Using Canada's Procurement Experience to Streamline United Stater Government Purchasing Practices

• Author: Captain John T. Kuelbs
• Pages: 02

I. INTRODUCTIONS

Studying Canada's pracess of purchasing supplies and equipment for governmental use illuminates useful contrasts with the American government's procurement system. At its most practical l e d , such a comparison acquaints government contract lawyers in both the public and private sectors with the differing rules and policies applicable to the purchasing practices of the Canadian and United States governments. In addition to providing those commercial lawyers who negotiate transactions across the U.S.-Canadian border with practical legal information, an analysis of this nature encourages procurement attorneys to look beyond traditional procedures to answer questions raised in their own government contracting systems. Finally, insighm revealed by reference to foreign methods can provide alternatives to perceived inadequacies within the United States system.

Section I1 of this study highlights the present funcrians and scope of the Canadian Department of Supply and Services (DSS)to provide an understanding of the agency responsible for Canadian government purchasing. Section 111 then examines the st~tutor~ basis of the Canadian government's purchasing policy in depth, and traces subsequent interpretations of the statute through official statements, debates and committee hearings in the House of Commons.

An analysis of the stem in the ~rocess of contract formation

which tend to favor domestic firms and encourage other mvern-mental objectives is provided in succeedmg sections. SecEan \-I dares certain areas within the United Starer Department of Defense procurement system and recommends improrements in the American system based an information derived from the study of analogous Canadian procurement procedures.

OF SUPPLY ASD SERVICES

Three wars after the Glassco Commission recommended the creation oi an agency to centralize purchasing and supply operations for rhe entire Canadian Government,' centralization of these func-tions began on an experimental basis. First, the government reassessed the supply procedures of the federal departments and then it increased rhc powers of the purchasing and supply center, in the process closing some ?epartmental supply stores and pooling their stocks in a central purchasing and supply agency. The Deparrmenr of Defence Production2 was designated the core of this new agency.

In 1969, apparently recognizing the effectiveness of the central supply agency's work during the experimental period. the gorernment began providing for the consolidation of operarions. The Government Oreammian Act3 created the Department of Supply and Services (DSS),' headed by a Minister of Supply and Services who also served as Receiver General for Canada. After an organuarional and break-in period. the Department experienced three years of extensive operational growth and produced significant tax savins' despite reduced emplovee strength.

The Department of Supply and Services IS the purchasing and accounting arm of the government. It provides major common

a Gmernmeni 0:gmlzmon Act of lP69, c 26 (Can 1 rhrrrinrfw circd u

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Gorernmrnr Organizirion Act'

md Receiver General for Canada. IO rhe ilanrrril Chiprer of rhe hrchuing \Im~~emnr

4isulwon of Canada, Monrrsd, Quebec. \lay 15. IWI II 8 Ihere-inrfrer cited &I Go! er .Address1

I46

services in the areas of procurement, warehousing, printing and distribution, accounting, payment and audit, and management ad-visory In simple terms, it buys for the government, pays the bills, and balances the books to promote effective and efficient management at minimum cost.

The Canadian Government, through the Department of Supply and Services, is Canada's largest consumer of services and materials with a shopping list of more than one billion dollars annually.' Through the Receiver General, ir is also the largesr accounting and payment organization in all of Canada: it alone issues more than twenty-six billion dollars each year in socio-economic and other payments.' Thus the Department is instrumental in assisting the circulation of Canada's tax dollars, stimulating the economy and conuiburing greatly to the maintenance of the life style of all Canadians.8

The Department of Supply and Services is organized into two major administrative sectors, each under the direction of a Deputy Minister. Responsibility for purchasing material for government use rests with the Supply Administration, and far the purposes of chis study of purchasin policv any in depth examination of the Department will be Iimiteftothat sector.- Internally, the Supply Administradon divides procurement responsibilities among three categorical elements. The first, the Science and Engineering Procurement Service, engages primarily in the purchase of complex technical items, such as aircraft, ships and electronic equipment, including This service is responsible for implementing the government policy of contracting research and development requirements to the private seaor?' The Science and Engineering Procurement Service also includes the Canadian Commercial Corporation which assists Canadian industry in selling to

foreign governments. This Service is headed by an Assirrant Deputy hfinister.

