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ARCHIVED - Report of the Review of the Draft Treasury Board Policy on Managing Procurement
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5.0 Strengths of the Draft Policy
5.1 The draft policy is principles-based, and takes a broad and strategic approach to guiding and supporting procurement practices. This is the correct focus as opposed to a rules-based system that dictates a cookie-cutter approach to procurement. Rules are rigid; principles are not. Real change in procurement practices will not be achieved by imposing a rigid set of rules and regulations on top of current ones. A principles-based policy will promote an adaptable and entrepreneurial approach on the part of procurement professionals. Guiding principles combined with professional values should inform the decisions and actions of those undertaking procurement on behalf of the Government of Canada.
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Highlights of Strengths
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Imposing a higher degree of control over government procurement processes might seem appealing. However, stifling the discretion of the vast majority of public procurement professionals who conduct themselves appropriately is not beneficial. Complexity, risk and specialized application are not served well by a one-size-fits-all model of procurement. The principle-based approach of the policy will allow for the empowering of a culture of innovation, initiative and improvement. Professionals can apply principles to situations not dictated by rules or procedures.
5.2 The draft policy is clear as to department head and individual procurement official responsibility for government procurement. Clearly defined roles and responsibilities promote accountability. The policy identifies monitoring and reporting requirements. This seeks to clarify who is responsible for what and spells out where accountability rests. Based on previous policy breaches there was not a thorough understanding of accountabilities or acceptance of responsibility for actions.
Under the draft policy, deputy heads are designated with overall responsibility for managing procurement within their respective departments. It is reasonable to locate accountability at this level and to provide deputy heads with the flexibility to be innovative in the creation of sound management practices for their departments. As senior officials, deputy heads are responsible for managing outcomes, monitoring compliance with the policy and acting on problems, while front-line procurement professionals are responsible for conducting their acquisition practices in accordance with the policy. In turn, the Treasury Board Secretariat is tasked with the role of external oversight of each department's performance in the management of its procurement. This oversight mechanism should serve as check and balance in protecting the integrity of the government's procurement processes, and preventing mis-management and misuse.
However, achieving accountability in procurement needs to go beyond defining roles and responsibilities to instilling ethical behaviour. Similarly, well designed control systems must be tied to knowledge and skills development to improve efficiency and effectiveness in obtaining value for money and sound stewardship.
5.3 Straightforward and succinct definitions are provided for the key concepts of "value for money" and "sound stewardship." The policy also clearly states that these should be guiding principles to ensure the government's ability to operate effectively and deliver programs to the citizens of Canada. It is not evident that these fundamental principles were sufficiently defined, appropriately communicated or adequately implemented in the past.
5.4 The draft policy takes the right approach and achieves the balance it seeks between avoiding a system of red tape while requiring reasonable oversight. In providing latitude for the professional judgment in procurement management, the policy encourages creativity, flexibility and a more risk-based approach in the management of processes and procedures.
5.5 It appears from reading the draft policy that the government envisions a joint approach with procurement centrally managed by PWGSC while acquisition tools and processes are put into the hands of departments. According to the policy, the exclusive authority to acquire all good and services, with minor exceptions, rests with PWGSC unless delegated by the Minister of PWGSC. The Deputy Minister of PWGSC is responsible for providing common services for procurement to departments. However, the policy also states that it "recognizes that procurement is conducted within an integrated system....where responsibilities are exercised collaboratively both within and across departments." This seems to allow for flexibility in meeting varying departmental needs while allowing the government to more effectively pursue value for money and sound stewardship through the corporate-level management of procurement.
5.6 It is commendable that the policy is explicit in assigning accountabilities and responsibilities for procurement to those public servants who have the necessary knowledge and skills to fulfill their duties. This acknowledges the specialized expertise that trained and experienced procurement professionals have to contribute. It also reflects the fact that having the right human resources in place is critical to the effective operation of the government procurement system.
Similarly, the government makes the commitment to recognize the value of certification of public servants, specifically referencing those in the procurement, materiel management and real property communities. Investing in the training and certification of its employees will help the government to ensure that public servants perform their jobs professionally and ethically, and that procurement professionals are equipped with the right skills to contribute to the future success of Canada.
