6.                   DELEGATION OF AUTHORITY – CONTRACTS AWARDED FOR THE PERIOD OCTOBER 1 TO DECEMBER 31, 2008, SPONSORSHIP AND ADVERTISING, LEGAL OUTSOURCING COSTS AND PAYMENT WITHOUT REFERENCE AND 2008 CONSOLIDATED ANNUAL SUMMARY

 

DÉLÉGATION DE POUVOIR – CONTRATS ACCORDÉS POUR LA PÉRIODE DU 1er OCTOBRE AU 31 DÉCEMBRE 2008, COMMANDITES ET PUBLICITÉS, FRAIS LÉGAUX D’IMPARTITION ET PAIEMENTS SANS RÉFÉRENCE ET DÉCLARATION ANNUELLE INTÉGRÉE DE 2008

 

 

 

COMMITTEE RECOMMENDATION

 

That Council receive this report for information.

 

 

RECOMMANDATION DU COMITÉ

 

Que le Conseil prenne connaissance de ce rapport.

 

 

 

DOCUMENTATION

 

1.      City Treasurer’s report dated 16 March 2009 (ACS2008-CMR-FIN-0010).

 

2.      Extract of Draft Minutes


Report to/Rapport au :

 

Corporate Services and Economic Development Committee

Comité des services organisationnels et du développement économique

 

and Council / et au Conseil

 

16 March 2009 / le 16 mars 2009

 

Submitted by/Soumis par : Marian Simulik, City Treasurer/Trésorière municipale

 

Contact/Personne-ressource :  Daniel Farrell, Program Manager, Supply Management Division / gestionnaire de programme, Division de la gestion de l'approvisionnement,
(613) 580-2424 ext./poste 21505; Daniel.Farrell@ottawa.ca

 

     

Ref N°: ACS2009-CMR-FIN-0010

 

 

SUBJECT:

DELEGATION OF AUTHORITY – CONTRACTS AWARDED FOR THE PERIOD OCTOBER 1 TO DECEMBER 31, 2008, SPONSORSHIP AND ADVERTISING, LEGAL OUTSOURCING COSTS AND PAYMENT WITHOUT REFERENCE AND 2008 CONSOLIDATED ANNUAL SUMMARY

 

 

OBJET :

DÉLÉGATION DE POUVOIR – CONTRATS ACCORDÉS POUR LA PÉRIODE DU 1er OCTOBRE AU 31 DÉCEMBRE 2008, COMMANDITES ET PUBLICITÉS, FRAIS LÉGAUX D’IMPARTITION ET PAIEMENTS SANS RÉFÉRENCE ET DÉCLARATION ANNUELLE INTÉGRÉE DE 2008

 

 

REPORT RECOMMENDATION

 

That the Corporate Services and Economic Development Committee table this report, to be received and discussed at the next scheduled meeting of CSEDC, and then forwarded to Council for information.

 

 

RECOMMANDATION DU RAPPORT

 

Que le Comité des services organisationnels et du développement économique dépose le présent rapport qui sera discuté à la prochaine réunion prévue du CSODE, puis transmis au Conseil municipal pour information.


BACKGROUND

 

The Purchasing by-law requires the Supply Management Division to report to Council on a quarterly basis.   Each quarterly report: 

 

1.      contains information on contracts exceeding $25,000 awarded under delegated authority;

 

2.      identifies all contracts categorized as:

 

(a)    Consulting Services

(b)   Professional Services

(c)    Follow-on Contracts

(d)   Amendments  

 

3.      identifies the reason for outsourcing in accordance with the definitions discussed below.

 

In addition to the above, this fourth quarter report includes details about the 2008 Sponsorship and Advertising, Legal Outsourcing Costs and Payments without Reference.

 

In November 2008, the Corporate Services and Economic Development Committee directed that staff provide an annual summary of contracts awarded under delegation of authority and legal outsourcing costs totalling the contracts over $25,000 as reported each quarter by vendor.  This summary has been included in this report.

 

 

DISCUSSION

 

Document 1

 

The contracts approved for the period of October 1 to December 31, 2008 are listed in Document 1.

