Issue
Since the piloting of the OntarioBuys program three years ago we have raised concerns regarding the procurement procedures developed by the OntarioBuys. Specifically under OntarioBuys there was the creation of shared-service organizations (SSOs). One such SSO is the Ontario Education Collaborative Marketplace (OECM). Under this SSO there are number of stipulations that are unrealistic for small and medium size firms to be able to meet.
With the permanent entrenchment of OntarioBuys in the 2009 Ontario Budget it is clear that the government is committed to the program. However, there are significant process changes that must be made for OntarioBuys to be a fair and open process that does not negatively impact on businesses across the province.
Background
OntarioBuys is a government initiative launched in 2004 to achieve savings in the procurement of goods and services in the provincially-funded broader public sector (BPS) including hospitals, school boards, colleges and universities. The BPS Supply Chain Secretariat, part of the Ministry of Finance, is responsible for administering and managing program. OntarioBuys encourages BPS organizations to engage in collaborative ordering, delivering, warehousing and payment of goods and services. Since 2005, the program has provided $148 million to expand SSOs and support projects aimed at helping broader public sector organizations become more efficient.
The first SSOs to be created under OntarioBuys was the OECM, which is a not-for-profit corporation founded by nine educational institutions (six universities, two colleges and one school board). With $35 million in funding from the Ministry of Finance in 2007, the OECM objective was to establish an e-procurement marketplace for the goods and services currently purchased by its members. Over the next five years the number of members of OECM is anticipated to increase to 45 members with an average spending on goods and services of $2 billion annually. OECM is the largest OntarioBuys initiative in terms of projected savings. The product and services list for which OECM will be issuing requests for proposals (RFPs) continues to grow, while the issues raised by the business community related to the process remain largely unresolved.
In 2009, the OECM released its first RFP for office products. A review of the RFP raised a number of concerns for suppliers. First, the terms of the RFP required three-year firm pricing, which was subsequently changed to one-year firm pricing just before the close of tender with no extension granted. This left many businesses unable to responded based on the new information. The RFP also stipulates that there should be no minimum order size. This means if an institution orders a set of the pens it can without receiving a higher charge rate based on size of purchase. This an unrealistic expectation considering the scope of educational delivery sites within Ontario and the request for departmental delivery.
As well, there are no provisions in the RFP process that allow for the value added components that ensure the overall service of business to its clients. The only level of service provision is the need for a toll free telephone number. Many small and medium sized companies take pride in the high level of service provided to its clients, and it is an important competitive edge in many communities across Ontario. In fact, the current system which is driven by locally based institutions working with suppliers to keep costs contained through a strong working relationship between supplier and purchaser will be erased completely within the new guidelines.
In addition, OECM demanded a rebate of up to 5 per cent on all purchases, plus a volume escalation discount and prompt payment discount that could actually increase the cost of products. Since the closing of the RFP, OECM has changed the rebate to a 3 per cent administrative fee that will be charged by the awarded suppliers to the participating organizations under OECM. Again, the changes took place after the closing of the RFP negating the opportunity for all suppliers to re-submit on the RFP. The rebate will be used to finance yet another government bureaucracy at a time when governments should be looking for ways to reduce its size.
Modifications have been made to the RFP process, but there is still a concern that the competitiveness of the process is unfairly balanced. This concern was reinforced in a report from the Auditor General in the fall of 2009 that assessed the OECM. The report demonstrated that there are significant risks that were overlooked in the creation of OECM. One of the noted concerns was low supplier participation. According to the report, SMEs are unable to access OECM due to the shear size of the RFPs and the stipulations of the RFPs being issued by the organization.
While the government should be commended for seeking ways in which the procurement of goods and services is conducted in a manner that saves money and reduces expenses, the process of procurement should not be prohibitive to SMEs across Ontario. In addition there should be considerable metrics to determine the actual savings that the Ontario government is making through a modified supply-chain management process. In doing so the provincial government will be able to be both accountable and ensure competitiveness integrity when it comes to the OntarioBuys program.
Recommendations
The Ontario Chamber of Commerce urges the Government of Ontario to:
1. Include private sector representation on the boards of all shared-services organizations operating under OntarioBuys.
2. Immediately develop monitoring guidelines to assist OntarioBuys staff as they conduct oversight of project funding;
3. Mandate performance metrics for the OntarioBuys program and its shared-service organizations as a means to measure the actual return on investment compared to the realized cost savings and leveraged efficiencies.
4. Mandate OntarioBuys and its SSOs to create a clear dispute resolution mechanism.
5. Immediately initiate consultations with business to develop proper guidelines that address the concerns raised by the Auditor General in its review of the OECM.