5.7 As with any management system, effective measures are essential to monitor, assess and improve performance. The draft policy requires that meaningful, objective and measurable performance indicators be developed, with the specific measures to be determined by the responsible parties. These performance indicators will be of critical importance to not only those managing, reviewing or auditing the government's procurement system, but also to those managing the government's programs and services. In light of this, performance indicators must be developed in the context of measuring procurement's contribution towards achieving overall government objectives.
While the specific performance indicators may well vary, sound measures will invariably need to be built on sound data. Timely and accurate spend data must be captured and analyzed in order to reliably track performance.
5.8The policy clearly defines the elements of the procurement function. Properly, the emphasis is placed on procurement planning and analysis. Planning is of greatest importance in procurement, as the first strategic step in the process. Procurement planning involves developing a strategic plan in advance of commencing the procurement process. It draws a strategic connection between the higher level operational planning, and implementation through procurement. This approach ensures a proper business case supports the proposed acquisition and gathers all the relevant stakeholders at the beginning of the process. It also establishes goals for the procurement at the outset as well as a framework for monitoring performance. At the same time, it requires that a procurement team is formed with the necessary knowledge and skills to carry out the task.
6.0 Opportunities for Enhancing the Draft Policy
6.1 The current policy objective (5.1) states: "The objective of this policy is to manage procurement in a sustainable and financially responsible manner that supports program delivery and operations." This policy objective could be more robust. Consider the following objective statement:
The objective of this policy is to ensure that a culture of accountability is cultivated within the Government of Canada, that the government receives value for the money it spends and that procurement is managed in a manner that supports program delivery and operations, and helps government achieve its policy outcomes.
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Recommendations for Policy Enhancement
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Additionally, the expected results statement (5.2) reads: "Compliance with the requirements of this policy is expected to result in a federal procurement management regime that obtains value for money and sound stewardship in all procurement transactions." This statement is somewhat narrow. It could be expanded to:
Effective implementation and management of this policy and compliance with its requirements is expected to result in an accountable procurement management regime that is fair, open and transparent, and provides value for money and sound stewardship.
6.2 The draft policy states that procurement is to be managed in a manner that is fair, open and transparent. Fairness, openness and transparency would benefit from being defined in the policy document, as there are conflicting views on what these terms mean. It may be precarious to leave them open to interpretation. What one individual sees as fair may not be considered fair by another. Those conducting procurement activities on a daily basis, as well as suppliers and potential suppliers to government, require a clear and consistent understanding of these basic principles.
6.3 Deputy heads are assigned dual accountability in the policy (3.2) both to their respective ministers and to the Treasury Board. It would be advisable to clarify the nature and extent of this dual accountability. Otherwise consideration should be given to re-evaluating this dual reporting relationship, in light of possible conflicting priorities. This section of the policy also states that "management controls for procurement will vary across organizations...." While it is reasonable to expect that management controls reflect differences across departments, caution must also be taken to identify a minimum standard.
6.4 The policy requirement that the Deputy Minister of PWGSC is responsible and accountable for ensuring that tools and methods of supply are put in place within departments (6.2) could be strengthened. It would be prudent to attach possible consequences if adequate tools, technologies and resources are not being provided to support departmental procurement processes. Stipulating what avenues of recourse are available to deputy department heads if they believe their needs are not being met by PWGSC needs to be addressed.
6.5 The draft policy indicates that deputy heads are responsible for reporting on the effectiveness and efficiency of the acquisition system as well as co-developing the measures to be used to assess performance (6.3.2.). While, as previously stated performance measures are critical, the way this requirement is set up suggests that the deputy heads will be asked to report on themselves based in part on their own criteria. This has the potential to lead to a subjective evaluation. There needs to be further direction on establishing these performance measures.
Also, in relation to monitoring and reporting requirements, there is some lack of clarity as to the role of the Deputy Head of PWGSC and the Secretary of the Treasury Board in this regard. Specifically, the wording of the draft policy (6.2, 6.3.2 and 6.3.3) reveals possible redundancy with respect to assessing department performance in the management of procurement.
6.6 It is noted that there is no reference anywhere in the policy to the roles and responsibilities of elected officials in the procurement system of the Government of Canada. The Federal Accountability Action Plan states that "the Government will ensure that the procurement process is free of political interference." With a principal goal of the draft policy on managing procurement to enforce fair, open and transparent procurement, consideration should be given to clarifying the scope of involvement of elected officials. Typically the appropriate role of elected officials is limited to approving procurement policy and overall budgets, and ensuring a professional procurement system is in place.
