Audit of the Management of Procurement Services

Presented to the Departmental Audit Committee (DAC)
July 11, 2022

Table of Contents

• Executive Summary
  • Introduction
  • Strengths
  • Areas for Improvement
  • Internal Audit Conclusion and Opinion
  • Statement of Conformance
• Introduction
  • Audit Purpose and Objectives
  • Audit Considerations
  • Scope
  • Approach and Methodology
  • Criteria
• Findings and Recommendations
  • Governance and Compliance
  • Procurement Processes
  • Human Resource Planning and Training
  • Transition to the new Directive on the Management of Procurement
• Appendix A – Audit Criteria

Executive Summary

Introduction

The procurement function serves as a mechanism for organizations to acquire the goods and/or services they require to advance organizational needs and priorities. Procurement methods include: sole-source contracting, competitive contracting, supply arrangements and standing offers, purchase orders, and acquisition cards.

Natural Resources Canada (NRCan) is subject to a suite of procurement-related instruments that include legislative, policy, and regulatory instruments, which are managed by the Treasury Board of Canada Secretariat (TBS) and its central purchasing agents, Public Services and Procurement Canada (PSPC) and Shared Services Canada (SSC). These instruments outline the responsibilities for managing and executing procurement activities. Of note is the ongoing departmental transition to a new overarching Treasury Board (TB) policy and associated directives that cover the management of procurement. Fully effective May 13, 2022, the new Policy on the Planning and Management of Investments and the Directive on the Management of Procurement serves as the main procurement related policy suite.

Within NRCan, the Assistant Deputy Minister (ADM) of the Corporate Management and Services Sector (CMSS) is the Senior Designated Official (SDO) with authority and functional responsibility for procurement related activities. The SDO is responsible for supporting the Deputy Minister’s accountability for all requirements detailed within the TB Policy and Directive on the Management of Procurement.

Within CMSS, the Finance and Procurement Branch (FPB) is responsible for the core operations of the procurement function. All managers across all sectors have delegated contracting authority; however, it is restricted. The Lands and Minerals Sector (LMS) through the Surveyor General Branch and the Polar Continental Shelf Program, and the Communications and Portfolio Sector (CPS) hold increased procurement-related delegated authorities for specific purposes, such as procuring land surveys and printing services. While the FPB holds primary responsibility for procurement oversight and activities, all sector business owners are responsible for planning their procurement activities and ensuring that requests are submitted for action.

The objective of this audit was to assess the effectiveness and efficiency of management processes related to the procurement function, and the adequacy of governance over procurement operations, as it relates to meeting the needs of the Department.

Strengths

Overall, FPB has established oversight mechanisms for procurement activities at the operational level to facilitate compliance with policy requirements, and procurement activities and processes generally comply with government policy requirements. The Department has also made progress in implementing action plans to address the recommendations from the recent Office of the Procurement Ombudsman (OPO) Review. In addition, FPB has made significant efforts to implement the COVID-19 Vaccination Policy for Supplier Personnel, which came into effect in November 2021.

The Department has also designed and implemented processes and procedures in support of procurement activities, and this information is readily available to sectors/business owners. Despite delays in processing, business owners conveyed their overall satisfaction once their procurement requests were actioned.

As part of the transition to the new TBS Directive on the Management of Procurement, the Department has developed a Procurement Management Framework.

Areas for Improvement

There is a need to enhance governance for strategic and integrated procurement planning and to encourage active participation by the sectors. Improvements are needed to better define the roles and responsibilities of the Procurement Policy, Analysis and Reporting Unit (PPAR) and the Procurement Services Unit (PSU), to enhance communication and collaboration.

In addition, changes are required to ensure that procurement-related guidance is regularly reviewed and updated, constraints in the current procurement processes are examined, and service standards are evaluated for relevance and potential data gaps to address any performance challenges. Further, there is a need for FPB to improve and strengthen its communication mechanisms with sectors.

Additional work is required to document FPB’s human resources (HR) and succession planning and monitoring processes; to enhance staff training requirements; and to strengthen processes for knowledge transfer and sharing. These actions would support resourcing needs, enhance the staff training complement, and ensure that potential knowledge disparities between staff members are reduced.

Internal Audit Conclusion and Opinion

In my opinion, the Department has elements of an effective procurement function and some adequate oversight mechanisms but a number of improvements are required to enhance the efficiency and effectiveness of management processes. Additional opportunities exist to formalize and strengthen HR and succession planning processes, and training initiatives.

Statement of Conformance

In my professional judgement as Chief Audit Executive, the audit conforms with the Institute of Internal Auditors' International Standards for the Professional Practice of Internal Auditing and the Government of Canada’s Policy on Internal Audit, as supported by the results of the Quality Assurance and Improvement Program.

Michel Gould, MBA, CPA, CIA
Chief Audit and Evaluation Executive
July 11, 2022

Acknowledgements

The audit team would like to thank those individuals who contributed to this project and particularly employees who provided insights and comments as part of this audit.

Introduction

The procurement function serves as a mechanism for organizations to acquire the goods and/or services they require to advance organizational needs and priorities. Procurement methods include: sole-source contracting, competitive contracting, supply arrangements and standing offers, purchase orders, acquisition cards, and temporary help services.

Within the Government of Canada, procurement activities are governed by a complex series of legislative, policy, and regulatory instruments, managed by the Treasury Board of Canada Secretariat (TBS) and its central purchasing agent, Public Services and Procurement Canada (PSPC). Integral instruments for financial management and procurement activities include: the Financial Administration Act (FAA), Government Contracts Regulations, and the Treasury Board (TB) Contracting Policy. Additional policies and directives support these instruments, such as the TB Policy on Green Procurement, the TB Directive on Government Contracts, including Real Property Leases, in the Nunavut Settlement Area, and requirements defined to ensure that legal obligations are adhered to in modern treaties (Comprehensive Land Claim Agreements) relating to procurement activities. These instruments serve to provide direction, and when in compliance with these instruments, procurement activities would be conducted in a fair and transparent manner, provide value for money, and demonstrate sound stewardship.

Natural Resources Canada (NRCan) is subject to these instruments, including the TB Contracting Policy.  Fully effective May 13, 2022, a new overarching policy, the Policy on the Planning and Management of Investments and its associated directives covers the management of procurement, investment planning, real property, and materiel management. This new policy suite and associated directives replace the TB Contracting Policy, and previous policy coverage in the listed areas.  They serve as the main procurement related policy suite. Currently, NRCan is in the process of transitioning to the new policy suite and its associated directives, which includes designating a senior official (termed the Senior Designated Official - SDO) to be responsible for supporting the Deputy Minister’s accountability for all requirements under the new Policy, and developing and implementing a departmental Procurement Management Framework (PMF).

