The committee met at 3:34 p.m.

[S. Bond in the chair.]

S. Bond (Chair): Good afternoon. Welcome to our committee members this afternoon. I very much appreciate…. I know there are one or two that may be slightly delayed, but we’re going to get started so that we can honour the time commitment that’s being made by staff and the Auditor General and her team this afternoon. Thank you for that.

We have one item of business this afternoon. As a new committee, we’re getting used to the process. We’re going to tackle the review of one of the Auditor General’s reports.

Then we plan to pick up the pace fairly significantly in January. The vice-Chair and I have spoken, and we would like to see some of the reports move forward in a fairly expeditious way. So we look forward to a much heavier work agenda early in January.

[3:35 p.m.]

This afternoon we’re going to consider the Office of the Auditor General’s audit report that is called Workstation Support Services Contract: An Audit of Due Diligence. That was completed by the Auditor General and her team in November of 2016.

We have representatives here today from the Office of the Auditor General, and we will also be hearing the ministry response to the audit. We’ll have those staff members move over to the presentation spot after we’ve heard from the Auditor General. So we’ll turn the floor over to the Auditor General and her team as we walk through the audit results, and then we’ll ask the ministry team to be ready for their presentation.

Thank you for joining us today, Carol. We appreciate it.

Consideration of
Auditor General Reports

Workstation Support Services
Contract: An Audit of Due Diligence

C. Bellringer: Thank you very much for inviting us to present our report on the workstation support services contract. With me from the office I have Malcolm Gaston, who’s the assistant Auditor General, and Laura Hatt, the executive director who led the audit. The rest of the staff from that audit are also in the room, I see.

This audit is about an alternative service delivery arrangement. Those arrangements are essentially contracts that result in a long-term business arrangement with a service provider and have been used extensively to outsource key government services. The particular audit that we looked at looked at the due diligence completed to on-board — that is, adding — the health authorities to an existing contract for workstation support services.

The aim of adding or onboarding onto these contracts is often to capitalize on volume cost savings and the expertise that the private sector can offer. Although there are potential benefits to British Columbia citizens achieved through these arrangements, they are complex, with significant financial, legal and governance risks that need to be considered.

The audit was completed just over a year ago, and since that time, my office has been requested by the strategic partnerships office in the Ministry of Citizens’ Services to further discuss the report and the recommendations. The ministry has shown a strong interest in taking the lessons learned from this particular case and applying them to other deals. This is encouraging, and our office will continue to keep an eye on how the large contracts are being managed. We have not yet done a follow-up, however, on the changes proposed and how they’re being used throughout the whole government reporting entity — that is, both core as well as the broader public sector.

I’ll turn it over to Malcolm to go through the details of the audit with you.

S. Bond (Chair): Malcolm, before you start, maybe I’ll just clarify, first, for our committee.

I think the typical practice is that we allow the presentations to occur. Then, unless you have an absolutely urgent question, maybe just write down your questions. We can start a speakers list, and we will deal with the recommendations or the questions that you have at the conclusion of both presentations. Is that all right with the committee?

Okay. I just wanted to make sure we weren’t jumping in to interrupt Malcolm every five minutes.

M. Gaston: In 2004, government entered into a ten-year agreement with a contractor for the provision of workstations across ministries and some Crown agencies. In 2010, the Ministry of Citizens’ Services extended the contract to end in 2017. At the same time, Health Shared Services B.C., now known as B.C. Clinical and Support Services, worked with the Ministry of Citizens’ Services to add the health authorities and their 50,000 workstations to the 2004 agreement.

This addition, reported to be worth $395 million, was a significant addition to the contract. These workstations are essential to the delivery of care, as health care providers rely heavily on technology. Our audit focused on the decision to add the health authorities and the due diligence government undertook before extending the original agreement.

Overall, we found the due diligence completed collectively by the Ministry of Citizens’ Services and HSSBC to be inadequate. Their analysis didn’t show that adding the health authorities would result in overall value for money for taxpayers, and it also indicated that cost savings for the health authorities was unlikely.

The legal and policy analysis was limited and not well documented. The business analysis was fragmented, had limitations and could not demonstrate that onboarding provided the best value for money. We were unable to determine if HSSBC had obtained the appropriate approvals from the health authority CEOs. The documentation of key decisions was poor.

[3:40 p.m.]

The impact is that a very important decision was made despite limited information and a high degree of uncertainty. We found some contributing factors that had led to the limited due diligence, including tight timelines which limited the ability of each entity to fully analyze costs and benefits. There was pressure from the Ministries of Health and Citizens’ Services to on-board. Both were strong advocates for the expansion of ASDs to the broader public service, as there was a strong belief that cost savings would be delivered from this expansion.

Lastly, the responsibilities between the Ministry of Health and HSSBC were unclear. Adding the health authorities to the existing contract may have been a good solution for government. However, at the end of the day, decision-makers, especially health authority CEOs, did not have enough information to make a fully informed decision.

