Report to/Rapport au :

Corporate Services and Economic Development Committee

Comité des services organisationnels et du développement économique

29 November 2009 / le 29 novembre 2009

Submitted by/Soumis par : Kent Kirkpatrick, City Manager/Directeur municipal

Contact Persons/Personnes ressource : Marian Simulik, City Treasurer

Community and Social Services/Services sociaux et aux communautés

(613) 580-2424 x, marian.simulik@ottawa.ca and

M. Rick O’Connor, City Clerk and Solicitor/Greffier et Chef du contentieux.

(613) 580-2424 (Ext. 21215)

Rick.O’Connor@ottawa.ca

Ref N°: ACS2009-CMR-FIN-0058

SUBJECT:	PURCHASING BY-LAW - REVIEW

OBJET :	RÈGLEMENT SUR LES ACHATS - ÉTUDE ET REVUE

REPORT RECOMMENDATIONS

That the Corporate Services and Economic Development Committee recommend that Council approve that:

1. The City Treasurer be directed to establish and fill the new position of Chief Procurement Officer;

2. The criteria to engage the services of a Fairness Commissioner in specific procurement processes as set out in this report be adopted;

3. Subsection 9(1)(e) of the Purchasing By-law dealing with a “substantive objection” to a procurement process be revised to adopt the Comprehensive Complaints Process as described in this report;

4. The Purchasing By-law be amended to reflect the use of a local preference provision as a “tie-breaker”; and

5. The Purchasing By-law be amended to add to the discretion of the City Treasurer, in consultation with the City Clerk and Solicitor, the authority to prohibit a supplier from bidding on future contracts when engaged in litigation with the City of Ottawa.

RECOMMANDATIONS DU RAPPORT

Que le Comité des services organisationnels et du développement économique recommande au Conseil d’approuver que :

1. Le Trésorier municipal soit chargé de créer et de pourvoir le nouveau poste d’Agent principal des achats;

2. Le critère pour retenir les services de commissaires de l’équité pour certaines procédures d’achats décrites dans ce rapport soit adopté;

3. Le paragraphe 9(1)(e) du Règlement municipal sur les achats traitant de « l’objection de fond » relative aux procédures d’achats soit révisé et que l’on adopte le processus intégré relatif aux plaintes décrit dans ce rapport;

4. Le Règlement municipal sur les achats soit modifié pour intégrer une clause de préférence locale pour le départage de soumissions équivalentes;

5. Le Règlement municipal sur les achats soit modifié pour ajouter, à la discrétion du Trésorier municipal en consultation avec le Greffier municipal et chef du Contentieux, le pouvoir d’interdire à un fournisseur en litige avec la Ville d’Ottawa de soumissionner sur de futurs contrats.

EXECUTIVE SUMMARY

On July 8, 2009, Council directed “Legal and Procurement staff to review the Purchasing By-law and report back to Committee and Council before the end of 2009 with options to further ensure that the City’s procurement processes reflect best practices from the Bellamy Report and the Federal Accountability Act in an effort to help promote fair, transparent and objective procurement processes including an official point of contact for all competitive processes, as well as a comprehensive complaint process.”

In September 2005, Madam Justice Denise Bellamy delivered her four-volume report to Toronto City Council, being the results of two judicial inquiries. The Bellamy Report focused on all aspects of leasing contracts for computers and related software between the City and MFP Financial Services and between the City and Oracle Corporation and to inquire into the history of the contracts and their impact on the ratepayers of Toronto and to investigate a number of issues related to consultants retained by the City (as well as the former City of North York) and the purchase of computer hardware, among other matters.

Furthermore, Madam Justice Bellamy also held hearings on the subject of “good government”. In short, individuals and panels of academics, politicians and experts presented ideas in “the workings of municipal governments”. The so-called “Good Governance Phase” of the Inquiry was designed to help Madam Justice Bellamy fulfill her mandate to make any recommendations which she deemed appropriate and in the public interest.

Enacted in 2006, the Federal Accountability Act was intended to fundamentally change the way the Federal Government operates in various areas, including the provision of conflict of interest rules, additional restrictions on election financing, as well as new measures respecting administrative transparency. It was a direct political and legislative response to the events surrounding the so-called “Sponsorship Scandal” and encompassed a number of recommendations made by Mr. Justice Gomery in his Second Commission Report entitled, “Restoring Accountability”.

While the Federal Accountability Act seeks to achieve a wide range of objectives in procurement, the statute takes the view that a best practice in promoting fair, transparent and objective procurement is to establish a bidder complaint process that is independent, that works efficiently, and that provides meaningful relief. In this respect, the Act mirrors some of the intentions of the Bellamy Report, and these important principles are captured in the comprehensive complaints process being recommended for approval later in this report.

This report will provide information on both the Bellamy Report and the Federal Accountability Act followed by a discussion and recommendations dealing with the following subjects.

1. Official Point of Contact

The concept of an official point of contact in procurement matters is a best practice that requires a tender document to always state the name and full contact information of the person whom prospective bidders can contact with any questions. The tender document should make clear that this is the only City person bidders contact regarding this tender for the entire procurement process.

Although not expressly set out in the Purchasing By-law, this basic principle of sound procurement has been a longstanding procedure at the City of Ottawa.

2. Chief Procurement Officer

In a section in her Report entitled, “Central Procurement”, Madam Justice Bellamy determined that “procurement should be overseen and managed by one City department” and “since effective procurement is fundamental to the good governance of the City, the head of the central procurement department should be a very senior position”.

In response, the City Treasurer is recommending that the level of responsibility for procurement at the City of Ottawa should be undertaken by a new position called the Chief Procurement Officer and be equivalent to a Deputy Treasurer.

3. Fairness Commissioners

At the City Council meeting of October 28, 2009, a direction was issued for staff to review the use of more Fairness Commissioners for large and/or contentious procurements. In her Report, Madam Justice Bellamy recommended that “for major, high-risk, controversial or complex tenders, the City should consider retaining a fairness commissioner.”

Currently, at the City of Ottawa, Purchasing staff do make use of these independent fairness monitors, however, their involvement is limited to those procurement issues which are either very complex, or have the potential of becoming contentious.

The City Treasurer recommends that staff continue to use Fairness Commissioner services on an “as needed” basis, selected from the competitive standing offer now in place in planned procurement processes which are complex or potentially contentious, as determined by the Chief Procurement Officer and based on an assessment of the criteria set out in this report.

4. Comprehensive Complaints Process

In addition to seeking “to ensure that the City’s procurement processes reflect best practices”, the Council Motion resolved that a “comprehensive complaints process” be put in place, which was also a recommendation in the Bellamy Report.

5. Local Preference

In response to an inquiry sent in June 2009, all Members of Council were advised that, on the basis of the Discriminatory Business Practices Act, it would be Legal Services opinion that the City is not able to adopt a Local Preferences Purchasing Policy.

However, more recently, the City Clerk and Solicitor received the following inquiry from a Member of Council: “Is it feasible to structure the policy (in relation to the City procurement process), to support local suppliers if all other things are equal?”

In response, staff suggested that, in the event of two identical bids, that one of the factors to be considered in the “tie-breaker” analysis could be whether or not the bidders are “local”. Should Council adopt this recommendation, staff would amend the Purchasing By-law and prepare additional guidelines in the City’s Purchasing Policies and Procedures Manual to clarify the meaning of the word “local”.

6. Litigation Exclusion

Council inquired about the ability of the City of Ottawa to temporarily suspend both business relationships and grants to persons or organizations engaged in litigation with the City.

In response, the City Clerk and Solicitor provided to Corporate Services and Economic Development Committee and Council his legal opinion, on November 10, 2008, that there was sufficient legal authority for the City of Ottawa to initiate a litigation exclusion to its Purchasing By-law that would prohibit vendors and suppliers of goods, services or construction who have legal actions pending against the City from doing business with it while such matters are unresolved. In addition, it was noted that this exclusion could also prohibit persons, associations and not-for-profit organizations from applying for grants under various City programs while any lawsuit by such person, association or organization was still pending against the City.

In an attempt to overcome the problems associated with an overly broad litigation exclusion, staff recommend that the City Treasurer be given the delegated authority recommended to reject a bidder who is engaged in litigation against the City.

RÉSUMÉ

Le 8 juillet 2009, « en vue de promouvoir des processus d’acquisition équitables, transparents et objectifs, [le Conseil chargeait] le personnel des Services juridiques et de l’Acquisition d’examiner le Règlement municipal sur les achats et de déposer un rapport devant le Comité et le Conseil municipal avant la fin de 2009, en présentant des solutions visant à veiller à ce que les processus d’acquisition de la Ville d’Ottawa reflètent les pratiques exemplaires issues du rapport de la juge Bellamy (rapport Bellamy), ainsi que la Loi fédérale sur la responsabilité. Le processus comprendra une personne-ressource officielle responsable de tous les processus d’appel d’offres de même qu’un processus intégré relatif aux plaintes ».

