'Quasi-' sole source opens ACAN of worms in Canada

Government fails to tell public of $869M preferred-supplier contracts (Ottawa, Canada)

Last year, the ombudsman’s office tallied all the contracts exceeding $25,000 that went to preferred suppliers from 2005-07. It found that departments spent $1.7 billion using what are known as ACANs — Advanced Contract Award Notices.

An ACAN is used to bypass a normal bidding process, when a department wants to give a contract to a specific buyer and posts a notice of its intention on the government’s electronic bidding system to see if any other bidders come forward claiming they are qualified and can do the work. If no other bidders materialize within 15 days, then the contract goes to the preferred supplier.

The Ottawa Citizen questioned the $1.7-billion figure and Mr. Minto’s office sought a recount and Public Works found four more contracts totalling $869.5 million that weren’t counted.

“How do you miss reporting $869 million worth of contracts?” asked Shahid Minto, the government’s procurement ombudsman.

The discovery means the government under-reported the value of contracts issued as ACANs by 34%.

ACANs have long been controversial. They were designed to make sole-source contracts fairer and more transparent.

The Treasury Board, which sets the contracting rules for Public Works and other departments, forbids sole-source contracts unless a contract is worth less than $25,000, is a case of pressing emergency or national security, or if there is only one “unique” supplier who can do the job.

An ACAN is only to be used when a contract meets one of those four exemptions to bypass the bidding process.

Auditor General Sheila Fraser has argued ACANs have become a substitute for bidding and many bureaucrats simply see them as a “fifth exemption” to get around calling bids. She and Treasury Board officials have locked horns for years over them.

The Treasury Board “deems” ACANs competitive and counts them in its yearly tally of competitive contracts. Ms. Fraser considers them non-competitive and said they can be abused as a way to get around rules that forbid sole-source contracts.

As ombudsman, Mr. Minto — also a former assistant auditor general — has flagged his own concerns about a “loophole” departments are exploiting to use ACANs and get access to larger spending limits that are normally allowed for contracts awarded by competition.

If a contract is given to the preferred supplier because no other bidder comes forward during the notice period, then the deal is formally “deemed” a competitive contract. And then the spending limit shoots up to the levels allowed for competitive contracts.

Mr. Minto said the government has always restricted spending limits on sole-source or directed contracts because they are considered high-risk and open to abuse.

He has argued this loophole should be closed because it undermines the government’s “risk mitigation strategy” of controlling spending limits or authority.

For Mr. Minto, ACANs come with all sorts of risks to the fairness of procurement in government.

For big contracts, alternative suppliers often don’t have enough time to put together a bid or don’t bother because they assume they don’t stand a chance against the preferred bidder. Too often, he said, the minimum 15-day notice period becomes the maximum and that’s typically too short for other bidders to respond.

Read more: http://www.nationalpost.com/news/Government+fails+tell+public+869M+preferred+supplier+contracts/3235197/story.html#ixzz0srboEAwK