Our audit also raised concerns with central government’s oversight of the decision to add the health authorities to the original contract. There were no expectations with respect to the required financial and legal analysis or for an independent review of the decision prior to approving the addition and contract extension. Without stronger oversight, this situation could happen again. At the time of our audit, there were 12 similar contracts reported to be worth over $6 billion, and government was looking for opportunities to expand them.

Our four recommendations focus on how government could make better-informed decisions in similar situations. The strategic partnerships office was created in 2012 to provide guidance and support to public sector organizations managing these types of agreements. However, there is more that government can do to effectively manage similar decisions in the future.

We made the following recommendations: firstly, identify clear responsibility for the oversight of significant ASD contract decisions, such as onboarding; secondly, require an independent review of onboarding decisions to ensure that the principles of fairness and value for money are considered; thirdly, ensure that expectations for due diligence requirements for onboarding are clearly communicated to the service provider and contract management offices across the B.C. public service, and included within this is analysis of alternative procurement options, demonstrated compliance with legal policy and trade agreement obligations, analysis of costs and benefits, documentation of due diligence; and fourthly, report publicly on the planned and achieved results of significant ASD initiatives.

That concludes our presentation.

S. Bond (Chair): Thank you very much. I take it that no one has any burning questions. Then we can move on to the ministry’s action plan and response, and then we’ll be able to, perhaps…. I know the questions for the Auditor General and her team are typically about scope and those kinds of things, so why don’t we do the transition, then?

Thank you, Malcolm. Thank you to the Auditor General.

Why don’t we do a transition, and perhaps we could have introductions as our senior staff present to us.

C. Fischer: Government’s chief witness is Bobbi Sadler, the assistant deputy minister, who is responsible, newly responsible. She has a number of people who assist in the…. Pelle Agerup is an important witness, as he is currently heading the strategic partnerships office.

S. Bond (Chair): Well, welcome this afternoon. I am sure that Bobbi will explain to us what “newly responsible” means in the context of this report. Carl, thank you for that introduction. Much appreciated.

We’ll just wait until we have the final alignment there, and then we’ll….

Bobbi, were you going to begin?

B. Sadler: Yes.

S. Bond (Chair): All right. Well, welcome. We turn the microphone over to you, and we’ll save our questions until you’re finished.

[3:45 p.m.]

B. Sadler: Okay. Thank you, Chair, and thanks to the committee, members of the Auditor General’s office, the Auditor General, and our colleagues here from the Ministry of Finance for having us here today to talk about the audit Workstation Support Services Contract: An Audit of Due Diligence.

I’ll introduce myself. I’m Bobbi Sadler. I’ve been in the role for one month — assistant deputy minister of procurement and supply in the Ministry of Citizens’ Services. Before I introduce other folks with me here today, I do want to pass on my sincere apologies on behalf of my deputy minister, Jill Kot. She couldn’t be here today due to scheduling issues, but she wanted me to assure the committee that we have the right people here today to answer your questions and talk through this audit.

With that, I’d like to introduce Pelle Agerup. He’s my executive director of the strategic partnerships office.

I have Ian Donaldson in the back corner here. He’s the acting assistant deputy minister at Ministry of Citizens’ Services and manages the current IBM workstation contract.

I have Brad Kocurek here from the Ministry of Health. He’s the acting assistant deputy minister of health information management division from the Ministry of Health.

I’m going to be walking through the presentation and, hopefully, answer your questions at the end.

We’d like to thank the Auditor General and her staff and acknowledge all their efforts with regards to this audit of the onboarding of the health authorities on the workstation contract to government. I will begin by saying that the province fully agrees with all the recommendations in the report and will continue to always seek ways to improve our processes and policies, with the goal always to strengthen our processes in the delivery of services to British Columbians.

The original workstation support contract was signed in December 2004 and is managed by the Ministry of Citizens’ Services. This services contract provides workstations to all the ministries and their staff across the province, and in 2010, the six health authorities were on-boarded.

The OAG audit covers the lack of due diligence conducted in the onboarding process of the health authorities, which resulted in these four recommendations that we have addressed, as we stated in our action plan.

On the following slides, I’ll walk you through what we’ve done. First of all, I’d like to say that we acknowledge that proper due diligence was not done in this onboarding. As I mentioned before, we agree with the OAG recommendation made. With that, we support the need for improving oversight, independent reviews, documentation of analysis, due diligence and public reporting on all our strategic contracts.

Since 2010, we have made significant changes by providing oversight of the large outsourcing contracts. Since then, the Ministry of Citizens’ Services has established the strategic partnership’s office in 2012. We call that the SPO office. This is under my responsibility as ADM of procurement and supply. Its mandate is to provide management oversight, and we’ll continually work for ways to improve our management of these strategic contracts.

The contract deal offices are out with the appropriate ministry program areas, but the oversight role lies in the Ministry of Citizens’ Services. We actively work with the contract deal offices across all ministries on a frequent basis, meeting often and obtaining an ongoing status of the contracts. This is governed by an assistant deputy minister’s committee that now meets regularly to make sure we have an integrated approach to service delivery and proper procurement and that reporting processes are being followed.

