Internal Audit Consulting Engagement: Procurement and Authorities of Large-Scale Purchases (Final Report)

May 16, 2016

Background

• This consulting engagement on Procurement and Authorities Related to Large Scale Purchases from the Reforms Implementation is included in the 2015 - 2018 Risk-Based Audit Plan that was approved by the Canadian Institutes of Health Research (CIHR) Governing Council (GC).
• This report will make recommendations based on the review of the procurement experiences related to large scale procurement at CIHR, including any associated services, maintenance, support and professional services related to the Elsevier implementation. It will provide management with best practices, areas of improvement, and lessons learned during the process.
• This report has examined past practices but limits its recommendations to those that provide utility for future procurement activities.
• The scope of this engagement is limited to the procurement process for the Research and Reviewer Matching Solution (RRMS) implementation. The procurement of the CRM system will not be discussed at length as pre-competed procurement instruments were used and they are a standardized process within the Government of Canada.

Research and Reviewer Matching Solution Project Procurement History

Procurement Areas Covered

• Authorities and Policies
• Resources and Expertise
• Common Practices
• Future Impacts

Executive Summary

• Appropriate contracting authorities and procurement vehicles were used for the initial contracting of the Research and Reviewer Matching Solution (RRMS) using Elsevier.
• CIHR should develop a project management framework and process which includes a Project Complexity & Risk Assessment and consistent costing practices in order to support future procurement activities.
• The CIHR's Investment Plan must be updated to include all significant projects including the RRMS. It should be regularly updated and included as part of an overall project management framework.
• A process should be developed to identify gaps in expertise when engaging in highly complex procurement activities.
• Four procurement options exist for the RRMS when entering into the next round of procurement. It is recommended that CIHR go through Public Services and Procurement Canada for future procurement actions related to the RRMS after completing a post pilot feasibility study on the system.

Strengths

Procurement Strengths

• Appropriate contracting authorities and procurement vehicles were used for the initial contracting of the RRMS using Elsevier. Procurement activities that enabled success included:
  • CIHR conducted an environmental scan which is a valuable exercise in identifying potential suppliers for systems that are not widely available or known.
  • CIHR saw gaps in expertise for the purchase of the Research and Reviewer Matching Solution and as a result engaged external procurement experts for the contracting process to ensure CIHR was adequately supported in meeting all contracting regulations.
  • Holding a bidder’s conference was advantageous in identifying interested parties, reaffirming process steps to those that may not be aware of mandatory bidding requirements, and enabled an open and transparent forum to clarify complex IT Request for Proposal business requirements.
  • Consulting with other government departments contributed to CIHR’s interpretation and application of policies.
  • Exploring partnerships with other government departments early on within the procurement process could help reduce costs.
  • Carrying out an open electronic bidding process created competition, may have reduced costs, and helped identify more potential suppliers.

Opportunities

Policy on the Management of Projects

Requirements

• TB's Policy on the Management of Projects allows CIHR to exercise up to $1M in project authority when supported by an internal costing exercise.
• A "Project Complexity and Risk Assessment Template" (PCRA) must be performed for each project over $1M.

Recommendations

• CIHR should establish a project management framework and process to ensure that projects are managed in a consistent but flexible manner, having considered all legislated or mandatory requirements and include a full project costing.
• A PCRA should be completed for all Government of Canada projects. Project EnaBleS should complete a PCRA immediately if they have not already done so already. Based on the results of the PCRA, management will have assurance that they have the appropriate project authority.
• Management should develop a project costing methodology that aligns with the practices of other departments including software licensing fees and the "Treasury Boards Guidelines on Costing" to support the conduct of the PCRA. CIHR did not include Elsevier licensing fees in the Research and Reviewer Matching Solution project costing as they were included as on-going program costs.

Policy on Investment Planning

Requirements

• Investment Plans are to include all assets and services acquired by the Agency to: "ensure resources are allocated in a manner that clearly supports program outcomes and government priorities"^{Footnote 1}.
• As a majority of purchases consist of projects: "Investment Plans must also include sufficient information on planned projects to support an informed decision by Treasury Board Ministers as to which projects would warrant their consideration over the planning horizon"^{Footnote 1}.
• Investment Plans are to be updated every 3 years.

Recommendation

Stats

• The Financial Planning Unit is undertaking a formal update to the Investment Plan for 2015/16 which will include the Research and Reviewer Matching Solution under the new "EnaBleS" project.

Resources and Technical Expertise

• The Procurement Unit is an adequate size and has the appropriate level of expertise and knowledge for most of CIHR's contracting activities.
• External procurement expertise is needed when CIHR does not have the appropriate internal resourcing, technical expertise and knowledge to manage the complex procurement needs of large-scale, highly-complex IT projects.

Recommendations

• A process should be established to identify high risk procurement needs that are linked to the Investment Plan.
• A process should be developed to determine when the Procurement Unit should engage external experts e.g. external consultants, other government departments, Public Services and Procurement Canada (PSPC).
• CIHR may want to consider leveraging procurement related partnerships, services, and advice from other government departments when internal expertise is inadequate. For example, during interviews NSERC/SSHRC indicated they had significant experience in the implementation of a CRM, and procurement of large scale projects, including using PSPC to purchase licenses and seeking project authority from Treasury Board for projects over $1M.

