What can we learn from Canada's experience with a Procurement Ombudsman?
Interview with Frank Brunetta, Procurement Ombudsman for Canada. The remit of the Ombudsman is to promote fairness, openness and transparency in federal public procurement. Before joining the office of the procurement ombudsman Frank was Assistant Deputy Minister of the departmental oversight branch, public works and government services in Canada, where his responsibilities included provided independent assurance and oversight on the prudent, probity and transparency of departmental operations.
I would like to start our interview by discussing the role of the office, namely how it came about and what are the powers that are contained in the Office of the Procurement Ombudsman.
The creation of the office primarily came through a procurement scandal that we’ve referred to as the sponsorship scandal, and this is a procurement issue that was conducted under the former government, the Liberal government where procurement rules were severely breached. The Conservatives seized on that opportunity, the Liberal government fell, the Conservatives came into power with part of their platform being to clean up public procurement, they passed, one of their first tasks after being in power was to pass the Federal Accountability Act, within the Federal Accountability Act there was a provision for the creation of a procurement ombudsman who would in some form oversee public procurement.
As I understand it the original concept was for a procurement auditor and as the bill passed through the two houses of parliament the decision was made to make the office not a procurement auditor but a procurement ombudsman. So primary impetus for creating the office really was a very severe scandal where public funds were misdirected, if you do any research on it you’ll see that there were charges laid, people went to jail for it, etc, so the Conservative government created the office and it was through an amendment to the Department of Public Works and Services Act, so they amended the Act to make provisions for this office and then regulations were generated which essentially give the office four primary mandates, one is to review complaints with respect to the award of a contract for the acquisition of goods below 25,000 Canadian dollars, and services below 100,000 Canadian dollars including taxes.
The second is to review complaints with respect to the administration of a contract, regardless of dollar value, the third element of our mandate is to review the practices of departments for acquiring goods or services to assess their fairness, openness and transparency and make necessary recommendations to improve those practices. This element is a bit of a holdover from the procurement auditor role that I alluded to earlier and then finally the fourth element of our mandate is to ensure that an alternative dispute resolution process is provided if requested and agreed to by both parties to a federal contract. There is a fifth that is contained but has yet to be invoked with the minister or the governing council can ask the Procurement Ombudsman to undertake a review as they see fit, so for example if there’s another procurement scandal I am, or this office is one of the options for them to review how that procurement was conducted. So those are the five elements, but the four primary ones are the ones that I referred to, if you have complaints for the award of a contract between certain dollar thresholds or under certain dollar thresholds, review of complaints on the administration of a contract and that has no dollar thresholds, the procurement practice of departments and I can get into that a little bit, how that’s done, and then ensure the ADR, Alternative Dispute Resolution process is in place. So in terms of the review of government procurement practices, we do a couple of things to determine what areas we might want to review there Pedro, our office operates very much like a complaints office that you’d have in any major corporation, so we have a 1-800 line, we have a website, where suppliers can contact us to tell us about issues that they may be having regarding a department, a particular process or a procurement vehicle. We track those calls and the nature of the calls, we do different types of analysis, we try to determine whether a particular department is a constant source of irritation for suppliers, whether a particular process has been a particular problem, or whether there’s some sort of a pattern that can be established with a particular procurement vehicle. We do that because the regulations require me to have reasonable grounds to undertake a procurement practice review, if I can establish reasonable grounds then I can go into a department or to several departments to review that practice, to see whether there is in fact compliance with the appropriate rules and regulations and to ensure that whatever is being done in terms of procurement is fair, open and transparent. That’s essentially my mandate.
Could you describe a little bit more what economic operators that take part on the contracts that are covered by your mandate, what can they expect from your intervention for a contract that has been awarded.
That’s the first element of my mandate which is reviewing the award of a contract below 25,000 Canadian dollars for goods, and below 100,000 dollars including taxes for services, so if I can give you an example, a supplier may be responding to a request for a proposal by a department, he or she submits a proposal and sometime after that submission is notified by the department that the proposal has not been accepted, typically in Canada departments provide a reason for the proposal not to be accepted. If the supplier is unclear or does not agree with that reason or alternatively if he feels that there’s been some sort of inappropriate approach used to award the contract to the winning bidder, or to exclude his or her bid, they can call my office and the first thing we do, because we are after all an ombudsman’s office, we try to understand the issue, get some sense as to what happened, how it happened and then to be quite honest with you Pedro, and I would say 90% of the times when we explain the process to the supplier the supplier has a better understanding of why the department did what they did, and we were able to... we call it dispose of the matter, what we find Pedro, since the office opened is in the vast majority of cases a supplier will call our office with the intent of complaining but the issue is based on a misunderstanding of how the federal procurement process works. A lot of suppliers believe that doing business with the Canadian government is like doing business amongst themselves, they don’t understand it, certain rules that have to be followed, doing business with the Canadian government isn’t as simple as my father used to when he was a contractor, it was a handshake, some suppliers still believe that’s the case, so when we explain the process a lot of these complaints are dealt with through information exchange.