 

Where appropriate, staff used the following definitions as outlined in the Purchasing By-law to identify the contract category, the outsourcing reason and the non-competitive exception.  

 

Professional Services

 

Professional Services means services requiring the skills of professionals for a defined service requirement or for a specific project related deliverable including but not limited to the areas of engineering, architecture, design, planning, information technology, financial auditing and fairness commissioners.

 

Consulting Services

 

Consulting Services means assistance to management, including but not limited to the areas of strategic analysis, organizational design, change management, policy development, feasibility studies and other services intended to assist decision making within the organization.

 

Amendment

 

An amendment is an increase in the scope of an approved contract, which is unanticipated.  Those amendments that are both greater than $50,000 and 50% of the original contract will be identified in the quarterly report. 

 

Follow-on Contract

 

A follow-on contract differs from an amendment in that the original contract or bid solicitation document recognizes the fact that it is likely that the initial defined contract scope may be expanded to include a number of related phases that are either included in the tender document, or are customary in relation to the work assignment. Rates charged for the follow-on contract are reviewed by Supply Management Division, and must be based on those rates proposed by the service provider in the original competitive “bid”.

 

An extension to a contract is not categorized as an amendment or a follow-on contract.  An extension is a contract term allowing the City to continue purchasing the good or service for an extended period of time where the option to extend the contract was outlined in the bid document. 

 

Reasons for Outsourcing the Work

 

The reason Consulting and Professional Service contracts are let is identified as follows:

 

(a)        workload related or lack of internal resources by a “W”;

(b)               need for specialized expertise by an “E”;

(c)                need for independent third party oversight by an “I”;

(d)               regulatory requirement by an “R”;

(e)                proprietary service or unique market position by a “P”; and

(f)         business model required outsourcing by an “O”.

 

Non-Competitive Purchases

Under subsection 22(1) and (8) of the Purchasing By-law the requirement for competitive bid solicitation for goods, services and construction may be waived under joint authority of the appropriate Director and Supply Management and replaced with negotiations by the Director and Supply Management under the following circumstances:

22(1) The requirement for competitive bid solicitation for goods, services and construction may be waived under joint authority of the appropriate Director and Supply Management and replaced with negotiations by the Director and Supply Management under the following circumstances:

a.       where competition is precluded due to the application of any Act or legislation or because of the existence of patent rights, copyrights, technical secrets or controls of raw material,

b.      where due to abnormal market conditions, the goods, services or construction required are in short supply,

c.       where only one source of supply would be acceptable and cost effective,

d.      where there is an absence of competition for technical or other reasons and the goods, services or construction can only be supplied by a particular supplier and no alternative exists,

e.       where the nature of the requirement is such that it would not be in the public interest to solicit competitive bids as in the case of security or confidentiality matters,

f.        where in the event of a "Special Circumstance" as defined by this By-law, a requirement exists, or

g.       where the possibility of a follow-on contract was identified in the original bid solicitation.

h.       where the total estimated project cost for professional services does not exceed $50,000.

i.          where the requirement is for a utility for which there exists a monopoly.

22(8)    Despite any other provision of this by-law, the Director, Infrastructure Design and Construction Services and Supply Management may jointly award a contract for which no competitive bids were solicited provided that,

a.       the contract is to complete outstanding works in approved plans of subdivision or site plans, and

b.      the City holds sufficient funds as security to complete the works or the subdivision or site plan agreement contains provisions to recover the costs from the developer.

 

This report identifies all non-competitive purchases as well as references the appropriate subsection 22(1) and (8) exception.

 

Supply Management Division certifies that all the contracts awarded under Delegation of Authority for the period of October 1 to December 31, 2008, are in compliance with the Purchasing By-law.

 

The following table summarizes the total number and value of the contracts as well as the different categories under which the applicable contracts fall.