Aussi, des demandes adressées par les conseillers municipaux au Greffier municipal et chef du Contentieux au cours de la dernière année ont soulevé diverses questions relatives aux achats, notamment sur le recours à des commissaires de l’équité et sur le pouvoir de la Ville d’adopter dans le cadre du Règlement municipal sur les achats à la fois une clause de préférence locale et une clause d’exclusion pour cause de litige.

En septembre 2005, madame la juge Denise Bellamy a déposé un rapport en quatre volumes au Conseil municipal de Toronto suivant la tenue de deux enquêtes judiciaires. Dans son rapport, la juge Bellamy s’est intéressée à tous les aspects des contrats de location d’ordinateurs et de logiciels afférents entre la Ville et MFP Financial Services et entre la Ville et Oracle Corporation. Son mandat consistait à examiner les antécédents des contrats et leurs conséquences sur les contribuables de Toronto et à scruter un certain nombre de problèmes en lien avec les consultants engagés par la Ville (ainsi que par l’ancienne Ville de North York) et l’achat de matériel informatique, entre autres questions.

De plus, madame la juge Bellamy a tenu des audiences sur la question du « bon gouvernement ». En résumé, des individus et des groupes d’universitaires, de politiciens et d’experts ont soumis des idées entourant « les rouages et le fonctionnement de l’administration municipale ». La communément appelée « phase de bonne gouvernance » de l’enquête avait été conçue pour aider la juge Bellamy à s’acquitter de son mandat qui consistait à formuler toutes les recommandations qu’elle jugeait appropriées et dans l’intérêt public.

Édictée en 2006, la Loi fédérale sur la responsabilité visait à modifier fondamentalement la façon dont le gouvernement fédéral se comportait dans différents domaines et, notamment, à instaurer des règles en matière de conflits d’intérêts et à ajouter des restrictions sur le plan du financement des élections ainsi que de nouvelles mesures relatives à la transparence administrative. Il s’agissait d’une réponse directe et législative à ce qu’on est convenu d’appeler le « scandale des commandites » qui incorporait un certain nombre de recommandations formulées par le juge Gomery dans son deuxième rapport de la commission du même nom qui portait sur la transparence.

La Loi fédérale sur la responsabilité vise un large éventail d’objectifs sur le plan de l’approvisionnement. Elle stipule notamment qu’une pratique exemplaire pour promouvoir des procédures d’acquisition équitables, transparentes et objectives consiste à établir un processus relatif aux plaintes indépendant, efficace et assorti de mesures réparatoires significatives pour les soumissionnaires. À cet égard, la Loi reflète certaines intentions du rapport Bellamy et ces importants principes s’inscrivent dans le processus intégré relatif aux plaintes dont l’approbation est recommandée au Conseil municipal plus loin dans ce rapport.

Ce rapport fournit des renseignements sur le rapport Bellamy et sur la Loi fédérale sur la responsabilité et est suivi d’une analyse et de recommandations traitant des sujets suivants :

1. Interlocuteur officiel

Le concept d’interlocuteur officiel en matière d’achats est une pratique exemplaire qui exige que soient toujours mentionnés dans le dossier d’appels d’offres le nom et les coordonnées de la personne avec laquelle les soumissionnaires éventuelles peuvent communiquer s’ils ont des questions. Le dossier d’appels d’offres devrait préciser qu’il s’agit de l’unique personne à la Ville avec qui les soumissionnaires peuvent communiquer relativement à l’appel d’offre en question pendant tout le processus d’approvisionnement.

Même s’il n’est pas expressément stipulé dans le Règlement municipal sur les achats, ce principe de base en matière de sain approvisionnement est appliqué de longue date à la Ville d’Ottawa.

2. Agent principal des achats

Dans une section de son rapport intitulé « Central Procurement », madame la juge Bellamy a établi que « les achats devraient être supervisés et être administrés par un service municipal [et que] le système d’approvisionnement efficace étant fondamental à la bonne gouvernance de la Ville, la personne responsable du service municipal des achats devrait faire partie de la haute direction » [traduction].

À l’instar de cette proposition, le Trésorier de la Ville recommande que la responsabilité pour les achats à la Ville d’Ottawa relève d’un nouveau poste intitulé Agent principal des achats et que ce poste se situe dans la hiérarchie municipale au niveau de celui de Trésorier adjoint.

3. Commissaires de l’équité

Lors de la réunion du Conseil municipal du 28 octobre dernier, une directive a été donnée au personnel de la Ville de réviser la procédure relative au recours à des commissaires de l’équité pour des achats d’envergure et/ou contentieux. Dans son rapport, madame la juge Bellamy recommandait à la Ville de Toronto « de retenir les services d’un commissaire de l’équité dans le cas d’appels d’offres majeurs, à risque élevé, controversés ou complexes » [traduction].

Présentement, à la Ville d’Ottawa, le personnel chargé des achats fait appel à des surveillants de pratiques équitables indépendants, mais a recours à leurs services uniquement dans des dossiers d’approvisionnement soit très complexes soit susceptibles de devenir contentieux.

Le Trésorier municipal recommande que le personnel continue d’avoir recours au besoin à ces commissaires de l’équité sélectionnés à même l’offre à commandes en vigueur pour des processus d’achats planifiés complexes ou potentiellement contentieux, tel que déterminé par l’Agent principal des achats et basé sur une évaluation du critère décrit dans ce rapport.

4. Processus intégré relatif aux plaintes

En plus de « veiller à ce que les procédures d’achats de la Ville soient conformes aux pratiques exemplaires » dans le domaine, la motion du Conseil municipal demandait d’établir un processus intégré relatif aux plaintes, ce qui était également une recommandation du rapport Bellamy.

Aux fins de cet examen, le personnel de la Ville recommande au Conseil municipal d’adopter un processus intégré relatif aux plaintes comparable à celui en vigueur à la Ville de Toronto et dans diverses autres municipalités. La clarification par écrit du processus de plaintes fera en sorte que les fournisseurs sauront, antérieurement à toute initiative d’approvisionnement, quels sont leurs droits, ainsi que le moment et la manière de les exercer (p. ex. débreffage, plainte écrite, échéanciers, etc.). De plus, le processus de plaintes décrit dans ce rapport conserve au Conseil son autorité comme arbitre exécutoire dans de tels litiges.

5. Préférence locale

En réponse à une demande formulée en juin 2009, tous les membres du Conseil ont été informés qu’en vertu de la Loi sur les pratiques de commerce discriminatoires, les Services juridiques étaient d’avis que la Ville ne pouvait pas adopter de politique de préférence locale en matière d’approvisionnement.

Par contre, plus récemment, un membre du Conseil adressait la question suivante au Greffier municipal et chef du Contentieux: « Peut-on structurer la politique (relative aux procédures d’achats de la Ville) de manière à appuyer les fournisseurs locaux si tous les autres aspects s’équivalent? »

En réponse, le personnel de la Ville suggère qu’advenant deux propositions identiques, le facteur à considérer pour faire le départage puisse être le fait que le fournisseur soit « local ». Si le Conseil devait adopter cette recommandation, le Règlement municipal sur les achats serait modifié en conséquence et de nouvelles lignes directrices seraient ajoutées au Manuel des politiques et procédures en matière d’achats de la Ville pour clarifier le sens du terme « local ».

6. Exclusion pour cause de litige

Le Conseil municipal a voulu savoir si la Ville d’Ottawa pouvait suspendre temporairement ses relations d’affaires et l’octroi de subventions à des personnes ou des organisations en litige avec la Ville.

Selon un avis juridique soumis le 10 novembre 2008 par le Greffier municipal et chef du Contentieux au Comité des services organisationnels et du développement économique, la Ville d’Ottawa a l’autorité juridique suffisante pour inclure dans son Règlement sur les achats une clause d’exclusion pour cause de litige qui interdirait à des vendeurs et fournisseurs de biens, de services et d’ouvrages en litige avec la Ville de faire affaires avec cette dernière tant que les contentieux ne seraient pas réglés. De plus, il est précisé qu’en vertu de cette exclusion, il soit interdit aux personnes, associations et organismes sans but lucratif d’adresser des demandes de subventions à la Ville dans le cadre de divers programmes municipaux tant que les poursuites intentées par ces personnes, associations ou organisations contre la Ville sont en cours.

Dans le but de surmonter les problèmes liés à une définition trop large de l’exclusion pour cause de litige, il a été recommandé d’accorder au Trésorier municipal l’autorité requise pour refuser un soumissionnaire en litige contre la Ville.