All significant changes to procurement and contracting, as stated, with my office’s mandate has been implemented to meet the due diligence expectations identified by the OAG and includes detailed business case development, financial and legal analysis and ongoing monitoring of the service delivery contracts.

I will note that with the new mandate of our current government, there will be a change of procurement and contracting moving forward. As such, we will be working to identify and implement those changes, all the while focused on the OAG recommendations.

[3:50 p.m.]

On recommendation No. 1, clarity of roles and responsibilities for oversight. Under my responsibility, the SPO office has developed a due diligence flow chart that outlines the processes for significant contract decisions, including onboarding. All deal offices with strategic contracts have to follow this process. It is a gated process that identifies the deliverable and the decision points for establishing or changing the contracts in the portfolio.

In addition, showing the deal offices approvals…. It includes sign-off of senior government employees, the ADMs of all the deal offices on key milestones before moving forward in the process. Treasury Board staff are engaged in the process as appropriate. Lack of due diligence and cutting corners often happens when projects are running out of time. By setting expectations early and with good governance — that includes ADMs of all the deal offices — process steps and executive approvals in the planning stages have significantly reduced the risk and maintained timelines to ensure tight timelines do not undermine the process.

SPO has reviewed the core policy and identified potential changes. Although no changes have been made to date, we believe the current active and direct involvement in the due diligence process, as I described, provides sufficient oversight and has occurred without making direct changes to policy. We will continue to work with the office of the comptroller general to continue to make the changes in core policy, if needed.

In addition to the due diligence process, SPO has implemented a RACI, which means who’s responsible, accountable, who needs to be consulted and who needs to be informed for procurement on all strategic contracts. Over 30 stakeholders, including legal, risk management, procurement, the Auditor’s office and Treasury Board staff, have been engaged and consulted to document roles and responsibilities for all key activities and decisions. This included who’s responsible for the oversight role.

Recommendation 2: independent review of large deci­sions. We believe a sound and comprehensive business case is the key document for significant contract decisions, such as extensions and onboarding. Before approval of any business case, an independent review is required. The SPO’s office works closely, through our due diligence process, to stress the importance of this step. It monitors and supports the business case approval process, ensuring all parties understand the expectations. This is a required step in the process.

The SPO office is involved in reviewing, guiding and signing off the business cases. Treasury Board staff then determine if full Treasury Board is required for moving a business case forward.

Recommendation 3: set clear expectations of due diligence. As previously mentioned, our due diligence flow chart process covers the approval steps in preparation of and during the procurement process. The process ends with a signed contract but makes sure that a detailed business case is completed and that a sound financial and legal analysis is completed. Then it moves onto an ongoing monitoring process between the contract deal office and my office in SPO.

As I stated earlier, it’s important that the main objective is to deliver services to British Columbians. It’s the forefront here. These strategic contracts have gone through proper due diligence as the process moves through the life cycle from the beginning of the procurement stage, or onboarding stage, through to completion with ongoing monitoring throughout.

In addition to the previously mentioned processes, the SPO is further setting expectations for due diligence through a change management process that includes review and approval of high value over $500,000. They have to be reviewed by the SPO office. Portfolio knowledge management includes document templates and playbooks to support the life-cycle framework. These are reusable standard tools and templates that all can use. It allows for a good process and knowledge to be repeated successfully.

Then lastly, training and capacity-building. Relevant training is now made available to staff in the deal offices managing the strategic contracts that are in the SPO portfolio. The training includes planning, establishing and running a large contract, as well as education of the life-cycle framework.

[3:55 p.m.]

Recommendation 4: better public reports on results. In regards to this recommendation, through the Office of the Information and Privacy Commissioner, SPO is proactively and publicly releasing information on the contracts in the SPO portfolio on an annual basis.

I will add, as well, that we have determined that better reporting was needed across the program. So additionally, SPO is also performing a health check on each of the contracts in the portfolio annually. This performance management report is available to the deal office and the service provider.

The main purpose is to keep the relationship and the contract active by identifying differences in the perception of the health of the contract management.

Ongoing information to Treasury Board in annual reports on all contracts is provided.

I’ll summarize the actions we have taken to address the recommendations in the audit. We believe we have incorporated significant changes into the oversight of the large outsourcing contracts since 2012, when the health authorities were added to the work station support services contract.

The establishment of the SPO office in 2012 supports the province to continually improve on the identification, management and oversight of these strategic contracts.

All four recommendations have been addressed, and more work is being done to further align the strategic contracts with evolving needs of British Columbians and the mandate of this government.

Finally, I will note that my ministry is responsible for fixing and transforming our procurement processes. I’ve recently been brought in to manage this transformation and make the necessary changes. This includes consideration of all citizens, including First Nation citizens and communities large and small. So we are reviewing all of our strategic contracts as part of this process.

We are also working to remove barriers and make it easier for British Columbians to access government procurement opportunities by simplifying our processes, creating opportunities to share ideas and encouraging business growth.

