1989 Report of the Auditor General of Canada

Main Points

Scope of the review

21.1 The objectives of this year's review were twofold. The first was to follow up and assess the adequacy of corrective action undertaken by the Department of Supply and Services (DSS) in response to our 1987 audit of its government-wide administrative services. The second was to determine client departments' perceptions of the cost and quality of DSS government contracting services by conducting an opinion survey (paragraphs 21.18 to 21.20).

Follow-up of our 1987 audit findings

21.2 DSS management has commenced corrective action, most of which is still in progress. Some of the more significant productivity issues reported in our 1987 chapter will take time and effort to resolve. Systems and infrastructures that were designed to suit the 1970s technology are gradually being transformed to fit the needs of the 1990s (21.21 to 21.51).

Opinion survey of government contracting services

21.3 In general, client departments are satisfied with the central role played by DSS in the government contracting process. However, concerns were expressed over the timeliness of awarding contracts, delivery, and the cost and quality of goods and services procured. DSS clients suggested improvements in the process of planning and administration of the government contracting process (21.52 to 21.100).

Department's conclusion

21.4 The reflections in this chapter convey an understanding of what is happening within the Department and provide an objective and professional point of view. The information included in the chapter will be of value to the continuing process of effecting change in the Department.

Introduction

21.5 The Department of Supply and Services (DSS) was formed in 1969 as part of a general administrative reorganization of government in response to a concern for efficiency and economy in government operations.

21.6 Its mandate derives from the Department of Supply and Services Act, the Financial Administration Act, the Defence Production Act, and numerous Orders in Council and Treasury Board Administrative Policies. In addition, DSS has several Memoranda of Understanding which govern its relationships with other departments and agencies.

21.7 Within government, DSS is known as a common service organization providing goods and services to virtually all federal departments and agencies. These goods and services are delivered within a framework of policies established by the Treasury Board and with sensitivity to the broader objectives of government such as regional or industrial development.

21.8 According to Treasury Board policies, the primary role of common service organizations is the provision of service to their client departments and agencies, and, within that role, the primary goal is the attainment of maximum value for money. In addition to Treasury Board policy and procedures, many of the activities of DSS are directed or constrained by other authorities such as the Minister of Finance or the governing legislation and policies of individual departments and agencies DSS serves. Therefore, DSS activities are conducted in a complex environment where the objectives of service, control and value for money may conflict.

21.9 To deliver its various service lines, the Department employs close to 9,500 people and is organized into six major areas (see Exhibit 21.1).

(Exhibit not available)

21.10 The Supply Operations Sector is responsible for the acquisition of and contracting for goods and certain services on behalf of other government departments and agencies and co-managing major crown projects. All contracting services are provided to clients on a fee for service basis.

21.11 The Management and Operational Services Sector is responsible for the overall management and functional direction of government-wide administrative services such as accounting, computing, and other related services provided to government departments and agencies.

21.12 The Regional Operations directorates are the vehicle for day-to-day delivery of the Department's common services through a national network of District Supply and Services Offices.

21.13 The Finance and Administration Sector provides corporate financial and administrative support to the Department.

21.14 The Corporate Policy and Planning Sector provides planning, program direction, policy formulation and review, internal audit and program evaluation for the Department.

21.15 The other corporate functions include the Department's legal, human resource and public affairs services.

Scope of the Review

21.16 In our 1987 audit of DSS, we reported on our evaluation of the management controls over the delivery and the productivity of government-wide administrative services provided by the Management and Operational Services Sector.

21.17 In our 1988 audit we reported on the procedures used by DSS to ensure that suppliers of goods and services, contracted for by the Supply Operations Sector on behalf of other government departments, complied with the terms and conditions of government contracts. We considered key contract conditions, particularly those pertaining to departmental contract audits.

21.18 The objectives of this year's review were twofold. The first was to follow up and assess the adequacy of corrective action undertaken by the Department in response to the recommendations in our 1987 annual report.

21.19 The second objective was to determine client departments' perceptions of the cost and quality of DSS contracting services by conducting an opinion survey.

21.20 The first part of this chapter deals with the follow-up of our 1987 audit. Results of the opinion survey are contained in the second part of the chapter.

