2.0 Findings

2.1  MANAGEMENT CONTROL FRAMEWORK

Essentially, a management control framework is the plan of policies, processes and procedures put in place by an organization’s management team to ensure that the organization meets its goals.  They include processes for planning, organizing, directing and controlling operations.

Certain central agency policies have been put in place to guide departments.  Some important points from these documents relating to accommodation, material management and contracting activities from these documents include:

• Treasury Board’s Guide to the Management of Real Property – Appendix D: Accommodation Guidance for Departments, which says that departments are responsible for developing and communicating well-documented guidance on accommodation needs, including requests for goods and services related to accommodation (internal policies, standards, and guidelines) and recommends that departments develop an accommodation management framework; 
• Treasury Board’s Policy on Materiel Management, which says that departments must have in place a materiel management framework that reflects an integrated approach to risk management, provides relevant performance information, sets out clear accountability and decision-making regimes, and supports timely, informed materiel management decisions;
• The Treasury Board’s Policy Framework for the Management of Assets and Acquired Services, which says that Deputy Heads are accountable for implementing an effective framework for the management of assets and acquired services;
• The Treasury Board’s Contracting Policy, which says that:
  • Government contracting is to be conducted in a manner that will stand the test of public scrutiny;
  • Departments must ensure they have adequate controls to protect the integrity of the bidding process;
  • Fees paid for service contracts must not exceed market rate;
  • Departments are to avoid entering into service contracts which create employer-employee relationships and ensure that no employer-employee relationship develops over time; 
  • Contracting authorities must ensure compliance with the Security Policy, therefore ensuring that any necessary security clearances or reliability checks are carried out;
  • If temporary help is required, contracting authorities should consider obtaining temporary help services from companies with which PWGSC has entered into temporary help standing offers; and
  • Departments are to consider the possibility of conflict of interest should a consultant or professional be in a position to exercise bias toward a third party that could put the latter in a favoured position for future business with the Crown.
  • The Financial Administration Act and Treasury Board policies outline departments’ responsibilities to implement proper controls and measures to account for the stewardship of public funds and assets.  Specifically, management is responsible for ensuring adequate mechanisms are in place and effective to mitigate the risk of and to prevent and detect wrongdoing and fraud.

In TC’s FMO, auditors expected to find policies/procedures/processes/ transaction records related to departmental space management, furniture purchase/reuse/disposal/warehousing, furniture inventory, building services and charge-backs.  These tools would contribute to consistency of practice, a shared understanding within TC, compliance with central agency policies, and maximization of resources.

Few such documents were found.

The audit team could not find departmental objectives for FMO or the documents that would comprise an FMO management control framework, i.e., a plan of policies, processes and procedures put in place by management to guide FMO staff and ensure it achieves its objectives.

There was a small number of draft and final documents that could be the beginning of a management control framework.  There is a draft planning and design manual (21 November 2011) titled TC Design Criteria/Standards that sets out procedures for planning and design related to NCR renovations and moves and a document with general service standards (29 November 2011) titled HQ Service Standards: Materiel, Contracting, Security & Facilities Management document and an inbox process to track and assign accommodation service requests was introduced in November 2011.  More recently, FMO located a draft Framework for Office and Related Accommodation within Transport Canada, produced in 1985, which could possibly be a starting point for a current framework. 

There is also a TC Guide to Procurement and Material Management dated 12 December 2012 that presents materiel management responsibilities of TC managers at all levels, e.g., for planning, use, custody, tracking and disposal of material, keeping it in good working condition, and protecting it.

2.2  ACCOUNTABILITIES RELATED TO TC ACCOMMODATION

The government spends approximately $25.1M for accommodation for TC employees in 2012-13 in NCR (Table 3).  Responsibilities/accountabilities related to this space are shared between PWGSC and TC.

PWGSC is responsible for providing and managing federal government office space and special purpose space.  PWGSC gives each department a “space envelope” based on TB-approved program submissions and pays the cost of this space.  A department may work through PWGSC to obtain additional space but must pay “reimbursing rent” for any space that exceeds its approved space envelope.  PWGSC holds leases with landlords and, besides the space envelope, pays for property maintenance (cleaning services, plumbing) and the fit-up of office space.

