry out construction in a manner that enhances access, competition and fairness and results in best value or, if appropriate, the optimal balance of overall benefits to the Crown and the Canadian people".

Specifically the objectives of the audit were to:

• Determine if TBS's contracting practices were appropriately managed; in consideration of value for money in contracting;
• Identify areas of risk within the process for which controls should be in place to mitigate; and
• Identify any issues of non-compliance to TB and TBS's policies and guidelines.

2.3.Scope

The audit assessed the TBS contracting process from initiation of contract request through to contract closure including financial controls, monitoring, contract management and reporting. 

The audit assessed the following procurement vehicles available to TBS managers:

• Traditional Non-Competitive  – TBS defines these as contracts for amounts less than $25,000. Letters of Agreements are included under this process; which represents contracts for less than $10,000.
• Traditional Competitive – TBS defines this process as contracts greater than $25,000 handled with competitive bidding processes through targeted vendor selection or open bidding using the MERX Open Bidding System.  These contracts are processed internally at TBS.
• Call-ups – This procurement process utilizes contracting terms under Public Works and Government Services Canada (PWGSC) Standing Offers where contracting is handled by PWGSC.  A standing offer is an offer from a potential supplier to supply goods, services or both, on the pricing basis and under the terms and conditions stated in the standing offer.
• PWGSC Competitive Contracts – TBS defines this contracting process as contracts handled with PWGSC using competitive, open bidding processes.
• Other – A significant number of contracts for goods and services are handled through use of purchase orders with material suppliers and contracts with service providers of temporary help.

See Appendix 3 for a breakdown of the number of contracts by type for fiscal years 2001/2002 through to 2003/2004.

2.4. Criteria

The criteria used for this audit were based on generally accepted criteria and covered the following key contracting elements of the contracting policies, publications and directives[1]:

• Authorities and Roles and Responsibilities – Authority had been delegated and is carried out with prudence, and in accordance with delegation instruments.
• Best Value – Contracting out was the more cost-effective means of program delivery when the knowledge, expertise, resources or facilities required were not available in.house.  There was clear identification of requirements and resulting assessment/analysis (not necessarily cost based).
• Bidding and Selection – Bids had been solicited, except where it was not possible, practical, or cost effective, pursuant to Section 6 of the Government Contracts Regulations.
• Review Mechanism – Appropriate review mechanisms for management oversight and monitoring were in place so that value for money was achieved in the utilization of resources from an overall management and decision-making perspective.
• Contract administration – Contracts were managed to ensure successful execution in terms of time, cost and performance.
• Financial considerations – Compliance with Sections 32, 33, and 34 of the Financial Administration Act.
• Documentation – Procurement files were complete.

During the course of the audit the audit criteria identified above were evaluated against the end.to.end contracting process.

2.5. Approach and Methodology

Approach

The approach taken to conduct the audit included the following steps:

• Identified and documented the TBS contracting processes including key controls.
• Selected a small judgemental sample of contracts from April 2001 to September 2004 representing various types, risks (complexity, size, non.competitive, competitive) and TBS sectors.  The contracts were completed or in-progress, and were assessed for their compliance with the guidelines stipulated in the TBS contracting policies and publications.
• Evaluated the TBS contracting process project against audit criteria and best practices.
• Identified areas for improvement for the contracting process project.
• Based on the above steps, practical recommendations were developed and communicated to the Material Management Section management.

Methodology

The audit team conducted research of TB policies and TBS guidelines as well as external best practices for contracting.  Based on the research, audit criteria were identified by the audit team and subsequently reviewed and approved by the Internal Audit and Evaluation Committee.

The audit team interviewed key members of the Material Management Section (MMS), fund centre managers, members of the Contract Review Committee and financial management/accounts payable. 

A judgmental sample of 47 contracts was chosen from the period April 2001 to September 2004.  Refer to Appendix 3 for a breakdown of the type of contracts included in the sample.  The sample was reviewed for assessing compliance with TB Contracting Policy as well as TBS contracting guidelines.  Preliminary findings were presented to key staff in the MMS.

 

• Previous Page
• Table of Contents
• Next Page