Follow-up of our 1987 Audit Findings

Background

21.21 The government-wide administrative services provided by DSS and reported on in our 1987 audit report included Public Service Pay, Public Service Superannuation, government cheque issue and related support functions. Our audit was particularly concerned with the ability of DSS to deliver services of acceptable quality at a reasonable cost.

21.22 We concluded that, while the Department had maintained adequate service quality, its service costs were high, its delivery systems were labour intensive and it had not fully exploited the benefits available from automation. We recognized in our 1987 chapter that corrective action to address these issues represented a major challenge for DSS management and indicated that, to improve productivity, the Department should:

• set cost and quality targets for all products or service lines and develop the necessary strategic plans for their achievement;
• establish clear and responsive accountability relationships for the cost and performance of each service line under the new plans;
• ensure that appropriate human resource skills are put to use in developing and implementing these plans;
• develop automated systems capable of achieving planned service line cost and quality targets; and
• develop adequate management information tools in the areas of cost accounting and performance measurement to control and monitor the performance of each product or service line.

21.23 Our follow-up review assessed the adequacy of corrective action taken by the Department in response to the 1987 chapter. The initiatives of the Department in responding to our recommendations are set out below.

Corrective Action

21.24 Strategic planning. The Department is currently undertaking an extensive strategic planning exercise intended to evaluate its service lines to reach a common understanding with its clients and central agencies as to future courses of action to be taken. Several Service Line Studies, which are completed or currently underway, are designed to evaluate the Department's current activities, its role and the cost-effectiveness of alternative modes of service line delivery and performance measurement options.

21.25 Service lines' costs. The cost and quality of service lines delivered by a common service organization, such as DSS, should be major criteria in assessing its overall performance. DSS service lines' costs should compare favourably with those of similar organizations.

21.26 In our 1987 audit we selected the DSS Public Service Compensation services, as a sample of DSS service lines, for comparison with other organizations. Our analysis indicated that the DSS compensation service costs were significantly higher than those of the organizations we reviewed.

21.27 DSS is currently undertaking a major project to reduce its compensation service line costs by developing a new, integrated Public Service Compensation System. This system is intended to increase the use of automation and take greater advantage of modern technology.

21.28 In June 1989 Treasury Board approved $11.5 million for DSS to complete the feasibility study for this project. The Department estimates the total cost of the project to be $55 million, including costs to other departments. Once fully implemented in 1995, potential savings within DSS for Public Service Compensation services are estimated by the Department to be up to $23 million annually. Upon the completion of the feasibility study, DSS will be in a position to refine its estimates of the total costs and the potential annual savings of this project.

21.29 Since our 1987 audit, DSS has introduced automation into the calculation of retroactive Public Service Pay changes and the issue of urgent government cheques. There has also been a gradual increase in the use of the Public Service Pay on-line data capture system by DSS clients. DSS is planning to further increase the use of this on-line data capture system. This would result in further operating cost reductions at DSS.

21.30 DSS annually prints and mails approximately 110 million cheques to the public for socio-economic payments such as Canada Pension Plan, Old Age Security and Family Allowance. DSS has recently obtained government approval to deposit these cheques directly into the banks of the recipients who wish to receive direct deposits. Savings resulting from the application of this method of payment are estimated by DSS to amount to $7 million annually. This estimate is based on the assumption that 40 percent of the recipients would accept the direct bank deposit method of payment. If more recipients accept the new method, the estimated savings would be even greater.

21.31 Regional operations. DSS delivers its services through a regional network of District Supply and Services Offices. The productivity of these operating units is important to the Department's overall cost effectiveness. Comparative information on their productivity is a basic tool for management in identifying potential opportunities for efficiency improvements and is a prerequisite to corrective action.

21.32 In 1987 we analyzed the productivity of certain parts of these operating units, which employ approximately 2,700 people, and determined that there were long-term opportunities for the Department to improve productivity in this area of its operations, particularly in the small offices. We also reported that DSS did not have the management tools to measure and report on the productivity of its regional operations.

21.33 Since 1987, DSS has eliminated the position of Assistant Deputy Minister, Regional Operations and reduced its regional staff by 120 person-years from the 1987 levels.

