Recently, the Procurement Ombudsman Alexander Jeglic released a report calling for fundamental change in the procurement system. He offered five recommendations:

  • The establishment of a federal Chief Procurement Officer (CPO) to ensure effective oversight.
  • The creation of a government-wide vendor performance management (VPM) system to enhance supplier accountability.
  • The development of one universally applicable set of federal procurement rules to simplify the overly complex federal procurement landscape for both suppliers and procurement professionals.
  • The use of artificial intelligence (AI) advancements to modernize federal procurement tools and systems.
  • The establishment of a framework for procurement data collection to increase the transparency of federal procurement.

The popular idiom that is the title of this note implies that there are often bad and ugly aspects hidden in broad statements or recommendations.

There is little to quibble about regarding the employment of AI and improved data collection (and management) – both government wide priorities, with the first still emerging as a new opportunity and the latter a longstanding challenge. The other three recommendations could have elements of the bad-to-ugly based on my experience, depending on how they would be rolled out. And it seems that I am not alone in having concerns, based on the consultations mentioned in the report that were conducted before releasing it publicly.

The Chief Procurement Officer: The establishment of a Chief Procurement Officer (CPO) has become common in large organizations with significant supply chains and purchasing elements to their business, in recognition of the importance that commercial acumen and contracting plays to the bottom line of such organizations.

Interestingly, the proposed CPO responsibilities highlight ‘oversight’. Based on my tenure with a portfolio of weapon system platform acquisitions, between the Treasury Board and Public Services and Procurement Canada (PSPC) – the latter also employing contract lawyers seconded from the Department of Justice – there is more than enough oversight in the procurement activity already. But other shortfalls are also highlighted in the report.

Responsibility gaps are identified between organizations which a CPO could address, but better clarity regarding mandates could also address issues around accountability and leadership. Notwithstanding three structural options to standing-up the CPO’s office offered in the report (in the Treasury Board Secretariat, in PSPC or in a new department headed by the CPO), the Treasury Board Secretariat is the likely location – as is the case for the Comptroller General of Canada. That said, I honestly doubt it would achieve much in the short term; the government has launched its system-wide expenditure review and the related workforce adjustment, so a CPO and support entourage would be in direct competition with these initiatives.

While other jurisdictions such as the UK may have adopted a government CPO – in the UK case starting a decade ago, now renamed the Government Chief Commercial Officer and with what look to be quite different responsibilities than recommended for the Canadian Government’s CPO – what is not clear is the success of such functions in the oversight area. Furthermore, there are many other ways to implement the Ombudsman’s recommendations without adding to the standing bureaucracy in the procurement business.

Professionalization of the federal procurement community practitioners was also identified as a requirement for a CPO, this clearly more of a support function than an oversight responsibility and admittedly one assigned to the UK’s CCO. In the Canadian context, one finds this odd, as I am not aware of any other Chiefs in other practitioner communities in the federal public service. And as a Fellow of the World Commerce and Contracting association, I suggest that international body could very quickly offer a simpler and effective solution to addressing procurement capacity and capabilities.

I do see one important potential benefit offered by a CPO. In a recent Vanguard article, I discussed my past observation of periodic power imbalances between those who oversee contracting for weapon system platform acquisitions and other stakeholders that are expected to comply without questioning the PSPC official’s contracting decisions. A CPO could offer as a minimum an independent perspective when contracting conflicts arise between government stakeholders, and at its best as the court of final decision in such matters.

A Simplified Procurement Rule Set: This too was seen as a responsibility of a CPO – the development of one universally applicable set of federal procurement rules for both suppliers and procurement professionals. This one-size-fits-all approach is among the many desirable and sought after silver bullets more broadly, but one characterized as a myth in a myriad of articles written by practicing professionals. Even outdoorsmen know that bullets require different calibers for different target scenarios. Such an approach for procurement would be ugly when dealing with the difference between buying a fleet of government cars and the highly complex business of acquiring a fleet of new warships as in the case of the River Class. An overly simplified and universally applicable set of rules would cater to the lowest common denominator, and one wonders what new problems would be created.