TC and PWGSC have signed “occupancy instruments” for space in 15 NCR buildings (Table 3).  The total cost for this space, including TC’s reimbursing rent of $1.5M for space beyond its approved space envelope, was $25.1M in 2012-13.
 

Table 3: TC’s NCR Accommodation Costs 2012-13

PWGSC’s Place de Ville Lease Renewal Project, initiated in 2009 may have been the impetus for some progress because since TC’s Place de Ville Steering Committee was established in May 2011, there has been some TC senior management discussion of space management to facilitate TC input into PWGSC Place de Ville Steering Committee Lease Renewal Project discussions.

Auditors observed a lack of clarity on where in the Department the responsibility/authority for overall management of TC accommodation resides.  Staff of the ADM Corporate Services sign PWGWC occupancy instruments on behalf of TC, track NCR space usage by TC and pay the costs of such tracking, but each ADM is responsible for managing his/her group's own space allocation.  The Department does not have an accommodation management framework and there is no department-wide process to ensure space utilization is maximized.  As a result, there are many vacant work stations in NCR and the number is likely to increase with implementation of DRAP cuts first announced in spring 2012. 

2.3  TRACKING OF TC SPACE UTILIZATION

For close to 20 years (from 1995 to March 31, 2013), the FMO has used a software module called Archibus to track TC work station utilization in NHQ.  Another Archibus module was later purchased for a different purpose (details in Section 2.4).  Altogether, costs totalled over $2M (Table 4).

Table 4: TC Payments for two Archibus Modules

TC’s total costs for the facilities management module were over $1.8M.  They included software subscriptions, module customization and, because TC did not have an employee with the knowledge/experience to put the module to use, a full-time consultant from a design firm for at least two years at a cost of $312,403.  An FMO design/planning standing offer agreement was amended so FMO could use it to contract this individual; it is not clear that the use of the standing offer agreement for this purpose was appropriate.   

Since PWGSC requires departments to record floor plans on an AutoCAD system (a software application for computer-aided design and drafting), a second responsibility of the consultant was keeping TC AutoCAD drawings updated.  Until fall 2011, the consultant sent monthly emails to floor space coordinators in each ADM’s groups to request updates on work station utilization.  Since then, there was no regular updating process but on the consultant’s own initiative, periodic ad hoc information requests were made by telephone. 

Recent Archibus records showed 639 vacant work stations in the NCR, a 21% vacancy rate.

To assess the system’s accuracy, auditors did a walkthrough of 39 of the 47 TC floors in the NCR.  They had obtained the most recent Archibus floor plans from FMO; 72% of the floor plans had been updated that month or the month previous.  They found 783 vacant work stations (a 25% vacancy rate) ⁹.  Auditors were advised that the Corporate Services group has been in discussions with PWGSC in the hope of finding other tenants for the unoccupied TC leased office space. 

Auditors did not find evidence that work station information in Archibus was analysed and provided to senior management to support discussions about space maximization; the only known use appears to have been for the recent Place de Ville Lease Renewal Project. 

At the end of 2012-13 (on 29 March 2013), the FMO discontinued use of the Archibus facility management module and its contract for a full-time design consultant for the module’s implementation.  FMO staff have since been recording space information on an Excel spreadsheet and, as required by PWGSC, continuing with AutoCAD to produce floor plans. 

The government’s lease cost for Tower C space for TC was approximately $17.8M in 2012-13.  On that basis, the current annual cost of vacant work stations could be in the range of $4.45M, not including fit-up costs. 

2.4  ARCHIBUS ROOM RESERVATION MODULE

The other Archibus module—this one for boardroom reservations--was purchased by FMO in 2006 (cost information not available), and an upgrade was purchased for an additional $98K in March 2011.  

There was a one-and-a-half-year delay before the upgrade was operational.  It had been expected that the upgrade would be operational within five months, and the final payment was issued after five months, but the system was not operational until a year after final payment was made.

The upgraded module is being used to manage reservations for 13 shared Tower C boardrooms (10 on the concourse level, two on the 9th floor, and one on the 20th floor).  This represents 27% of all Tower C boardrooms (13 of 48).