BACKGROUND

On July 8, 2009, in conjunction with a report dealing with a Voice over Internet Protocol (VoIP) contract, and the Mitel Networks’ objection to that procurement process, Council carried several Committee recommendations, including the following:

3. Direct Legal and Procurement staff to review the Purchasing By-law and report back to Committee and Council before the end of 2009 with options to further ensure that the City’s procurement processes reflects best practices from the Bellamy report and the Federal Accountability Act in an effort to help promote fair, transparent and objective procurement processes including an official point of contact for all competitive processes, as well as a comprehensive complaint process.

Additionally, individual Councillor inquiries to the City Clerk and Solicitor and the City Treasurer, over the last year, have raised a variety of related procurement issues, including the use of Fairness Commissioners, as well as the City’s ability to implement both a local preference and a litigation exclusion as components of the Purchasing By-law. Therefore, in recognition of the fact that all of these items relate to the Purchasing By-Law, this report will provide information on both the Bellamy Report and the Federal Accountability Act followed by a discussion and recommendations dealing with the following subjects:

1. Official Point of Contact;

2. Chief Procurement Officer;

3. Fairness Commissioners;

4. Comprehensive Complaints Process;

5. Local Preference; and

6. Litigation Exclusion.

1. Bellamy Report

As referenced in the Council Motion, the results of Toronto’s most recent judicial inquiries have been described as being “fraught with scandal, corruption, sex, innuendo – the Bellamy Report (which reads like your Grisham thriller) has emerged as the de facto handbook for how not to procure IT goods and services, nor in fact any types of goods and services. It clearly demonstrates the need for transparency, objectivity and accountability in decision-making” (see Lou Milrad, “Municipal IT Procurement: Lessons Learned from the Bellamy Inquiry”, Municipal World, June 2006, p. 21). Briefly, Madam Justice Denise Bellamy delivered her 1,123 page, four-volume report to Toronto City Council in September 2005, the results of two judicial inquiries that focused on the following:

(1) In February 2002, the Toronto Computer Leasing Inquiry was established by Toronto City Council to inquire into all aspects of leasing contracts for computers and related software between the City and MFP Financial Services and between the City and Oracle Corporation and to inquire into the history of the contracts and their impact on the ratepayers of Toronto; and

(2) In October 2002, Toronto City Council voted to expand the mandate of the earlier judicial inquiry when it established the Toronto External Contracts Inquiry. That second inquiry was to investigate a number of issues related to consultants retained by the City (as well as the former City of North York) and the purchase of computer hardware, among other matters.

Furthermore, Madam Justice Bellamy’s Inquiry also held hearings on the subject of “good government”. In short, individuals and panels of academics, politicians and experts presented ideas in “the workings of municipal governments”. The so-called “Good Government Phase” of the Inquiry was designed to help Madam Justice Bellamy fulfill her mandate to make any recommendations which she deemed appropriate and in the public interest.

The Bellamy Report contained 241 recommendations, of which 111 were directed at procurement issues at the City of Toronto. Although the Report was focused on Toronto, Madam Justice Bellamy observed that the general principles behind the recommendations “are equally applicable to other municipalities and other levels of government.” In this regard, various, relevant recommendations on procurement matters and related “best practices” from the Bellamy Report will be referenced in the respective sections below.

2. The Federal Accountability Act

However, for the purposes of this report, the most important change under the Federal Accountability Act related to the authority to appoint a Procurement Ombudsman under the Department of Public Works and Government Services Act, which has lead to the establishment of the Office of the Procurement Ombudsman. In accordance with Section 22.1(3) of the Act, the mandate of the Procurement Ombudsman is as follows:

a) Review the practices of departments for acquiring material and services to assess their fairness, openness and transparency and make any appropriate recommendations to the relevant department for the improvement of those practices;

b) Review any complaint respecting the award of a contract for the acquisition of goods below the value of $25,000 and services below the value of $100,000;

c) Review any complaint respecting the administration of a contract for the acquisition of material or services by a department, regardless of dollar value; and

d) Ensure that an alternative dispute resolution process is provided, if both parties agree to participate.

As can be seen from the description above, the role of the Procurement Ombudsman is very broad and goes well beyond responding to complaints from disappointed bidders. A more detailed summary of the Procurement Ombudsman and other procurement complaint processes employed by the Federal Government can be found at Document No. 1 to this report.

DISCUSSION

1. Official Point of Contact

The Council Motion that initiated this report included an express reference to, “including an official point of contact for all competitive processes...”. The concept of an official point of contact in procurement matters is a best practice that can be found in Recommendation 205 of the Bellamy Report:

205. When a tender document is publicly released, it should always state the name and full contact information of the person whom prospective bidders can contact with any questions. The tender document should make clear that this is the only City person bidders may contact regarding this tender for the entire procurement process.

In the background research paper on “Procurement” for the Bellamy Report, the authors summarize the importance of a “single point of contact” as follows:

Most experts agree that poorly managed communication between bidders and government officials can pose a major risk to the integrity of the procurement process at all levels of government in terms of demonstrating fairness, equity, and transparency.

According to experts and the professional literature on procurement, a common best practice is to establish a single point of government contact (typically the official responsible for managing the actual procurement process) and require that all vendor communication with government officials be made through that single point of contact.

*****

By way of example, the Ontario Government is fairly typical in this regard. Request documents are usually quite specific that from the time a release document is issued until a contract award has been made there can be no contact by bidders on their agents/lobbyists with any government officials (including specific reference to Ministers and Ministers’ staff) other than the designated contact person.

Although not expressly set out in the Purchasing By-law, this basic principle of sound procurement has been a longstanding procedure at the City of Ottawa. In fact, this best practice is found in most City bid solicitation documents, normally accompanied by a prescriptive inquiry process which advises potential bidders not only on the City contact person, but also that the inquiry must be in writing, and submitted within a predetermined inquiry timeline.

In her September 2006 report entitled, “Bellamy Inquiry Progress Report”, Toronto’s City Manager, Shirley Hoy, confirmed that, “the City’s usual practice is to identify two contacts: a [procurement] contact for process questions and a line Division contact for technical questions.”

In addition, the Bellamy Report expands on this information exchange process further:

Information given by the contact person to one bidder after the bids are in should be given to every other interested bidder as well, with enough time for them to give it consideration.

In this regard, City of Ottawa responses to particular bidder questions are issued in an official addendum through one of several internet-based bid distribution networks, without naming the source of the inquiry. Once again, the City’s approach is in accordance with sound, public procurement best practices.

2. Chief Procurement Officer

In a section in her Report entitled, “Central Procurement”, Madam Justice Bellamy set out the following two recommendations with respect to the importance of both the central oversight of public procurement as well as the fact that it should be run by “a very senior position”:

133. Procurement should be overseen and managed by one City department.

134. Since effective procurement is fundamental to the good governance of the City, the head of the central procurement department should be a very senior position.

Toronto’s City Manager confirmed in 2006 that, “the City’s procurement is centralized in the Purchasing and Materials Management Division” and that, “the City’s updated Purchasing By-law specifically designates the Director of Purchasing and Materials Management as the City’s Chief Purchasing Official.” The City Manager further noted that both the Director of Purchasing and the City Treasurer are “able to serve as policy advisors to Council on large procurements.”

At the City of Ottawa, general responsibility for procurement matters rests within the overall jurisdiction of the Finance Department. In fact, the Manager, Supply Branch, is the specific position which reports directly to the City Treasurer on all procurement issues.

Not surprisingly, procurement is a key function in any large organization and is responsible for an annual spend of about $800M at the City of Ottawa. Recent initiatives, such as the following, have seen the Manager of Supply engaged in meaningful dialogue with the most senior members of executive management at the City:

a. the ongoing “procurement savings targets”;

b. strategic sourcing in relation to the spend analysis; and

c. high profile procurement issues debated at Council.

However, in light of Madam Justice Bellamy’s recommendation that procurement should be run by “a very senior position”, the City Treasurer is recommending that the level of responsibility be more appropriately recognized within the organizational structure at the Deputy Treasurer level.

Given the above, the City Treasurer intends to replace the existing Manager of Supply position with a newly defined Chief Procurement Officer position, equivalent to a Deputy Treasurer, whose job description will include some of the broader, remedial responsibilities as described by the Federal Government’s Procurement Ombudsman, continuing to report directly to the Treasurer.

Some corporations consider purchasing to be a straightforward means to an end: the goal is to minimize costs while meeting functional, purchasing requirements. As a result, the primary purchasing model often rests on finding the best price for each isolated transaction through individual purchases. However, this approach misses a significant strategic potential to add value to the organization through the purchasing function by driving innovation and superior long-term cost performance.

