ARCHIVED - Horizontal Internal Audit of Contracting for Professional, Technical and Temporary Help Services in Small Departments and Agencies

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Executive Summary

The objective of the audit was to determine whether contracting for professional, technical and temporary help services in small departments and agencies (SDAs) is being managed in a fair, transparent and competitive manner and whether the overall management and administration of contracting comply with the intent of the policies in place. We examined the management practices and controls over contracting activity including effective oversight, procurement strategy, contract award and contract administration.

Why This Is Important

Contracting for services has traditionally been recognized as a high-risk area, given the complexity of the policies and regulations established by central agencies. This complexity is compounded in SDAs where there are fewer resources to complete the necessary tasks and where the effects of employee turnover can be significant. It is therefore important that each SDA have an effective procurement strategy to meet its needs and that this strategy be governed by an appropriate level of management capable of challenging whether the activity will meet the organization’s priorities. Additionally, given resource constraints in SDAs, effective oversight of contracting activity ensures that decisions are not made unilaterally and that policies and regulations are respected.

Overall Assessment

Effective oversight, appropriate procurement strategies, and contract award and administration respecting the guiding principles of the applicable contracting policies and regulations ensure that contracting activity is accomplished in an open, fair and transparent manner. SDAs understand and respect the principles associated with contracting, but contracting activities could be carried out using more rigorous processes.

Oversight over contracting activity ensures that procurement requirements are in line with the strategies and priorities of departments and agencies, that a challenge function exists to ensure contracting alternatives are considered, and that policies and regulations are given sufficient due consideration. In many of the SDAs, we found that an appropriate level of management was assigned the responsibility of challenging contracting activity; in other SDAs, this challenge function was not being provided by someone with the appropriate level of authority. Nevertheless, all SDAs have the opportunity to improve the challenge function by increasing the levels of experience and awareness.

Procurement strategies implemented by departments and agencies should ensure that open and fair processes are followed. We found that contracts entered into through sole sourcing were not sufficiently justified by any of the SDAs in our audit. We also found that when standing offers were used, they were not used appropriately and therefore may not have resulted in best value to Canadians. However, we found one instance where an SDA had developed a standing offer to meet its unique recurring needs and to provide faster access to these services at best value to Canadians.

Although we found instances of sole sourcing in which the justifications had not been documented, contracts were generally being awarded in an open and fair manner. The requirements for professional, technical and temporary help services advertised in competitive requests for proposals were commensurate with the scope and timing of work agreed to in formal contracts. Evaluation criteria were objective and permitted an open and fair choice of the most successful supplier. Improvement is needed to ensure that contracts and contract amendments are signed prior to the start of agreed upon services, which will safeguard against work being completed outside of the agreed terms and conditions. In addition, SDAs should retain clearly documented results of the evaluation process to support the ranking of suppliers in an objective manner.

Adequate documentation to support contracting was generally lacking in SDAs. In each of the SDAs, we found at least one example of important missing documentation on file. On the other hand, SDAs have been providing Canadians with proactive disclosure of their contracting activity in a robust, timely and open manner.

Conclusion

Overall, SDAs need to improve their management of contracting activity, which will ensure enhanced competition and fairness and transparency in the spending of public funds. Although there are some explicit weaknesses, SDAs recognize the need for governance and control in their contracting decisions and have put in place oversight functions to provide challenge to the acquisition of professional services. SDAs should address the need to ensure that appropriate documentation exists to support their contracting activity and that their files are complete. Greater rigour is also required to mitigate possible risks arising from improper use of sole sourcing and standing offers.

The Internal Audit Sector of the Office of the Comptroller General (OCG) has asked SDAs to prepare detailed action plans in response to this audit report. The audit results and recommendations encountered positive reactions from responsible officials within SDAs. There were good indications that improvements would be pursued. Furthermore, the OCG will facilitate the dissemination of information related to audit findings including sharing of best practices as requested.