We want this process to better engage with small, medium and our large companies. We recognize that procurement is an area where we have opportunities and obligations to make it easier to do business with government. We want to learn and adapt and ensure that this process is not only working for British Columbians but for the people who deliver services.

This must work for government staff, as well, and those who rely on the services we deliver. That is our goal.

S. Bond (Chair): Pelle, did you have anything you wanted to add?

P. Agerup: No. I’m here for questions, if you have anything — support.

S. Bond (Chair): You’re here as the support team.

Thank you, Bobbi. I’m sure that it was a bit of a surprise when you had to…. You’ve had the job a month, and suddenly, you’re here responding to a report from the Auditor General’s office. We appreciate the good work that you did in your presentation.

Why don’t we start a speakers list. We’ll start with Mitzi. Then if others have questions….

M. Dean (Deputy Chair): Thanks to everybody for the information and the preparation for today.

I’m wondering whether there has been any procurement since the report and, also, whether there’s been any public report or reports to Treasury Board?

P. Agerup: Service C was the first reprocurement opportunity that’s been completed. We have, since then, started a couple of…. To do the full procurement takes several years, so many of these are actually in flight, or we have started doing the work.

The two work station procurements were started. The health authority side is going ahead, whereas the core government’s procurement approach was cancelled. So those are the two ones that have been the furthest out of the 12 large deals in our portfolio.

We have facilities, which is all the building maintenance contracts. It’s on the way as well. Then they are following very tightly, one after the other after the other.

M. Dean (Deputy Chair): Sorry, I squeezed two questions in there. Have there been any public reports or reports to Treasury Board?

P. Agerup: Treasury Board, yes. We’ve been meeting with Treasury Board staff regularly and updating them, first starting with this due diligence flow chart that Bobbi mentioned, to make sure we rope in all the deals and set expectations.

Also, the RACI has been involved in setting detailed expectations — where and when, who has to be consulted, and so forth — in the process.

[4:00 p.m.]

Setting expectations makes it all much easier for project planning. A lot of this is actually about project management, right, to make the deals properly connected.

Also, a public report is going through on all the deals. All the contract information is made publicly available annually. I believe August was the first that went out with all this data.

J. Yap: Thank you to government and Auditor General for the presentations. A couple of questions. First of all, it was a ten-year deal, from 2004, and I see there was an extension by two years, so that would take us to 2016 or ’17. What’s the status of the agreement?

B. Sadler: We had gone out on procurement. We cancelled the procurement. The contract has been extended to March 2019.

J. Yap: But the intent is to consider a new vendor?

B. Sadler: Like I said, we’re just…. I’ve come into the new job. I’m looking at all the strategic deals and coming up with a plan on what to do with all the deals that are coming up in the next couple of years.

This deal is one of them, but as Pelle said, the health authorities procurement is in the process right now, for the workstation.

J. Yap: Right. Now, in your presentation, on recommendation 1, you mention that on larger procurements, there would be involvement of Treasury Board. What’s the definition of “larger contracts”?

P. Agerup: We have a couple of different criteria that we try to lump together to see what is an important strategic deal. It could be different things — if it involves large outsourcing of staff, if it’s something over $10 million or $15 million annually, if it’s something that’s risky or risky to government or a really complex process. That’s how they’ve been identified.

As I mentioned, there are 12 large deals in this portfolio. Should that be more in the future? Maybe. These other ones that came up, the alternative service delivery contracts, started — what? — 15 years ago. That’s how we consider them strategic.

J. Yap: So $10 million to $12 million.

P. Agerup: That’s one of the criteria.

B. Ma: In a follow-up to MLA Yap’s question, about $10 million to $12 million is one of the criteria that you use to determine whether or not a contract should go to Treasury Board staff. I guess I’d like to know a little bit more about those trigger points — maybe what they were before and what they are now.

P. Agerup: As I mentioned, the alternative service delivery contract came out of a process a long time ago. The result of it is 12 large deals. After SPO was formed, we picked up after the ASD secretariat and started to monitor and oversee these 12 deals that came historically into our portfolio.

How we assess new deals that might come up might be of interest to Treasury Board and to government. Those are some of the criteria we’re using — $10 million to $15 million, something that’s risky, complex or involves outsourcing of staff — together with Treasury Board staff, to say: should we keep an eye on this one more project to make sure that they are following our process and make sure that they are properly negotiated and come to fruition?

B. Sadler: To be clear, through our governance process, there are assistant deputy ministers in all the deal offices and all across government that we work through. A decision is made at that committee to work with Treasury Board staff, of which the criteria are: it’s a big contract, it’s a strategic deal, it may be over $15 million, it affects staff, it’s moving services somewhere else. We go through that process with Treasury Board staff, work through it with them, and then a decision is made, with recommendation from Treasury Board staff and senior deputy ministers on what the next steps are.

[4:05 p.m.]