In another recent Vanguard article on complexity debt, I suggested an approach where there would be a universal though shalt set of rules, but each would be accompanied by a long list of considerations for tailoring as appropriate. Whether a CPO is required to achieve such a change and maintain such a strategy for contracting is a valid question.

Vendor Performance Management (VPM): Such systems may work in jurisdictions where available competitors are many and the government has considerable leverage, but this certainly is not the case in for many Canadian sectors where the Canadian government routinely buys small quantities. And once you leave the domestic environment, holding companies such as Lockheed Martin and Boeing accountable becomes a recipe for making legal firm’s rich and increasing the Procurement Ombudsman’s complaint backlog by many factors.

Clearly, effective VPM cannot be easy to create, given that the PSPC fledgling program has apparently been 10 years in the making. It also does not surprise me that consultation raised concerns with the feasibility of such systems. I would add that when disputes arise over Canada’s assessment of a company’s performance, arbitration carried out by anybody other than the already overwhelmed courts are unlikely to be seen as fair by at least one of the parties to the conflict.

What is also interesting are the Key Performance Indicators (KPIs) identified in the Ombudsman’s report that foreign governments often employ in such systems: quality, cost, time/schedule and management:

  • Cost and schedule are directly related and are simply efficiency measures, which rarely can be met in complex acquisitions. Furthermore, when it is a prioritized KPI in a VPM system, there is serious risk of motivating shortcuts that can jeopardize quality.
  • As for mismanagement aside from fraud, such a finding could be as much a failure of government commercial acumen and diligence in the Request for Proposal (RFP) process. One also wonders whether the failure of a critical third or fourth-tier supplier would be a reason to blackball a prime contractor if the delivery schedule slipped by a year or more. Also important is the method by which Requests for Proposals morph into contracts, which for Canada is often done without allowing negotiation and therefore likely to be seen as unfair in any arbitration. And regularly upsetting the fairness scales is the interplay between undisciplined government clients and suppliers during the life of the contract. Add the global challenges of international supply chains, weather extremes and even pandemics requiring astute management to merely achieve delivery, and you have a questionable KPI in terms of effectiveness.
  • Quality is really where the rubber meets the road and usually the priority KPI from a user’s perspective, but it is very much related to the uniqueness and maturity levels of the technologies involved and the adequacy of the time available before delivery.

Today, contract flexibility is the common requirement to navigate the uncertainties of the volatile environment for the complex procurements – not hardwired contractual KPIs. Perhaps the creation of a CPO could at least ensure flexibility where appropriate as an acceptable contract strategy.

Further consideration is also relevant. If company ABC has been found wanting repeatedly and a significant performance penalty is applied to some number of future bids, that entity can merely close-up shop and re-emerge as a new commercial entity XYZ. Besides, everyone in Canada deserves more than one chance when there are limited competitors in various markets, especially where new start-ups are involved.

It is important to mention that every contract for complex outcomes includes a vendor performance measurement scheme to track progress. Personally, I am a firm believer that the purpose of any VPM should be to improve performance during each contract. If that was the intent of an evolving priority on creating a VPM system, I am all in.

In closing, I would offer three points:

The decision years ago to make departmental (and agency) Deputy Ministers responsible for interpreting many of the policies of the Treasury Board likely has led to the broad mosaic of capabilities across the Federal public service in general and it seems procurement in particular. It strikes me that perhaps that decision needs to be refined.

As a second point, I can understand how procurement complaints could relate to the potential value brought by a CPO, a simplified rule set and vendor performance management – the latter to weed out repeat complainants whose complaints have no validity. The pursuit of a perfectly level procurement playing field is a noble one but, in the end, rarely ever perceived as such by the second ran bidders. But one example comes to mind, as described in a CGAI paper published in 2019 (Another Way to Buy Warships). There I described how a bid process in Australia achieved a thumbs-up fairness assessment for a multi billion warship competition from all three bidders before the winner was announced – one which did not have a CPO involved but employed a Fairness Monitor instead, and which attracted no complaints after the winner was selected.

And my final point is the report should be of interest to the three Ministers tagged to make progress in the long overdue endeavour for meaningful military procurement reform, the degree of improvement and innovation required being much broader than contracting alone.