NRCan has designated the Assistant Deputy Minister (ADM) of the Corporate Management and Services Sector (CMSS) as the SDO with authority and functional responsibility for procurement related activities. These activities are managed by the Finance and Procurement Branch (FPB) and its functional units, the Procurement Services Unit (PSU) and the Procurement Policy Analysis and Reporting Unit (PPAR). Outside of FPB, the Lands and Minerals Sector (LMS) through the Surveyor General Branch and the Polar Continental Shelf Program, and the Communications and Portfolio Sector (CPS) hold additional procurement related delegated authorities beyond those held by other sectors. These delegated authorities are held for specific purposes, such as procuring land surveys and printing services. While the FPB holds primary responsibility for procurement oversight and activities, all sectors are responsible for planning their procurement activities and ensuring that requests are submitted to PSU for action.

Generally, items below a monetary threshold of $5,000 can be acquired through the use of an acquisition card. As of May 24, 2022, this limit was increased to $10,000. All other procurement requests must be submitted to FPB through the eProcurement contracting system, except for those initiated and managed by sectors with special procurement delegations for specific purposes as stated above. The eProcurement system is a request intake system used by CMSS that interfaces with the AMI system to track and assign requests to procurement officers. NRCan’s delegated authority for procuring goods, services, and construction internally, without the support of PSPC, is $3.75M for services sourced competitively ($200K sole source), $750K for construction sourced competitively ($100K sole source), and for contractual arrangements, $500K for services and $25K for goods. Requests exceeding these thresholds are processed by PSPC unless specific authorities are obtained through a TB Submission.

The Office of the Procurement Ombudsman (OPO), an independent office within PSPC that assesses whether procurement practices support the principles of fairness, openness, and transparency, recently completed an external review of NRCan’s procurement practices as part of its five year review process that includes 20 federal departments. This external review assessed NRCan’s procurement activities and compliance, in particular for areas in evaluation criteria and selection plans, solicitation documents, and evaluation of bids and contract award, for contracts awarded between January 1, 2018 and December 31, 2019. Given this recent review, the audit took into account the review results, including recommendations and actions taken by CMSS, in order to avoid duplicated efforts in these areas.

During the audit’s scope period (January 1, 2020 to March 31, 2022), 13,849 procurement requests were submitted through the eProcurement system; 8,972 requests were completed; 273 requests were in progress; 1,263 requests were recalled by the originator; 188 were not yet assigned; 136 were pending IT review. This totals $218,104,928.18 in completed requests for this period. This excluded contract amendments and task authorizations, which do not normally go through eProcurement.

 

Table 1 – Procurement Requests

Status of Request	Total Number of Requests	Dollar Value of Requests
Completed	8,972	218,104,928.18
Completed from IT Inventory	3,017	3,501,288.27
In Progress	273	106,301,303.94
Recalled	1,263	40,231,035.85
Other (returned, assigned, or sent to IT)	136	250,081.95
Not yet assigned	188	46,731,858.31
Total	13,849	$ 415,120,496.50

The audit team recognizes that this scope period coincided with the COVID-19 pandemic, which impacted the regular operations of the procurement function. However, this did not impact the ability to carry out the audit within the planned timeframe.

This audit was included in the 2021-2026 Integrated Audit and Evaluation Plan, approved by the Deputy Minister on May 5, 2021.

Audit Purpose and Objectives

The objective of the audit was to assess the overall adequacy of governance, management processes and controls supporting the implementation of a department-wide plan to fulfill the Department’s Open Government obligations and further facilitate the delivery of its broader mandate.

Specifically, the audit assessed whether:

• Adequate governance and oversight mechanisms exist to provide strategic and operational guidance, enable the transition to the new policy suite, and facilitate compliance with GOC policies and guidance;
• Effective and efficient business processes and communications mechanisms are in place, and are operating effectively to support NRCan’s procurement needs and activities; and
• Effective resource planning, succession planning, and capacity building processes and mechanisms exist, and that they are operating effectively to support NRCan’s procurement function.

Audit Considerations

A risk-based approach was used in establishing the objectives, scope, and approach for this audit engagement. A summary of the key underlying potential risks that may impact the effective management of NRCan’s procurement services include:

• Adequate governance structures and efficient business processes to manage the Department’s procurement function and activities in compliance with relevant government policy instruments;
• Effective processes and mechanisms to transition to the new TB policy suite;
• Clearly defined roles, responsibilities, and accountabilities pertaining to procurement processes and activities;
• Effective mechanisms that enable frequent and timely two-way communication between sectors and the procurement function;
• Effective human resource planning, including succession planning, capacity building, and training to ensure that the Department’s procurement activities are well supported; and
• Effective knowledge transfer processes to ensure that pertinent information is retained within the procurement function. 

Scope

The scope of the audit focused primarily on FPB/CMSS procurement processes and activities in compliance with existing government policy requirements, their capacity to advance departmental procurement priorities and needs, and their ability to support sectors in delivering on their objectives through procurement activities. The audit also included the procurement activities managed by sectors who hold special procurement related delegations. Further, the audit examined FPB’s activities for transitioning to the new Directive on the Management of Procurement.

The audit examined procurement activities from January 1, 2020 to March 31, 2022, in order to include the most recent activities and processes. The audit did not assess or provide an opinion on procurement evaluation results as this was assessed in the OPO external review, and did not include construction contracts or procurement activities that fall outside of the scope of NRCan’s authorities, such as those procured through PSPC or Shared Services Canada (SSC). However, the audit examined the advice provided to sector clients and internal processes that are used for requests sent to PSPC and SSC.

The scope of the audit did not examine acquisition cards and related processes, due to recent and ongoing continuous audit coverage in this area, nor did the audit examine the directives within the new TB policy that do not pertain to procurement. 

In addition, the audit considered the methodology and results of recent internal control assessments conducted by the Financial Policy, Reporting and Internal Controls Division within CMSS.

The results of other previous advisory, audit, and evaluation projects on related topics were also considered where deemed relevant in order to inform the audit and reduce duplication of efforts.

Approach and Methodology

The approach and methodology used in this audit followed the Institute of Internal Auditors' International Standards for the Professional Practice of Internal Auditing (IIA Standards) and the TB Policy on Internal Audit. These standards require that the audit be planned and performed in such a way as to obtain reasonable assurance that audit objectives are achieved. The audit included tests considered necessary to provide such assurance. Internal auditors performed the audit with independence and objectivity as defined by the IIA Standards.

The audit approach included the following key tasks:

1. Interviews with key FPB personnel and sector representatives;
2. A review of selected key documents, business processes, and communication materials;
3. File review of a sample of procurement requests and completed files - a judgmental sample of 25 procurement files (10 sole source contracts for goods under $25K and services under $40K, 15 competitive) was reviewed and assessed for appropriate levels of financial signing authority, sufficient documentation on sole source contracts, evidence of solicitation for competitive contracts, completion of security requirements where applicable, and proactive disclosure where applicable; and
4. Walkthroughs of key procurement processes, such as the contracting process and the quality assurance process.