2.5  PLANNING AND DESIGN SERVICES

Planning and Design Services has five FTEs (a manager, a project manager and three officers).  Until 31 March 2013, there were also three full-time consultants.  The consultants were from planning/design firms that had had standing offer agreements with FMO for many years. 

Although PWGSC has master supply arrangements for planning/design services with several planning/design firms, including those used by FMO, and the development of standing offer agreements is time-consuming for both departments and companies, FMO has repeatedly opted to develop TC-specific standing offer agreements and all its standing offer agreements have been with the same two companies.  Total TC payments to the companies from 2008-09 to 2012-13 was $3.8M, and total payments since the first contracts was $5.9M.

Consultants from the planning/design firms performed much the same work as TC employees over the years.  They managed moves, office reconfigurations, and construction projects.  They created office designs using AutoCAD, estimated move/reconfiguration/restructuring costs, provided advice on furniture purchases and contractors, scheduled work, and ordered furniture.  They also had a role in space management.  In some cases they took direction from employees and in others, they provided direction to employees.  One consultant had been working at TC for six years.

Some of the contracts were standing offer call-ups for full-time services of planners/designers, others were for small, short-term contracts.  One company, for example, had several FMO contracts to provide a registered architect’s sign-off on FMO designs.  Accepted practice would have been to work through PWGSC. 

There is the risk of an employer-employee relationship and value-for-money questions related to longer contracts.  For example, FMO paid $712K, an average of $142K/year, for the full-time services of a planner/designer for a five year period.).  The salary for an employee with the same experience (GT-3 level) would have been $50K-$57K/year.

2.6  INBOX COORDINATOR

A month after the November 2011 moratorium on all but the most necessary accommodation projects, FMO made a call-up against one of its planning and design standing offer agreements for a full-time intermediate designer.

The work involved monitoring of FMO telephone and email inboxes, entering requests for accommodation services (chairs, furniture, reconfigurations, office moves, coat hooks, picture hooks, etc.) into an Excel spreadsheet, and forwarding requests to the Planning and Design Manager or the Building and Emergency Services Manager for action.  A contracted intermediate designer was used for 15 months for this work at a cost of $155,086 (approximately $97,600/year), a significant commitment at a time of cutbacks.  The work has since been done by a staff member at a cost of $50-57K/year.  The number of inbox entries between November 2011 and January 2013 was 585, an average of two entries per working day. 

2.7  OFFICE FURNITURE SUPPLIERS

PWGSC has supply arrangements with several companies for office furniture purchases.  FMO purchases furniture from a small number of the suppliers and encourages others in the department to use the same suppliers.  As a result, most TC furniture/wall panel orders are directed to three companies: orders to the top supplier totalled $5,300,753 since 1999, orders to the second supplier totalled $2,994,420 since 2007, and orders to the third supplier totalled $1,554,950 since 2002. 

2.8  WAREHOUSING AND INVENTORY

FMO’s Building and Emergency Services unit has six FTEs and two full-time contract movers.  The unit manages two TC warehouses in the NCR--one on the P1 level of in Tower C and one in Gatineau, Quebec--and two Tower C storage rooms (on P2 and P3 levels of Tower C).  The warehouses and storage rooms are used for new and used furniture and other inventory.

It was found that the controls to prevent or minimize inventory loss are weak. 

The Gatineau warehouse has no security camera and the key can be duplicated.  During a site visit in fall 2012, auditors found a minimal inventory of used furniture.  In a follow-up visit in March 2013, there was new furniture with stickers showing purchase dates of 2003, 2009 and 2010.  

The warehouse on the P1 level of Tower C has a security camera and requires swipe card access; at the time of the audit, there were 138 individuals with access, including all staff of the property manager, electrical and other contractors, cleaners, all FMO staff and all building commissionaires.  It is not known whether all these individuals have security clearances.

The P2 and P3 storage rooms have no security cameras.

The TB Policy on Real Property Management encourages departments to minimize real property costs by borrowing, using surplus goods, leasing, or cost-sharing with another department, and TC managers sometimes ask whether FMO has new or used furniture to meet their needs in its warehouses.