Statement of Assurance

In my professional judgment as Executive Director, Operational Auditing, sufficient and appropriate procedures and evidence gathering were performed to support the accuracy of the audit conclusion. The audit findings and conclusion are based on a comparison of the conditions that existed at the time of the audit, in the departments reviewed, against pre‑established audit criteria. Further, the evidence was gathered in accordance with the Internal Auditing Standards for the Government of Canada and the International Standards for the Professional Practice of Internal Auditing.^[1]

Background

The Treasury Board Policy on Internal Audit requires the Comptroller General to lead horizontal audits in small departments and agencies (SDAs). Horizontal audits are designed to address risks that transcend individual departments in order to report on the state of governance, controls and risk management across the Government of Canada. This report presents the results of the horizontal audit of Contracting for Professional, Technical and Temporary Help Services in small departments and agencies (SDAs).

The principal authoritative instruments governing contracting are the Government Contracts Regulations and the associated Contracting Policy. The intent of these instruments is to enhance access and competition and result in best value to the Crown and Canadians.

The Government Contracts Regulations provide the framework for contracting activity within the Government of Canada. They are supported by the Treasury Board Contracting Policy which provides further direction on contracting rules.

The Treasury Board Contracting Policy ensures that the procurement of goods and services is accomplished “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.” The Contracting Policy states that “government contracting shall be conducted in a manner that will stand the test of public scrutiny in matters of prudence and probity, facilitate access, encourage competition and reflect fairness in the spending of public funds.”

In 2005, fundamental changes were introduced to the way the government acquires goods and services, in keeping with its commitment to deliver services smarter, faster and cheaper and thereby provide best value to Canadians. Public Works and Government Services Canada (PWGSC) established a number of standing offers for goods and services that departments and agencies procure on a recurring basis. Many of these standing offers are mandatory. 

Included in the mandatory standing offers are a wide variety of professional, technical and temporary help services. These include, for example, Professional Services Online (PS  Online) and temporary help services (THS). THS standing offers are intended to be used when a public service employee is absent for a period of time or when there is a requirement for additional staff during a workload increase and an insufficient number of public service employees are available to meet the requirement. All other professional services requirements should be procured through other PWGSC standing offers, supply arrangements or other procurement vehicles.

Audit Objectives, Scope and Approach

Objectives and Scope

The objective of the audit was to determine whether contracting for professional, technical and temporary help services in small departments and agencies (SDAs) is being managed in a fair, transparent and competitive manner and whether the overall management and administration of contracting comply with the policies in place.

For the 19 small departments and agencies (SDAs) included in our audit, we looked at whether effective oversight of contracting activity was in place, whether the processes for soliciting bids and awarding contracts were done in a fair, open and transparent manner, and whether contracts were managed and administered in a manner to ensure they are successfully executed in accordance with the agreed terms and conditions. We also examined whether adequate documentation existed to support all phases of the contracting activity.

Audit Approach

The audit was conducted in two phases. Consultants were engaged to support the Office of the Comptroller General audit team in both phases.

Phase 1

To select the SDAs to be included in the audit, we performed a risk analysis of all SDAs to assess their potential risk exposure resulting from the volume of contracting conducted. Our review considered factors such as the number and types of contracts awarded, management oversight, and controls. On the basis of this analysis, we chose the 19 LDAs listed in Appendix 1. These SDAs account for more than 50% of total SDA expenditures on professional and special services.

Phase 2

For each of the 19 SDAs, we compared their practices with the criteria outlined in Appendix 2. Our methodology included interviews with managers, administrative officers, procurement and contracting employees, and finance staff directly involved in the contracting process. We also reviewed contracting procedures and practices. This included any additional policy or guidance issued by the SDA to help it achieve its contracting objectives.

We also reviewed a sample of contracting files to determine whether contracting activities had complied with the applicable policies and regulations and whether there was appropriate documentation to support critical decisions and actions taken for the contracted service. In total, we examined 222 contract files that were active during the period April 1, 2006, to March 31, 2007. Of these, 153 files were for contracts greater than $10,000 and 69 files for contracts under $10,000. The samples were chosen to ensure that contracts of varying sizes and risk exposure were considered for our audit conclusions.

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