21.34 Further productivity and efficiency gains in regional operations should result from the following initiatives which were described above:

• implementation of the newly designed Public Service Compensation System;
• increase in the use of the on-line data capture system; and
• increase in the use of direct bank deposit of government cheques.

21.35 DSS management indicated that internal studies, which are currently underway, are examining ways of rationalizing the regional operations and assessing their future role.

21.36 The Department has recently implemented a new performance measurement system for its regional operations. Periodic reports are now being made available to DSS management on a limited distribution basis. The new system measures a region's performance against a base period in addition to its performance relative to other regions.

21.37 In conjunction with its Service Line Studies, DSS is performing a post-implementation review of this new system. It is still too early to evaluate the degree of its usefulness for management in monitoring the performance of regional operations.

21.38 Development of technology. In 1987 we encouraged the Department's project, which was in process, to rationalize its five multi-technology data centres across Canada and consolidate them into a single technology data centre. We recognized that this rationalization was a prerequisite for DSS to develop new, modern systems and to improve human resource skills.

21.39 The project was recently completed. Reductions of approximately 65 person-years in DSS have resulted from the rationalization of technology even though the workload handled by DSS's newly equipped data centre has significantly increased over the same time period.

21.40 DSS management indicated that it is examining ways to introduce more automated technology into its newly consolidated data centre operations to rationalize workloads and achieve further operating cost savings.

21.41 The results of our review of the Efficiency of Federal Government Data Centres, including those of DSS, are scheduled for reporting in next year's report.

21.42 Development of computer systems. Management controls over planning and conducting systems development projects are needed to ensure that the cost of automation development is minimized and that the potential benefits of automation are realized and reflected in lower service line costs.

21.43 In 1987 we reviewed DSS management controls over selected major systems development projects. The results of our review indicated that the computer systems development experience at DSS had not been consistently successful. The Department has now adopted a new systems development methodology which sets out guidelines for project management. The focus of the methodology is on deliverables or outputs at specific points throughout the term of the project.

21.44 Overall, we found that the policies, guidelines and standards needed to address the concerns expressed in our 1987 chapter regarding systems development were in place. However, formal procedures to support their use were still in development, or had been implemented too recently to allow for a realistic evaluation of their effectiveness.

21.45 Cost information. Sound productivity management depends on reliable, timely and useful information, including that produced by performance measurement and cost accounting systems.

21.46 The 1987 audit reported that DSS did not have full cost information on its products or service lines.

21.47 DSS has now developed a costing system which is designed to capture and report full service lines costs and to provide the necessary data to support cost comparisons. However, it is not yet widely used by DSS product managers and therefore it is too early to evaluate the degree of its usefulness for management in monitoring and controlling costs of services.

21.48 A common service organization such as DSS should provide members of Parliament with information that would allow them to evaluate whether the services provided by the Department are delivered in a cost-effective manner.

21.49 In our 1987 chapter we reported that the information in the Part III Estimates and the Operational Plan Framework, which were centred around the organization structure, did not provide a clear picture of the nature and costs of service lines offered by DSS.

21.50 No significant changes have yet been made but the Department plans to provide Part III Estimates on a service line basis after the completion of its Service Line Studies. This approach is not expected to be finalized before 1991 due to the extensive co-ordination required.

Conclusion

21.51 DSS management has commenced corrective action, most of which is still in progress. Some of the more significant productivity issues reported in our 1987 chapter will take time and effort to resolve. Systems and infrastructures that were designed to suit the 1970s technology are gradually being transformed to fit the needs of the 1990s.

Opinion Survey of Government Contracting Services

Background

21.52 In 1987-88 the Supply Operations Sector of DSS issued some $10 billion worth of contracts for goods and services on behalf of other government departments and agencies (see Exhibit 21.2).

(Exhibit not available)

21.53 In a common service organization such as DSS, the level of client satisfaction with the quality and cost of the contracting service it provides to its customers is a significant indicator of the Department's performance.

21.54 To obtain the perceptions of DSS clients, we conducted an opinion survey of certain client departments, accounting for approximately 50 percent of the volume and value of contracts issued by DSS, about the quality and cost of the contracting services provided to them.

