President, Construction News and Report Group of Companies
Recent procurement scandals at hospitals in the GTA and Ottawa have raised challenging questions about the boundaries between effective business development and relationship management and unethical (and of course illegal) kickbacks and bid rigging schemes.
It seems the problems have arisen when public organizations and private business interface in ways that stretch the boundaries. Stories about St. Michael’s Hospital in Toronto, and more recently at The Ottawa Hospital, suggest that, while client entertainment and even travel gifting can be quite legal and effective, there is a slippery slope and recently several individuals and organizations have slid over the cliff.
How widespread are these problems?
Quite obviously, no one will issue a (truthful) news release if they are involved in fishy dealings (though it seems at least in the case of The Ottawa Hospital scandal, some expensive fishing trips are indeed part of the story). Journalistic investigations of these issues can be challenging. Some reporters were well aware of The Ottawa Hospital problems sometime before the hospital sued two of its former employees and propelled the story into the public domain – but they couldn’t report on the matter because no one would officially confirm the problems.
As well, the federal Competition Branch has a strict no disclosure rule regarding current investigations. A bureau spokesperson stuck to her script in saying that she wouldn’t disclose anything – even the aggregate number of investigations – because of confidentiality rules. So there is a cone of silence on anything until it breaks out into the open, and then the shining light reveals how bad things have become.
Frankly, and pragmatically, despite all the protestations, no one wants a totally open and free for all environment in bidding public sector projects. Wide open competition, especially for jobs that could be considered standard in nature, creates massively huge bidding lists, and the “winner” usually is a contractor who has made a mistake and will take a bath – if he can complete the job.
Sometimes contractors figure they can offset low bids with profitable change orders, especially if the drawings are skimpy or inaccurate (a problem that occurs when owners try to cut their design fees to the bone), but this sort of solution is usually messy because (unless there is some corruption and collusion to preplan the change order claims) the public administrators, in seeking to keep their costs under control, will fight against the extra charges in these change orders. (And that leads to other nasty ethical issues, including one case I’m aware of where the owner’s representative called a contractor into his office and said if he filed what was a perfectly legitimate change order, he would never see any more work with the organization. And indeed he was barred from future jobs.)
Are there good solutions to these challenges? I think the best approaches are collaborative and inclusive. Industry associations have developed standard contract documentation and recommended procedures to ensure fair and open (but not crazy and irrational) bidding practices. The Ottawa Hospital, to its credit, has sought out an advisory committee from the local industry to remedy its procurement processes. The industry can, and thankfully is, willing to contribute to solving the ethical and fairness challenges in procurement systems.
Mark Buckshon is president of the Construction News and Report Group of Companies, which publishes the GTA Construction Report. He can be reached by phone at (888) 627-8717 ext. 224 or by email at firstname.lastname@example.org. He publishes a daily blog at www.constructionmarketingideas.com.