Management Action Plan in Response to Internal Audit of Contracting

Canadian Environmental Assessment Agency
March 2005

Note: PWGSC introduced on April 1, 2005 a new process for the management of procurement and contracting services entitled "The Way Forward". This initiative brings about fundamental changes to the way departments and agencies operate. It is important to note that this audit, including the audit recommendations and the management action plan in response to the recommendations, were completed prior to PWGSC introducing this new process. However the Agency will be taken this new process into consideration when implementing the various corrective measures.

Introduction

As a follow up to the January 2005 recommendations highlighted as part of the independent audit on contracting practices at the Canadian Environmental Assessment Agency, management of the Agency accepts the findings of the audit report and has prepared the following action plan. Although the Agency recognizes that some gaps have been identified and do exist, it also wishes to emphasize that some good practices are already in place and the below actions are to build upon those. The Agency therefore needs to strengthen existing processes and bring about a more coordinated approach through centralization of certain review and quality assurance functions.

However, it must be stressed that ultimate responsibility to ensure due diligence has been conducted as it relates to contract management is still an integral part of contract managers' responsibilities. The Agency also recognizes the key role (e.g. review forum, centre of expertise, etc.) played by Environment Canada (EC) in the contracting processes. It also strongly believes in maintaining and even increasing, where deemed necessary, this partnership with EC.

Audit Recommendations & Management Action Plan

1. A review mechanism be developed that will use a risk-based approach to reviewing contracting. It should review contracting activity to ensure compliance with legislation, regulations, and administrative, contractual and financial policies. It should ensure that the proposed contracts are in accordance with Agency objectives and that they are funded. It should also ensure that effective reporting is in place. Copies of its reports should be made available to the President.

Action: The Agency will revise the administrative and approvals process for materiel management. Administrative functions will be centralized in a new position of Administrative Officer, Materiel Management (AO-MM) reporting to the Senior Officer, Finance and Administration. This new position will be responsible for preparing templates and checklists for contracting officers, ensuring completeness of contracting files, verification of deliverables, preparing contracting reports for senior management, and ensuring that correct administrative processes are followed. Unusual, questionable or high-risk contracting activities will be pre-identified in consultation with the Agency's Operations Committee (OPS), and referred to OPS for approval prior to contract approval.

OPS will review monthly reports of all contracting activities to identify high-risk activities, and to oversee Agency contracting practices and procedures.

2. Contracting policies and procedures be documented,

Action: CEAA will work with Environment Canada Material Management Services to develop appropriate training and documentation materials for contracting. The new Administrative Officer - Materiel Management will be responsible to prepare, maintain and update all contracting policies, procedures and training materials approved by the Agency's Operations Committee.

3. A training plan be developed to ensure that managers and staff are provided with the appropriate level of training on the contracting process to support compliance of contracting activities with the relevant policies,

Action: Agency managers with delegated signing authority will be required to complete the School of Public Service Course "Contracting and Acquisition Management" (G115, 1/2 day) or equivalent training. Current managers will be required to complete this training at the earliest opportunity or at a minimum during their next training cycle. New managers will be required to complete this training as soon as practical upon appointment.

The new Administrative Officer, Materiel Management will provide all managers and staff with guidance and training on the Agency's contract administrative procedures.

CEAA will work with Environment Canada Material Management Services to develop appropriate additional training and documentation materials for contracting. Officers and staff involved in the contracting process will be required to identify appropriate additional material management training in their annual training plans.

4. The performance of the contractor be evaluated and the evaluation report provided to the contractor,

Action: The Administrative Officer, Materiel Management (AO-MM) will be responsible for ensuring that contract managers collect evaluation and performance information, and report this information to contractors based on a certain risk level or where deemed necessary.

5. Performance on contracts be monitored and regular reports provided to senior management. These reports should be made available to the review mechanism that is established for its review,

Action: The Administrative Officer, Materiel Management (AO-MM) will be responsible for collecting evaluation and performance information from contract managers and reporting this information to Operations Committee in the monthly contracting report when dealing with substantive contracts or issues requiring further attention.

6. Contract files be established that provide a complete audit trail including details on such items as options, decisions, approvals, amendments and an identification of the officials involved. Responsibility for maintaining an official contract file should be established. A standard file checklist should be developed to ensure that the files are adequately and consistently documented. Guidance addressing the documentation deficiencies should be provided to all contracting staff.

Action: The Administrative Officer, Materiel Management (AO-MM) will be responsible for preparing templates and checklists for contracting officers, ensuring completeness of contracting files, verification of deliverables, and ensuring that all related documentation is retained in a central materiel management file.

