A better way to buy – Canadian Government Executive

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May 7, 2012

A better way to buy

CGE Vol.14 No.2 February 2008

Often overworked and understaffed, the procurement offices of public agencies struggle with a process that keeps them focused more on minutiae than strategy. Associate editor Chris Thatcher spoke with three experts about how to improve the process: Vancouver consultant Michael Asner, author of The Request for Proposal Handbook, who works with municipal and state governments; Richard Paton, former deputy secretary of the Administrative Policy Branch at Treasury Board and now president of the Canadian Chemical Producers Association; and Robert Dye, president and COO of the Purchasing Management Association of Canada and the author of a review of the draft Treasury Board policy on managing procurement.  

CGE: How should public servants ensure fair play among contending suppliers – on a level playing field with due regard for accountability – while also ensuring that those same vendors aren’t strangled in red tape? And how do you balance timeliness and results with accountability and due process.

Richard Paton:
I think the most important thing is simply defining the requirements in a way that doesn’t bias towards one potential supplier. And define what you want to achieve as opposed to all the details of the inputs. We used to call that “solution-oriented” procurement. It has some risks in IT and areas like that. Sometimes you want to leave the creativity there for the private sector to respond.

Robert Dye: This has to be about being guided by a policy that provides flexibility in the way in which the public service does its job, not about following rules. And those public servants who are dealing with suppliers have got to be better trained, and trained in newer approaches. The issue of training is key because the objectives that Treasury Board is espousing in its new policy – fairness, openness, transparency and sound stewardship – are not unique to the public service. Those are the same principles and objectives followed in the private sector. There is training available. I’m aware of two good programs delivered through the Canada School of Public Service. But I’m not sure enough people are accessing them.

Michael Asner: What we’re talking about is the high risk, high visibility, highly contentious procurements; those are the ones that can come off the rails, sometimes because a boss becomes involved and makes political decisions and sometimes because the process is flawed. I’m analysing a file right now in which a ministry had an engineering firm do a study and a design, all good stuff, but when they decided to compete it, the users simply stuffed the engineering study into an RFP. Guess who won? Procurement officers are emasculated and when that happens they get overridden. If it happens once, they say, “Okay, I’ll hold my nose.” If it happens twice, they either get a large dose of ethics and look for another job or they buckle under. There are some fundamental issues that get raised by this behaviour. If you want to ensure fair play on high risk, high visibility, highly political contracts, hire a fairness officer, an outside party who can take the heat. And to free up the procurement people to focus on important strategic issues, raise your limits in your policies and procedures. Right now it takes you $30,000 worth of effort to award a $10,000 contract.

CGE: There are well-documented arguments in support of performance measurement as a means of assessing the effectiveness of public procurement. However, does this risk adding an extra layer of bureaucracy to an already excessive process?

Dye: No, and this isn’t unique to the public service. If you look at practice in the private sector, what cannot be measured cannot be managed. And performance measures are a needed and effective management tool. They need not be awkward, cumbersome and bureaucratic, although they can be if one isn’t careful. But there needs to be a performance measurement process, something that was called for in Treasury Board’s new draft policy. One of the key aspects of that policy was that deputy heads of departments are responsible for what is going on in their departments – this follows Gomery’s findings where far too many people were saying, “I didn’t know or it wasn’t my responsibility.” If you’re assigning responsibility, then you are also assigning the responsibility to ensure that performance is measured. It’s a common practice in the private sector and should be in the public sector.

Asner: Most performance measures are efficiency measures, not effectiveness measures. Effectiveness measures would be: Did we address strategic issues over the past year? Did we save the organization millions because we brought smarts to our contracting process? Did we get sued is not a measure of effectiveness. It may be a measure of intimidation or of vendors who want to do business in the future and are not complaining.

Paton: I’ve always been a supporter of evaluation and audit performance measurement. There is a risk. Government tends to be driven by process. So what are you measuring? That the bidding was open? That it was fair? That you got the lowest price? That nobody complained? These are the kinds of things that government tends to measure as opposed to did you get a solution? If it measured a solution, I think performance measurement could be quite useful to offset all that normal process stuff. Otherwise it can just be another level of bureaucracy.

CGE: Although every level of government allows for sole source contracting in particular circumstances, sole source contracts draw negative attention when they become public. How can that be better managed?

Asner:
Where there is only one vendor, you award it and you proclaim it: These are the sole source contracts, the vendors, the amounts and the reasons for each contract. Or, as in BC, you announce your intention to award it and if anybody screams, then you consider issuing a request for a quote or a proposal. You either disclose it beforehand or immediately after. Disclosure also solves single source contracts, but disclosure in the context of a policy: We will award a single source to a particular vendor when a) it’s under $10,000 b) we have justified it, and c) the vendor has not received a similar award within the past 12 months, and d) and so on. Clearly you have to raise limits and develop another method so you don’t compete $10,000 issues. You could cycle through those six vendors, perhaps, but you’ve got to spare your procurement people from doing this crap.

Dye: In many cases sole sourcing is misunderstood. You need to be developing relationships with suppliers, and this is not what is being done in many areas of the public service. If you have developed proper supplier relationships, you can manage the negative aspects of sole sourcing. What a lot of people don’t seem to understand is that sole sourcing can reduce costs. Many organizations will drop off the list of bidders if they see that it is going to be a long process and therefore too costly for them, and they may be the best source.

Paton: I’m a huge critic of the current approach. We used to have a reasonable level of sole sourcing. Treasury Board policy was about $50,000 at that time. After NAFTA, it dropped to $33,000. Then countless audits were done, the level of sole sourcing was deemed

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