A second element is the Commercial Supply Service which is principally involved with procuring commercial commoditiesuehicles, drugs, certain office equipmenr, furniture and the like.'* This service group also includes the Printing Sewice which controls both in-house print production as well as that which is contraned out.lS \Yare-housing, distribution. maintenance and repau;'* traffic management; freight cost auditing for government and uarel and accommodation arrangements for public servants are all pioiided by this Service under the direction of the Assistant Deputy Mmister, Commercial Supply.

The third element is the Corporate Alanagement Service which primarily concerns itself with "central planning. policy formulation, supply systems development. research and supply audit" far the entire Supplv This element also bears respansibilitr for developing specifications and standards, judging qualiw aid procuring data processing services." as well as protiding certad cantractual advisory services.1p The Assistant Deputy Minister. Corporate Management who heads this Service supervises more than administrative planning supporr. however. As Xlinirter Goyer noted when detailing the r&ponaibilities of the Corporate Management Service,

Cmomci and iupplier r~lmrmi dro erne under this IPIIICE, and a grcrr deal of imponrnce 1s plrced m mvnrvnrng our good relmonr uirh industry 81 Y C formulare our pumhuing pdlcior.19

Under the terms of the Government Organization .4ct of 1969, the Supply Administration must acquire and furnish goods and services to federal departments and agencies.z0 In order ro purchase, ware-house, distribute, maintain and dispose of such goads, the Supply Administration must organize and manage rhe provision of required material and SerYices and, "in cooperation with Crown Corporations,

acquire gwds and services from Canadian suppliers for foreign governments, direct Printing Operations and the Canadian Arsenals, and assist with the disponl of Crown assets."

An example of such a Crown Corporation is the Canadian Commercial Corporation (CCC), actually a funcrioning parr of the Department of Supply and Services. Government contracting afficers within the CCC am as both buyer and seller for the government. For example, as contractor-sellers on behalf of the Canadian military, they act in their capacity as CCC employees; and as buyers (ie,,buying from foreign overnments) they serve as DSS officers. For example, if the VnitecfSrater Department of Defense desires to purchase Canadian made Alpakas, the Department is not allowed to purchase directly from Canadian industry, but must purchase through the CCC. This procedure assures the buyer a fair price from Canadian industry at the same time it helps promote Canadian industry.Y

Methods of buying the wide variety of goods and services needed by the Canadian Government naturally vary with the type of commodities involved. For the procurement of usual items, the Depanmenr (DSS) invites interested Canadian suppliers to submit tenden, bur when special or very technical items are needed and the number of potential suppliers is limited. it is not always possible or feasible

IO obtain competitive bids. In such situarions, purchasing specialists analyze the quotation and often must negotiate the contracts.2B These purchasing specialists have broad experience in such diverse fields as communications, scientific instruments, aircraft consnuction and shipbuilding, Their competence is essential to the proper negoriation and administration of technical contract^.^'

Since the first of April 1971, the Supply Administration has been required to operate on a financially self-sufficient basis: it must self-finance or show a profit on the supplies or services it provides to ocher governmental departments." The Treasury Board and DSS have combined to study the Department's entire scale of prices but in the meantime, the Department continues to operate on a

self-sustaining basis bv charging customer departments and agencies sufficiently high rate; for their purchases of supplier and seryices.*n Financial dependence on revenues irom other departments and agencies has apparently spurred efficiencv within DSS For example, the volume of business handled by contiact increased from 5901 million in 1969 to mer 51.2 billion in 1972.79, a thirty-two percent increase in volume at the same time the senion's staff decreased by nine percent.2'

The Department of Supply and Services has found charm certain areas centralization promotes efficiency N hile in other areas decentralization has proved more economical. The Department has experienced advantages by centralizing "management" nhereas decentralization along economic and geographic lines has generally resulted in...