 

 

Total # of Contracts

Total $ Value

# Prof. Services

# Consulting
Services

Workload
related "W"

Specialized
expertise "E"

Independent third party oversight "I"

Regulatory
Requirement "R"

Proprietary
Service "P"

Business model outsourcing "O"

AG

4

$180,928

4

-

-

-

4

-

-

-

CM

36

$24,086,137

11

4

-

15

-

-

-

-

CO

333

$50,995,006

39

14

-

45

1

-

-

7

ISCS

183

$98,039,375

68

11

-

28

-

-

-

51

Total

556

$173,301,446

122

29

-

88

5

-

-

58

 

 

 Document 2

 

Legal costs paid for 2008 are listed in Document 2. 

 

Although Legal Services is required by the Purchasing By-law to identify those law firms in receipt of an annual cumulative total of $100K or more, the Branch has identified all of the law firms providing external legal services to the City during 2008, as well as identifying disbursement and GST costs for that same period of time as per Sections 13(1) and (2) of the Purchasing By-law.  Also, included for 2008 are the amounts paid to external law firms with respect to litigated insured claims.  These amounts represent legal fees and disbursements associated with litigation, which are funded by the City's Self-Insurance account and therefore, are not paid from the Legal Services' budget.   Similarly, the amounts reported for external legal services provided with respect to the Light Rail project and litigation are not paid from the Legal Services’ budget, and, instead, are paid from the North-South Light Rail budget within the Infrastructure Services and Community Sustainability Department.

 

The annual total for outsourced legal services increased from $2,537,406 in 2007 to $3,480,103.15 in 2008, representing an increase of 37.15%.  The increase, in part, is due to the expanded reporting in 2008, which includes, for the first time, expenditures in the area of insured litigated claims.

 

Document 3

 

In accordance with the Sponsorship and Advertising Policy, Supply Management Division is responsible for preparing an annual report to Council on all Sponsorships exceeding $25,000.  Document 3 provides the detail of these sponsorships, which total $1,126,961.

 

Document 4

 

Payment without reference to a purchase order describes a method of payment and is not a reflection of the method used to procure the goods or services.  All procurement actions that go through the Supply Management Division have a corporate purchase order created and therefore these are known to be in compliance with the Purchasing By-law.  A payment without reference is a legitimate payment method permitted within corporate procedure and is recognized in the Purchasing By-Law. These types of payments provide a cost effective process for low dollar value goods and services and are the standard method used for paying utility and telecommunication costs.  As payments without reference do not go through the Supply Management Division, an assessment of their compliance with the Purchasing by-law can only be made after the fact. 

 

Document 4 of this report lists the purchases greater than $25,000, paid without reference to a purchase order.  The 2008 purchases made without reference total $80.6 million.  Of these, approximately $42.5 million was paid to utility companies or other companies that have a monopoly on the provision of a good or service.  These purchases would not be set up through a purchase order.  The majority of the other purchases listed, valued at $37.6 million have been procured through a competitive process and paid without reference to expedite payments for small value items.  The non-compliance purchases paid without reference total $0.5 million or approximately 0.6% of the total purchases paid without reference.  

  

Periodically reviewing the number of invoices per vendor and the total dollar amount paid to each vendor illustrates noticeable purchasing trends.  The Supply Management Division now reviews payments without reference to ensure the purchases were in compliance to the Purchasing By-law and then consults with client departments to determine appropriate procurement methods.  In this regard, 7 vendors who were paid through payments without reference have been identified in Document 4 as having non-compliant procurements.  The value of these purchases total $0.5 million while in 2007 the value totalled $1.1 million.  There has been a 55% decrease in the value of non-compliant purchases from those identified and reported in the 2007 Delegation of Authority 4th Quarter Report, ACS2008-CMR-FIN-0016. 

 

With respect to the 7 vendors paid without reference in 2008, one client department has completed the competitive process for purchases of this nature, another client department has agreed to commence a competitive process in 2009, and the Supply Management Division has started a pro-active dialogue with the 5 other client departments to determine whether the goods or service being purchased could be procured through a competitive process or paid through the issuance of a corporate purchase order.  The results of these discussions will be presented to Council in the 2009 Delegation of Authority 4th Quarter Report.  