As such, one of the first tasks of the Chief Procurement Officer will be to transform the City’s current purchasing unit from a transactional procurement organization to one with a more strategic focus. Briefly, strategic sourcing benefits an organization in several ways, including:

(1) improved ability of the organization to achieve strategic goals due to alignment of purchasing strategies with business strategies; and

(2) improved contribution from purchasing outcomes to service delivery.

Finally, this transformation will likely include the establishment of a Strategic Sourcing Group within Supply Management who would focus on corporate business strategy identification, alignment of sourcing strategies and business strategies, use of a “total cost” model, increasing both internal client and external supplier collaboration, and enhancing the City’s overall procurement skills and visibility.

3. Fairness Commissioners

At the City Council meeting on October 28, 2009, a direction was issued for staff to review the use of more Fairness Commissioners for large and/or contentious procurements. In his May 2003 report to the City of Toronto Council on the RFP process regarding Union Station, the Ontario Integrity Commissioner, Mr. Justice Coulter Osborne, recommended the appointment of a Fairness Commissioner “in major projects…to oversee the RFP evaluation process, and in some cases even the development of the RFP, to ensure that the process is objective and fair throughout.” In Recommendation 166 of her Report, Madam Justice Bellamy put forth a similar proposal with respect to Fairness Commissioners:

166. For major, high-risk, controversial or complex tenders, the City should consider retaining a fairness commissioner.

In support of Recommendation 166, Madam Justice Bellamy provided the following insights:

Introducing a fairness commissioner could be a helpful step in creating a perception of impartiality in awarding major contracts;
Ideally, a fairness commissioner would be someone with a strong procurement background and no current or recent ties to the City;
A fairness commissioner should approach his or her function mindful of the need to balance two competing needs: the need for fairness and objectivity in procurement processes, and the need for some flexibility in determining which commercial entity can best meet the City’s procurement needs. An overly rigid approach to procurement processes may eliminate bidders on insubstantial grounds and thereby deprive the City of access to bidders who could provide excellent value to the taxpayer;
The fairness commissioner should be involved in the tender process from beginning to end, as opposed to coming in merely at the evaluation stage; and
A fairness commissioner should be seen as an adjunct to the procurement process, not as a substitute for the procedures, policies, and conduct of staff that show commitment to fairness and transparency in procurement.

Currently at the City of Ottawa, Purchasing staff do make use of these independent fairness monitors. However, their involvement has been limited to those procurement issues which are either very complex, or have the potential of becoming contentious.

Since January 1, 2007, the City has spent about $260,000 on fairness commissioner services, as follows:

Vendor	Project	Amount	Total Per Vendor

PPI Consulting Limited	Beaver Barracks	$23,400.00
PPI Consulting Limited	Water Meter Reading System	$65,008.00	$ 88,408.00


P3 Advisors Inc	Pay and Display	$79,193.00	$ 79,193.00


Knowles Consultancy Services Inc	Dome at Ben Franklin Park	$26,000.00	$ 26,000.00


PSC The Public Sector Company	Beach Pavilion at Petrie Island	$22,500.00
PSC The Public Sector Company	VOIP	$36,000.00
PSC The Public Sector Company	Integrated Street Furniture	$ 8,250.00	$ 66,750.00


		Total:	$260,351.00

For small to mid-sized projects, the commissioner may be an internal person, such as someone from the central purchasing authority. The person often becomes involved at the invitation of the operating department, particularly where the buying team anticipates a higher than normal degree of external scrutiny. Larger, more complex projects benefit from an external expert. Set out below are five critical details public institutions should consider before appointing a fairness commissioner.

1. Which projects warrant a Fairness Commissioner?

Both Mr. Justice Osborne and Madam Justice Bellamy have recommended using Fairness Commissioners for “major” projects. While there is no single criterion for what constitutes a major project, it is suggested that high-value, high-profile, complex and controversial projects are the primary candidates.

2. Determining the appropriate skill set

Once the decision to retain a Fairness Commissioner has been made, the purchasing organization should consider the appropriate skill set required for the particular project. The City has had a competitive standing offer in place for the provision of these services since 2007.

3. Ensuring the independence of the Fairness Commissioner

Madam Justice Bellamy observed that, "It is important to ensure the internal person has both objectivity and independence from the procurement decision-makers," To have credibility, a fairness commissioner must be empowered with sufficient independence to provide an effective check-and-balance to the project team. In effect, the individual should have an independent oversight role and capacity to ensure disagreements with the public officials managing the procurement are brought to the attention of appropriate senior managers.

4. Defining the scope of engagement

The purchasing organization should clearly establish the role of the Fairness Commissioner at the outset of a project. While one of the key functions of a Fairness Commissioner is ensuring the fairness of the evaluation process, the Commissioner can also play a role during the preliminary planning phases, particularly with respect to larger and more complex undertakings.

5. Balancing fairness and effectiveness

At the end of the day, it is the public institution, rather than the Fairness Commissioner, that is responsible for both the fairness and success of the procurement process. While the process has to be transparent and fair, buyers must also strive to get a good deal for the taxpayer, deliver the product or service within reasonable timeframes, and navigate a tendering terrain that is full of legal risk.

At Document 2 of this report is a more fulsome discussion of the use of Fairness Commissioners.

In June 2004, Toronto City Council approved a staff report entitled, “Feasibility of Using Fairness Consultants for Certain Procurements”. The purpose of the report was to “investigate the merits of using external fairness consultants for certain procurements.” In adopting this report, Council approved the criteria to be used by Toronto staff when assessing a project for potential use of a Fairness Commissioner. Briefly, those criteria are as follows:

(1) Rapidly evolving products, especially software;

(2) High-risk endeavours;

(3) Out-of-country vendors challenging required Canadian terms and conditions;

(4) New technologies such as waste management or information systems;

(5) Competition against a long-term incumbent (to avoid perception of undue advantage);

(6) Innovative forms of procurement;

(7) New, high value products;

(8) Development/new use or operation of significant public sites/facilities/properties;

(9) Anticipated high profile and controversy that can lead to few responses or pressure to take low bid/price regardless of other areas evaluated s best; and/or

(10) Private-public or public-private partnerships (known as P3s).

For convenience, this report is set out in its entirety at Document 3. The City Treasurer recommends that staff continue to use Fairness Commissioner services on an “as needed” basis, selected from the competitive standing offer now in place (and renewed from time to time), in planned procurement processes which are complex or potentially contentious, as determined by the Chief Procurement Officer and based on an assessment of the criteria listed above.

4. Comprehensive Complaints Process

In addition to seeking “to ensure that the City’s procurement processes reflects best practices, the Council Motion resolved that a “comprehensive complaint process” be put in place. The following recommendations from the Bellamy Report also address the same concerns regarding a comprehensive complaint process:

230. To demonstrate its commitment to maintaining integrity and transparency in the procurement process, the City should have a comprehensive bidder complaints process.

231. A bidder should not be allowed to file a formal complaint without having made a post de-briefing submission to the City.

233. The City should adopt a formal two-stage process to manage bidder complaints, to replace the current standing committee/deputation approach.

Since originally being approved in 2000, the City of Ottawa’s Purchasing By-law contains only two provisions with respect to vendor complaints. Subsection 9(1)(e) states that, “Despite any other provision of this by-law, the following contracts are subject to Council approval:

(e) where a substantive objection emanating from the bid solicitation has been filed with the Director or with Supply Management.

In addition, Section 1 of the By-law defines “substantive objection” to mean “a written objection to Supply Management or the Director by an interested party giving specific reasons for the objection and subject to the proviso that the objection is not precluded by legislation or applicable trade agreements.” Obviously, these two provisions cannot be characterized as a comprehensive complaints process.

A recent survey of other public purchasing organizations, in relation to the existence of formal complaints processes, provides some insight into municipal trends:

Municipality	Complaints Process

Calgary, Alberta	Process managed internally within Supply Management
Durham Region	No formal complaints policy in place at this time
Hamilton	Policy requires a written complaint to the Manager of Purchasing. If not resolved, the complaint is referred to Committee and Council
London	No formal complaints policy in place at this time
Niagara Region	No formal complaints policy in place at this time
Region of Peel	Formal process within Purchasing By-Law, includes review by Director Purchasing and Regional Solicitor, and possible escalation to the General Committee
Sudbury	No formal complaints policy in place at this time
Thunder Bay	Purchasing By-Law defines process, starting with Supply staff, and escalating to head of Finance, and CAO, if necessary
Windsor	No formal complaints policy in place at this time

While the recommendations in the Bellamy Report seeking a “comprehensive bidders complaint process” and the prerequisite of a “de-briefing submission” prior to a bidder initiating a formal complaint are largely self-explanatory, the third recommendation to “adopt a formal two-stage [complaint] process” requires further examination. In her Report, Madam Justice Bellamy provided the following rationale for this latter recommendation:

Complaints should initially be adjudicated by a neutral panel of administrative staff that does not include anyone who was involved with the procurement. The initial adjudication could be reviewed by an official or officials with a high level of independence, such as the fairness commissioner, the integrity commission, or personnel from the auditor general’s office. The decision of the second panel would be final and not subject to further review within the City.

