The Broader Public Sector Supply Chain Guidelines: Yesterday, Today and Tomorrow

December 15, 2010 | William (Bill) M. Pigott

Yesterday

In April of 2009, the BPS Supply Chain Secretariat, Ministry of Finance (better known as “Ontario Buys”) rolled out the Broader Public Sector Supply Chain Guidelines, Version 1.0 (“BPS”). The goal of the BPS is to improve and harmonize public sector procurement across Ontario.

The BPS is “harmonized” with Agreement on Internal Trade (“AIT”), except for a few areas where BPS is more restrictive.

The BPS applies to public owners receiving more than $10 million annually from the Ministry of Health and Long-Term Care (“MOHLTC”) and two other Ontario ministries (“Recipients”). The BPS required Recipients to implement the following BPS principles no later than March 31, 2010:

  • “Code of Conduct”; and
  • “Procurement Policies and Procedures”.

Funders police the BPS by requiring annual reports from Recipients which confirm that:

  • procurement activities are BPS compliant;
  • transactions that do not follow BPS were properly exempted; and
  • where necessary, there is a schedule to fully implement BPS.

Ontario Buys is intent on receiving Recipient feedback and to refining the BPS over time.

In the spring of 2010, Ontario Buys anticipated that Version 1.1 of the BPS would be issued in the late spring or in the summer.  It is our understanding that Version 1.1 is intended to refine the existing BPS, not overhaul it.  For a variety of reasons, some of which may be related to continuing procurement problems in the broader public sector, Version 1.1 has not yet been issued.

There has been anxiety around the question “how will the funders react to our BPS record”?  In the spring and summer of 2010, Ontario Buys was in discussions with MOHLTC and the Local Health Integration Networks (“LHINS”) to define BPS reporting, compliance measurement, and sanctions.  However, uncertainty continues.

Today

On October 20th, 2010, the “Office of the Auditor General of Ontario” released a special report to the legislature. Having audited the business practices of some sixteen LHINS and hospitals, the Auditor General reported that, while procurement was improving, there were still many abuses to be addressed.

On the same day that the Auditor General released his special report, the Minister of Health introduced Bill 122, the Broader Public Sector Accountability Act (“BPSAA”) into the Ontario Legislature (which is discussed in further detail above).

Among other things, the Act empowers the Management Board of Cabinet to issue directives concerning the procurement of goods and services in the broader public sector. Section 12(3) requires that:

“[e]very designated broader public sector organization to which the directives apply shall comply with the directives”.

In part VII, section 18, hospitals are addressed directly as follows:

“Every obligation of a hospital under this Act is deemed to be an obligation it is required to comply with under the terms of the service accountability agreement required under Section 20 of the Local Health System Integration Act, 2006”.

A directive from Management Board of Cabinet does not enjoy quite the status of a statute, but it might as well as any hospital which ignores BPS will be subject to sanctions under their service accountability agreement.

It is a good bet that the Management Board of Cabinet will issue one or more directives which require that all Recipients implement, follow, and observe the BPS. Also likely is that Ontario Buys will issue Version 1.1 of the BPS in concert with any such directives.

It is unusual for a bill to move through the legislature this quickly, absent some issue of public health or safety being at stake. The trajectory of the Act suggests a government that is serious about cleaning up procurement abuses.

Tomorrow

We have no reliable insights on the date that the BPSAA will come into force or when the Management Board of Cabinet will issue directives that impact hospitals. While we cannot see beneath tomorrow’s veil, an educated guess suggests early 2011 for proclamation of the BPSAA, the issuance of directives and the emergence of the BPS, Version 1.1.

While it is possible that something other than the BPS will be the subject of the directives made under the BPSAA, a curveball like that is doubtful. The most likely scenario is that the Management Board of Cabinet will take advantage of the platform and history which the BPS provides, meaning that BPS will be the meat of Management Board directives on procurement and that Version 1.1 of BPS will debut in that role.

Currently, BPS Version 1.0 requires all Recipients to use a procurement process that creates the “bid contract” first seen in a Supreme Court of Canada decision called R. v. Ron Engineering & Construction (Eastern) Ltd. The “bid contract” creates contractual obligations between Recipients and vendors governing the conduct of the procurement process itself; not the object of the process, being the purchase. When the goods or services are clearly specified, the “bid contract” is a useful tool. However, when the Recipient’s needs are unformed and the intent of the procurement is to identify and refine those needs, the “bid contract” may actually get in the way. This is particularly the case when the Recipient wishes to engage the vendor in a problem solving, negotiation rich process. Make no mistake, the “bid contract” is a real contract and any Recipient that breaches it may be liable to damages. But, the “bid contract” should not be “de rigeur”. The procurement process should be fashioned to serve the purchase – not the other way around.

The BPS is a swinging pendulum – now at a somewhat proscriptive extreme. As the amplitude of the pendulum gradually shortens, the BPS will be a useful and educational procurement tool, creating a consistent way of approaching the art of procurement.

All organizations should be reviewing their procurement practices to ensure BPS compliance.  Please contact us if you would like more information on our BPS compliance program.

Disclaimer

This publication is provided as an information service and may include items reported from other sources. We do not warrant its accuracy. This information is not meant as legal opinion or advice.

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