21.55 We interviewed approximately 140 senior officials and operational personnel in the selected departments, who were representative of the client departments in the area of materiel management and operations. We sought their general perceptions concerning DSS contracting services, based on their extensive experience with such services.

21.56 To ensure that these general perceptions were reasonable, we selected a sample of contracts and interviewed the client department operational personnel who had initiated them, concerning their experiences with the specific contracts selected in our sample. The results of these interviews, and comments received from client officials, are reported in the following sections of this chapter.

21.57 To select our sample we obtained a listing of contracts issued by DSS with a value of $100,000 or more. We excluded major crown projects (over $100 million) because each is unique.

21.58 From this listing we selected a random base sample of contracts for each department included in the review. From the base sample we judgmentally selected 143 completed contracts for the interviews. We attempted to include, in our selection, contracts covering the range of goods and services that are essential for the main mission and operations of the selected client departments.

21.59 Our opinion survey of client department officials covered the following areas:

• DSS participation in the contracting process;
• timeliness of contract award and delivery of goods or services;
• achievement of quality requirements;
• costs of goods or services;
• user fees charged by DSS;
• client departments' direct buying authority; and
• Government policy objectives.

21.60 The following are the survey findings on client perceptions and suggestions for improvement. They are reported for further evaluation by DSS in conjunction with its internal studies currently underway.

Opinion Survey Findings

DSS participation in the contracting process

21.61 All contracts issued by DSS require the co-operation and joint effort of both DSS and the requisitioning client department to achieve a successful conclusion. The degree of DSS participation varies from stage to stage in the process.

21.62 Client department operational personnel reported medium to high levels of participation by DSS in developing sourcing strategies, issuing requests for proposals, evaluating proposals, issuing contract documents, and negotiating contract terms and conditions. Few respondents reported that DSS participated in developing specifications for, or inspecting the quality of, the goods and services contracted through DSS (see Exhibit 21.3). Respondents were generally satisfied with the DSS contract officers' knowledge of products and markets and with the level of their communication with them.

(Exhibit not available)

21.63 However, there was a consensus among DSS clients that, after contracts are awarded, the role of DSS in administering them is limited. Although respondents reported a certain degree of DSS participation in contract administration, it was described as involving only the processing of paper, legal documents and payment claims. Most clients reported that DSS was not generally involved in the ongoing monitoring of the progress of contracts, but would participate, on an exception basis, if the client reported a problem.

21.64 Although DSS has the mandate to ensure the quality of goods and services procured, it has delegated most of this responsibility to the client departments through mutual agreements or practices established over the years.

21.65 Client department officials suggested that:

DSS should play a more active role in the area of contract administration relating to monitoring suppliers' compliance with quality requirements, delivery dates, performance milestones and other significant terms and conditions of a contract.

Timeliness of contract award

21.66 Timeliness of awarding contracts for goods and services is important to the efficiency of government operations.

21.67 In our opinion survey, 3 percent of the client department operational personnel could not address this issue. Those who could reported that 22 percent of the selected contracts were not awarded in a timely fashion while 78 percent were. The elapsed time required to issue the selected contracts, as compared to the time perceived by clients to be reasonable, varied, depending on the size of the contract. The perception of client department officials was that most delays occurred in either the very large or the very small contracts. Many respondents reported that most delays occurred during the stages of issuing requests for proposals or bids and during contract negotiation (See Exhibit 21.4).

(Exhibit not available)

21.68 Some of the other delays were reported as occurring in developing specifications and in raising and transmitting requisitions to DSS. Such steps in the contracting process take place within the client departments and are, therefore, not the responsibility of DSS.

21.69 Respondents often commented that delays in awarding contracts occur due to excessive workloads of DSS contracting officers and that more streamlining of the contracting process at DSS and in client departments is required.