Councillors should not be involved in the complaints process.

The Report goes on to recommend that the “formal complaints process should have tight deadlines that will move the matter forward quickly” and that the “results of the bidders’ appeals should be made public.”

In short, the Bellamy Report’s suggested approach for a comprehensive complaints process for bidders would result in the removal of Toronto City Council from the decision-making process in all procurement matters. In response, the City Manager’s 2006 progress report on the Bellamy Inquiry noted that, “Council adopted the Procurement Process Policy in July 2004 to protect the interests of the City, the public and persons participating in the procurement process.” The Toronto Policy reinforces fairness, openness, transparency and integrity by adopting consistent and standard approaches for many issues, including “dealing with vendor complaints”. However, without providing much analysis, the report rejected Madam Justice Bellamy’s Recommendation 233 (for a “formal, two-stage process to manage bidder complaints to replace the current standing committee/deputation approach”) in favour of the following, modified complaints process:

The current policy requires the complaint to be made in writing to the Chief Purchasing Official. If the complaint cannot be resolved, the bidder is advised of their right to make a deputation to Committee.

As noted earlier, this hybrid approach to vendor complaints (e.g. staff engagement followed by Committee/Council action if required) is currently being used in other municipalities. As such, it would appear that neither the City of Toronto nor any of the comparator municipalities cited have taken the steps necessary to remove their respective councils entirely from the decision-making process when procurement complaints arise.

It is worth noting that Recommendation 233 is merely one out of a number of similar recommendations contained in the Bellamy Report aimed at removing Toronto City Council from the procurement process, save and except for the enactment of broad policies. In this respect, reference may be had to the following, additional recommendations:

129. City Council should establish fair, transparent, and objective procurement processes. These processes should be structured so that they are and clearly appear to be completely free from political influence or interference.

130. Councillors should separate themselves from the procurement process. They should have no involvement whatsoever in specific procurements. They have the strongest ethical obligation to refrain from seeking to be involved in any way.

131. Members of Council should not see any documents or receive any information related to a particular procurement while the procurement process is ongoing.

132. Councillors who receive information from vendors related to any specific procurement should tell them to communicate with one or more of the following three people, as is appropriate in the circumstances:

a) the contact person in the tender document, in accordance with the contact rules in place

b) the fairness commissioner

c) the person in charge of the complaints process, as set out in the tender documents.

232. Councillors should not act as advocates for aggrieved bidders.

For the purposes of this review, staff recommends that Ottawa City Council adopt a comprehensive complaints process that reflects the approach adopted in Toronto and various other municipalities. By clarifying the complaints process in writing, vendors will know, in advance of any procurement initiative, what their rights are, as well as when and how to exercise them (e.g. de-briefing, written complaint, timelines, etc.). To provide additional clarity with respect to the roles and responsibilities, it is recommended that Recommendation 132 from the Bellamy Report be adopted and adjusted accordingly. In essence, this recommendation, that Members of Council refer any questions/concerns during a procurement process to either the City’s “official point of contact”, the respective Fairness Commissioner or the party responsible for the complaints process, effectively complements the parallel recommendations in this report, as well as meeting the general principles to have transparency and accountability with respect to the procurement process at the City of Ottawa. As such, the comprehensive complaints process is set out in Document No. 4 to this report and retains Council’s jurisdiction as the final arbiter of such disputes.

Finally, it is suggested that the issue of further separating Council from procurement complaints – including the possibility of prohibiting “lobbying of any kind at any time during a City procurement process” in Recommendation 107 – should be revisited in greater detail during the next review of the Purchasing By-law in the 2010 Governance Review.

5. Local Preference

On June 4, 2009, an e-mail was sent to all Members of Council in response to an inquiry received by them on the subject of local preference. The e-mail stated as follows:

Staff understand that an inquiry has been received by Members of Council with respect to the possibility of the City of Ottawa adopting a Local Preferences Purchasing Policy.

Legal Services staff have had the opportunity to review the Ontario Discriminatory Business Practices Act. The Discriminatory Business Practices Act prohibits the City (and any other person in Ontario) from refusing to engage in business with another person because of that person’s geographical location. (There is an exemption if such refusal is in respect of a foreign country and is consistent with a policy of Canada or is in respect of another province and is consistent with a policy of the Province of Ontario).

On the basis of the Discriminatory Business Practices Act, it would be Legal Services opinion that the City is not able to adopt a Local Preferences Purchasing Policy.

More recently, however, the City Clerk and Solicitor received the following inquiry from Councillor Steve Desroches:

“Is it feasible to structure the policy (in relation to the City procurement process), to support local suppliers if all other things are equal?”

The response to the Councillor is set out below, as follows:

As you are aware, any form of "local preference" policy - as it may relate to a municipal government's statutorily-mandated policy for its procurement of goods and services - must also comply with the Province's Discriminatory Business Practices Act. Briefly, the stated purpose and intent of that provincial statute "is to prevent discrimination in Ontario on the ground of race, creed, colour, nationality, ancestry, place of origin, sex or geographical location of persons employed in or engaging in business [emphasis added]." Furthermore, Subsection 5(1) of the Act states that "no person in Ontario may engage in a discriminatory business practice".

While this statute does not appear to be referenced in the general text that you have cited (being The Law of Municipal Finance, by Patrice C. Noé and Allan C. Ross), it is discussed in a more specific legal book on local government procurement entitled, Municipal Procurement Handbook (ironically also co-authored by Patrice C. Noé). At page 312 of that book, the authors not only recognize the above-noted legislation but also expand upon the possibility that a local preference policy may be possible in the case of a “tie” among competitors:

A key question for any municipality to resolve is the extent to which municipal procurement practice ought to favour local suppliers over those based in more remote locations. As discussed in Chapter 11, in Ontario discrimination against local suppliers contravenes provincial law. Perhaps for this reason, it is sometimes argued that the giving of a local preference is inherently wrong. However, a moment's thought is sufficient to show that this view is untenable. If all other factors are equal, there is no justification for not giving a local preference. Indeed, a failure to do so would almost amount to punishing the supplier for being connected with the purchasing municipality. Nevertheless, it can be difficult to craft a proper regime for local preference. For instance, if a local preference is to be given, the first question to resolve is the extent to which the locality of a supplier is to be determined - is a local office or plant sufficient, or is it also necessary that the supplier be locally based and controlled.

The question of when a local preference policy could be useful to a municipality has also been the subject of further comment in Procurement: A Practical Guide for Canada's Elected Municipal Leaders, by Denis Chamberland. In a more detailed examination of the "tie-breaker" proposal for the use of a local preference option put forth by Noé and her colleagues, Chamberland provides the following analysis for consideration:

Another reason for the topic’s staying power is that, in some context, the economic realities make it clear that it may make sense to favour a local supplier. For example, what should be the determining factor(s) where a bid is tied between two suppliers? If one supplier is a local enterprise, and the other is not, selecting the local one will contribute to the local economy. Similarly, it would make little business sense for a municipality to conduct a Canada-wide competition, and for a supplier 200 kilometres away to offer to provide technology help-desk support services where on-site visits may be required. A supplier could argue that remote service has become the norm in the industry, but there may be good reasons why the municipality needs a local preference. In the above two examples, common sense suggests that the local company should be given priority.

But, it is a challenge to define the legitimate circumstances where preference may be granted to a local supplier. Being able to successfully defend the integrity of the procurement process is another. The former is about applying judgment, and is the responsibility of the evaluation team; the latter is about transparency and proper disclosure, and is, in part, the responsibility of elected representatives. They must ensure that the procurement framework contemplates the exercise of the required discretion.

There can be circumstances where recognizing a local preference may be defensible and a legitimate business practice. However, the evidence overwhelmingly shows that it generally makes better economic sense to avoid local preferences.

Clearly, this issue of a local preference in procurement matters has been a long-standing subject of debate for all levels government. The above-noted inquiry seeks to “support” local suppliers if all other things are equal, in other words, in the situation of a “tie bid”. Perhaps surprisingly, with over 800 competitive bids each year, there are very few tied bids at the City of Ottawa. However, in the event of such a tie, Subsection 28(6) of the City’s Purchasing By-law identifies the following four “factors to be considered in the breaking of [a] tie:

(a) Prompt payment discount;

(b) When delivery is an important factor, the bidder offering the best delivery date be given preference;

(c) A bidder in a position to [offer] better after sales service, with a good record in this regard, be given preference;

(d) A bidder with an overall satisfactory performance record be given preference over a bidder known to have an unsatisfactory performance record.

