Consultancy contract 'disregarded' procurement practices

The Canadian province of New Brunswick has been criticised for a consultancy contract that displayed a “troubling disregard of procurement practices”.

In a report auditor general Kim MacPherson said she found “serious areas of concern” with the Department of Social Development’s (DSD) procurement of the contract, which aimed to help the department identify significant budget savings.

Criticisms of the contract included that the consultants’ performance was self-evaluated, they were paid on the basis of anticipated savings, rather than actual savings, and no maximum price was set in the contract.

At June 2016 the consultants had been paid $13m to identify $47m of savings, but just $10m were realised. However, the audit found insufficient data to support even this figure.

MacPherson said due to the payment structure, where “the consultant was paid according to anticipated savings, the department had to pay over $1.8m in performance fees for work on initiatives that were apparently not approved by government”.

Weaknesses in the contracting process included questionable procurement practices, a poorly structured contract with no clear objectives or deliverables and a lack of appropriate monitoring. 

The final amount paid to the consultant exceeded the purchase order by more than $700,000.

“The practices used by the department in procuring this advisory services contract favoured a single consulting firm, resulting in an unfair, non-transparent process,” said MacPherson.

The DSD was criticised for procuring the first two phases of the contract under an “urgent/emergency” exemption clause, which meant it was exempt from following a competitive tender process.

The consultant procured under the exemption clause gained a clear advantage over other potential suppliers in the third phase of the tender because they were on-site in the DSD’s offices when the tender was developed, while the tender itself was only open for 12 business days.

MacPherson recommended the DSD structure contracts containing performance compensation based only on actual savings and it should design and develop agreements that provide for performance measurement, including clear objectives and well-defined deliverables.

She said it was important to ensure emergency and urgent exemptions are not used inappropriately by departments to bypass the competitive tendering process.

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