B. Ma: Would that include any new…? Is there any additional onboarding onto existing contracts anticipated in the near future, and would those also follow this new process that you now have?

P. Agerup: Yes. There are probably around 20 onboarding activities throughout government every year. Some of them are very small. For example, we have a large hosting deal. If you add on more services to that deal, that would be a very small onboarding. But right now there is larger onboarding happening with the HRMS, which is the human resources management system, onto an existing contract.

B. Ma: And that would follow this new process? It would be treated as though it was a new contract to be reviewed?

P. Agerup: Correct.

B. Ma: Just one more question, on terminology. What is the difference between onboarding and…? Basically, you have a base contract, and you’re change-ordering a new scope onto it. It’s very similar. Can you describe the difference between a change order and onboarding?

P. Agerup: Yes. Usually when we talk about onboarding, it’s another entity that enters into the existing contract — in the case of the health authorities, they were six entities entering into the current core government contract — whereas a change order might be something within the contract with the same entity.

R. Glumac: Regarding onboarding, you’re saying that there are, potentially, coming up in the future some large…. My understanding at this point is that, in the past, a business case wasn’t created around those. In the new one, there will be a business case created. Correct?

B. Sadler: Yeah, absolutely. Anything moving forward and onboarding will require a business case, has to go through the governance.

I just want to point out again that we are currently looking at all our procurement processes today. It’s a bit different in that it now needs to go through not only the governance; it needs to go through a deputy minister committee as well. We are looking at all our procurement processes. There was some in-flight onboarding, in a few cases, on the hosting deal, on the HRMS, the human resources management system.

We don’t have a lot of plans for onboarding at this point. We’re looking at all our strategic contacts, which is 13, and we’re assessing the state that they’re at and what we need to do with moving them forward.

R. Glumac: When you say you don’t have a lot of plans for onboarding, what does that mean exactly?

B. Sadler: Well, we’re looking at the contracts one by one and seeing the status of them — where they’re at, the needs across the ministries and doing an assessment of whether there needs to be onboarding or not.

I think the process has changed in the last couple of years and, certainly, in the last month. It’s not just a given that things will be on-boarded. Following this process that we have, it has to go through governance. It goes to the Deputy Ministers Council, and we’re matching up the services of the strategic contracts with the services needed by the ministries. We are looking at changing our procurement and our processes and looking at opportunities for small and medium businesses as well.

R. Glumac: One more question. The case of Health Shared Services B.C. and some of the health authorities not having access to adequate information is outlined in the findings. Given that there will be more of a business case, more work being done around there, is there also a change in process that this information is shared with these boards so they can make proper decisions with adequate information? Is there a change in how’s that’s handled?

B. Sadler: Chair, can Brad Kocurek answer that question?

S. Bond (Chair): Sure, as long as he steps up to the microphone, because it is being recorded. Happy to have him participate, yes.

B. Kocurek: Definitely, there’s been more oversight put in place for the re-procurement activities that are taking place for the health sector right now. The Ministry of Health is oversighting the process so that we can make sure there is a fair and independent process run.

[4:10 p.m.]

In addition to that, on the health sector side, where they are developing the solution up through all levels of governance, including leadership council, they are being passed regular information, and they are involved in all of the decision-making.

R. Glumac: All right. So that was a change.

B. Kocurek: A significant change from the first time, yes.

R. Sultan: First of all, I think we all owe a debt of gratitude to the Auditor General for again turning a spotlight on a huge chunk of money with a lot of questions surrounding it from a taxpayer point of view. I recall the previous report that she prepared on the internal IT project within health authorities, as I recall.

The other thing that impresses me — it pops right off the page to me, at least — is the scale of spending on these activities. We see ministries struggling to get by with $15 million or $20 million a year performing what I think the public views — and, certainly, I think, the politicians view — as very important functions. They’re peanut-sized in comparison to the amount of money flowing through this conduit.

I’m not saying it’s not necessary, but the sheer scale of taxpayer resources here surprises me. It shouldn’t surprise me. I appreciate these things cost money. Nevertheless, it’s a reminder, I guess, of what a computerized world has required us to do.

My first question is…. IBM’s name is mentioned prominently in the Auditor General’s report. Do I draw from that that the bulk of the contracts have been with this one vendor?

B. Sadler: For the workstation services. We have 13 strategic contracts today, and IBM is the vendor for the workstation support services.

R. Sultan: They’re only one of the 13. Is that what you’re saying?

B. Sadler: Correct.

R. Sultan: So in terms of share, they are not dominant. Is that what you’re telling me?

B. Sadler: Yes. They have the workstation contract.

R. Sultan: I guess I’m not picking up very swiftly on what you’re saying. There are 13 different contracts, and IBM holds 13 of them. Is that what you’re saying?

B. Sadler: No, IBM holds the workstation support contract. That’s one of the 13.

R. Sultan: I see. So they are far from being the sole source.

B. Sadler: Correct.

R. Sultan: Okay. Well, that’s reassuring.

The other part where I was struggling a little bit — and I apologize for coming in towards the tail end of the Auditor General’s presentation — was on the point being that in the past, accountability has been a little hard to pin down here.

