Auditor general cites troubling disregard of procurement practices in $13-million Social Development contract20 June 2017
FREDERICTON (GNB) – In her latest report tabled today in the legislative assembly, Auditor General Kim MacPherson found serious areas of concern with the Department of Social Development’s procurement process involving a $13 million consulting contract. This contract for advisory services was intended to assist the department in identifying significant budget savings. Weaknesses found include questionable procurement practices, a poorly structured contract with no clear objectives or deliverables and a lack of appropriate monitoring.
The report indicates that the consultant’s performance was self-evaluated and compensated on the basis of anticipated savings and not actual savings, with no set maximum price in the contract.
“Since the consultant was paid according to anticipated savings, the department had to pay over $1.8 million in performance fees for work on initiatives that were apparently not approved by government,” said MacPherson.
As of June 2016, the department had paid the consultant almost $13 million to identify $47 million in anticipated savings. The department claimed it was able to realize actual savings of about $10 million. However, the auditor general found insufficient relevant data supporting the savings figure calculated by the department. Furthermore, 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 auditor general found the first two phases of the contract, collectively costing over $200,000, were inappropriately contracted under an urgent/emergency exemption, which exempts departments from following a competitive procurement process for purchases.
The same consultant also remained on-site during the development of the third-phase tender. An invited tender was issued for the third phase but was only open for 12 business days. The auditor general found that these processes, among others, provided the consultant with a clear advantage over any other proponent responding to the tender.
MacPherson made 13 recommendations to the Department of Social Development which include:
- structuring contracts containing performance compensation based only on actual, measurable results;
- communicating to Service New Brunswick the rationale for not following Service New Brunswick procurement procedures and advice; and
- designing and developing agreements that provide for performance measurement, including clear objectives and well-defined deliverables.
MacPherson also made three recommendations to Service New Brunswick which include:
- ensuring emergency and urgent exemptions are not used inappropriately by departments to bypass the competitive tendering process, and maintaining a record of why the decision to approve the exemption was made.
The Advisory Services Contract chapter can be found in Volume I of the 2017 Auditor General’s Report, which also contains a chapter on climate change. The report and one-page summaries for the chapters are available online.