21.70 To improve the timeliness of the contract award process, client department officials suggested the following:

• Increasing the client departments' level of authority to directly handle and issue small contracts would reduce the volume of low-value contracts issued by DSS and result in reduced clogging of the DSS system.
• Increasing the use of standing offer arrangements, whereby DSS would pre-negotiate and pre-approve a contract with a specified supplier, would permit client departments to place their orders directly with that supplier without having to go through DSS each time goods or services are ordered.
• Client departments should ensure that their specifications for goods and services are current and accurate, to avoid delays caused by DSS returning them for adjustment.
• Lists of suppliers should be refined to ensure that only fully qualified suppliers are invited to respond to requests for proposals. By eliminating unqualified suppliers from DSS's source lists, proposal evaluation time could be reduced.
• Contracts that are routine and simple should have a system which is simpler than that required for the complex ones. The use of telex and telephone orders for such contracts should be encouraged.
• There should be an increase in the use of modern technology in the contracting process to reduce paper work and improve timeliness.

21.71 Several respondents felt that improved communication between the client departments and DSS would facilitate the timely issuance of contracts. Early communication by client departments to DSS about planned requirements and contracting needs was viewed as important. A few respondents suggested situating a DSS contract officer in client departments would facilitate communication.

Timeliness of delivery of goods and services

21.72 Delays in the delivery of goods and services may affect departmental operations and program performance, and could result in budgetary problems.

21.73 In our opinion survey, 3 percent of client operational personnel could not answer questions related to this issue. Of those who could, 23 percent reported that timeliness in the delivery of goods and services was a problem. In 77 percent of the selected contracts, delivery was reported to have been timely.

21.74 Of the contracts with delays in delivery, most frequently it was the suppliers who were reported to be responsible. Over half the respondents reported that the supplier was almost completely responsible for the delay. Respondents also indicated that both DSS and client departments share some of the responsibility for these delays (see Exhibit 21.5).

(Exhibit not available)

21.75 To improve the timeliness of delivery of goods and services, client department officials suggested the following:

• Improve the front end evaluation of suppliers' capabilities, to ensure that prime contractors and sub-contractors can provide the required goods or services on time.
• Remove delinquent contractors from the DSS list of suppliers.
• Improve monitoring of supplier performance and enforce contract terms for progress and delivery.
• Encourage and enforce the use of penalty clauses and liquidated damages in government contracts.
• Negotiate a more realistic time frame for the delivery of goods and services.

Achievement of quality requirements

21.76 Client departments determine their need for goods and services and establish their statements of requirements and specifications. When the goods and services are received, they are inspected by client department officials to ensure that the requested specifications have been met. Failure to achieve contracted quality requirements may result in delays in operations, impact on safety, and result in extra cost to the government or the supplier.

21.77 In our opinion survey, 8 percent of client department operational personnel could not address this issue. For those who could, it was reported that in 96 percent of the sample contracts selected the goods and services met or almost met departmental quality requirements. However, concerns about quality were reported in 4 percent of the contracts in our sample. The concerns were reported in contracts for services as well as in contracts for goods. We noted that quality problems tend to occur in the contracts which have a high degree of technical complexity.

21.78 Quality inspection was seen by respondents as being the responsibility of the clients who set the specifications, determined the quality requirements and inspected the goods or services on delivery.

21.79 In those contracts where quality requirements were not met, client officials indicated that the reasons were most often related to a poor choice of supplier or to problems with the client specifications for the goods or services. In some cases poor choice of supplier was the result of constraints in selecting them. For example, choices having to be made amongst a limited number of suppliers, sometimes as a result of directives related to national and regional industrial, Canadian content, or small business policy objectives. In some of the contracts in which quality was a concern, the client officials reported that the goods and services met the specifications but fell short of the department's requirements. This indicated a failure of the specifications to sufficiently define the department's quality requirements.

21.80 Client department officials suggested the following:

• There should be better definition of client quality requirements and improved description of the specifications.
• Improve the front end evaluation of suppliers' capabilities to ensure that they could provide goods or services of the required quality.
• There should be more client involvement in evaluating suppliers' proposals, regardless of contract size.
• Contracts should always be awarded on the basis of best value, which is generally a balance between a fair price, reasonable delivery time and appropriate quality. Lowest price alone should not be the prime factor in awarding contracts.
• DSS should monitor contract performance and ensure that the lists of suppliers are always current, accurate and contain only suppliers with proven track records.

Cost of goods and services

21.81 The value of goods and services contracted by DSS on behalf of the Government of Canada amounted to $10 billion in 1987-88. Therefore, efforts to obtain even a small reduction or discount in the price of these goods and services could result in significant savings. Adequate procurement planning and use of appropriate methods of supply are essential to achieve such savings.