The criteria were developed based on key controls set out in the Treasury Board of Canada’s Audit Criteria related to the Management Accountability Framework – A Tool for Internal Auditors, in conjunction with the TBS Directive on Procurement, and relevant associated policies, procedures, and directives. The criteria guided the fieldwork and formed the basis for the overall audit conclusion.

Appendix A summarizes the detailed audit criteria.

The conduct phase of this audit was substantially completed in March 2022.

Criteria

Please refer to Appendix A for the detailed audit criteria. The criteria guided the audit fieldwork and formed the basis for the overall audit conclusion.

Findings and Recommendations

Governance and Compliance

Summary Finding

Overall, FPB has established oversight for procurement activities at the operational level to facilitate compliance with policy requirements. While governance structures and mechanisms to manage the Department’s procurement activities are in place, they are not adequate to provide strategic and operational guidance, and are not being leveraged or used consistently. There are also opportunities to enhance the annual procurement planning process to ensure that procurement priorities are communicated and utilized to support strategic and integrated procurement planning.

Roles, responsibilities and accountabilities related to the procurement process are clearly defined, documented, and communicated; however, they are not all up-to-date. In addition, PPAR and PSU have an opportunity to better define their internal roles and responsibilities in order to improve communication and collaboration.

Procurement activities and processes generally comply with government procurement policy requirements. In addition, FPB has made progress in implementing action plans to address the recommendations from the recent OPO Review, and is on track to meet most timelines. FPB has also made significant efforts to implement the COVID-19 Vaccination Policy for Supplier Personnel, which came into effect November 2021.

Supporting Observations

Effective governance and oversight mechanisms should be in place to provide strategic direction and to ensure compliance with Government of Canada policies and guidance. The audit examined whether governance structures and mechanisms for procurement activities are clearly defined, provide strategic and operational direction, and provide oversight for the Department’s procurement activities, including compliance with relevant government policy instruments. Further, the audit examined whether roles, responsibilities, and accountabilities related to the procurement process are clearly defined, documented, and communicated to relevant parties.

Governance and Oversight

At the operational level, the primary oversight mechanism over procurement activities is the quality assurance (QA) function conducted by PPAR. Procurement files are reviewed and assessed to ensure compliance with government policy instruments. Deficiencies in the processing of procurement files are identified and efforts are made to correct issues through training and awareness. Files are generally reviewed and assessed after completion; however, there are instances where PPAR conducts QAs prior to tendering to ensure that required elements are included when processing the procurement requests. PPAR also monitors and reports on departmental procurement activities; this includes mandatory reporting such as on procurement activities related to Comprehensive Land Claim Agreements and other modern treaties to Indigenous Services Canada, and discretionary reporting.

There is currently no designated governance committee being used for strategic procurement planning. Previously, the ADM-level Procurement Review Board (PRB) served as the governance body for reviewing and providing recommendations or direction on complex and high risk procurement activities, with the ADM CMSS/ Chief Financial Officer (CFO) making the final decisions. As the number of decisions being brought to PRB declined, and as the committee was mainly being used for secretarial approval of procurement activities, it was dissolved in 2020.

The ADM-level Departmental Operations Committee (DOC) was identified as the appropriate forum for the ADM CMSS/CFO to bring forward procurement issues for discussion as needed, at their discretion. Since the DOC’s inception in April 2021, there have been no specific discussions on procurement issues. The audit team noted that procurement issues have been discussed at the DG-level Finance and Real Property Committee (FRPC). This includes an update on procurement, such as completed, ongoing, and planned actions for addressing the high volume of unassigned requests and workload. Procurement issues are also discussed as part of CMSS’ sector management committee meetings, and at a recent Senior Management Committee meeting held in early 2022. These efforts provide a degree of oversight over procurement activities; however, they are not sufficient to provide strategic direction for the function.

Strategic Procurement Planning

FPB leads an annual procurement planning exercise in consultation with most of the sectors. Requests for information (call-outs) and a procurement planning template are sent to Directors General at the beginning of the fiscal year to solicit information about anticipated complex procurement requirements. The template contains information on required procurement, anticipated contracts with former public servants, and information on anticipated procurement in the Nunavut Settlement Area. This information is intended to enable the PSU to plan, prioritize, and manage their requests by ensuring capacity, managing workload, and optimizing bulk purchases or standing offers for efficiencies, and to support PPAR with their various reporting requirements. Guidance information on the planning exercise is provided to employees on the departmental intranet, The Source.

Although there is a documented procurement planning process, the exercise has not been leveraged or used consistently, and procurement planning information is not effectively solicited/or received from sectors. FPB indicated that many sectors do not respond to the request for procurement requirements, and those that are returned to FPB often do not contain a complete list of planned procurement requirements. Ideally, these plans would allow PSU to inform sectors’ needs and priorities into their own activities and allow them to assess internal capacity requirements. Without a collaborative approach and sector participation to gather information for procurement planning, this may limit procurement planning at the strategic level, and procurement prioritization at the operational level.

Sectors indicated that procurement planning happens at the working level within sectors and is not well integrated with other planning functions in the Department. Over the past year, FPB has made efforts to meet with sectors to acknowledge and to address the backlog of procurement requests by holding engagement sessions at sectors’ management committee meetings. These discussions include prioritization of unassigned requests, the state of procurement, and a broader discussion about the results of the Department’s integrated business planning exercise.

As per the TB Policy on the Management and Planning of Investments, departments are required to ensure that departmental investment planning is integrated with other functions, including procurement, real property, and materiel management. NRCan has been making progress towards developing an investment plan management framework that includes procurement considerations and alignment with department's integrated business planning activities. These actions are in response to the findings and recommendations from the recent Audit of Strategic and Operational Planning Process (2019) and the internal controls assessment on investment planning (2020). As part of implementation of the framework, the Department will be initiating a pilot approach to investment planning, which includes an enhanced and more integrated procurement planning exercise.

Roles and Responsibilities

The key participants in the procurement process are the sectors/business owners and the contracting authorities. A business owner (or sector client who uses FPB’s procurement services) is an individual who is responsible for the business or program area for which the project, procurement, or program is established. A contracting authority is a person who has delegated contracting authority to enter into a contract or contractual arrangement on behalf of a department or agency. The procurement officers within the PSU are all contracting authorities. Programs with special delegations for procurement are also contracting authorities. PPAR provides policy guidance on the operations of the procurement function.

Roles, responsibilities, and accountabilities related to the procurement process are clearly defined documented and communicated to relevant parties via the departmental intranet, The Source. However, this information has not been updated since 2020, with some documents last updated in 2015 and 2018. Business owners interviewed during the course of the audit indicated that they are aware of their roles, responsibilities, and accountabilities relating to procurement, but they expressed a need to be informed of any relevant changes.

Within the procurement function, PPAR and PSU have an opportunity to better define expectations of their internal roles and responsibilities in order to improve communication and collaboration, especially with the changes to procurement procedures resulting from the implementation of the new Directive. This includes a disparity in expectations regarding updating and maintaining procedural and guidance documents (e.g., desktop procedures), and for engagement with business owners on changing procedures.

