Public Services and Procurement Canada has rolled out new rules aimed at strengthening oversight of professional services contracts and shifting towards “outcome-based” procurement practices amid years-long criticism over major delays in project delivery, cost overruns, and heavy reliance on external consultants.

Federal suppliers and buyers were notified of the changes through CanadaBuys—the website where federal tender opportunities and contract awards are posted—in mid-June. Eight out of the 10 new measures took effect on July 1, and apply to all new professional services contracts using mandatory methods of supply from this date onwards. The other two measures will be implemented at a later date.

According to the government, the new measures are intended to reinforce Public Services and Procurement Canada’s (PSPC) oversight as the government’s central purchasing authority to address concerns raised in recent procurement audits, and to reduce reliance on professional services contracts.

“The changes are part of a broader shift to bring the federal government’s procurement approach in line with best practices in other governments and commercial organizations,” reads a PSPC statement to The Hill Times.

PSPC manages approximately $37-billion annually on behalf of departments and agencies. Over the last couple of years, the department has faced criticism due to a series of contracting controversies, political scrutiny, committee showdowns, scathing watchdog reports, the historic admonishment of a contractor, and multiple RCMP investigations.

The new measures include implementing a $20-million cap on task- and time-based contracts to reduce the government’s reliance on professional services contracts. 

The department underlines that these contracts have historically resulted in cost overruns and “weak accountability.” Under the new rules, any contract valued over $20-million must be procured through solutions-based methods.

“If not managed properly, time-based contracts incentivize effort rather than outcomes. They pay vendors for the hours worked, not for the value delivered. This can lead to project delays, scope creep, cost escalations, and difficulty holding vendors accountable—particularly for large, complex IT or transformation initiatives,” reads the explanation on the procurement portal.

The widely used task-based informatics professional services (TBIPS) arrangement will not be eliminated, but its use will now be phased out, and limited to low-value, low-complexity, routine services. According to PSPC, a TBIPS requirement is for “finite work assignments that require one or more consultants to complete. A task involves a specific start date, a specific end date, and set deliverables.” 

According to the new measures, contracts valued at more than $3.75-million for task-based professional services will be limited to a maximum period of two years, including any option period. 

Contracts can only be extended beyond two years with assistant deputy minister (ADM) approval. ADMs will also have to approve all non-competitive professional services contracts or amendments that exceed $3-million.

Any increase to the original contract value will now be capped at 30 per cent, and will require further approvals based on the size of the increase. Any increases between 21 and 30 per cent will have to be approved by an assistant deputy minister.

The department will also introduce mandatory “Value for Money Assessments” for all requests for proposals—the first step of procurement in which the government invites firms to submit their bids—to ensure it pays fair market value. 

Other measures include quarterly reporting on the use of mandatory methods of supply—procurement instruments such as standing offers and supply arrangements that departments use to purchase goods and services—as well as further due diligence on invoices and timesheets, clarification for task authorizations, and the use of an outcome-oriented approach to avoid misuse and reduce the risk of employer-employee relationships. 

The new rules are a step up from the Treasury Board’s 2023 Manager’s Guide, which is essentially a procurement guide for departmental managers, but did not offer clear direction or account for different risk levels, according to Alan Williams, a former assistant deputy minister of materiel at National Defence.

Williams said the new measures will add value to the procurement process, but a meaningful change would have to include a cultural reform in PSPC promoting accountability and productivity. 

“It is better than what they had, which was a total disaster. But it misses the core problem,” Williams told The Hill Times in a July 1 interview.

“If you want to improve procurement, you have to change the culture from a risk-averse culture to one that embraces continuous learning and innovation where officers can review case studies and better understand how to fulfill their role in safeguarding integrity in the procurement process.” 

Canada’s federal procurement system has long been criticized for its heavy reliance on outside consultants and contractors. In 2023-24, Ottawa spent a record $20.7-billion on outsourcing, and reports show that IT contractors cost at least 22-per-cent more than in‑house staff. Critics have repeatedly said that outsourcing professional services leads to higher costs in government projects, reduced transparency, and a loss of institutional knowledge within the public service. 

Williams also questioned how much training and discussion had taken place with procurement officers ahead of the rollout of the new measures.

“Do officers understand what is meant by ‘adequate documentation’ or ‘appropriate documentation?’” he asked, referring to the lack of details in the government’s notice.

Williams also challenged the $20-million threshold and the 30-per-cent cap. “That’s a lot of money. Why not try to introduce solutions-based contracts at much lower dollar values whenever the risk is warranted?” he said.

Federal Procurement Ombud Alexander Jeglic told The Hill Times in a July 2 email that some of the new measures will be tested in upcoming reviews by his office, following up on their PSPC, ArriveCAN, and McKinsey reports, which will determine if they addressed his recommendations.

“Without completing these follow-up reviews, it is too early to comment on the sufficiency of the changes. That being said, I continue to advocate for foundational reform,” Jeglic said.

The ombud is set publish a new report next week outlining the top five foundational changes needed to address long-standing federal procurement issues.

Auditor General Karen Hogan’s office also acknowledged the new procurement measures. 

“While the Office of the Auditor General does not comment on government policy decisions, our future audits will consider the implementation of these measures to determine whether they are being applied effectively and as intended,” said senior communications adviser Claire Baudry in a July 2 email.

Baudry added that in June 19 remarks, Hogan had “stressed the need to return to the fundamentals of procurement—ensuring that rules are well understood and properly followed across departments.”

Hogan’s previous reports into the government’s procurement practices cited consistent issues across departments, such as missing security clearances, payments for incomplete work, and poor documentation.

Lightbound said PSPC has “done a lot” to apply Hogan’s recommendations and educate departments to properly apply the rules to avoid mistakes, and pledged further reforms to fix government procurement.

ikoca@hilltimes.com

The Hill Times

 

Irem Koca is a Turkish-Canadian journalist who joined The Hill Times in late 2023. She got her start in Canadian media in the Toronto Star's Ottawa bureau, covering federal politics and national stories under the paper's year-long fellowship. With a background in broadcast journalism, she spent several years as a world news reporter at CNN Turkey. Her freelance work on Turkish politics has been featured in The New York Times and Reuters. She is fluent in English and Turkish. See all stories BY IREM KOCA