PACC Committee Report

GOVERNMENT RESPONSE TO THE

SIXTH REPORT OF THE STANDING COMMITTEE

ON PUBLIC ACCOUNTS

[Chapter 14, Canadian International Development Agency (CIDA) -
Managing Contracts and Contribution Agreements of the
October 2000 Report of the Auditor General]

Introduction

The Government of Canada reviewed carefully the report of the Standing Committee on Public Accounts tabled on May 17, 2001. The Government has taken note of the five recommendations contained in the report.

The Government is committed to strengthening and modernising government procurement. This commitment is found in Results for Canadians: A Management Framework for the Government of Canada, which sets out a clear direction for renewing government based on: citizen-focus, values, results and responsible spending.

The Auditor General and the Standing Committee have both commented on the importance of the management of contracts and contribution agreements and their integration within the planning and delivery of CIDA projects and programs. As both have noted, planning and delivering programs and projects in an international context, in sovereign developing countries, is a complex, risky operation.

The role of the local partner organisation in defining needs, with the target population, is key in this process. This approach is replacing the traditional donor-driven approach that Canada, like other donors, had in the past. The recipient country increasingly has ownership of its development process where CIDA assists the recipient country in those development efforts. Typically these might be to draft environmental protection legislation, develop an elementary school curriculum using technical assistance, or provide project management expertise. Financial support is based on long term comprehensive goals, recipient country ownership of development, partnership, and a focus on developmental results.

CIDA does not deliver this assistance directly but rather does so through Canadian and international organisations. CIDA signs contracts or contribution agreements with for-profit or not-for-profit organisations working with recipient countries with which they plan and deliver development results. The agreements can involve, among others, the private sector, NGOs, universities, Canadian municipalities, multilateral organisations and community-based associations in recipient countries. They set, in collaboration with the recipient country, expected results within prescribed time and financial limits. The implementing agency delivers the expected results within the administrative framework of the agreement. The management of contracts and contribution agreements to deliver development assistance programs is complex and therefore must be flexible enough to respond to operational requirements and changing development needs.

While the nature of development assistance is evolving and with it the various delivery and contracting mechanisms, the requirement for a consistent, transparent and fair process for managing contracts and contribution agreements does not change. CIDA has addressed the observations raised by the Auditor General, as will be demonstrated by the follow-up audit. The Agency plays an important role in international development assistance, given the relatively limited resources available.

RECOMMENDATION 1

That once CIDA has obtained Treasury Board approval for its renewed framework for contribution agreements, it provide a copy to the Standing Committee on Public Accounts, no later than August 31, 2001.

The Government accepts this recommendation. Treasury Board Ministers approved CIDA’s “Terms and Conditions for International Development Assistance” on March 22, 2001. This authority sets the overall framework within which financial resources voted by Parliament are managed by CIDA. The Agency was commended for its renewed Terms and Conditions, which met the requirements of the Policy on Transfer Payments in effect since June 1, 2000. The Agency is tabling this document with the Clerk of the Standing Committee on Public Accounts.

RECOMMENDATION 2

That CIDA develop a policy on how to better evaluate past performance of potential bidders, including methods of identifying and assessing past liabilities with other departments and agencies, and that CIDA submit an interim report on the progress of this initiative to the Standing Committee on Public Accounts by March 31, 2002.

The Government supports exploring this issue further. The Auditor General identified the issue of assessing past performance as a potential criterion within the evaluation of contract proposals in the October 2000 audit. Although CIDA presently evaluates a proponent's past experience based on the declarations of that proponent, the Auditor General recommended that these assertions be verified in the rating of the proposals. The policies and practices of other donor agencies were examined by the Auditor General and it was found that, even in countries where performance evaluation was mandatory by law, managers found it difficult to implement and consequently few contractors were ever evaluated.

CIDA introduced contractor performance evaluations nearly 20 years ago. Widespread dissatisfaction on the part of suppliers, a deterioration of CIDA/supplier relations, legal implications and workload issues culminated in the abandoning of contractor performance evaluations.