However, FMO has no current inventory of warehouse and storage room contents.  PWGSC performed a furniture inventory count of the NCR TC buildings in the summer 2012; but, the inventory list has not been used by FMO to monitor and control inventory (including inventory in warehouses).  Developing and maintaining the inventories has been assigned to moving contractors, according to their contract, and this is not yet being done.  Auditors are of the view that warehouse and storage room inventories should be done by employees rather than contractors. 

Departmental controls were not effective to prevent unaccompanied or off-hours warehouse/storage room entry by staff or contractors.

2.9  MOVING SERVICES

PWGSC also has supply arrangements that departments can use to obtain services from a moving company.  The supply arrangements allow departments to hire movers on an “as and when required” basis. 

Rather than using PWGSC supply arrangements, FMO has opted to request bids for TC-specific standing offer agreements. 

Except for three months in 2004, the same company has had the TC standing offer agreement for moving services.  There have been three standing offer agreements with the company since 1999 (1999-2004, 2004-2008 and 2008-2013) ¹⁰.  Total TC expenditures were $3M since 1999 ($1.2M from 2008-09 to 2012-13). 

During the three months in 2004 when the FMO standing offer agreement was with another supplier, this company was awarded a non-competitive contract for three office moves at a price of $18,900. 

FMO’s 1 June 2008 Request for Proposals for moving services said movers would be required on an “as and when required basis”.  However, the successful supplier has had full-time work for at least two movers for the duration of the contract (four full-time movers until June 2012 and two since then).  Payment records indicate that the movers were paid for 8-hour days rather than 7.5-hour days as specified by the contract.

There was also a discrepancy with respect to security provisions.  The Request for Proposals said the successful bidder must have or be able to obtain secret clearance for two senior installers, secret clearance for two installers, and enhanced reliability for all other installers, and the clearances were to be obtained before the installers would be permitted access to TC premises, but FMO did not hold the successful bidder to these conditions.

Although the company has had movers full-time at TC since the contract awards, it has just one mover with secret clearance.  The other has had an active building pass although he had no security clearance from 2007 to March 2013 (he had reliability clearance effective March 2013).

Because of security requirements and the “as and when required basis” service requirement in the Request for Proposals, there is evidence in departmental files that at least one company decided against submitting a bid.  An email to TC from a company representative said the company “prides itself on providing our clients with reliable and high quality service and after reviewing the tender and its requirements, we felt that the requirement to have secret cleared staff available on an as needed basis would be hard to meet.  Although we do employ a limited number of secret cleared people, we could not guarantee their availability when you need them.  We feel it is important that when we commit to a service contract that we can always provide what the client requires when they require it.  [Our company] has committed personnel to other government departments who are employed every day as part of the contract and we find this easier to maintain the staff required to service their contracts.  If Transport Canada is looking at a permanent in house crew, we would [definitely] be interested in this type of tender”.

The Treasury Board Contracting Policy says that even though the Contracts Directive allows for amendments, every effort should be made to avoid: inadequate initial funding resulting in amendments to increase the contract value; inadequate pre-planning resulting in amendments to change the design, specifications or quantity involved; and improper administrative procedures resulting in amendments to change the specifications and delivery or other requirement in order to protect the contractor or government agency involved.  There were a total of 32 amendments to the TC standing offer agreements for moving services (Table 5).

Table 5:  Standing Offer Agreements for Moving Services

The Deputy Minister had requested a senior procurement committee be established.  In December 2011, the Senior Procurement Review Committee (SPRC), “to provide Transport Canada with improved oversight of procurement planning, priorities and expenditures” ¹¹ was formed.  The committee was established in 2011-12 and has Group/Region heads as members.  Terms of Reference say proposals for professional service contracts over $100K and contract amendments that would increase the total to more than $100K must be reviewed.              

FMO submitted three of the four most recent moving company contract amendment proposals for SPRC approval.  Auditors reviewed two of the three amendment proposals and found that the proposals contained incorrect information.  The proposals said the original contract value was $800K rather than $200K ¹², understating the size of the proposed increases.  The most recent proposal (which the Committee approved) will bring the total increase to $1.28M, a more than 500% increase.