One thing that I pointed out in one of my annual reports to parliament, I think it was last years was that what I found is that it’s often not the information in itself that is satisfying the supplier, it’s who it is coming from, because in a lot of cases the supplier will have called the department and received a very reasonable explanation from the department, but they don’t accept it, the supplier does not accept it. On the other hand they call our office, we give them essentially the same information but because it’s coming from an independent neutral third party, an office that has no vested interest in the procurement process, they seem to accept it much more openly, and that’s perhaps a point I should have made when it came to my mandate, my office is an independent office, we’re not beholden to any government department, any agency, while I report to the Minister of Public Works, the Minister has no influence and no say in the work that I do, the areas that I review, or how I review them, so we really are independent and arm’s length from the government operation. That seems to be a big bonus and attraction for suppliers, to know that they’re coming to an office that isn’t attached to any government operation.
Do you have any idea about the figures of complaints you get every year or have you gotten since the start of the office?
I'm in the process of preparing my annual report to parliament, so those numbers are pretty fresh. Last year we received 577 contacts, now I have to stress the word contact, because we often get calls that have nothing to do with procurement, so we track every call that we receive, any contact that we receive, last year was 577, and since my appointment four years ago that number has steadily increased, I believe it’s roughly 70% higher, 577 is 70% higher than it was the first year I took office, and a large reason for that is one of my primary objectives when I took office was to ensure that the suppliers knew this office existed, keep in mind that we’ve only been operational since 2008, so one of the big challenges for the office was to promote our services, so the increase, the 70% increase in the four years isn’t because procurement is somehow getting worse, it’s because more suppliers know we exist. Now of the 577 if I can boil it down to how many we actually investigated, so reviewing of complaints as per the first element of our mandate, reviewing complaints for the award of a contract below 25,000 for goods and 100,000 for services, last year we investigated three and that’s a startling contrast given the number of contacts we have, but let me explain to you that we are after all an ombudsman office and our primary objective is to de-escalate issues, I once said to a parliamentary committee that my objective is to do no investigations. I mean that’s ludicrous, but really our objective is to try to deal with things informally, that’s the role of an ombudsman’s office, so when you look at the contrasting numbers of 577 and three investigations, while a lot of those numbers, a lot of the 577 have to do with suppliers simply calling us to find out how things are supposed to work and whether in their particular circumstances it worked the way it should have. I believe that the number is about 170 of the 577 were suppliers calling with what they felt should be a complaint and that was through the process of information exchange, facilitation that my office provides between the supplier and the department, that we were able to de-escalate those numbers and only have to deal with three actual reviews or investigations, so while the mandate sounds like I have pretty strong powers to investigate, I keep in mind that the role of an ombudsman is to deal with things informally, and try to facilitate informal resolution issues and that’s really the principle that dictates our approach as an office.
And regarding any disputes on the administration or performance of the contracts, what is your role on those, what can you provide to the parties?
Well again there are two elements to that nature of complaint, if there is a complaint with respect to the administration of a contract, as I said initially there is no dollar value on the administration, the truth of the matter is most complaints with regards to the administration of a contract are because the holder of the contracts, or supplier who is engaged in a contractual arrangement with a department is having some sort of a disagreement with the department, so in the vast majority of cases we do not investigate that complaint, what we offer is alternative dispute resolution which is the fourth element of my mandate, so a supplier will come in and say, “Well I don’t agree with the way the department is administering this contract, or their interpretation of the terms and conditions of this contract, can you help?” once that request is made the regulations require me, I have no discretion, the regulations require me if that request is made to approach the other party to the contract which is the department, and offer alternative dispute resolution and in these cases we would essentially mediate the dispute. And on that business line or that element of our mandate the office has a sparkling record of 100% of the cases being resolved, what we find and it’s not any different than any other type of alternative dispute resolution, by the time one of the parties of the contract contacts our office, the lines of communications have broken down to the point where the two parties aren’t talking, so our task is, I hate to minimise it, but it’s fairly easy. We get the parties to sit across from a table again, and try to reinvigorate that dialogue, that should never have broken down, once they start talking and they start understanding each other’s position and we orchestrate the session so that it allows both sides to outline their views and their position, what we find without exception of people start to understand the other party’s perspective, and inevitably must be human nature, they try to find a mutually acceptable solution, and once that happens that agreement they arrive at becomes legally binding, so we have them sign a legally binding agreement and that’s how that issue is resolved.
How many ADR cases have you had since 2008?
Well that’s... I mentioned earlier one of the challenges was to ensure that suppliers knew we existed, that seems to be working with an increase of 74%, the ADR continues to be a challenge, we have had 13 cases since 2008 and we have done a considerable amount of outreach advertising, I can’t conclude on why the uptake on that service isn’t what we expected it to be but it could be that a lot of these disputes are being resolved through dialogue without our assistance, we know that in some cases some departments have their own ADR processes, we know that in some cases some departments include litigation clauses in the contracts that preclude a supplier from coming to see us.
Is that legal?