Compliance

Procurement activities and processes tested as part of the audit generally comply with government procurement policy requirements. Specifically, testing included: verification of a valid Section 32 approval; security requirements checklists on file; Contract Planning and/or Advance Approval (CPAA) on file; verification of sole source justifications (where applicable); and proactive disclosure requirements. This testing did not duplicate the efforts of the OPO external review, which focused on procurement activities and compliance with government policy requirements, in particular for areas in evaluation criteria and selection plans, solicitation documents, evaluation of bids, and contract award. In addition, the oversight provided by PPAR, through the QA review function and the monitoring and reporting of procurement activities helped facilitate compliance. There were no significant deficiencies or noncompliance identified in the sample files reviewed for the audit.

FPB has established an internal working group and distributed tasks to procurement officers for implementing action plans in response to the eight recommendations from the recent OPO external review. At the end of March 2022, two recommendations regarding clarity on Indigenous requirements and updating Desktop Procedures were self-assessed by FPB as complete and the other six were in various stages of implementation. The outstanding recommendations include:

• establishing a quality control process to ensure mandatory criteria for bids are defined and communicated;
• updating internal guidance for the development of bid evaluation criteria and bid selection methodologies;
• establishing a process for and documenting communication to suppliers for prior to bid closing, for contract aware notices, and for sending regret letters;
• establishing processes to ensure consistent instructions for bid evaluators; non-compliant bids are disqualified and not further assessed; and technical evaluations adhere strictly to the evaluation criteria and scoring grids in solicitations;
• establishing processes to ensure bid evaluations and procurement files are appropriately documented; and
• establishing a process to review planned procurements to ensure aggregate requirements are not inappropriately divided to circumvent controls and / or existing agreements.

The implementation of all action plans related to the OPO Review, such as updating internal guidance for the development of evaluation criteria, establishing processes to ensure that evaluations are appropriately documented, and updating Contracting Desktop Procedures, will allow FPB to continually assess its operations and maintain updated documentation for compliance and alignment with government policy instruments. FPB has indicated that they are on track to meet most implementation timelines.

In November 2021, the COVID-19 Vaccination Policy for Supplier Personnel (the Vaccination Policy) came into effect. Under this policy, departments are required to ensure that solicitation and contracts for new procurement requirements include appropriate clauses regarding vaccination certification; that solicitation documents for active procurements (not yet closed) be amended to include the clauses related to vaccination certification; and that suppliers of existing contracts within the scope of the Vaccination Policy be issued letters regarding the new requirements. Guidance from TBS and PSPC continually changed as departments were responding to these requirements. NRCan’s FPB took immediate steps to address the Vaccination Policy by communicating the requirements and implications to business owners and contracting authorities on how to apply the policy; revising and updating existing templates for bid solicitation; notifying suppliers from existing contracts to obtain signed certification if applicable; and verifying and tracking bidder responses in a central repository for monitoring and reporting purposes. FPB has, therefore, made significant efforts to implement the Vaccination Policy, in light of short timelines and changing requirements. This was done while managing existing operational requirements for procurement and while preparing for the transition to the new Directive on the Management of Procurement.

Risk and Impact

In the absence of a clearly defined governance mechanism for procurement, a collaborative approach and sector participation to gather sector information for procurement planning, departmental procurement activities may not be integrated and aligned with overall sector and departmental objectives and strategies.

A lack of clarity on roles and responsibilities within FPB for updating information, guidance, and templates, and for engagement with business owners may result in inaccurate and/or outdated information being utilized by procurement staff throughout the process, and business owners not receiving the support and guidance they require.

Recommendation

Recommendation 1: It is recommended that the ADM of CMSS:

1. Define and implement a governance mechanism for strategic procurement planning, including leveraging the pre-existing committees for oversight and direction;
2. Establish a mechanism to solicit sector input to enhance strategic and integrated procurement planning; and
3. Define and clarify roles and responsibilities between FPB’s PPAR and PSU.

Management Response and Action Plan

Management agrees with Recommendation #1.

A: The NRCan Procurement Management Framework (PMF) will identify the existing Finance and Real Property Committee (FRPC) as the primary governance body that can provide strategic oversight and direction; as well as the Departmental Operations Committee (OC) where FRPC or the Senior Designated Officer (CMSS ADM/Chief Financial Officer) may present high-risk procurements, as needed, for consideration. The PMF and FRPC Terms of Reference will be presented to FRPC and the SDO for endorsement by September 2022.

Position responsible: Senior Director, Finance and Procurement Services

Timing: September 2022 for the NRCan PMF to be completed and the FRPC Terms of Reference updated and endorsed.

B: In June 2022, FPB launched a new comprehensive Annual Procurement Plan exercise, including soliciting and considering sector input, that both supports how the Department plans and manages investments while reflecting a strategic approach to departmental procurements. It is part of the implementation of the TBS Directive on the Management of Procurement and is also consistent with the messages shared during the Integrated Business Plan (IBP) exercise that information gathered would be broadened to enhance planning. Procurement Planning processes for FY 22/23 are aligned with Financial Situation Reports (FSRs) and will continue to be aligned with the FSR exercise going forward. In preparation for the next IBP cycle (FY 23/24), FPB will work collaboratively with the Planning and Operations Branch, leverage the same tool and advance planning further.

Position responsible: Senior Director, Finance and Procurement Services

Timing: Completed June 2022. The mechanism to solicit sector input to enhance strategic and integrated procurement planning (i.e., Annual Procurement Plan) was developed and launched on June 8, 2022. The process is ongoing and aligns with FSRs.

C: The NRCan PMF will outline the roles and responsibilities between PPAR and PSU as well as those of Business Owners.

Position responsible: Senior Director, Finance and Procurement Services

Timing: September 2022 for the NRCan PMF to be completed and endorsed.

Procurement Processes

Summary Finding

Overall, documented processes and procedures have been established in support of procurement activities; however, certain elements are not working efficiently or effectively to support the timely execution of activities, resulting in significant delays within the process that impact business owners’ ability to meet their needs and attain their objectives.

In addition, opportunities exist to ensure that guidance (including procedural documentation, flowcharts, and templates in support of procurement activities) is regularly reviewed and updated to ensure that business owners are leveraging the most current materials in support of their activities. There is also an opportunity to evaluate service standards for relevance, address potential gaps in the data collected, and leverage this information to address performance challenges.

FPB has established mechanisms and processes in order to communicate with business owners; however, there is an opportunity for FPB to improve and strengthen its communication mechanisms and to provide business owners with more consistent and timely communications.

Supporting Observations

Efficient and effective business processes should be in place to support the management of procurement needs and activities. The audit examined whether planning, prioritization, and communication processes and mechanisms existed, and whether these were being effectively utilized to address and manage business owners’ procurement needs and activities. Further, the audit examined whether processes existed to address procurement requests and conduct procurement related activities to support business owners in delivering on their objectives.