Recommended Next Steps - Project EnaBleS

Procurement Options

Procurement Option #1 – Research and Reviewer Matching Solution

Perform custom procurement in-house

Under subsection 28(1) of the CIHR Act, CIHR is given the power to procure goods and services from outside the federal public administration^{Footnote *}. However, if the requirement is greater than $2M, procurement must be managed by PSPC on behalf of CIHR. The alternative to PSPC is to obtain prior Treasury Board approval (via a Treasury Board submission).

Procurement Option #2 – Research and Reviewer Matching Solution

Pre-competed Procurement Instruments (PCPI)

Can result in standing offers, supply arrangements, or task authorization contracts. Departments and agencies should always consider use of these procurement instruments as the first method of supply of goods and services.

Procurement Option #3 – Research and Reviewer Matching Solution

Advance Contract Award Notice (ACAN)

"A public notice indicating to the supplier community that a department or agency intends to award a good, service, or construction contract to a pre-identified supplier, believed to be the only one capable of performing the work, thereby allowing other suppliers to signal their interest in bidding by submitting a statement of capabilities. If no other supplier submits a statement of capabilities that meets the requirements set out in the ACAN, the contracting officer may then proceed with awarding the contract to the pre-identified supplier."^{Footnote 2}

Procurement Option #4 – Research and Reviewer Matching Solution

Public Services and Procurement Canada

PSPC is normally the contracting authority for large, complex goods and services contracts for departments, which is often the major cost of a project. Dedicated account managers are assigned to each department and agency to provide advice and solutions.

Procurement Option Recommendation

• CIHR should conduct a post pilot feasibility study to ensure the Elsevier based RRMS continues to meet and support the Agency's needs. In addition, CIHR should conduct an environmental scan to ensure they are aware of potential suppliers and new technologies.
• If CIHR wishes to continue with the Research and Reviewer Matching Solution using Elsevier or another supplier it is highly recommended that PSPC be used for the future procurement given the nature, complexity, breadth, risks and need for a longer term solution.
• When considering this procurement vehicle management must ensure to plan for increased lead time and the risk of additional administration and oversight.

Other Observations

• Opportunities to partner with other departments with similar lines of business for the procurement of the RRMS exist however other organizations contacted are not prepared to undertake such endeavors at this point in time. CIHR could seek future partnerships once it has been determined that the system functions as desired including joint development or procurement.
• At the end of the current contract, CIHR will only have access to researcher profiles performed and validated by the RRMS at a specific point in time; CIHR will not have access to system functionality at the end of the current contract, or any intellectual property.
• Other government departments have pursued similarly-scaled projects (large, IT-driven, highly complex) but are required to use Public Services and Procurement Canada as their contracting authority. By contrast, under its Act, CIHR has an exception that grants procurement authority for projects below $2M.
• Difficulties surrounding obtaining successful bids were identified as the main challenge and were mitigated by additional, out of the ordinary, procurement steps.

Appendices

Appendix A - Questions Examined

Authorities and Policies

• Were project and contracting authorities respected and used appropriately? (Q1)

Resources and Expertise

• What challenges did CIHR face, how would they be handled differently? (Q2)
• When dealing with vendors with limited experience with the Government of Canada what factors are critical to facilitate the receipt of successful proposals? (Q3)
• Does CIHR have the appropriate resourcing, technical expertise and knowledge to manage large scale IT projects with complex procurement needs?  (Q4)
• Is external procurement expertise needed to support large scale purchases? (Q5)
• Were there any outcomes or consequences from the procurement process that were not anticipated? (Q10)

Common Practices

• What did CIHR learn from its interactions with Treasury Board and PSPC in terms of project authorities and purchases of software? (Q7)
• Have any other Departments or Agencies pursued procurement of (and implemented) specialized program delivery systems or unique (unique in their availability on the market) tools for long-term business integration and use and if so what best practices were identified? Could these practices be applied to facilitate long-term procurement of the data matching solution? What are the risks of reliance on accessibility of such unique resources in the context of procurement rules? (Q11)

Going Forward

• What alternative approaches could be considered for future procurement actions or renewals, e.g. pre-competed tools versus custom procurement? (Q6)
• Do opportunities exist for partnering with other departments, agencies or foundations with similar needs or objectives? (Q8)
• What will be the status of CIHR's access to software functionality and related data at the end of the current contracts? (Q9)

Appendix B – Project vs. Contracting Authority

Appendix C - References

• TB Policy on the Management of Projects
• TB Standard for Project Complexity and Risk
• Project Complexity and Risk Assessment Tool
• TB Policy on Investment Planning - Assets and Acquired Services
• CIHR Act
• PSPC Supply Manual

Other references used for information:

• Financial Administration Act
• Policy Framework for the Management of Assets and Acquired Services
• TB Contracting Policy
• TB Standard for Organizational Project Management Capacity
• Business Case Guide

Date modified:

2016-07-19