Audit of Contracting Process

October 2003

Report Summary

Project authorization

This project, which was part of the 2002-2003 risk-based audit plan, was authorized by the Health Canada Audit and Evaluation Committee.

Objectives

The objectives of this audit are to examine, evaluate, and make a report, with the aim of determining to what extent the contracting process within the Department:

• is governed by a management control framework.
• is undertaken with fairness, openness, honesty and integrity (by examining in particular the establishment sources of supply , bid evaluation and contractor selection, issuing of amendments, use of contracting authorities and best practices).
• complies with the applicable acts and regulations and the policies and procedures of Treasury Board and Health Canada.

Scope

This audit will deal with service contracts awarded by the Department, both by headquarters and regional offices. It will look at the contracting process from needs planning up to payment of the supplier.

In the event a detailed study is done that would include a review of contract files, the sample would be taken from service contracts in all sectors issued mainly during fiscal year 2001-02.

Context

One of the uses federal public service managers make of service contracts is to obtain, for short terms, specialized expertise that is not available within their organization. It is essential that the principles of best value and open access to contract possibilities always be observed, because they are the cornerstone of the federal government's contracting process. Over the last few years, the federal government's contracting practices have aroused considerable public interest. The great visibility around federal government projects, the high volume of service contracts awarded by Health Canada, and the inherent risks in increasing the use of contracts as a means to deliver programs, are significant risk factors. It was deemed appropriate in this context to carry out an audit of Health Canada's contracting process.

Issues examined

During the preliminary review phase of this audit it was agreed that three issues would be examined in the detailed examination phase. This report limits itself to those three issues as detailed herein.

Audit objective # 1 - Study of the management control framework

Determine to what extent the management control framework for the contracting process covers all the important elements; that the resulting action plan be reviewed to determine to what extent the work accomplished to date has brought about the expected changes; that the work that remains to be done is necessary and that the deadline set is achievable; and, that the structure and organization of the contracting function should be given particular attention to determine if it is the most suitable, effective and efficient.

Conclusions resulting from Audit objective # 1

The contract management framework developed by Deloitte and Touche is adequate, the action plan to fully implement it is complete and has started to positively influence the contracting performance of the department and the completion of remaining activities should be attainable within the proposed time lines. It would be more important to properly implement the remaining activities than to rush through them just to meet the deadlines in the plan.

Given that the near totality of the contracting activities are performed by Cost Centre Managers or Administrators who are not contracting specialists and that contracting is governed by strict requirements and severe and rigorous legal and administrative constraints it appears that the contractual structure and organisation of the procurement function does not give sufficient consideration to the low risk tolerance of the department in this area.

Recommendations resulting from Audit objective # 1

It is recommended that the Assistant Deputy Minister, Corporate Services Branch (ADM-CSB):

• 1. ensure that the remaining action plan activities are completed within the planned time frames;
• 2. give consideration to having the CRCC reviews conducted earlier in the procurement process;
• 3. give consideration to providing contracting authorities with appropriate levels of contracting expertise.

Audit objective # 2 - Materiel manual (Policy centre)

Study the content of departmental policy manuals concerning contracting to ensure it respects the spirit and the letter of the acts, regulations, policies and procedures that govern federal government purchases, and that it be organized in a logical, relevant way for the intended users.

Conclusions resulting form Audit objective # 2

The two guides respect the spirit and the letter of the laws, regulations, policies and procedures governing federal government purchases and are organised logically and are pertinent to the intended users.
The auditors question the need to continue to maintain two manuals as this increases the effort needed to keep the information up to date, increases the risk of not providing the same information on a given topic and may confuse the users.

Recommendations resulting form Audit objective # 2

It is recommended that the ADM-CSB:

• 4. give consideration to merging the two guides into one;
• 5. ensure that if the two guide approach is maintained the content be carefully examined to verify that the information on the topics appearing in both is identical;
• 6. ensure that the table(s) of content be reflective of the actual content of the guide(s), that the unused chapters either be identified as "for future use" or that there be no missing chapters.

Audit objective # 3 - Training on the contracting process

Verify that the program for training on the contracting process to ensure that the content and approach are conducive to bringing about improvements in the Department's contracting practices.

Conclusions resulting form Audit objective # 3

The four courses assessed individually meet the intended information needs of the target audiences although the Statement of Work and/or Request for Proposal sessions could benefit from an increase in the information on evaluation selection criteria and more time devoted to application exercises. In the auditor's opinion the orientation session offers a good overview but by itself is not sufficient for the exercising of contract approval authority by CCM's and CCA's because contracting is too complex to be understood and applied after a one day orientation session. Nonetheless the auditor is convinced that the courses are an essential element in the department's goal to increase the quality of its contracting practises.

Recommendations resulting form Audit objective # 3

It is recommended that the ADM-CSB:

• 7. ensure that the four courses on the contracting process continue to be offered to appropriate staff involved in the contracting process;
• 8. ensure that the content of the courses is updated to increase coverage of evaluation and selection criteria and allow more time to application exercises.