In May 2012, senior management approval was sought on FMO’s behalf for a Request for Proposal for a new standing offer agreement for moving services.  The note said TC needs its own standing offer because PWGSC’s ceiling ($400K for three years) is too low; TC wishes to have an agreement that will allow expenditures totalling $633K over four years (a two-year agreement plus two one-year extensions).

2.10  PROCUREMENT

Auditors found many weaknesses and gaps in procurement practices, based on the review of a sample of 43 FMO procurement files:

Procurement and contract files were not well organized and in numerous instances, key documentation was incomplete and unavailable.

Although the Treasury Board Policy on Contracting says procurement files should be established and structured to facilitate management oversight and to provide a complete audit trail, auditors found that 43 sample files were not organized, requiring a significant level of effort for reconstruction, and had the following deficiencies:

• In four instances, no documentation was provided to the audit team;
• In 37 instances, the complete procurement and contracting file was not provided to the audit team;
• Procurement files did not demonstrate evidence of review, monitoring and oversight by Contracting and Materiel Management.

Evidence of a review and challenge function including review by the appropriate contract committee was not always documented.

Key central agency policies say departments must ensure that management controls are adequate to protect the integrity of the procurement process and proper controls are in place to monitor and ensure corrective actions are taken.  They also say that public servants must show prudence and probity when they conclude contractual arrangements on behalf of the Crown. 

Auditors found that Transport Canada has two procurement committees—a Contract Review Committee, chaired by the DG Finance and Administration with DG-Director level members from across the Department, in place since 1996, and a Senior Procurement Review Committee (SPRC), established in December 2011, with a mandate to review professional services requirements related to operational requirements and provide Transport Canada with improved oversight of procurement planning, priorities and expenditures, but:

• There were no established quality assurance procedures to help ensure compliance with relevant central agency policies.
• There was no evidence of a monitoring mechanism on the status and progress of contracts.
• Of the four (4) samples that required SPRC review and approval, three were not reviewed by the SPRC.

Documentation provided did not always comply with the Treasury Board Policy on Contracting

The audit included an analysis of the procurement and contracting process for goods and services procured on behalf of the Facility Management Organization.  The following provides a summary of the results:

Approval to Commit Funds (Financial Administration Act Section 32):

Of 28 contracting files that required FAA section 32, auditors observed:

• In six instances, there was no evidence of FAA section 32 (21% non-compliance or six of 28 files), and

• Of the FAA section 32 approvals received, there were two instances where FAA section 32 approvals were received after the contract award (9% non-compliance or two of 22 files).

Bid Solicitation and Evaluation:

Public Servants are required to perform their duties in a way that will stand the test of highest public scrutiny and abide with conflict of interests measures and requirements. According to the Procurement Policy, bids are required to be solicited before contracts are awarded, unless they comply with specific exceptions (e.g. sole source). The sample testing indicating the following observations:

• Of 12 sole source contracts sampled, documentation justifying the sole source contract was not provided in seven of the samples.

Contract Award:

Contracts or purchase orders are required to be in place prior to services being rendered.  Of 43 contracting files sampled, auditors observed:

• In 20 of 43 instances, contracts/purchase orders/task authorizations were not provided/signed.
• In two instances, there were indications that services were rendered prior to the contract being signed.
• In one instance, there was an appearance of conflict of interest.

Rendering services prior to a contract being signed may result in additional financial and/or reputation risk to the department should funds not be available or disagreement in expectations arise between Transport Canada and the vendor.  In addition, the appearance of conflict of interest or contract splitting could result in legal and reputational risk for the Department.

Contract Amendments

Although contract amendments are permitted, it is expected that contracts should not be amended unless they are in the best interests of the government ¹³.  Frequent contract amendments were observed to time and value without documented justification.  The sample included four contracts for which the total value exceeded the original contract amount.

In addition, a contract amendment was observed with per diem rates that exceeded the rates provided in the original contract without documented justification for the per diem increase ($400 per day vs. $292 per day).

Emphasis on contractors for work one would expect to see done by employees both in FMO and the procurement office

Auditors observed that some individuals had been contracted by FMO for long periods of time.  They also identified an individual in the procurement area who had been contracted from more than one company since 1999 and who had been doing the work of a senior procurement officer.  Such long term contracting is not effective for many reasons, one being cost and another being the risk of creating employer-employee relationships.