Documentation of Procurement Processes

FPB has defined and documented both internal procurement procedures to be utilized by staff members, and external processes to be leveraged by all business owners with procurement needs. Internal procedures include the PSU desktop procedures, the PPAR reporting standards, QA procedures, and a QA template tool. Internal procedures are sufficient and enable FPB staff to effectively execute their procurement-related responsibilities.

External procurement processes are in place for planning, purchasing goods and services with CMSS’ support, and contract amendments. Further, FPB has developed templates in support of processes, and visual process flowcharts depicting business owner and other party involvement, such as IT, vendors etc. Information available on the departmental intranet, The Source, provides guidance and expected service standards for processing requests to business owners to support them with their procurement needs and activities, and adequately highlights their roles and responsibilities throughout the process. This information is communicated to all sectors via The Source, however, this information is not regularly reviewed or updated to ensure its continued accuracy and relevance. In some instances, FPB has provided guidance to sectors with special delegations, however, there is no specific and updated guidance readily available on The Source or through other information sharing forums.

Procurement Planning and Prioritization

During the audit scope period, the procurement planning process was not regularly conducted or operating as intended, and was subsequently impacting PSU’s ability to adequately plan, prioritize, and manage procurement related needs and activities. This has resulted in procedural ‘bottlenecks’ that are occurring before procurement tickets are assigned to officers for processing. Further, it was indicated by PSU that the information yielded from this exercise is not adequate to allow for the effective management of procurement requests and planning of resourcing needs. As a result, the eProcurement system is the primary mechanism leveraged by FPB to plan, manage, and manually assign tickets to staff. Ticket assignment is based on a first in, first out process, the complexity of the ticket, and staff availability. Staff further prioritize their requests based on workload and ticket urgency. In light of the increased procurement request volume and internal FPB capacity issues, FPB engaged with senior management to proactively prioritize their procurement needs, including needs relating to new programming.

FPB does not regularly solicit the procurement plans and priorities from business owners, apart from the annual planning exercise with limited sector participation. Most business owners interviewed for the audit indicated that the planning process does not meet their needs. Some business owners indicated that they are proactive in sharing their needs with PSU. In the absence of effective planning processes, some business owners will attempt to bypass the system used by PSU in order to escalate the priority of their requests, through direct inquiries to PSU management. This is not a sustainable model, as it ultimately impacts and causes further delays in the processing time for other sector requests.

PPAR is seeking to implement additional planning-related enhancements, such as holding quarterly meetings with business owners to reconfirm their priorities and to set procurement expectations that are feasible. Implementation timelines for this initiative have not yet been established.

Procurement Processes for Requests and Activities

The procurement process involves sectors submitting their procurement needs to PSU via the eProcurement system. PSU will then review requests, seek additional information and documentation, and assign requests to procurement officers for processing. The end result includes a contract awarded for the delivery of services or goods being procured. Although there are sector procurement advisors assigned to provide support, business owners indicated that their need for guidance and direction are not always met. Prior to request submission, the advisors act as a point of contact between business owners and the procurement function, and help answer general procurement questions. The advisors are not regularly involved or invited to sector procurement planning discussions.

Although the established process is being followed, based on the audit process walkthrough and for sampled files, there are delays and ‘bottlenecks’ that impact the efficiency and effectiveness of certain elements of the process. Delays occur within the process at two main points: during the procurement planning process (detailed above), and at the outset of the procurement process, specifically, the time lapsed between sector request submission to PSU and request assignment, and the time required for PSU to obtain all relevant documentation from sectors. FPB management indicated that internal capacity issues impact their ability to assign requests to available procurement officers. Delays within these main process points result in additional time expended at the outset of the process, ultimately impacting and impeding the timely completion of the entire process. On April 26, 2022, updates were implemented to the eProcurement system, which require relevant information and documentation to be included when a request is submitted, instead of afterwards. These enhancements are intended to improve the efficiency of the process by eliminating the time required to obtain outstanding documentation.

Diagram 1 – High-level Procurement Process

FPB has implemented procurement service standards, tracks and monitors this information, and reports quarterly to CMSS management on whether standards were met. Some of the information tracked internally by FPB, however, is not relevant to and does not align with the standards shared with business owners. Information shared and tracked differs based on the number of categories tracked, monetary thresholds used, and days for completion (see table below).

 

Table 2 – Service Standards

Service Standards on the Source	Actual Service Standards Monitored by FPB
1. Requests sent to PSPC - 5 days for completion	1. Contracts under $25,000 - 15 days for completion
2. Simple acquisitions - 7 days for completion	2. Contracts over $25,000 - 100 days for completion
3. Complex level 1 - 15 days for completion	3. Contracts sent to PSPC or SSC - timeline not specified
4. Complex level 2 – 30 to 45 days for completion
5. Complex level 3 - 100 days for completion

 

The target for meeting the service standard is 75%; this means that if requests are processed within the specified time frame 75% of the time, the standard has been met. During the audit scope period, service standards for all categories were met, with the exception of contracts under $25,000 for Q4 of 2020-21 (37%), and Q2 for 2021-22 (39%) and Q3 for 2021-22 (13%). This was reflected in the audit sample testing, where there were four instances where service standards were not met within the twenty-five procurement requests tested. Interviews with PSU attributed these low scores to a lack of resourcing within PSU and the challenges with the volume of requests submitted for home office and IT equipment. The audit team found that service standards information is currently used for reporting purposes, however, it has yet to be meaningfully used to address performance gaps and improve processes.

Audit interviews with business owners highlighted that the procurement process does not meet their needs due to the delays within the process. They indicated that these delays have had corresponding impacts on the achievement of business objectives and priorities. Despite the delays, overall satisfaction with the procurement process increased from 2017 to 2021, per the results of the PSU satisfaction surveys for these periods. Business owners proposed the following improvements to the procurement process during audit interviews: sharing pertinent information of outstanding procurement requests; better communicating changes to the process that have an impact on business owners and ensuring that available information is up to date; and revising guidance to ensure that it is current.

Communications in the Procurement Process

FPB utilizes a variety of mechanisms to communicate with business owners regarding procurement processes and activities, including: information on The Source; sectors engaging with their assigned sector procurement advisors; sectors completing client satisfaction surveys; business owners contacting PSU to enquire about the overall status of their requests; and business owners and the procurement officer meeting to discuss the next steps for processing their requests. The primary mechanism for communicating with sectors is The Source; however, this information is outdated and, in some cases, does not provide accurate information on procurement activities. For example, flowcharts depicting procurement processes are dated 2015, and some of the information on the procurement planning process was last updated in 2018.

The communication mechanisms utilized by FPB largely promoted one-way communication with business owners, and there are limited proactive actions taken by PSU to inform sectors of the status of their requests. Business owners interviewed indicated that often no communication with PSU will occur after request submission until the request has been assigned to a procurement officer for action. Some business owners indicated that they will proactively communicate with PSU in order to receive status updates on their procurement requests prior to request assignment.