In the event of a tie, Purchasing staff would usually rely on Clause (a) above, and give preference based on this financial factor.

Over the past two years, Purchasing staff are aware of only two instances where the City received tied bids which could not be decided on the issues of financial merit. In both cases, the suppliers were local, and were called in to meet with the Purchasing staff. The City and both bidders (in each case) agreed to abide by the outcome of a coin toss, which was administered by the City purchasing officer. Although not a “high tech” solution, the bidders agreed in advance and were satisfied with the outcome. Ultimately, the City received the advantage of accepting the low bid, and the project client was able to proceed without undue delay.

These two experiences, and the statistical data from the full 2008 purchasing year (found at Document 5) suggests that there is no pressing need for the City of Ottawa to consider and implement a comprehensive local preference policy.

Clearly, the City of Ottawa is a strong consumer of local products, spending almost 95% of the annual purchasing dollar in Ottawa and the surrounding area, for goods and services which are available in the local community. That being said, it is suggested that, in the event of two identical bids, that one of the factors to be considered in the “tie-breaker” analysis by Purchasing staff be whether or not the bidders are “local”. Should Council adopt this recommendation, staff would amend the Purchasing By-law and prepare additional guidelines in the City’s Purchasing Policies and Procedures Manual to clarify the meaning of the word “local”.

6. Litigation Exclusion

In 2008, Council inquired about the ability of the City of Ottawa to temporarily suspend both business relationships and grants to persons or organizations engaged in litigation with the City.

In response, the City Clerk and Solicitor provided to Corporate Services and Economic Development Committee and Council his legal opinion, on November 10, 2008: a copy of the memo, “Procurement and Grants Policies – Litigation Exclusion”, being ACS2008-CMR-LEG-0026 IPD, can be found at Document 6 to this report. In short, the legal opinion stated that there was sufficient legal authority for the City of Ottawa to initiate a litigation exclusion to its Purchasing By-law that would prohibit vendors and suppliers of goods, services or construction who have legal actions pending against the City from doing business with it while such matters are unresolved. In addition, it was noted that this exclusion could also prohibit persons, associations and not-for-profit organizations from applying for grants under various City programs while any lawsuit by such person, association or organization was still pending against the City.

That being said, Supply Management does not believe it would be in the best interest of the City to institute a blanket exclusion against all suppliers of goods, services or construction engaged in litigation with the City. The City currently purchases many goods and services from limited and/or specialized markets. A small sample of such goods and services is set out below:

· Ambulances and replacement parts,

· Building Automation Systems / HVAC systems,

· Building Security Systems,

· Buses and replacement parts,

· Cement,

· Engineering design and inspection services for bridges,

· Engineering services for the upgrade and expansion of the water filtration plants and ROPEC,

· Environmental assessment services,

· Fire trucks and replacement parts,

· Fuel,

· Graders for winter snow clearing,

· Ice Plant Maintenance and/or Refrigeration Services,

· Information technology hardware and software, upgrades, repair and maintenance,

· Laboratory services which provide support for water, waste water and environmental projects,

· Landscape architects,

· Specialized CCTV and sewer work,

· Specialized heavy equipment, parts, repair and maintenance.

In the event that there was a broad litigation exclusion against any supplier, or several suppliers of such a good, it would mean that fewer bidders could bid on such contracts for the City. The unintended consequences of this action would be less competition among bidders and could result in higher prices for the City. In markets where there is only one supplier, it could also mean the City would need to make an exception or do without the good or service until the litigation was resolved.

Furthermore, many of the City’s purchases are followed by parts, maintenance and/or repair contracts, as well as product enhancement contracts in the case of software. Information technology suppliers of goods often have separate collateral contracts with the City for the maintenance of existing technology purchased previously as well as for professional services to support such technology. As such, a strict litigation ban against such a supplier would prevent it from bidding on new technology contracts for the City. Again, this would not likely be in the best interest of the City where the supplier was considered to be the leader in the field of the desired technology or the most cost-effective supplier.

At present, Subsections 37(1) and 37(2) of the City’s Purchasing By-law provide a discretion to the City Treasurer, in consultation with the City Clerk and Solicitor, to prohibit an unsatisfactory supplier from bidding on future City contracts where the performance of the supplier has been unsatisfactory in terms of failure to meet contract specifications, terms and conditions or for Health and Safety violations.

In the past, this authority has been used sparingly, albeit judiciously, and the ban has been temporary in nature (e.g. up to two years). In fact, when it has been used, the Treasurer’s decision was not challenged by the unsatisfactory supplier. In light of this example, it is suggested that this is a more practical approach to business relations with suppliers.

In an attempt to model a litigation exclusion in the mould of the existing unsatisfactory supplier approach and to avoid the problems of an overly broad litigation exclusion, staff recommend that the following provisions be used as the basis for a more discretionary approach to this issue:

(1) The City may, in its absolute discretion, reject a quotation, tender or proposal submitted by the bidder if the bidder, or any officer or director of the bidder is or has been engaged, either directly or indirectly through another corporation, in a legal action against the City, its elected or appointed officers and employees in relation to:

(i) Any other contract or services; or

(ii) Any matter arising from the City’s exercise of its powers, duties or functions.

(2) In determining whether or not to reject a quotation, tender or proposal under this clause, the City Treasurer and the City Clerk and Solicitor will consider whether the litigation is likely to affect the bidder’s ability to work with the City, its consultants and representatives, and whether the City’s experience with the bidder indicates that the City is likely to incur increased staff and legal costs in the administration of the contract if it is awarded to the bidder.

It is envisioned that, on the few occasions that the City Treasurer and the City Clerk and Solicitor invoke their discretion to prohibit a party from participating in City procurements, every attempt will be made to warn the party in advance, and in writing, of an actual procurement process.

Although the report recommends a limited, joint discretion to the City Treasurer and City Clerk and Solicitor to prohibit a party from participating in its procurement processes, it does not recommend a similar ban for litigants who may apply to the City’s various grants programs. In this regard, the research set out in Document 6 failed to find any municipalities in Ontario that had adopted a litigation exclusion with respect to grants. Such a statistic could be used to suggest that this type of policy is unwarranted. Therefore, in the absence of additional, factual evidence that such a policy is warranted, staff have not recommended that a potential litigation exclusion apply to City grants.

CONSULTATION

This report is scheduled to be “tabled” at Corporate Services and Economic Development Committee on December 1^st, 2009. It will be considered by the Committee and Council in January 2010, thereby allowing sufficient public consultation on the report’s recommendations. In addition, staff will send comments from the City’s various Advisory Committees, including the Business Advisory Committee.

LEGAL/RISK MANAGEMENT IMPLICATIONS

There are no Legal/Risk Management impediments to implementing any of the recommendations in this report.

FINANCIAL IMPLICATIONS

There are no financial implications.

RURAL IMPLICATIONS

There are no rural implications for this report.

SUPPORTING DOCUMENTATION

Document 1 : Government of Canada : Procurement Complaints

Document 2 : Fairness Commissioners

Document 3 : Toronto’s “Feasibility of Using Fairness Consultants for Certain Procurements”

Document 4 : Comprehensive Complaints Process

Document 5 : Purchasing Data (2008)

Document 6 : Procurement and Grants Policies – Litigation Exclusion

DISPOSITION

Pending Council’s deliberations on this report, staff will prepare any amendments to either the City’s Purchasing By-law or its related Procedures Manual.

DOCUMENT 1

GOVERNMENT OF CANADA: PROCUREMENT COMPLAINTS

Public Works and Government Services Canada (PWGSC) is the central purchaser for the Government of Canada, buying approximately $12 billion in goods and services each year. PWGSC has created a “Code of Conduct for Procurement” that provides a single point of reference for the above legal, regulatory and policy requirements of the procurement process at the federal level of government. The Code of Conduct for Procurement was one among many additions to the Federal Government procurement process that were the result of the introduction of the Federal Accountability Act (2006, c.9), an omnibus Act that amended PWGSC related legislation such as the Financial Administration Act (R.S., 1985, c. F-11) and the Department of Public Works and Government Services Act (1996, c.16).

Institutional changes included the creation of an Office of the Procurement Ombudsman that has jurisdiction over vendor complaints where the monetary threshold is below cases dealt with by the Canadian International Trade Tribunal. The Office of the Public Sector Integrity Commissioner was created to oversee disclosures of wrongdoing, including wrongdoing in respect to procurement. Finally, the Federal Government continues to use Fairness Monitors to oversee problematic or complex procurement processes to ensure the process is fair and transparent.

1. Canadian International Trade Tribunal

The Canadian International Trade Tribunal (CITT) is an independent administrative tribunal established under the authority of the Canadian International Trade Tribunal Act (1985, c. 47 (4th Supp.)). The CITT conducts inquiries into complaints by potential vendors concerning procurement by the federal government.