Yeah, the contract... every department has the discretion to include what they feel is appropriate for their operational requirements and their contracts. Now we were successful last year in having the vast majority of departments include clauses in the contracts that make suppliers aware that if there’s a dispute they can come to our office and we have started to see this year a number of suppliers that have contacted us who have become aware of the office through that clause, when I started in the office in 2008 I realised one of the biggest challenges was letting the suppliers know we existed and one of the things that I did last year was to ask department so put that clause in contracts, and in tracking the calls that we get from suppliers, one of the questions that asked is how did you hear about us and we’re starting to see a number of suppliers saying they heard about us through the clause in the contract.
That’s very interesting. Could you give us an idea about what is the cost of running an office like the Procurement Ombudsman?
Okay, depending on our workload and the typical transition that you have with staff, it fluctuates between 25 and 30 staff and we run on a budget of 2.8 million Canadian dollars, so it’s a fairly lean operation, now the Treasury Board submission that created our office has a provision that allows the ombudsman to return to the Treasury for additional resources if the original forecasted number of complaints increases, that threshold hasn’t been crossed yet so we haven’t gone back to the Treasury for additional resources, 2.5 to 2.8 seems to be a good number given the volume that we currently have.
Is that a yearly figure or a monthly figure?
No, that’s an annual.
I have a couple of questions to finish the interview. In the EU last year we introduced new substantive regulations, so the new substantive directives, and I think the process has now started for the review of the remedies directives which will deal with issues such as access to justice, access to the Courts for aggrieved bidders, what could we learn from the Canadian experience?
That’s a very good question Pedro, let me say that, I’m speculating a little bit here but putting it in the Canadian context, I would say that last year alone based on the numbers of contacts that we’ve had at our office, there could have been, and this is a worst case scenario obviously, there could have been 200 additional cases clogging up the Court system, roughly 200 additional procurement cases clogging up the Court system had our office not been there, again worst case scenario, I’m assuming that every complainant that called our office, had it not been for our office the only recourse they would have had is to take the department to Court. Now the reality of it is based on my discussions with suppliers, a lot of them because of our thresholds, or financial thresholds of being 25,000 dollars for goods and 100,000 for services, because those thresholds are where they are a lot of the contacts that we get are from small and medium enterprise, so the reality is a lot of these small businessmen and women could not afford to take the government to Court, so they would have simply walked away from the complaint or the issue and while some people may say, well that’s all well and good, what they don’t realise is with every small and medium enterprise that walks away from a government contract or doing business with the government contract, we contract or shrink the pool of available suppliers, which means less suppliers, you’re running a risk of lower quality and higher prices.
It is in the public interest to ensure that there are as many suppliers bidding on government contracts as possible, the more suppliers, it’s a first year university economics, the bigger the pool of supplier, the better the competition, the lower the price. So I feel our office contributes to that because it keeps... as I said earlier, it keeps small and medium enterprise engaged in public procurement through a redress avenue that explains why things didn’t materialise the way they expected it to, why departments may have done what they did or in some of the cases allows them to have us investigate on their behalf why their bid was rejected, and in some cases at least two of the three that I referred to earlier, investigations I did last year, the supplier was absolutely right that their bid was mishandled and there’s a provision in my regulations that allows me to recommend compensation to that supplier. So what can the UK learn, I think it’s that an office such as mine is a good mechanism for keeping cases out of the Courts, from a political perspective it’s a great way to show that the politicians are listening and providing a venue and avenue for small and medium enterprise to be heard and to allow them to voice complaints and have their issues investigated and ultimately it provides an environment where suppliers, a) aren’t afraid to make a complaint, b) have some incentive to stay in the federal procurement world because they know that if an issue does come up there’s an independent office that they can turn to, and c) as I said earlier, that broader pool really of suppliers, really is a benefit to the public taxpayer.
Very well, thank you very much, just to cap off the interview, looking forwards, your time as Procurement Ombudsman is reaching its end and as far as I know it’s not renewable, so how do you see the role of the procurement ombudsman evolving over the next let’s say five to ten years.
That’s a very good question Pedro, I’m currently in the process of writing a report that I plan on submitting before my departure, there are a few areas I think the office could, I can’t say improve, but where we could have more of an impact for suppliers, there are areas in the regulations for example, whether it’s through design or oversight, there’s an area in the regulation that allows me to request documents from departments, so when I lodge an investigation or a review the regulations allow me to request documents, it has no teeth, there’s no provision for the department to supply those, it’s not mandatory, I can request but the regulations don’t say it’s mandatory, so there are regulatory changes that I think I have a responsibility to highlight for the next ombudsman and the government. In terms of where the office needs to evolve, I think the ADR aspect of our mandate is grossly underutilised and as I said earlier it’s a mystery to me why that is, it’s a free service and from the numbers we have, the track record we have it makes a world of difference in resolving disputes that in some cases have been going on for months, so if the office needs to evolve to really embrace the ombudsman, the role, I think it’s through the ADR process, so I think those are the two areas that I think some evolution is required.
Thank you very much for this half an hour.
You’re very welcome Pedro.
You can find me at my blog telles.eu or on Twitter where I use two handles, @Detig for general discussion and also @publicprocure for public procurement related topics. I will see you soon, thank you.