7. The documentation deficiencies outlined in Section E. (2) Departmental Processes for Contracting for Services should be addressed, including:

  • references in the file as to whether the requirement was included in the annual work plan,
  • need to contract and evidence that an analysis was conducted to determine whether the need could be met with internal resources,
  • signed and dated Statement of Work,
  • copies for MERX postings for competitive contracts,
  • copies of ACANs for non-competitive contracts,
  • contractor certification of best rate,
  • analysis showing that employer/employee relationship was not created,
  • an analysis showing that contract splitting had not occurred, and
  • evidence that the deliverables were received in accordance with the terms of the contract.

Action: The Administrative Officer, Materiel Management (AO-MM) will be responsible for preparing templates and checklists for contracting officers, ensuring completeness of contracting files, verification of deliverables, and ensuring that all related documentation has been collected and is retained in a central materiel management file.

8. Templates and checklists be developed to address what is required in a statement of work, evaluation criteria, intellectual property clauses, avoiding employer/employee relationships and sole-source justification,

Action: The Administrative Officer, Materiel Management (AO-MM) will be responsible for preparing templates and checklists for contracting officers to ensure that such critical components are fully addressed by contract managers. This includes how to address requirement on the statement of work, evaluation criteria, intellectual property clauses, avoiding employer/employee relationships and sole-source justification.

9. Contract planning, to the extent possible, be integrated with the agency's planning process including the development of the annual work plan,

Action: Starting in 2006-07, contract managers, as part of the Agency operational planning process are to include a forecast, where possible, of the contract work for the upcoming year. The Administrative Officer Material Management (AO-MM) will be responsible to track actual requirements against these forecasts and have contract managers provide explanations of significant deviations.

10. Sole source contracts be advertised by way of Advance Contract Award Notices in order to increase the transparency of the non-competitive contract process,

Action: Managers will be encouraged to use ACAN postings for sole source contracts where time permits. Alternatively, managers will be asked to explain the rationale for limited bid solicitation or sole sourcing. Contract reports to Agency Operations Committee will report on the method and process for choosing a contractor.

* It should be noted that, CEAA may have to adjust its approach on such issues in accordance with "The Way Forward" which is a new approach to management of contracts introduced by PWGSC on April 1, 2005.

11. A certification of the contractor's best rate should be obtained,

Action: Where ACAN postings are used, this will provide confirmation that the best rate was obtained. As for limited bid solicitation and sole sourcing, managers will be asked to explain how determination of best value was made. Contract reports to Agency Operations Committee will report on the method and success in determining "best-value" contracting.

12. The criteria for determining employer/employee relationships published by the Canada Revenue Agency should be included in the manual of policies and procedures or on the CEAA intranet. These criteria should be reviewed and an analysis conducted before each professional services contract is entered into and documentation of the analysis included in the file,

Action: The Administrative Officer, Materiel Management (AO-MM) will assess the overall risk of an employer-employee relationship against established CRA criteria and refer high-risk contracts to Operations Committee for review and approval.

13. Contracts of a similar nature with similar deliverables be identified and monitored in order to mitigate against contract splitting, and

Action: While contract managers are still responsible to ensure that contract splitting does not occur, the Administrative Officer, Materiel Management (AO-MM) will assess the overall risk contract splitting against established criteria and refer high-risk contracts to Operations Committee for review and approval.

14. Controls over deliverables be increased.

Action: While contract managers are still responsible to ensure completeness of contract deliverables and documentation, the Administrative Officer, Materiel Management (AO-MM) will also review the completeness of contract deliverables, documenting and refer any concerns to Operations Committee for corrective action.

Estimated RESOURCE IMPLICATIONS for implementation of the above:

  • 1 FTE, Administrative Assistant, Materiel Management (approx $65K/yr, incl. EBP)
  • Additional material management training and documentation as well as normal operating costs (10-15K/ yr)
  • Enhanced material management reporting to SFO and Operations Committee

Total estimated implementation costs approx. $75K-$80K / year.

Although total estimated costs of implementation appears relatively high as a proportion of total annual contracting volume (approximately 6-7% of $1.5M volume for the years in review), it is likely that there will be substantial increases in contract volumes in subsequent years associated with the Agency's significant growth in 2004-05. Furthermore, we can expect that there will be a series of benefits in addition to improved controls, such as

  1. improved contracting service levels
  2. reduced administrative burden on operational administrative assistants
  3. improved overall support for program delivery