Two-way communication primarily occurs after tickets are assigned to procurement officers for processing, and this was confirmed through audit testing. Business owners indicated that communication between them and procurement officers occurs to discuss requests, obtain missing and/or incomplete documentation, and to respond to general questions about the process. This communication provides sectors with additional information on their requests, and an understanding of file progression and expected completion.

While FPB has established mechanisms and processes in order to communicate with business owners, there is an opportunity for FPB to improve and strengthen these mechanisms and to provide all business owners with more consistent and timely communications.

Risk and Impact

When processes are not reviewed and updated regularly, there is a risk that business owners may not be equipped to efficiently and effectively execute their procurement duties, affecting the overall processing of requests and timelines, and ultimately impacting the achievement of business owner priorities and objectives.

A lack of efficient and effective procurement processes, including request prioritization, may result in delays, affecting the overall processing time and limiting the achievement of business owner priorities and objectives.

Without accurate and precise data collected and used to support the monitoring and tracking of procurement service standards, insufficient information may limit the ability to detect and remediate issues and performance gaps.

Without a consistent approach to inform business owners of the status of their requests before they are assigned and throughout the procurement process, there is a risk that the expectations for file initiation and processing time may not be clear, resulting in business owners not having the required information to make informed decisions to meet their needs and objectives.

Recommendations

Recommendation 2: It is recommended that the ADM of CMSS:

1. Develop and implement a prioritization process for procurement requests, including engaging with business owners;
2. Review current procurement processes to identify and analyze any procedural constraints, and devise mechanisms to promote continuous process improvement;
3. Review service standards for relevance, address potential gaps in the data collected, and leverage this information to address any performance challenges; and
4. Enhance communications mechanisms between contracting authorities and business owners, including assessing the feasibility of an automated mechanism to provide regular status updates throughout the procurement process and to clarify timelines.

Recommendation 3: It is recommended that the ADM of CMSS review, update, and communicate guidance to business owners, including flexibilities in procurement approaches offered in the new TB Directive, to ensure that information available is current, clear, and provides sufficient information to enable business owners to execute their duties.

Management Response and Action Plan

Management agrees with Recommendation #2.

A: Prioritization and engagement  

1. FPB is working with the Financial Systems division to enhance the reporting capability within the AMI system and enhancements to eProcurement to better support and communicate to Business Owners to allow them to regularly review requests, clarify timelines, and confirm sector priorities; and to determine if additional flexibility can be built-in to improve functionality and reporting.
2. FPB is developing criteria to prioritize procurement requests; i.e., prioritization amongst all the requests received from the various sectors.
3. FPB has enhanced engagement between programs and procurement, for meaningful discussion and integration of procurement considerations into the planning of programs, projects and service delivery; e.g., via recurring attendance at senior management meetings and program specific discussions. Furthermore, FPB has included within the Annual Procurement Plan exercise the opportunity for sectors to prioritize their requirements. The Procurement Plan will be reviewed and updated by Business Owners at the same time as the FSRs. In addition, presentations to OC and FRPC on procurement status and progress have also occurred.

Position responsible: Senior Director, Finance and Procurement Services

Timing: A (i) November 2022 for system, e-request and reporting enhancements; A (ii) October 2022 for prioritization criteria and recommendation process; A (iii) initiated during fourth quarter of FY 21/22 and ongoing.

B: Continuous process improvement

1. FPB will be reviewing its triage/internal assignment process to find efficiencies and implement them, where feasible and will examine whether client-recalled procurements are occurring due to constraints in the process and whether an enhancement of the e-procurement system could address this issue.
2. Training and awareness sessions will be developed and delivered to provide education to Business Owners on the end-to-end procurement process and legislative constraints that guide the process.
3. FPB will review and streamline procurement processes as new initiatives brought forth by Central Agencies are implemented.

Position responsible: Senior Director, Finance and Procurement Services

Timing: B (i) December 2022 for triage pilot; B (ii) May 2023 for the delivery of training; B (iii) ongoing.

C: In May 2022, a comparative analysis was undertaken to benchmark how NRCan measures against Other Government Departments (OGDs) Service Standards (e.g., GAC, PSPC, Transport, RCMP and others). This information will be leveraged to address any performance gaps and challenges. NRCan remains in line with OGD processing times based on existing analytics. While it has been challenging to consistently meet Services Standards this past FY, initiatives brought forth by Central Agencies could impact processing times (e.g., social procurement and new security requirements); as such, NRCan Procurement Service Standards will remain the same in FY 22/23, pending further assessment.

A new Service Standards Review will be conducted in September FY 23/24.

Position responsible: Senior Director, Finance and Procurement Services

Timing: Completed and shared with senior management (via email) and FRPC members on June 7, 2022. The new Service Standards Review will be conducted in September FY 23/24.
D: Enhance communications mechanisms to provide regular status updates throughout the procurement process and to clarify timelines - 

1. FPB is working with the Financial Systems division to enhance the reporting capability within the AMI system and enhancements to eProcurement to better support and communicate to Business Owners to allow them to regularly review requests, clarify timelines, and confirm sector priorities; and to determine if additional flexibility can be built-in to improve functionality and reporting.
2. FPB has enhanced engagement between programs and procurement, for meaningful discussion and integration of procurement considerations into the planning of programs, projects and service delivery; e.g., via recurring attendance at senior management meetings and program specific discussions. In addition, FPB has included within the Annual Procurement Plan exercise the opportunity for Sectors to prioritize their requirements. The Procurement Plan will be reviewed and updated by Business Owners at the same time as the FSRs.

Position responsible: Senior Director, Finance and Procurement Services

Timing: D (i) November 2022 for system, e-request and reporting enhancements;
D (ii) completed initiated during fourth quarter of FY 21/22 and ongoing.

Management agrees with Recommendation #3.

To evolve the suite of documents already available on NRCan intranet, a client-centric web-based collaborative platform (such as SharePoint) will be developed that will house procurement guidance information, relevant notices from central agencies, required forms, service standards etc., which should provide current, clear and sufficient information to enable business owners to execute their duties. Notifications to Business Owners for updates and changes will be explored.

Position responsible: Senior Director, Finance and Procurement Services

Timing: April 2023 for a client-centric web-based collaborative platform.

Human Resources Planning and Training

Summary Finding

Overall, opportunities exist to formally document and strengthen HR and succession planning mechanisms for the procurement function, and associated monitoring processes. These processes are largely informal and monitoring is conducted on an ad hoc basis.

Training and guidance provided to staff are sufficient and enable staff to adequately execute their duties. However, there are opportunities to strengthen training and awareness through the addition of fraud-related and other complementary topics, and monitoring of attendance/training completion to reduce potential knowledge disparities among FPB staff.

With respect to knowledge sharing and transference in support of capacity building, there is an opportunity to ensure that mechanisms are strengthened and regularly utilized for information sharing purposes.