When you started talking, I had visions of three huge entities at play here within governance. I refer again to Vancouver Coastal Health Authority — as one of probably the biggest health authorities, as an example — Citizens’ Services and Treasury Board.

You seem to be bouncing a lot of the accountability responsibility up to Treasury Board, in terms of making sure everything is okay. I don’t know if that’s a fair interpretation. But if it is, it would worry me. Where does the buck stop if things aren’t working well? Is it in Coastal? It is in Citizens’ Services? Or is it those people in Treasury Board who kind of messed up? Where does the buck stop?

B. Sadler: From an operational point of view, it’s the oversight of the Ministry of Health that oversees the IBM contract for the health authorities. They operationally make sure that IBM is providing services to the health authorities. My office’s role is to make sure that they are following proper process, they’re getting value for the contract and that they’re doing proper reporting on the spend.

Treasury Board staff is part of the process at the beginning with the business case. So Ministry of Health….

R. Sultan: The process of….

B. Sadler: Through the approval at the beginning with the business case, right?

R. Sultan: Okay.

B. Sadler: So right now, in this particular case with the workstation deal, it’s the Ministry of Health’s oversight.

[4:15 p.m.]

R. Sultan: So if things aren’t going well, who gets fired?

B. Sadler: I’m not sure I can answer that question.

R. Sultan: Well, I guess what I’m saying, in a rather crude fashion, is that I still think there’s ample wiggle room here to point the finger at somebody else — which, if I’m interpreting the Auditor General’s report fairly, is part of the point of her report.

B. Sadler: I would just comment that as public servants, we take our jobs very seriously, and our responsibility is to oversight — so Brad’s case, and the Ministry of Health, my responsibility to make sure that these contracts are managed properly and reported on.

R. Sultan: Well, I understand the ideology — and that might not be too strong a word — to drive this onboarding process was the view, which I’m sure is a very rational view, that by having these areas of specialized expertise focused in one large entity, they will be the experts. They will make sure it’s done efficiently and so on. You really don’t have dozens and dozens of little departments trying to reinvent the wheel. You have one great big entity out there that is really all-wise, efficient, effective and up to date.

I would guess the downside to that approach, if it at all resembles what in fact the approach has been, is that, it seems to me, it doesn’t have a great deal of competition built into it. You’re sort of putting your faith in this big thing and hoping that it’s all going to work well. If it isn’t, you’re kind of stuck with them. You don’t have many options. Is that true?

B. Sadler: I’m not sure I understand your question. But after the business case is done, and we’ve decided we’re going to go and move on a workstation deal or something, we do go through a procurement stage, right? Proper procurement is done.

Now, in this case, you’re right. The onboarding was not done through a procurement process. We agreed that proper due diligence was not done — and why my office was set up in 2012. But we do go through procurement. We have a procurement policy, and we do go through a competitive process. In this case, we did not.

R. Sultan: I guess my point is, and you’re assuring me, that there is competition in the process.

B. Sadler: Absolutely, yes.

S. Bond (Chair): I’m just going to recognize the Auditor General for a moment. Did you want to comment on this? All right. Why don’t you go ahead and do that.

C. Bellringer: It was just specifically to what we had found when we did this particular audit. Now, it was 2010, so prior to the creation of this whole office. What we had found was that the Deputy Minister of MTICS was the one who gave the final internal approval of the two-year-term extension of the master services agreement, and there was no oversight body or requirement for one to confirm whether the onboarding was appropriate. It was actually in the report. We are comfortable with that oversight taking place at Treasury Board. It’s not something that can be decided as a one-off without somebody looking at it in the overall context.

S. Bond (Chair): Thank you. That was a very helpful intervention.

A. Olsen: I guess, for me, an eye-opening read, a Sunday afternoon read, for sure. I note that this is basically a $300 million contract that, I think, if I read the report properly, turns into a $1 billion contract in the end for a very large company. To Mr. Sultan’s point, in this process, there was very little competition that was built into this. It was a $300 million contract that grew to a $1 billion contract because we had already signed a contract.

I guess the thing that stood out most for me, or among them, is that the Ministry of Technology, Innovation and Citizens’ Services had made a decision that onboarding was the way to go. Perhaps, to answer the question, it could have been deemed as political — the decision to go down this route.

[4:20 p.m.]

I want to know…. I think I’ve heard it, but I just want to be clear. The question that I have is…. I think I heard no, the answer, but you can clarify this for me. This is not the process in which we’re continuing to go down, where we have made a decision that we’re just going to be onboarding onto the contracts that we already have. Did I hear that correctly?

B. Sadler: Well, we’re certainly going to go through the due diligence to make sure that there’s a business reason to do that, but I’m going to say, from sitting in my position today, we are not going to just do that.

A. Olsen: The due diligence, right. My understanding of the process here is the…. Anyway, okay. I’m good.

B. Ma: I’d like to start by going back to something that MLA Sultan had said because it’s a bit contrary to what I understood the situation to be. But I think it might just be a communications issue.