Any potential vendor who believes they may have been unfairly treated during the solicitation or evaluation of bids, or in the awarding of contracts subject to the Trade Agreements including the Federal/Provincial Agreement on Internal Trade may lodge a formal complaint with the Canadian International Trade Tribunal. The complaint must meet a monetary threshold in order to be considered by the CITT. The Procurement Ombudsman rather than the CITT conducts reviews of any complaint is in respect to the award of a contract for the acquisition of goods below the value of $25,000 and services below the value of $100,000.

The CITT has the powers of a Court of Record and may review all aspects of a procurement action up to and including contract award. The Tribunal decides whether a complaint is valid and may recommend appropriate remedies including the issuance of a new solicitation, the re-evaluation of the proposals, the termination of the contract, the awarding of the contract or monetary compensation. When a complaint has been accepted to inquiry prior to the contract award, the government institution may be ordered by the Tribunal to postpone any award until the resolution of the complaint. The Tribunal, however, does not have the ultimate power to delay the performance of any contract.

2. Office of the Procurement Ombudsman

Since the coming into force of the Procurement Ombudsman Regulations in the spring of 2008, the Office of the Procurement Ombudsman been involved in addressing vendor complaints arising out of contracts awarded for procurements below the monetary thresholds of the Federal Provincial Agreement on Internal Trade that would otherwise have been subject to that Agreement.

The Procurement Ombudsman, reports to the Minister of Public Works and Government Services Canada. Unlike the CITT that issues binding decisions, the Procurement Ombudsman may only make findings and recommendations in respect of the complaint, including a non-binding recommendation that a vendor be compensated by the government. Although the Ombudsman has this power, he has seldom exercised it. During the 2008-2009 period, the Procurement Ombudsman undertook a single investigation and received only 71 contract award complaints. The Federal Regulations allow the Procurement Ombudsman to use other means to resolve disputes including the ability to manage an Alternative Dispute Resolution Process using a neutral third party from outside the Office of the Procurement Ombudsman.

In addition to facilitating the resolution of vendor complaints, the Procurement Ombudsman undertakes reviews of the practices of departments for acquiring products and services to assess their fairness, openness and transparency and make any appropriate recommendations to the relevant department for the improvement of those practices. In performing this role, the Procurement Ombudsman is able to provide independent advice to various government departments on improving the procurement processes.

3. Fairness Monitors

As a proactive measure and prior to a dispute arising, the government often engages an independent Fairness Monitor (known as Fairness Commissioner at the provincial and municipal levels of government) to monitor and make recommendations on the procurement process for fairness and to ensure that the bids are evaluated in accordance with the evaluation procedures specified in the bid solicitation documentation.

As early as September-October 2000, the House of Commons’ Standing Committee on Public Accounts considered a report from the Federal Auditor General with respect to, “Alternative Forms of Delivery: Contracting for Property Management Services” with the Public Works and Government Services Canada. The minutes and key recommendation from the Federal Standing Committee assisted in the development of Fairness Monitors in the Federal Government:

The Department’s use of Fairness Monitors contributed significantly to the success of the initiative. These Monitors provided independent assurance to all parties that the process was fair and conducted according to the rules. Potential litigation and complaints were thus avoided. The Committee believes that the use of such Monitors should be extended and therefore recommends:

1. That Public Works and Government Services Canada amend its Contracting Manual to include the use of independent Fairness Monitors for all large and complex procurements.

As a result, the PWGSC Fairness Monitoring Program has been in place since 2004 and is described as follows:

The Fairness Monitoring (“FM”) Program provides management, client departments, government suppliers, Parliament and Canadians with independent assurance that PWGSC’s activities are conducted in a fair, open and transparent manner.

Independent third-party Fairness Monitors observe all or part of a departmental activity. Based on their observations, they provide an impartial opinion on the fairness of the monitored activity. The Program helps PWGS protect the interests of its clients, and Canadian taxpayers, by identifying and resolving fairness issues as they arise. Dealing with any issues early makes the process fairer and avoids possible costly after-the-fact resolutions.

When they are finished observing an activity, Fairness Monitors document their opinions in a final FM Report. The report is delivered to the office of the Chief Risk Officer. PWGSC makes all final FM Reports available to the public. The availability of the reports is subject to limits of disclosure under the Access to Information Act and Section 7 of the Privacy Act.

In August 2009, PWGSC issued its Fairness Monitoring Policy which provided the following insights regarding the “Use of Fairness Monitors”:

When a Fairness Monitor has been engaged to support a procurement process, he/she will provide written reports to the Departmental Oversight Branch (DOB), in accordance with the statement of work included in the Fairness Monitor’s contract, attesting to the fairness of the procurement process.

If a Fairness Monitor observes a situation that constitutes, or has the potential to create, fairness deficiencies, the Fairness Monitor will inform the project team of its concerns and seek a resolution. If a resolution cannot be reached, the Fairness Monitor will immediately advise DOB.

The Fairness Monitor will submit a final report to DOB, which includes, among other things, the Fairness Monitor’s overall attestation of assurance on the fairness of the monitored activity and any unresolved fairness deficiencies observed. The report will be made public after tabling with Senior Management.

DOCUMENT 2

FAIRNESS COMMISSIONERS

Recent research by Aird & Berlis LLP, Barristers and Solicitors in Toronto suggests that:

· “There appears to be little doubt that fairness commissioners are being appointed more often by a broader range of public sector organizations than was the case just a few years ago, both in Canada and abroad.

· Organizations in various sectors routinely appoint a fairness commissioner on their more complex/sensitive projects, here are some examples in Ontario:

o Ontario Power Authority use fairness commissioners for major energy procurements

o City of Toronto appoints a fairness commissioner as needed, such as the recent TTC purchase of 204 new low-floor streetcars

o Ontario Community Care Access Centres appoint a fairness commissioner on all of their health services procurements

o Infrastructure Ontario has a standing offer approach and selects a fairness commissioner from the eligible list for most of their large infrastructure projects

o The Toronto-area regional municipalities and transportation authority routinely appoint fairness commissioners on their larger projects

o Smaller organizations are also more often appointing fairness commissioners to more complex or sensitive procurements’ such as the City of Guelph on two recent projects, and West Perth Power Inc. on a recent procurement for a smart-metering project

· The Government of Ontario also makes extensive use of fairness commissioners, including on large information technology projects

· The Government of British Columbia routinely uses fairness commissioners, on large information technology projects

The City of Brampton has used fairness commissioners in the past although it does not have a written policy on their use. Hamilton's purchasing policy mentions the use of fairness commissioners, but does not provide details on when they will be used. The City of Oshawa hired a fairness commissioner once, for a $40 million P3 project. The commissioner hired was a former judge for the area, and was paid an honorarium. This was described as an exception to the rule given the size and profile of the project as they generally do not use them. Niagara Region does not currently use fairness commissioners, but is interested in changing their policy to incorporate their use. The Region of Peel and the City of Mississauga do not currently use fairness commissioners.

Aside from individual procuring organizations, there are others that fully support the use of fairness commissioners and actively promote the on-going development of the role. For example, in a 2005 paper the Canadian Council for Public-Private Partnerships commented that its members “applaud the use of Fairness Commissioners” and expressed the hope that standard measurements for determining fairness could be developed to make the role even more meaningful.

Outside Canada, the role of fairness commissioner also appears to be growing. In Australia, for instance, the Department of Finance and Deregulation formally published its Guidance on Ethics and Probity in Government Procurement in 2005. In the United States, many public bodies make use of fairness commissioners, California being particularly notable.”

In response to the specific question as to use of this type of service in the private sector, Denis Chamberland, a member of the firm states that “... it does happen, but not too often. As you know the procedural fairness requirements apply only to the public sector. But organizations sometimes decide to run a procurement as though they’re subject to the public rules.”

Howard Grant of PPI consulting, a well-known procurement expert and fairness commissioner is “not aware of any private sector organisations that use fairness services.” He suggests that in the Public sector, the Federal government and Federal crown corporations such as Canada Post, and EDC, make extensive use of fairness commissioners, as do the Provincial governments of Ontario, Alberta, and British Columbia. Also using these services are Provincial crown corporations such as Ontario Lottery and Gaming Corp., as well as Municipalities such as Calgary, Winnipeg, and Toronto.

DOCUMENT 4

DRAFT COMPREHENSIVE COMPLAINTS PROCESS

The City is committed to the highest standards of integrity with respect to dealing with vendor complaints, which shall be handled with fairness and equity for all participants.

