Audit of Contracted Transportation Services

January 2026

1259-3-0118 (ADM(RS))

Reviewed by ADM(RS) in accordance with the Access to Information Act. Information UNCLASSIFIED.

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Background

Since 2006, the exception has been granted to DT, which allows for higher contracting limits, specifically for transportation services in urgent or exceptional circumstances. This authority allows DT to procure transportation services quickly and efficiently when needed, without the usual constraints of standard contracting limits. In June 2022, TB approved the latest submission for the exception, granting the limit until June 30, 2027. Following the audit, in June 2025, TB permanently granted DT the exception authority.

DT uses contracted transportation services to move personnel and materiel in support of CAF operations and exercises when CAF transport capability cannot satisfy the transportation requirements. Contracted services include air, sea, ground vehicles and rail movements, depending on the need and location of delivery.

DSPCOS 7, in ADM(Mat), is responsible for transportation contracts that exceed the financial limits delegated to local authorities (e.g., base/wing commanders). Since April 2022, DSPCOS 7 has engaged in 203 transportation contracts (valued at approximately 280 million CAD), of which three used the exception. The DT transportation contracting limits are set by TB policy^{Footnote 1}.

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Key Findings

In accordance with the TB Directive on the Management of Procurement^{Footnote 3}, DT procures transportation services to address internal resource limitations across air, sea, ground and rail transportation. Each category of transportation requires external contracting. For example, transportation services are contracted out as the CAF does not have sufficient airlift resources to support ally exercises nor their own ships that are able to move large cargo.

For the three exception contracts reviewed, DT had clear justification for contracting transportation services and used the exception as intended. Moving forward, to support long- term contracts that allow for multiple shipments during a CAF operation, the exception is essential. DSPCOS 7 is working on a business case to expand the use of exception contracts. This case will show how DT can save money through joint partnerships and how Canada can meet its commitments to its allies.

The audit team developed a process map (Annex C) and a document checklist (Annex D) based on legislative, TB and DT contracting policies to verify the completeness of transportation files. Transportation contracts, within standard or exceptional limits, generally follow the same process and require the same documents. A separate checklist was created for Strategic Air Lift International Solution (SALIS) contracts as there is a unique process.

There were three exception contracts within the audit scope: two SALIS contracts valued at approximately 4 million CAD each and one ground movement valued at just over 9.2 million CAD. The two SALIS contracts were each 100 percent compliant with the requirements of the checklist, while the ground movement contract was 80 percent compliant.

The 19 sampled standard limit contracts, valued at approximately 44 million CAD, were 80 percent compliant with the requirements of the checklist. Each of the 19 files had at least one missing document that was required by TB or DT Policy.

Overall, the 22 sampled transportation files were, on average, 83 percent complete when verified against the document checklist that reflects legislative, TB and DT requirements (Annex D). There was a decrease in compliance rates during fiscal year 2023/24, but compliance rates improved the following year under new DSPCOS 7 management and with increased monitoring. The following table highlights the documents that were most often missing.

Regular monitoring is essential to ensure the completeness of the transportation contracting files. There is an opportunity for ADM(Mat)’s internal contract compliance teams to include transportation files in their reviews. Policies and guidance exist to help procurement officers ensure contract files are complete, but SOPs do not exist for DSPCOS 7. The section manager monitors contract files by checking 10 files or 10 percent of the annual volume of files, whichever is the lesser amount.

TB policy requires contracting files to have auditable evidence and ensure that delegated financial authorities were exercised during the procurement process. The delegation of authority (DOA) form was found in 8 of the 22 reviewed sample contracts. The remaining 14 files were missing DOA documents. Including DOA forms within contract files establishes financial authorities. It provides evidence of those authorities along with the required audit trail for contract reviews.

Management Response:

See Annex A for management’s response to Recommendation 1.

There were inconsistencies found with file completeness, naming conventions and overall information management practices. Establishing and following internal information management standards would improve file completeness and decrease the risk of missing key documents.

As the procurement authority, DSPCOS 7 is responsible for ensuring that all documents associated with procurement are in the file. To be complete and auditable, each file must contain the full set of required documents. Where possible, hyperlinking within electronic files is an efficient way to ensure continuity through multi-year contracts and to avoid duplication of electronic files.

Management Response:

See Annex A for management’s response to Recommendation 2.

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Conclusion

Transportation services are essential for the CAF to fulfill its mandate. Where large-scale movements are needed and economies of scale can be realized, it is important that the exception is available to support DT and is managed in compliance with applicable legislative requirements. A complete and auditable contract file would help ensure that legislative and policy requirements are met, demonstrating DT’s commitment to open, fair, transparent and responsible use of public funds.

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Annex A: Management Action Plan

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Annex B: About the Engagement

This engagement conforms with the Internal Auditing Standards for the Government of Canada, as supported by the results of the Quality Assurance and Improvement Program.

Objective

The objective was to assess if contracted transportation services were managed in compliance with applicable TB and DT policies and requirements.

Scope and Approach

The scope covered DT’s contract files for contracted transportation services from fiscal year 2022/23 to 2024/25. During this period, DSPCOS 7 was responsible for 203 transportation contracts.

The methodology included document review, interviews, process mapping, a judgmental sample contract review, and analysis of contract files held in the Records, Document and Information Management System. The audit team reviewed all three exception contracts and 19 standard contracts for document compliance. The sample was pulled from the four commodities of air, sea, ground vehicles and rail.

Contracts were selected in consideration of high vs. low cost, domestic vs. international requirements, open and closed, and requesting organizations. The audit team developed a compliance checklist that considered TB and DT policies. The sampled contracts were then reviewed against the checklist for document compliance.

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Annex C: High-Level Process Map

A high-level process map was developed in consultation with DSPCOS 7 and after a review of key TB and DT policies.

The following map outlines the contracting process using four key steps: the services requested, contract content, contract award and contract closure. These steps correspond with the audit team’s compliance checklist, which outlines key documentation required for each step of the process.

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Annex D: Compliance by Document

The following checklist was used to ensure transportation contracts followed the requirements set by legislation, TB and DT. It was used during the review of selected contracts to check if important documents were included. If a document was missing, it was noted. The overall compliance rates vary by document type.

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