Correct me if I’m wrong, but there are 13 strategic partnership contracts currently in play. This report is on one of them, or on the onboarding of one of them. And for that one contract, IBM is the sole provider.

B. Sadler: Correct.

B. Ma: Okay. I just wanted to make sure that was clarified there.

In the report, it refers to a vote amongst the health authorities as to whether or not they would proceed in onboarding onto this contract. There was a health authority that objected and said that they didn’t have enough information to proceed. Do we know which health authority that was?

B. Sadler: No.

L. Hatt: No, we were unable to determine which health authority had said no, had abstained. We’re not actually even sure if it was a health authority, because there are more members on the HSSBC board, aside from the health authorities.

B. Ma: Do we know that there were objections to this because of minutes where the comments were not attributed to people around the table? Is that correct?

L. Hatt: Yes, that is correct.

B. Ma: There was also a statement made in the report, whereby they suggested that the Ministry of Health may have applied pressure on health authorities to join in on this strategic partnership. Do you believe that that was the case?

B. Sadler: I’m sorry. It was before my time.

B. Ma: Is there somebody else on your team here who might be able to…?

B. Sadler: Do you want me to let Brad answer?

A Voice: Brad, do you have any…?

B. Kocurek: I don’t have any more information. I was not around at the time.

S. Bond (Chair): Sorry. If you’re going to speak, you have to be on the record, which is the microphone.

B. Kocurek: I said I was not around at the time at the Ministry of Health. I think it’s all before our time, so I’m unsure.

B. Ma: Okay. Are there remaining high-ranking public officials in the Ministry of Health that were around at the time of the discussion to on-board this contract?

B. Kocurek: No, there are not.

M. Dean (Deputy Chair): What I’m hearing is that you listened to the Auditor General, came up with an action plan and started to do some detail work, and now we’ve moved to a significant shift anyway. There’s going to be a transformation in ways of moving forward with procurement.

I’m just wondering. Looking forward, when do you think you’re going to be in a position that your new systems are all in place?

B. Sadler: We’re working on that. We’re doing a bunch of engagement with the vendor community right now, and internal in government as well. We’re just gathering information based on those engagement sessions, and we hope to have a moving-forward plan, if you will, over the next several months.

R. Glumac: For clarification on that last question from Bowinn, nobody in the Ministry of Health is currently there that was involved in anything related to this in the past. Everyone is…. Does that mean that it’s an entire change of staff at the Ministry of Health? I’m just curious.

B. Kocurek: One clarification. The Ministry of Health had a much smaller role in the previous onboarding in 2010. The role this time is much more significant. The folks that were in leadership positions in 2010 are no longer with the Ministry of Health.

[4:25 p.m.]

S. Bond (Chair): All right. I hope you’ll indulge the Chair with some questions, because I have some that I would like to ask.

I think one of the things that I am going to pursue just a tiny bit…. On page 29 of the report, there’s actually a quote from the Auditor General’s office that says: “This may have been the best solution, but we cannot say for sure.”

Because there are large sums of money and there is a contract in place, I can tell you that I’m concerned when I hear that there may be no more onboarding considered, because there may be times when onboarding is absolutely the right direction to take. It is about reducing duplication. It’s about making sure that it’s the best value for money. So I would be very concerned if there was an arbitrary policy shift that simply says: “We’re not doing it anymore.”

I don’t think that’s what the Auditor General’s report says, actually. What it says is we need appropriate processes in place. So I’m wondering if the ministry team could explain if, suddenly….

I think in the world we all work in, which is very complex, there’s always — and there needs to be — a way to look at how you do things more efficiently. Onboarding may well be one of those alternatives. So I think moving to an arbitrary “we’re never going to consider it” would cause me some concern, especially in light of the report saying that it may well have been the best solution. We just don’t know that because of the way it was done.

B. Sadler: Yeah, I think that’s a fair statement. All I’m saying is that we’re going to go through more of a process this time around, instead of just automatically onboarding.

For example, and back to the question previously, if there is an entity that needs to get a workstation support contract, it may not make sense that we go through a huge procurement process, moving forward. So what I’m saying is there’s a bit of a pause, if you will, as we look at all the strategic contracts, as we look at our procurement processes and look at moving forward what we need to do.

I recognize what you said, and I take that back.

S. Bond (Chair): I think it’s just that all of us want to see a transparent, open procurement process. One of the constructive criticisms that was raised by the Auditor General’s office was that there was no test of whether or not this procurement met the policies of government for open and transparent procurement. That’s actually what the report says. So it’s not about the active onboarding. It’s about the way it was done. I think that today…. I do want to remind members that there is an action plan that’s been provided by the ministry for our reference.

I think an arbitrary move in one direction or another is not what the report speaks to. It speaks to making sure that if you’re going to on-board, did you look at it from a competitive perspective? Is it the best value for money, and does it actually help health authorities do their job?

