Paul Emanuelli Click here to see full sized version.

In recent years, the steady torrent of headlines highlighting government spending controversies has put senior government officials in Canada in the hot seat. This spotlight on public spending has launched an ethics revolution, transforming the once sleepy subject of government procurement into a front-page, prime-time and mainstream matter of national importance. Like never before, public institutions across Canada are now under increasing pressure to protect the public interest by seizing the initiative and guarding against spending improprieties.

Justice Gomery’s November 2005 report on the sponsorship program clearly directed accountability for proper procurement practices to the highest levels of government. As the report stated, “willful ignorance of administrative inadequacies will not absolve a Minister from responsibility for failures within the department.”

While front-line procurement professionals across Canada may have built a reputation for prudence and honesty, recent controversies threaten to cast a shadow over that hard-earned reputation. The steady stream of recent government spending scandals calls for high-level remedial action to protect that reputation.

Building winning conditions to counter credibility gap

As detailed in my book Government Procurement, public institutions need to counter this credibility gap by building winning conditions for their procurement professionals. Those winning conditions call for clear centralized rules and practices and a broad range of flexible procurement tools that empower innovation. However, before any procurement team can function to full capacity, public institutions also need to engage in the following macro-level measures:

• promoting values-based procurement and internal checks and balances;

• defining clear roles and responsibilities within the organization; and

• establishing independent external oversight of procurement activities.

These macro-level measures are expanded upon below with the Gomery report serving as a reference point.

Ethics and accountability

A procurement organization should encourage values-based procurement by promoting a culture of ethics within the institution which includes: (i) mechanisms for internal regulation, reporting and self-governance; and (ii) measures to protect the security of tenure of employees responsible for enforcing internal governance rules. The Gomery report found that the sponsorship program was lacking in this regard. Among its “Major Findings”, the report noted:

“• a veil of secrecy surrounding the administration of the Sponsorship Program and an absence of transparency in the contracting process;

“• the existence of a ‘culture of entitlement’ among political officials and bureaucrats involved with the Sponsorship Program, including the receipt of monetary and non-monetary benefits;

“• reluctance, for fear of reprisal, by virtually all public servants to go against the will of a manager who was circumventing established policies and who had access to senior political officials.”

Such conditions, if allowed to persist, leave the situation ripe for future spending abuses. This clearly calls for remedial action.

Clear roles and responsibilities

A procurement organization should establish a clear and comprehensive set of roles and responsibilities within the institution including a clear division of roles between: (i) elected officials; (ii) senior management officials responsible for establishing and enforcing compliance with procurement rules; and (iii) front-line procurement professionals responsible for running specific projects. The Gomery report found that the sponsorship program lacked these necessary safeguards. Among its “Major Findings”, the report noted:

“• clear evidence of political involvement in the administration of the Sponsorship Program;

“• insufficient oversight at the very senior levels of the public service which allowed program managers to circumvent proper contracting procedures and reporting lines;

“• the refusal of Ministers, senior officials in the Prime Minister’s Office and public servants to acknowledge their responsibility for the problems of mismanagement that occurred.”

To guard against similar future abuses, it is crucial for public institutions to establish clearly defined roles and a system of checks-and-balances that protects the public interest against improper spending practices.

Enhanced external oversight

For years the courts and the Canadian International Trade Tribunal have been effectively serving an oversight role over government procurement. An extensive body of case law has evolved to help clarify the rules that apply to a public tendering process. However, this type of oversight tends to focus on specific contract award competitions, rather than on the activities that occur behind closed doors and beyond the scope of a specific procurement process. Ultimately, to be fully effective, independent oversight must penetrate beyond the transaction-specific level. Institutional-level oversight functions, such as those performed by the Auditor General of Canada when it first uncovered the sponsorship program irregularities, need to be expanded to shine a brighter light on public sector spending practices.

Waiting for Gomery’s final report

While we await Justice Gomery’s soon-to-be-released final report on the sponsorship program, those responsible for the procurement practices of public institutions can take pause and consider whether they are ready to build the winning conditions that are so critical to maintaining the reputation of Canada’s multi-billion-dollar government procurement industry. The future will tell whether the past spending scandals were the work of a few bad apples or the tip of an approaching iceberg.

Paul Emanuelli is a Toronto-based lawyer. This column includes excerpts from his recently released Government Procurement textbook published by LexisNexis-Butterworths.