Audit of the management and delivery of procurement: chapter 2


Introduction and background

This audit was included in the AEB's 2013 Integrated Risk-Based Audit and Evaluation Plan, as approved by the Deputy Minister, upon recommendation of the External Audit Advisory Committee.

The procurement of goods, services and construction in the Government of Canada is recognized as a high-risk area as it is complex, highly regulated and subject to public scrutiny. For instance, the Office of the Comptroller General of Canada identified the risk associated with procurement and contracting as significant, as challenges with contracting directly impact the delivery of government programs and services.Footnote2 The following presents some of the key legislative and policy elements that govern procurement activities:

  • Financial Administration Act (FAA);
  • Government Contracts Regulations;
  • Treasury Board (TB) Contracting Policy;
  • Directive on Delegation of Financial Authorities for Disbursements; and
  • Several international trade agreements (such as the North American Free Trade Agreement).

At ECCC, the TB Contracting Policy, along with the Department's set of procurement and contracting guidance documents constitute the cornerstone of the management control framework for procurement activities. In the last two years, there were no ECCC issues flagged or raised by suppliers to the Procurement Ombudsman or to trade tribunals.

In November 2013, the responsibility for the ECCC's Procurement and Contracting Division (PCD) was transferred from the Corporate Services Branch (CSB) to the Finance Branch (FB). This was to optimize interdependencies between procurement and finance functionsFootnote3.

Since the transition, PCD has gone through a number of challenges including the hiring of three key procurement positions (chiefs), the staffing of the Director General position, which had been vacant for one year, and the replacement of the Director. Changes also included the adoption of the Systems Applications and Products software (SAP). This major departmental project involved changing the financial system and implementing new business processes for procure to pay. Furthermore, Finance Branch went through organizational changes, and a new service delivery model for accounting operations was implemented. As a result, branch resources were engaged primarily in meeting operational requirements while readying for this implementation.

During the course of this audit, other departmental corporate initiatives also took place, such as the implementation of the new travel and telephone systems and the email transformation initiative. These initiatives impacted all employees, including those of PCD.

While TB is the primary body responsible for procurement policy, the PCD is mainly responsible for the development of procedures and guidelines, the provision of advice, and the implementation of monitoring and quality assurance processes surrounding procurement and contracting activities. Purchasing roles and responsibilities are detailed on the Procurement intranet site.

ECCC's procurement officers have been delegated the authority to issue and approve contracts. Procurement operations are channeled through six regional offices (formerly seven offices, as ECCC's Dorval office closed during the course of the audit).

For significant acquisitions (i.e., over $25K), both the selection of the contracting methods and the selection of suppliers through the tendering process are the responsibility of the procurement officers. They are also responsible, in consultation with the program areas, for overseeing the tendering process, evaluating financial components of bids, managing the evaluation of the technical component by program staff; awarding the contract, and keeping an audit trail (proper documentation) to support decisions surrounding procurement and contracting activities. In addition, procurement officers must ensure conformity with numerous complex rules implemented by the GoC, regarding, for example, security requirements, integrity and supplier status. They must also determine whether any of these will affect the procurement method.

Program managers are responsible for most of the upfront work leading to the issuance of a contract, such as the definition of the requirement (Statement of Work). They are also responsible for the subsequent administration of the contract to ensure that goods and services are delivered and paid in accordance with the terms and conditions of the contract.

Contracting and procurement activities are essential to support the Department in delivering programs and services. In 2013-2014, 8,869 procurement transactions were processed, for a total value of about $148 million,Footnote4 representing approximately 15% of the total budget.Footnote5 The following table presents ECCC's procurement types, number of transactions and value for fiscal years (FY) 2011-2012 to 2014-2015.

Table 1 shows transactions by type for specified fiscal years:
  FY 2011-2012 FY 2012-2013 FY 2013-2014 FY 2014-2015
Type Number of Contracts Value ($-000) Number of Contracts Value ($-000) Number of Contracts Value ($-000) Number of Contracts Value ($-000)
Construction 43 $3,249 67 $4,452 81 $2,969 56 $2,902
Goods 4,997 $78,101 4,147 $62,442 4,203 $61,683 3,332 $55,107
Services 4,922 $81,148 4,675 $86,215 4,585 $83,081 3,940 $83,940
Total 9,963 $162,498 8,889 $153,109 8,869 $147,734 7,328 $141,949

Procurement is defined as the function of obtaining goods and services, whereas contracting is the agreement between the Department and the supplier for appropriate consideration. For the purpose of this audit, a procurement transaction includes a purchase order, a contract, a call-up against a standing offer agreement or a supply arrangement, and any related amendments.

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