Recently however, the supplier community has suggested to CIDA that this issue be re-examined. Proponents feel that poor performers are not appropriately assessed in the proposal evaluation process since they are rated on the basis of the declarations in the proposals. These areCIDA will explore an approach for its development assistance projects and will report to the Standing Committee on the progress of this initiative by March 31, 2002.

RECOMMENDATION 3

That CIDA proceed with its various specific measures designed to correct the shortcomings identified in its project planning and design phase and that it prepare an interim report on progress of these corrective measures and that the Agency submit the interim report to the Standing Committee on Public Accounts by March 31, 2002.

The Government accepts this recommendation. The audit identified four areas for improvement in contract planning and design: preparing contract plans and properly documenting project and contract files; reinforcing the challenge function, during project approval, of what are realistic and achievable results; considering sustainability during project planning and implementation; demonstrating the appropriate level of compliance with the Canadian Environmental Assessment Act (CEAA).

Project managers and contract officers now pay particular attention to document files with greater rigour. Program Directors and Director Generals who approve project proposals are now responsible for the expected results that are realistic and achievable, given the assumptions and risks. They are also responsible to ensure that project files demonstrate that sustainability is addressed during project planning and implementation. Since the audit, CIDA managers have taken corrective measures including the linking of CEAA compliance to financial controls. Improved training in compliance measures and practices is delivered on a regular basis with particular emphasis to new employees. The Agency will report on this issue by March 31, 2002, as requested by the Standing Committee.

RECOMMENDATION 4

That CIDA include in its project agreements, provisions allowing formal review mechanisms based on a project’s actual performance that would allow CIDA to decide whether to continue or withdraw from a project.

The Government accepts this recommendation. The Auditor General recommended that decision points to proceed or withdraw (“off- ramps”) be incorporated in projects and in agreements. CIDA was commended by the Auditor General for its monitoring of projects. Although there are presently off-ramps in most of the "design and deliver" contracts, there are none for standard contracts and contribution agreements. There are presently termination clauses in all contractual agreements but these are linked to termination for default of the contractor or for convenience, not for poor project performance. For projects involving major risks, CIDA will identify decision points (off-ramps) in the project design documents. Off-ramps will similarly be reflected in contracts and contribution agreements.

The Project Performance Framework will better indicate the expected developmental results and the performance indicators to measure progress. This will be done in collaboration with CIDA’s partners. The Agency will continue to monitor projects closely to confirm that critical assumptions still hold and progress is made on the project. Additional efforts are being made to identify reasonable timeframes and realistic results in the Risk Strategy. The critical points at which a decision whether to continue or not with a project, where applicable, will be incorporated in contracts and contribution agreements.

Some degree of flexibility will have to be maintained. There are situations in which project results are not achieved for a period of time, during which, for example, cultural relationships and baseline databases are built. For example, in the education sector in one African country, a Canadian not-for-profit foundation worked for a year and a half without achieving the expected results within the planned timeframe. One of the identified major risks, lack of full support by local government, was delaying progress, but a close monitoring of project performance helped reverse the impasse. The project is now on target for a successful completion.

RECOMMENDATION 5

That in order to better support and enforce federal contracting policy guidelines, particularly those concerning service contracts involving former public servants, Treasury Board Secretariat evaluate the feasibility of establishing a centralised registry that clearly identifies former public servants in receipt of a pension paid pursuant to the Public Service Superannuation Act or lump sum payments pursuant to early departure incentives.

There is already a central registry of all former public servants in receipt of a pension. Public Works and Government Services Canada established this registry for the administration of pensions. However, this personal information bank was set up with the intent of assisting in the administration of the federal pension plan only. The use of this information for any other purpose without the expressed agreement of each person identified in the bank is prohibited by the Privacy Act. Acting on the recommendation therefore would be in breach of the Privacy Act.

CIDA now uses the self-identification approach whereby persons must, as a prerequisite condition to entering into a contract, fill a formal declaration which permits the identification of former public servants in receipt of a pension or of a lump sum payment, to support policy implementation.