Federal procurement practices ripe for reform

A new report on the Canadian government’s procurement practices urges wider rollout of the vendor performance management (VPM) system that Public Services and Procurement Canada (PSPC) is now phasing in for select contractors and more openness to innovative tendering formats such as negotiated requests for proposals (NRFPs). To achieve this, and enhance the efficiency and transparency of what amounts to about $37 billion of annual spending, Canada’s Procurement Ombud, Alexander Jeglic, calls for: creation of a dedicated Chief Procurement Officer role; codified government-wide rules; and better data that could also support artificial intelligence (AI) tools.

“For far too long, federal procurement has been plagued by the same recurring issues — overly complex processes, unclear accountability and fragmented rules,” he maintains. “Now is the time for bold, foundational reforms that will strengthen the system, deliver better results for Canadians, and build trust in how public funds are spent.”

Jeglic’s newly released report recommends measures that could reduce costs, save time, ease complications and bolster accountability in federal procurement. This draws on his perspective heading up an independent office within government that is tasked with investigating complaints and dealing with disputes, and also incorporates insight from procurement officers and experts within government, industry, the legal sector and academia.

For suppliers, he paints a potential picture of an integrated system where they would be scored based on contract delivery metrics and that status would be made known across all government departments. This work has now begun for PSPC procurement, but performance ratings are thus far tied to a fairly scoped range of indicators and remain internal.

Approximately 90 other government departments do not have a consistent approach for benchmarking how well or poorly suppliers/contractors meet their obligations, arguably leaving all departments more vulnerable to serial underperformance. A formal government-wide rating system would allow past performance to be considered in bid evaluation whereas, under the federal government’s Directive on the Management of Procurement (DMP), Jeglic advises that any anecdotal sharing of that information could be construed as unfair treatment related to an undisclosed criterion.

“The lack of such a system severely limits the federal government in its ability to use performance indicators to inform their continued relationship with individual suppliers,” the report states. “Most importantly and problematically, it leaves the federal government unable to avoid awarding new contracts to known bad performers.”

Jeglic argues that the absence of a VPM system currently inspires “excessively restrictive” criteria in tenders in an effort to weed out subpar bidders. That’s happening in a process already cluttered with requirements.

“Every day, procurement specialists face multiple layers of rules, including trade agreements, legislation, regulations, policies (both government-wide and at the departmental level), directives, guidance documents and procedures that must be followed, with new layers continually being added. There continues to be more and more important considerations that have to be taken into account when conducting a procurement, including Gender Based Analysis Plus (GBA+), green procurement, Indigenous procurement, agile procurement, accessibility and social procurement initiatives, among others,” the report tallies. “Without clear guidance on how to navigate these complex rulesets, or how to prioritize an ever-increasing number of government initiatives, Canada’s federal procurement system remains difficult to navigate.”

With concurrence from his consulted legal experts, Jeglic advocates for a new set of harmonized procurement rules, established in legislation, to provide consistent guidance and replace the current policy-based framework. That could also be a modernization exercise, allowing for practices that are now accepted in other jurisdictions, including several Canadian provinces.

Notably, he links the federal government’s rigid approach to tendering to a 1981 Supreme Court of Canada decision, which decreed that a tender invitation and corresponding bid is a unilateral contract (commonly known as Contract A), separate from the subsequent awarding of the project (known as Contract B). Under that legal interpretation, bids are irrevocable and any later alterations to a tender’s terms could leave procurers open to legal challenge.

Jeglic hypothesizes that has “often led to a reliance on overly restrictive criteria, prescriptive technical requirements and onerous bidder submission requirements” to guard against that possibility. Correspondingly, it has created “unnecessarily complex and burdensome” processes and shrunk the pool of potential bidders.

In contrast, negotiated RFPs (NRFPs) offer a non-binding approach, which begins with an evaluation of supplier candidates that have expressed interest. Procurement officials rank these potential bidders and enter into discussions about various elements of the proposed future contract’s terms.

“The flexibility of the NRFP format is widely considered to have contributed to improved competition, better solutions, better value and mitigated many of the legal risks associated with traditional tendering formats,” Jeglic observes in another report released earlier this year. “The Canadian federal government is an outlier in its continued use of Contract A/B when compared both to Canadian provinces and municipalities, and to other countries.”

Among other suggestions for procurement reform, Jeglic highlights a need for more transparency and efficiency. He calls for an accessible compendium of procurement information that would report everything the government is purchasing and the sources of those contracts and supplies. As well, AI is identified as a means to reduce staff time spent on redundant and straightforward tasks.

As proposed, the new Chief Procurement Officer would wield the authority to implement and oversee accountability for government-wide measures. Jeglic also acknowledges that a “robust” dispute resolution mechanism must accompany a vendor performance management system.

“Given the impact that a poor performance evaluation could potentially have for suppliers, it is critical that sufficient safeguards are in place to ensure procedural fairness,” the report states. “Canada should take inspiration from best practices worldwide and adopt a multiple-tiered system of appeals for vendor performance scores that includes an independent, final decision-maker.”

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