21.82 In our interviews we asked client department officials whether DSS obtained goods and services at the lowest price, apart from those situations in which meeting other government national and socio-economic objectives accounted for a higher price having to be paid. We then asked them whether, had they had complete authority themselves to make purchases directly, they would have been able to obtain the goods and services at a lower price.

21.83 During the interviews, 15 percent of the client operational personnel could not address the first question. Those who could reported that DSS had obtained the lowest price in 95 percent of the contracts selected, while in 5 percent of the contracts, it had not.

21.84 To the second question, 19 percent of the client operational personnel could not respond. Those who could reported that in 4 percent of the contracts selected, DSS had obtained a higher price, in 54 percent an equal price, and in 42 percent a price lower than that which the client departments could have obtained had they had the mandate (see Exhibit 21.6).

(Exhibit not available)

21.85 Limited qualified sources of supply, government regulations, and restrictions imposed by the use of procurement as a lever to achieve national and regional socio-economic policy objectives were reported as factors restricting DSS's ability to obtain the goods or services at better prices.

21.86 To obtain better prices for goods and services, client officials suggested the following:

• There should be better planning and aggregation of government requirements for goods and services and more use of buying in bulk. DSS should negotiate with the suppliers on a government-wide basis to get better prices and discounts.
• There should be more use of national standing offers, as opposed to standing offers by department, to obtain better discounts on prices.
• The concept of having a lead department should be used to buy equipment which is needed by several departments. A lead department would set up the specifications and test the quality of the equipment; then DSS would buy in bulk on behalf of several departments.
• Client departments should ensure that their specifications closely match their requirements. They should not over-specify or define more detailed specifications than are normally required.
• More commercially available goods should be bought as long as they meet requirements. Client departments should reduce the tendency to request goods that have special specifications not readily available in the market place.
• The buy Canadian policy should be applied in a fashion that ensures that money goes back into the Canadian economy rather than going to Canadian agents of foreign manufacturers.
• There should be more direct buying from the producers rather than through middlemen.

User fees charged by DSS

21.87 DSS is a revenue dependent department. It recovers from its clients the total cost of its contracting services. The fees charged by DSS are generally based on the dollar value of the contract issued.

21.88 When questioned about user fees, 76 percent of client operational personnel were not aware of the specific fees charged to their departments by DSS for contracting services. Of those who were aware of the fee structure, 60 percent felt that the fees were unfair, 6 percent felt the fees were moderately fair, and 34 percent felt that fees charged were completely fair.

21.89 Many respondents suggested that the fees should be based on the amount of service provided by DSS in awarding and administering the contract, rather than on the dollar value of the contract awarded. Although DSS assigns to each contract a complexity level that reflects the quantity and technical quality of contracting effort required, these complexity levels are not used as factors in setting the fee structure.

21.90 Some officials questioned the appropriateness of charging all of DSS's operating costs to clients, including the cost of the DSS policy unit.

21.91 Other officials questioned why such fees should be recovered at all from client departments.

Client departments' direct buying authority

21.92 DSS policies require that government contracts over $500 for goods and certain services be issued through DSS.

21.93 In our opinion survey, 36 percent of client operational personnel could not express an opinion on whether the level of authority for direct buying by client departments was adequate. However, for those who could, 60 percent felt that the direct buying limit delegated to departments by DSS was too low. Some respondents noted that the dollar value limit had not kept pace with inflation. When asked what the limit should be, 27 percent of those who expressed an opinion felt that it should be raised to $1,000; 38 percent suggested limits of from $1,000 to $5,000, and 35 percent suggested limits over $5,000. Client officials indicated that increasing the dollar value limit of their direct buying authority would reduce the extent to which the DSS system is clogged by contracts of small dollar value.

Government policy objectives

21.94 Government contracting policies require that contracts should be awarded on the basis of best value: the combination of a fair price, reasonable delivery time and appropriate quality, taking into consideration the achievement of national and regional socio-economic objectives of the government. These objectives include national and regional industrial development, Canadian content, and the development of small business in Canada. In addition, government policies require the promotion of competition and the equitable treatment of all suppliers. All government contracts must be awarded on the basis of prudence and probity.