Supporting Observations

Effective HR and succession planning processes should be in place to support the management of procurement activities. The audit examined whether the procurement function had articulated and planned for current and future human resources needs, including the required skills, knowledge and competencies, and whether these needs were effectively implemented and monitored. Additionally, the audit examined whether those with procurement related responsibilities were equipped with adequate training, knowledge, tools and guidance necessary to fulfill their roles.

HR Planning and Succession Planning Processes

FPB leverages formal and informal processes to meet their current HR needs. Processes and mechanisms leveraged to support HR-related needs included word of mouth initiatives, utilizing pre-established resourcing pools, the Federal Internship Program for Persons with Disabilities, Student Bridging, and formally launching HR processes to seek required resources. Management indicated these processes were utilized on an ongoing basis during the audit scope period to address capacity challenges; however, in FY 2020-21 staffing processes were typically initiated once resource departures were known versus conducting them in advance. Further, management indicated that they utilize the Financial Situation Reports (FSRs) to plan for known departures and planned staffing as part of their salary forecasts.

FPB does not have formally documented succession plans in place that articulate key positions, required skills, competencies and knowledge in support of medium to long-term HR-related needs. Processes that are in place are largely informal. In addition, monitoring processes and mechanisms over HR and succession planning are conducted on an ad hoc, as needed basis.

Within PSU, formal and informal HR processes are leveraged to support and meet current HR-related needs. In this unit, there are no formally documented HR and succession plans in place. During the audit scope period, PSU indicated that there was significant turn-over within their unit; however, throughout the course of the audit, PSU was able to enhance existing resource levels by hiring 18 new full-time equivalents (FTEs). Obtaining qualified resources at the appropriate levels and having a full staff complement was noted as a challenge for PSU, who further indicated that the labour pool for procurement officers is competitive and limited. In addition, PSU recently conducted a review and revision of their Statements of Merit and Criteria (SOMCs) to ensure that defined job requirements align with current needs and activities.

Within PPAR, a formally documented HR plan exists; however, this plan is dated November 2016, and does not reflect PPAR’s current HR-related needs. A formally documented succession plan is also not in place; however, informally, PPAR has identified a successor for the PPAR Manager position. In addition, PPAR’s SOMCs are outdated; however, they indicated that there will soon be an initiative to review and update these SOMCs to reflect current needs and activities.

There is an opportunity for FPB to formalize and operationalize HR and succession plans that identify short and long-term resourcing needs. Ideally, these plans should identify key positions, and define the required skills, knowledge, and competencies required. Further, there is an opportunity for FPB to regularly monitor and review these plans to ensure that they are updated and/or actioned where required.

Training, Guidance, and Knowledge for Procurement

Training and guidance for FPB staff is provided through a variety of formal and informal mechanisms and processes that support staff in the execution of their duties. PSU and PPAR have each developed lists detailing relevant training that new staff members are required to complete. Documented guidance is also readily available to staff through the PSU Desktop Procedures and the PPAR Reporting Standards and associated tools. In addition to formal training and guidance, PSU and PPAR provide informal training and guidance through on-the-job learning, job shadowing, and mentoring opportunities. PSU and PPAR staff indicated that both formal and informal training and guidance received has equipped them with sufficient knowledge to execute their duties. Going forward, PSU is seeking to formalize and strengthen mentoring opportunities for their staff at all levels. These efforts should support and aid with knowledge retention and transfer, and capacity building, which is especially important during periods of high staff turnover.

Training and awareness pertaining to procurement fraud is important for ensuring that procurement staff are sufficiently equipped to identify potential procurement related red flags and fraudulent schemes. Both the PSU and PPAR training requirements for new staff members do not specifically incorporate this type of training. In addition, PSU and PPAR staff training requirements are not the same. A lack of consistent training may result in knowledge disparities between the two units, which are intended to work in tandem in support of the procurement function and operations. This may also hinder PPAR’s ability to provide appropriate advice and guidance to PSU, which may impact PSU's ability to make procurement decisions. Further, completion of training requirements is not formally tracked and monitored, resulting in the potential for greater knowledge disparities between the two units.

Processes and mechanisms for sharing additional knowledge, such as procurement needs of the sectors, new programming requirements, and specific information on sector requests, is mostly conducted on an ad hoc basis. Information of this nature may be shared by sectors through sector procurement advisors or the PSU manager, who may not always share pertinent information with the procurement officer responsible for processing the request. PSU indicated that sectors will sometimes request a specific procurement officer with previous knowledge of the program/sector to process their requests. Program/sector information sharing is important for knowledge retention and transfer, and capacity building purposes, and enables staff to have a stronger understanding of the context surrounding procurement requests and activities. Further, this is important to ensure that sectors’ needs are well understood and to avoid repetition of previously shared knowledge.

Risk and Impact

Without sufficiently documented HR and succession plans, there is a risk that FPB may not be able to attain their current and future HR objectives, limiting their ability to adequately identify and acquire necessary skills and competencies, and potentially impacting their capacity to support procurement needs and activities.

Without complementary training and awareness sessions on procurement related topics, there is a risk that FPB staff are not sufficiently equipped to identify potential risks, fraud indicators, and red flags, and potentially resulting in fraudulent activities going undetected and unnoticed.  

A lack of monitoring and tracking of the completion of FPB staff training may result in knowledge disparities in the team, and potentially result in different information being disseminated to sectors.

In the absence of regularly utilized knowledge sharing and transfer processes, there is risk that staff will not have a consistent understanding of sector activities, needs, new programs, and requests. Further, without consistent knowledge within the team, there is risk that valuable corporate knowledge will be lost during periods of high-turnover.

Recommendation

Recommendation 4: It is recommended that the ADM of CMSS:

1. Develop and implement HR and succession plans for FPB, and regularly monitor and update these plans as needed;
2. Require that FPB staff participate in consistent training and awareness activities, including fraud, bid-rigging, green procurement, Indigenous considerations in procurement and other complementary topics, and monitor attendance and completion of training; and
3. Strengthen and use knowledge sharing practices within FPB.

Management Response and Action Plan

Management agrees with Recommendation #4.

A: While informal resource and succession planning successfully occurs on an ongoing basis, and both PSU and PPAR units have design structures that allow for talent management and succession, FPB will work with HR to brainstorm on recruitment, retention and PG development programs, formally documenting these plans and strategies as appropriate. Of note, the PMF will be updated to recognize HR staffing, training and succession planning initiatives.

Position responsible: Senior Director, Finance and Procurement Services

Timing:  September 2022 for the NRCan PMF to be completed and endorsed; May 2023 and ongoing for formally documenting HR, succession plans and strategies as needed.

B: PSU and PPAR staff will be encouraged to participate in consistent training and awareness activities for all of the areas indicated in the audit recommendation on an ongoing basis, including events offered by the Canadian Institute for Procurement and Material Management, the Canada School of Public Service (CSPS) and other fora. This is in addition to the mandatory procurement courses required for them to receive functional procurement authority as per the Delegation of Procurement Authority Instrument and mandatory training found on the HR Learning Platform Mandatory Training | The Source (nrcan.gc.ca) (Accessible only on the Natural Resources Canada network). The tracking of completed training is currently housed in PeopleSoft and monitored by HR. FPB will also monitor PeopleSoft entries to ensure appropriate attendance and training completion.