 

As a result of the Supply Management Division’s investigation into the six non-compliant 2007 purchases, five clients departments are either procuring goods and services through a competitive process or paying through the issuance of a corporate purchase order.  In the sixth case, a Request for Standing Offer (RFSO) was established in the first quarter 2008.  At present Public Health is working with Supply Management Division to issue their own RFSO for their unique requirements. 

 

All payments without reference issued by members of Ottawa City Council and the Mayor have been removed because the City's Purchasing By-law does not apply to the Mayor and Members of Council (that is, elected representatives) individually. 

 

 

Document 5

 

Document 5 is a summary of the consolidated amount of contracts exceeding $25,000 awarded under delegated authority per vendor for all the 2008 Delegation of Authority Reports and the payments without reference.  The total Legal outsourcing costs are referenced in Document 2.

 

 

CONSULTATION

 

The preparation of this report is required by the By-law and as such no public consultation is required.

 

 

LEGAL/RISK MANAGEMENT IMPLICATIONS:

 

There are no adverse legal or risk management implications as the information is required to be disclosed pursuant to the Purchasing by-law.

 

 

FINANCIAL IMPLICATIONS

 

Prior to a contract approval, Supply Management Division staff confirms that the appropriate funds are available in the budget, based on receipt of a funded requisition in SAP.  The availability of funds is a condition of approval under delegated authority.

 

 

SUPPORTING DOCUMENTATION

Document 1 -      List of Contracts Awarded under the Purchasing By-law for the period October 1 to December 31, 2008 (Previously issues and held on file)

 

Document 2 -      Expenditures for outsourcing legal services of a cumulative total value of $100,000 or more in 2008 (Previously issues and held on file)

 

Document 3 -      List of suppliers awarded sponsorships and advertising contract(s) of a cumulative total value of $25,000 or more in 2008 (Previously issues and held on file)

 

Document 4 -      Payment without Reference not previously reported to Council (Previously issues and held on file)

 

Document 5  -     2008 Consolidated Delegation of Authority and Payments without Reference Summary (Previously issues and held on file)

 

 

DISPOSITION

 

Report forwarded for information pursuant to the By-law.  No further action required.


            DELEGATION OF AUTHORITY – CONTRACTS AWARDED FOR THE PERIOD OCTOBER 1 TO DECEMBER 31, 2008, SPONSORSHIP AND ADVERTISING, LEGAL OUTSOURCING COSTS AND PAYMENT WITHOUT REFERENCE AND 2008 CONSOLIDATED ANNUAL SUMMARY

DÉLÉGATION DE POUVOIR – CONTRATS ACCORDÉS POUR LA PÉRIODE DU 1er OCTOBRE AU 31 DÉCEMBRE 2008, COMMANDITES ET PUBLICITÉS, FRAIS LÉGAUX D’IMPARTITION ET PAIEMENTS SANS RÉFÉRENCE ET DÉCLARATION ANNUELLE INTÉGRÉE DE 2008

ACS2009-CMR-FIN-0010                                city wide / À l’Échelle de la ville

 

Ms. Marian Simulik, City Treasurer, indicated staff would be presenting Committee with changes that would be made to the report process due to concerns expressed by Councillors and the public.  Ms. Simulik then introduced Mr. Jeff Byrne, Manager of Strategic Projects and Mr. Dan Farrell, Program Manager of Purchasing.

 

Mr. Byrne spoke to a PowerPoint presentation, which served to provide Committee with an overview of the report and of changes that would be made to the report process.  A copy of the presentation is held on file.

 

Councillor El-Chantiry referenced the media and public reaction that had occurred when the report was released and he asked why a summary had not been attached to the report to properly explain the figures and put things in perspective.  Mr. Kent Kirkpatrick, City Manager, felt the Councillor raised a good point and agreed that in the future, the staff should attach a short summary or press release to properly explain all controversial reports or all reports that staff felt were potentially newsworthy to ensure that these were accurately reported in the media.  He also believed members of Council should have the benefit of that high level information prior to being put in the position where they had to answer questions from the media. 

 

Committee members expressed support for the idea. 

 

Following these exchanges, Committee voted on the item.

 

That the Corporate Services and Economic Development Committee receive and discuss this report and then forward it to Council for information.

 

                                                                                                            CARRIED