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Wednesday, December 17, 2014

Are we hard wired to corrupt our procurement systems?

The following article is, in original form, quite long, and a compelling story.  This extract is only a taste, and you really would do well to read the whole piece at the link.  It is a fine example of the difficulties government has in outsourcing services to private contractors.  

No worries; some day robots will provide all our services, and surely they will be much more uniformly competent, reasonable, selfless, up-datable to the latest technology and software, and unobtrusive, as well as inexpensive and non-proprietary?

Insiders’ rules: How government ‘wires’ contracts to get the people it wants
In this trial, one of the largest ever involving alleged white-collar crime, Canadians have been afforded rare glimpses into a government procurement system that is billed as competitive, open and fair but is actually riddled with tweaks and quirks that give bureaucrats significant power to determine outcomes.

It’s why the accused formed bidding alliances that are now a central issue in the ongoing trial in the Ottawa courtroom of Superior Court Judge Bonnie Warkentin. A 14-member jury is left to sort out whether those alliances were made known to federal contract officials, as required by the Competition Act.

While events leading to the trial occurred nearly a decade ago, little fundamental about the system has changed, the Citizen has determined through dozens of interviews with consultants, suppliers and former government contracting officials.

Suppliers have lived with the reality of rigid bureaucratic control for so long, it seems almost normal. They no longer think it odd that when departments issue a call for bids or proposals, the first order of business is to analyze the documents for evidence of ‘wiring.’

They’re looking for signs the government has already identified the winner or a preferred candidate. If it has, there’s usually no point in wasting time and money preparing a proposal that can easily run to 100 pages for something as simple as providing a few computer technology experts under contract.

“We see it all the time,” says the vice-president of a firm that has secured more than $100 million dollars worth of technology services contracts over the past decade from the federal government. “If it’s wired, we just move on to the next bid.”

Potential suppliers can tell if a request for bids is wired because the documents demand skills or experience so specific that only one or two firms can meet the minimum standard. Often these skills bear startling similarity to those possessed by contractors already on the job.

This is the real clue as to what’s behind this complex process — and the reason for it is simple: There’s an inherent conflict between running competitions and the desire of federal departments to solve practical problems by purchasing the services of specific, experienced consultants.

a central objective for many public servants is to ensure that important departmental projects get done on time and within budget. Whether this involves refurbishing the House of Commons or upgrading computer networks, government managers keen to avoid scandal want the best professionals possible on the job.

Thanks to many years of government downsizing, public service managers can no longer count on finding them in-house. So they purchase the know-how from the private sector. An estimated 60,000 private contractors or consultants are on the job at any given moment including about 25,000 in the National Capital Region alone. Not only do many of them work alongside full-time government employees, the departments involved have come to rely on them heavily.

This was certainly the case at the Canada Border Services Agency, which issued eight of the requests for proposals that are at the heart of the trial into alleged bid rigging.

“Because of their skills, consultants were actually the team leaders in the design and architecture (of computer systems),” Daniel Imbeau, a former manager with the CBSA, testified earlier this month. “A lot of times they were training our employees.”

The consultants, though, operate under finite contracts. When these come up for renewal, the CBSA and other departments are left to figure out how to make sure the right consultants – the incumbents — return.

The complication of course is that the government cannot – as a matter of sheer practicality – negotiate contracts with tens of thousands of individual consultants. They need to sign up with a corporate supplier such as Veritaaq, which in turn holds a contract with the government.

What we end up with is this world of artificial or constrained competition – in which federal departments make clear which consultants the suppliers should put forward during competitions. In many ways, consultants are just an extension of the public service. If they were employees, there would be no confusion about roles and no need to conduct competitions for their services.

Departments have every right to insist on certain types of experience and training, as long as they don’t cross the line and break the rules while they’re bending them in the direction they want.

Such was the case for instance with a major moving services contract sought by Envoy. The government last month revealed it had finally settled out of court, after agreeing to pay Envoy $35 million in lost profits and other damages. Envoy lost competitions against Royal Lepage Relocation Services (now Brookfield Global Relocation Services) in 2002 and 2004 – thanks to a rigged request for proposals.

Superior Court Justice Peter Innis noted in a ruling last year that the government “had acted intentionally to unfairly favour Royal Lepage Relocation Services, the incumbent.” Public Works officials had done so, he added, by weighting the technical aspects more heavily and, most crucially, by misleading Envoy about the true costs of providing property management services.

Innis concluded that Royal Lepage had used its insiders’ knowledge to reflect the fact hardly anyone actually used property management services while Envoy bid “using the grossly over-estimated values of PMS” described in the bid documents.” The inevitable result: Envoy lost.

The $1-billion-a-year informatics niche – which includes more than 200 firms in the Ottawa area alone — provides uniquely fertile ground for wiring. In part this is because its job descriptions are so complex. Knowledgeable bureaucrats can and do exclude consultants by requiring one extra computer language or one additional year of experience in an obscure software application among the compulsory features of a bid.

The level of detail in the requests for proposals is extraordinary. For example, CBSA last year published a 404-page RFP that listed nearly 100 technologies at play in the agency’s communications systems. The document noted that CBSA wanted to fill or renew hundreds of positions for information technology consultants involving 43 different categories of technical expertise.

On top of that, a supplier had to have done at least five information technology contracts each worth in excess of $1 million during the previous five years. Three of them had to have involved a government client.

The requirements prompted a lot of angst.

“As currently structured this RFP has the potential to prevent a notable majority of the vendors presently providing these services to CBSA to qualify,” one potential supplier wrote to the officials running the competition. “Will the Crown consider re-issuing this RFP?” the firm continued.

“No,” was the response from Public Works, the central agency that negotiates contracts on behalf of most federal departments.

CBSA last year whittled its list of informatics suppliers to fewer than 20 from nearly 50. The only new ones were the giants of the industry – IBM Corp. of New York and CGI Group of Montreal, both of which employ thousands of technical experts and could therefore meet the very difficult minimum requirements having to do with sheer volume. Smaller suppliers left out in the cold believe this was the point of the exercise.

When it comes to wiring bids, there are many shades of gray. For instance, a technical requirement that eliminates a consultant or supplier could very well reflect a rare set of skills essential for upgrading very old government computers – and not a deliberate desire to knock out the competition.

A former government official who has worked both sides of the street notes there is often a fine line in establishing technical requirements.

“You don’t want to set them so low that you’re faced with evaluating a ton of bidders,” he says, “on the other hand, you don’t want to make them so difficult you wind up with no competition.”

“We gave up trying,” said a senior executive with a large national firm that provides real estate advice and services. “The rules of the competitions kept changing and it always seemed as though conversations were taking place that we were never part of.”

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