21.95 Our interviews with client officials indicated that they generally perceive the DSS central contracting role as being beneficial to them and contributing to the achievement of the government's national and regional socio-economic objectives; fairness in the selection of suppliers; prudence and probity in contracting; and generally obtaining best value in awarding contracts.

Conclusion

In general, clients are satisfied with the central contracting role played by DSS

21.96 Client departments are generally satisfied with DSS contracting services, and with the assistance provided by DSS contract officers. The DSS central contracting role is viewed as being beneficial to client departments and contributing to the achievement of government national and regional socio-economic objectives, fairness to suppliers and prudence and probity in awarding contracts.

Concerns were expressed over timeliness in awarding contracts, delivery, and the cost and quality of goods and services procured by DSS

21.97 Client officials indicated that some of the factors contributing to these concerns included: inadequate specifications, poor choice of suppliers, restrictions on sources of supply imposed by the use of procurement as a lever to achieve government national and regional socio-economic objectives, the lack of contract penalties and inadequate monitoring of contract performance.

21.98 Respondents suggested the following improvements in the process of planning and administration of the government contracting process:

• Better identification of requirements and specifications with more emphasis on buying goods which are readily available in the market place.
• Careful evaluation of suppliers' capabilities and removal of poor performers from government lists of suppliers.
• Selection of more effective methods of supply, more aggregation of government requirements and more use of national standing offer arrangements.
• Effective enforcement of contract terms, use of penalties in government contracts and effective monitoring of contract performance.
• Reduction of paper work and increase in the use of modern technology in the contracting process.

Client officials question the basis of the fees charged to them by DSS

21.99 The fairness of basing the fee structure on the dollar value of the contract was questioned. Many respondents suggested that fees be based instead on the level and complexity of work performed by DSS.

Client departments' direct buying authority is too low

21.100 The current direct buying authority limitation of $500 is viewed as too low. As a result, a large number of small contracts must be awarded through DSS. This increases the DSS workload, and was viewed by some clients as contributing to delays by clogging the system. The majority of respondents suggested increasing the dollar limit of the direct buying authority by client departments.

Department's Response

Follow-up of 1987 Audit

The Auditor General's recognition of DSS's efforts to increase its efficiency and to guide the Department towards improved management of information resources through the application of modern technology is most welcome.

As per our testimony before the Public Accounts Committee regarding the 1987 Report of the Auditor General of Canada, DSS is working towards a state of the art automated operation to better service the federal government, the private sector and the general public while keeping an equilibrium of benefits, pay-backs and the required capital investment.

DSS's commitment to adequately serve our clients in the 1990s within a changing and dynamic environment is encompassed in the Department's reviews of service lines and the related studies, which are currently underway, to further modernize and rationalize our central and regional operations. It is important to note that the pace of implementation of the various technological changes must not exceed our capacity to absorb the change. The success of this transition, by its nature, is contingent upon an awareness of its logic and impact by all affected users, and the commitment to make it work. We believe that the present culture within the Department and among our client departments is predisposed to such changes. We also wish to stay in step with the private sector players with whom the Department interacts.

Opinion Survey of Government Contracting Services

The survey findings tend to corroborate our own views of client perceptions and our own understanding of the strengths and weaknesses of our acquisition service.

One of the fundamental objectives of DSS is the provision of adequate quality service to our client departments. Our aim, through our service line studies and the modernization of our systems, is to give clients the most efficient and least costly service possible in all areas of Departmental activity.

We acknowledge the need to strengthen our acquisition service in certain areas. Indeed, the chapter provides welcome support to initiatives that the Department intends to pursue, as a result of the current study of our Acquisition Service Line (ASL). One of the objectives of the ASL study is to redeploy professional DSS contracting personnel to higher value-added acquisitions functions, while making greater use of technology for standard commercial transactions. In so doing, DSS will be able to respond more effectively to client service needs, including many of the suggestions that arose during the client survey.

Conclusion

The reflections in this chapter convey an understanding of what is happening within the Department and provide an objective and professional point of view. The information included in the chapter will be of value to the continuing process of effecting change in the Department.