Complementary awareness sessions will be delivered on an ad hoc basis, such as Recognizing Bid Rigging, an information session offered by the Competition Bureau.

Since March 2022, FPB has had a membership with the Canadian Public Procurement Council (CPPC), a municipal-provincial-federal council that supports the sharing of best practices, staffing processes, industry trends/challenges, networking opportunities, etc. and this membership will be promoted to PSU and PPAR staff.

Position responsible: Senior Director, Finance and Procurement Services

Timing: Ongoing, mandatory training for procurement employees will be updated as it is completed and HR PeopleSoft entries will be monitored by FPB; ongoing for information/awareness sessions.

C: Strengthen and use knowledge sharing practices -

1. To evolve the suite of documents already available on the Intranet, a client-centric web-based collaborative platform (such as SharePoint) will be developed that will house procurement guidance information, relevant notices from central agencies, required forms, service standards etc. which will provide another forum for knowledge sharing and to access to up-to-date information.
2. The bi-weekly Procurement All Staff meeting will be the main forum for the sharing of best practices between PPAR and PSU and for knowledge download to Buyers. Meeting Minutes will be kept in GCDocs. The collaboration space in MS Teams will be promoted within both divisions as a tool to further enable knowledge sharing. 

Position responsible: Senior Director, Finance and Procurement Services

Timing: C (i) April 2023 for a client-centric web-based collaborative platform; C (ii) July 2022/ongoing.

Transition to the new Directive on the Management of Procurement

Summary Finding

As part of the transition to the new TB Directive on the Management of Procurement, the Department has developed a Procurement Management Framework (PMF) and an updated set of roles and responsibilities for sectors. Additional work is required to ensure that sectors are aware of and understand how the new requirements will impact their procurement activities.

Supporting Observations

The audit examined whether NRCan had developed and implemented an approach to transition to the new TB Directive on procurement. The new Directive is less prescriptive and encourages departments to consider collaborative, innovative, iterative, and outcomes-based procurement approaches where appropriate. Additionally, the new Directive requires departments to identify a senior designated official (SDO) responsible for implementing the requirements of the new Directive, including the development, implementation, and maintenance of a PMF for the Department's procurement function and activities. TBS has been providing guidance to departments on how to implement the new Directive, and will continue to do so through the SDO Council and the interdepartmental platform GCpedia.

The latest draft of NRCan’s PMF (March 2022) is generally in alignment with the requirements of the new Directive. The PMF explains and describes existing NRCan activities and processes that demonstrate compliance with the new Directive. It also explains new initiatives that will be put in place to ensure alignment and compliance. These include the SDO endorsement of high risk procurements (in lieu of the dissolved Procurement Review Board), an integrated approach to procurement and investment planning, and additional reporting requirements per the new Directive (e.g. 5% target for procurement with Indigenous businesses). Essential elements to meet the needs of business owners are outlined in the new Directive, such as workforce capacity, departmental procurement planning, and requirements for contracting authorities and business owners. At the completion of the audit, limited work has been done to date by FPB to address these elements. TBS released guidance on the transition to the new Directive in February 2022. Additional guidance is expected to be provided in the summer and fall of 2022.

Workforce capacity for the procurement function is included in the PMF. This aligns with the Directive's requirement for SDOs to identify and address the Department’s needs with respect to the necessary competencies, capacity, and professional development for procurement management. However, the ability to implement this requirement may be impacted by the challenges with HR and succession planning identified earlier in the audit. The annual procurement planning exercise is also included in the PMF for resource allocation and procurement strategy planning. However, as was indicated, this exercise has not been leveraged, and there are challenges with soliciting information from sectors.

Efforts have been made to engage and consult with sectors on the changes for contracting authorities and business owners as outlined in the new TB Directive. This includes additional requirements for contracting authorities’ regarding contractual arrangements; limitation of liability; and an outcomes-based approach for procurement. FPB has developed and indicated that they will communicate revised roles and responsibilities to sectors. Additional work is required in order to ensure that sectors are aware of and understand how the requirements impact their procurement activities. Business owners and contracting authorities will benefit from training and / or awareness activities in order to understand and adopt the new flexibilities in the Directive for procurement approaches. Based on information provided by CMSS and documents reviewed by the audit team, the focus has been on other departmental procurement priorities, and NRCan has not yet fully transitioned to the new Directive.

Appendix A – Audit Criteria

The criteria were developed based on key controls set out in the Treasury Board of Canada’s Audit Criteria related to the Management Accountability Framework – A Tool for Internal Auditors, in conjunction with the TBS Directive on Procurement, and relevant associated policies, procedures, and directives. The criteria guided the fieldwork and formed the basis for the overall audit conclusion.

The objective of this audit was to assess the effectiveness and efficiency of management processes related to the procurement function, and the adequacy of governance over procurement operations, as it related to meeting the needs of the Department.

The following audit criteria were used to conduct the audit:

Audit Sub-Objectives	Audit Criteria
Sub-Objective 1: To determine whether adequate governance and oversight mechanisms exist to provide strategic and operational guidance, enable the transition to the new policy suite, and facilitate compliance with Government of Canada (GOC) policies and guidance.	1.1 It is expected that governance structures and mechanisms for procurement activities are clearly defined, provide strategic and operational direction, and provide oversight for the Department’s procurement activities.
	1.2 It is expected that NRCan has developed and implemented an approach to transition to the new TB policy suite and directives on procurement.
	1.3 It is expected that governance structures and mechanisms for procurement activities facilitate compliance with relevant government policy instruments.
	1.4 It is expected that roles, responsibilities, and accountabilities related to the procurement process are clearly defined, documented, and communicated to relevant parties.
Sub-Objective 2: To determine whether effective and efficient business processes and communications mechanisms are in place, and are operating effectively to support NRCan’s procurement needs and activities.	2.1 It is expected that efficient and effective business processes are in place to address procurement requests and conduct procurement related activities to support sectors in delivering on their objectives.
	2.2 It is expected that adequate communications processes and mechanisms are in place and are being effectively utilized by the procurement function and sectors for the management of needs and activities.
	2.3 It is expected that adequate planning and prioritization processes are in place, and that these are being effectively utilized to address and manage sector procurement needs and activities.
Sub-Objective 3: To determine whether effective resource planning, succession planning, and capacity building processes and mechanisms exist, and that they are operating effectively to support NRCan’s procurement function.	3.1 It is expected that the procurement function has articulated and planned for current and future human resources needs, including required skills, competencies, and knowledge, and that these HR needs are effectively implemented and monitored.
	3.2 It is expected that employees with responsibilities related to procurement activities are equipped with adequate training, knowledge, tools, and other resources and guidance necessary to fulfill their roles.