6.7 The success of the draft policy is dependent on the development of a comprehensive implementation framework to guide departments in their adoption of the policy and ensure consistency in the policy's ongoing administration. While most stakeholders interviewed agree with the draft policy in principle, there are concerns about what it will look like in practice. The consensus is that this policy provides a clear top-level direction to senior management, but staff at the working level will require further guidance. The companion document will be key in addressing this.
Moving from a cumbersome, detailed rulebook to this streamlined procurement policy will also require a comprehensive change management process. It will be essential to the implementation of this new policy that these changes be effectively communicated as federal procurement officials transition from the old to the new.
7.0 Streamlining the Procurement Process
7.1 Treating the acquisition of services in the same way as the acquisition of goods needs to be examined. At present, the federal procurement process is based largely on the commodity model and is focused on savings. But the lowest price will not always guarantee the best value. This is especially true with services. Services are by definition relationship-based, and are often quite complex in their requirements and their delivery. Treating services with a standard "three bids and a purchase order" approach will lead to a commoditization of services that is ultimately disadvantageous to government achieving its value for money and policy objectives.
7.2 Consideration should be given to evaluating select corporate procurement practices (best practices) in the areas of supplier relations and strategic alliances. While openness and competition remain cornerstones of public procurement, building longer-term strategic partnerships with engaged suppliers can be of much greater benefit overall - both from a standpoint of reducing total cost as well as fuelling innovation.
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Recommendations to Streamline Procurement
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A focus on value would entail recognition of supplier competencies and past supplier excellence as well as the reality of switching costs. A value focus also properly places the emphasis on results not product or service specifications.
Current government contract regulations stipulate "compete on everything" with limited exceptions. This approach should be reviewed with thought given to supplier recruitment and selection formats other than open invitations to tenders. An example of this would be pre-qualifying potential bidders and having only qualified companies compete. The result would be a more streamlined and value-oriented procurement process for government and a more cost-effective proposition for suppliers to respond to a tender. When every supplier competes every time, it becomes about accountability of process not outcomes.
While there must be recognition that the public sector cannot operate by the same principles as the private sector, there is benefit in developing more sustainable and meaningful supplier relationships marked by a higher degree of information sharing and integration. Adapting best practices from the private sector does not preclude looking within the Government of Canada itself for learning opportunities. Of note in the federal government is the work done by the Department of National Defence where its results-oriented approach, leadership and internal culture have resulted in procurement efficiencies and advances.
7.3 The role of the Procurement Auditor should be reviewed. As the position is currently outlined in the government's Federal Accountability Action Plan, most stakeholders view it as more of an advocacy or ombudsperson role, rather than an actual audit function. In its current guise, the Procurement Auditor is charged with, among other duties, handling complaints from potential suppliers, reviewing complaints regarding contract administration and managing an alternative dispute resolution process for contracts. It appears from this, that there may be duplication in the role of the Procurement Auditor, the Auditor General and CITT.
7.4 The level of customer service of PWGSC to its internal customers across departments could be enhanced. There is a perception among many government departments that PWGSC representatives are not as consultative and customer-service oriented as desired. Typical comments relate to concerns with service levels (specifically response time), and not enough attention to operational needs.
Cultivating a customer-centric culture across the public service is critical. As stated earlier this year by the Clerk of the Privy Council, "Public service is about values, and it is about accomplishment. We must emphasize excellence, leadership and teamwork in everything we do." While in the past, supplier selection and management was thought to be the sole domain of procurement specialists, the current trend is towards team-based procurement, recognizing that it is necessary to bring together key people across the organization.
7.5 An evaluation of the relationship between PWGSC and its suppliers may find that PWGSC is not optimizing value for money in the acquisition of goods and services. This may be part of a skills gap best addressed through professional procurement education and training. Progress is already being made on this front through the federal government's Professional Development and Certification Program for the Procurement, Materiel Management and Real Property Community. The program is designed to enhance the skills and professionalism of employees working in these areas.
7.6 Effective procurement also requires that the necessary resources, tools and technologies to support procurement processes be provided. This includes, but is not limited to, adequate staffing levels, common information systems, a suite of current and flexible procurement options, and sufficient discretion to enable procurement staff to exercise independent judgment in decision‑making.