All vendor complaints, whether addressed to elected officials or to staff, are to be referred to the Chief Procurement Officer (“CPO”). All complaints must be in writing, signed by an official of the vendor’s company. Furthermore, the vendor must have received a de-briefing from the City’s Purchasing staff as a prerequisite to filing a complaint. The Chief Procurement Officer shall review the objection and determine, in consultation with the City Clerk and Solicitor where necessary, whether the objection is material, in accordance with the Purchasing By-Law. An objection may be considered to be “not material” if it is frivolous or vexatious in nature or solely related to any listed irregularities as defined in Schedule “A” of the Purchasing By-law.

Where the complaint or objection is determined not to be material, the making of the award shall proceed in accordance with the Purchasing By-Law.

In all cases where written complaints are considered material, the procurement process will be suspended to permit the following process to be completed.

Phase One: Program Manager, Purchasing

The vendor submitting the complaint will be invited by the Senior Purchasing Officer involved in the procurement process, to attend a formal debriefing, to discuss the bidder’s concerns or to go over the reasons why the complainant’s bid or proposal submission was not selected. The debriefing will follow the Guideline attached as Appendix A.

In recognition of the vendor’s right to timely access, Phase One should be actioned within five business days, and will be available as soon as the tender call document is released. During Phase One, the Program Manager, Purchasing, is authorized to try to resolve, by employing alternate dispute resolution techniques, the complaint. However, he can immediately re-direct any complaint to Phase Two, where the complaint appears to be material, those having significant factual or interpretive disagreements, or involving legal principles.

If, at the completion of Phase One, there is a better understanding and the vendor accepts the City position, the procurement will resume, including the contract award. If the vendor is not satisfied with the explanation, the complaint shall proceed to Phase Two.

Phase Two - Panel

Where substantive issues are present, or where the matter could not be resolved in Phase One, the complaint will escalate to the attention of the Chief Procurement Officer. Where there was a Fairness Commissioner assigned to the procurement process, the CPO will assemble a Panel and review the matter with the Fairness Commissioner, the City Clerk and Solicitor and any other member of the senior staff that is necessary. In the event that a Fairness Commissioner was not assigned to the procurement process, the CPO will engage one for the purposes of the Phase 2 review Panel.

Within ten business days, the Panel will meet with the vendor, to better understand the complaint, and to outline the City’s position on the matter in writing, and the factual reasons which support the position.

If, at the completion of Phase Two, there is a better understanding and acceptance of the City position, the procurement will resume, including the contract award. If the vendor is not satisfied with the explanation, the complaint may proceed to Phase Three.

Phase Three – Committee and Council

In this phase, the complaint would be elevated to the appropriate Standing Committee and Council for final resolution. As such, a staff report would be prepared, setting out all the factual, procurement and legal issues, as well as the results of Phase One and Phase Two of the Comprehensive Complaints Process for consideration of Committee and Council.

APPENDIX A

DEBRIEFING GUIDELINE

Purpose

To explain why a Proponent’s submission was not selected.

When

Typically, debriefings only occur at the request of an unsuccessful respondent.

Why a “best practice”

Recognizes the significant investment of time and money in submitting a proposal
Ensures that the respondent understands the reciprocal work done by the government
Explains the bid process and displays the integrity of the evaluation process
Often avoids the possibility that a rejected Bidder will take its disappointment to a higher authority, perhaps a member of Council
Is good for all concerned as Bidders can learn from their mistakes and hopefully they can submit better proposals in future
Permits the government to benefit from stronger suppliers

Who

The best person is the Purchasing Officer from Supply Management
Occasionally, for complex technical evaluations, members of the evaluation committee should attend

Key Concepts

· If the debriefing is a face-to-face meeting, then establish the rules up front. Make it clear that the reason for the meeting is to explain the evaluation process, and why the respondent was unsuccessful.

Take Time to explain the evaluation process and award strategy. Many times, the vendor does not appreciate the integrity and thoroughness of the process.
Only discuss the bid made by the unsuccessful party. Do not make comparisons between it and the other bids.
Only refer to the evaluation criteria or award strategy listed in the bid document. Do not make comments on matters unrelated to the evaluation criteria.
Use the evaluation spread sheet that listed the scores for the unsuccessful respondent. Emphasize the weakness of the proposal as per the score. “Out of a total of 50 points… your proposal scored 25”. Do not provide scores for any other specific proposals.
Explain where the unsuccessful proposal ranked in the final scoring, but not in relationship to any other specific proposals. Say only that “Out of five proposals, yours ranked third (or fourth, etc.).” Do not mention the names of the other proponents.
Point out the strengths of the respondent’s proposal, and acknowledge where the proposal scored well.
Provide advice on how the respondent can improve their scoring in future proposal submissions.
Confirm at the end of the session that the respondent is satisfied with the debriefing

DOCUMENT 5

PURCHASING DATA (2008)

The first pair of charts includes the geographical vendor breakdown for the 2008 purchasing contracts included in the four delegation of authority reports, including the purchase of items that are not available locally.

Total $ of Vendors		% Breakdown by $ of Vendors
Ottawa & Surrounding Area	$532,857,585.35	Ottawa & Surrounding Area	85.0%
Ontario (not Ottawa area)	$25,020,425.82	Ontario (not Ottawa area)	4.0%
Quebec	$1,606,311.80	Quebec	0.3%
Other locations	$4,378,591.34	Other locations	0.7%
Not available locally	$62,815,615.27	Not available locally	10.0%
TOTAL	$626,678,529.58	TOTAL	100.0%

The second set of charts adjusts the data to reflect the fact that some of the goods and services consumed annually by the City are not available locally (e.g. transit buses are not manufactured in Ottawa, nor is winter rock salt mined locally, for example).

Total $ of Vendors		% Breakdown by $ of Vendors
Ottawa & Surrounding Area	$532,857,585.35	Ottawa & Surrounding Area	94.5%
Ontario (not Ottawa area)	$25,020,425.82	Ontario (not Ottawa area)	4.4%
Quebec	$1,606,311.80	Quebec	0.3%
Other locations	$4,378,591.34	Other locations	0.8%

TOTAL	$563,862,914.31	TOTAL	100.0%

DOCUMENT 6

M E M O / N O T E D E S E R V I C E

To / Destinataire	Mayor and Members of City Council	File/N° de fichier:
From / Expéditeur	M. Rick O’Connor, City Solicitor	ACS2008-CMR-LEG-0026-IPD
Subject / Objet	Procurement and Grants Policies – Litigation Exclusion / Politiques d’approvisionnement et de subventions – exclusion du litige	Date: November 10, 2008

#	MUNICIPALITY	RESPONSE	COMMENTS FROM THE MUNICIPALITY
1.	City of Windsor	By-law	Purchasing By-law
2.	City of London	Policy	Purchasing Policy
3.	City of Brantford	By-law	Municipal Code
4.	Regional Municipality of Niagara	By-law	Procurement By-law
5.	Regional Municipality of Waterloo	By-law	Purchasing By-law
6.	City of Kitchener	Policy	Council Policy
7.	City of Sarnia	Policy	Policy
8.	City of Hamilton	Policy	Policy in place on Sep 5, 2007 (unable to verify current status)
9.	City of Greater Sudbury	No By-law/ Policy	Tender documents contain lawsuit prohibition clause
10.	City of Brampton	No By-law/ Policy	Purchasing documents contain lawsuit prohibition clause
11.	District Municipality of Muskoka	No By-law/ Policy	Tender documents include broad past performance clause
12.	City of Oshawa	No By-law/ Policy	Tender documents include lawsuit prohibition clause
13.	Municipality of Chatham-Kent	No By-law/ Policy	Tender documents include lawsuit prohibition clause
14.	Town of Markham	No By-law/ Policy	Purchasing documents include lawsuit prohibition clause
15.	City of Sault St. Marie	No By-law/ Policy	No lawsuit prohibition clause inserted into documents
16.	City of Toronto	No By-law/ Policy	No lawsuit prohibition clause inserted into documents

#	MUNICIPALITY	RESPONSE	COMMENTS FROM THE MUNICIPALITY
1.	City of Windsor	Does not have such a policy	Stated this has not been an issue as of yet.
2.	City of London	No response
3.	Regional Municipality of Niagara	Does not have such a policy	Stated that perhaps they should consider such a policy.
4.	Regional Municipality of Waterloo	Does not have such a policy	Stated that perhaps they should consider such a policy.
5.	City of Kitchener	Does not have such a policy	Stated this has not been an issue as of yet.
6.	City of Sarnia	No response
7.	City of Hamilton	Does not have such a policy	No comments made.
8.	City of Greater Sudbury	Does not have such a policy	Stated that perhaps they should consider such a policy.
9.	City of Brampton	No response
10.	District Municipality of Muskoka	No response
11.	City of Oshawa	No response
12.	Municipality of Chatham-Kent	Does not have such a policy	No comments made.
13.	Town of Markham	Does not have such a policy	No comments made.