To further that, in the value-for-money audit on page 29, core government actually received a 15 percent base seat rate discount in terms of the procurement that was done. When this contract was…. When the onboarding was looked at, the core contract cost went down by 15 percent. The problem was that it potentially added risk to the health authorities, as I understand it. The Auditor General can correct me if I’m inaccurate. But in essence, government was provided with savings on the core contract. The risk, however, was a transfer of additional costs to health authorities.

Was that kind of analysis done? When you look at overall value for money and for the core contract, are you able to quantify what the 15 percent saving and the core seat allocation was?

I. Donaldson: I’d like to make a comment on what’s commonly called the hosting deal, which is with what’s called now DXC.

[4:30 p.m.]

Earlier this year we went through a process where one of the Crown corporations wanted to significantly on-board onto the hosting deal. We went through an extensive analysis with that Crown corporation. It involved our office. It involved SPO. We shared a significant amount of information with the Crown corp.

Ultimately, the deal did not go ahead, but we did a very thorough analysis, and we did identify what the savings would or would not be and made a decision not to proceed on that basis. At that time, we considered the results of the workstations audit as part of the process that we were going to use in that analysis.

S. Bond (Chair): I think that’s precisely what the recommendations of the Auditor General are designed to do, and that is to inform future practice. My point was just that, while we look a business case analysis, it is about both sides of the equation. The report does cite that the core contract actually saw a 15 percent reduction — I don’t know what the monetary amount of that would be — and yes, there was risk to the health authorities.

I think the major point of this report is that the business case wasn’t clearly done, and it didn’t articulate whether or not this was the best choice. But to assume that onboarding should no longer occur, I think is very short-sighted. I think that it needs to be the process that we’re talking about.

I have one other question in terms of the strategic partnerships office. In the report by the Auditor General and her team, the concern was that independent oversight needed to be independent, and the SPO was actually in the ministry that was performing the work. I’m wondering if someone is prepared to say whether or not the current placement of the SPO addresses the concerns that were cited by the Auditor General in terms of potentially, I guess, inherent conflict.

The whole point is that we want independent oversight, so is the current placement of the SPO addressing the concern that was raised in the report? It was on…. I can give you the page in a second. But is the SPO in the right place when, in fact, they’re reporting to the decision-makers on the overall project?

P. Agerup: I think that the independent review is specific to certain decision points in the process, rather than the complete oversight of the whole life cycle of the deals. When it comes to independent oversight, SPO, arguably, could not be fully independent. We utilize third-party contractors a lot for independent review. That’s how we get around it.

S. Bond (Chair): Maybe let me just quote the paragraph for you: “In addition, the strategic partnerships office sits within” — at that time — “MTICS, and therefore is not fully independent from those responsible for delivering shared services and managing a number of these contracts.” So in the realignment of the current government and the ministry, this isn’t a political issue. It’s just a logistical issue. That was articulated on page 32.

Do we believe that the role of the SPO is now in a better position to reflect that concern?

B. Sadler: Certainly, it’s something that we’re looking at — where the SPO office is. But today we believe the answer is yes. We do bring in third-party contractors to do the reviews. But today the answer is yes.

S. Bond (Chair): Thank you. I know that’s after the benefit of one month in your new role. But I think it is an important differentiation, because much of this has been about independence and about who’s actually going to look at the contracts.

I guess my final comment about the Treasury Board piece….

[4:35 p.m.]

Having been a veteran at Treasury Board for many years, I do think that the report pointed out the need for someone to have that independent look at the business case. So the only things that concerned me were both the description of what “large” means, large contracts…. I think there have been some $10 million to $15 million. The other concern was a comment made about “it goes to Treasury Board when appropriate.”

I would think that, considering the recommendations of the Office of the Auditor General, there needs to be a pretty clear pathway to Treasury Board involvement. Relying on the definition of “the size of the contract” or “appropriate” probably doesn’t meet the test of making sure that there is a delineated and clear path to Treasury Board. They’re very good at what they do — Treasury Board staff. I think that, at least, gives me more comfort and probably gives the Auditor General and her team more comfort.

Is there an intent to formalize that so that it’s less discretionary? In other words: “Well, if it’s $15 million, it might go. And if it’s appropriate, it might go.” I think the report was pretty clear that there needs to be some degree of independent analysis of the business case, whoever creates it.

B. Sadler: Again, I’m looking at the processes that we have in place and want to move forward and improve that. I’d agree with you on that, yes.

S. Bond (Chair): Thank you very much.

A. Olsen: Thank you for your comments. I guess, for me, one further thing that I would like to add to this is that another theme that has run through here, which I’ve touched on a little bit, was that there was pressure exerted from government or exerted from a ministry to go a certain way. That, I think, resulted in a lack of due diligence in getting the business case.

When you asked the question of independence, one thing that I’d like to leave here is that if we’re going to be using contractors to do it, that of course there’s a terms of reference that’s drafted up to direct them, and that still is within the purview of SPO, which is under the ministry. Right? So it’s still within that influence that can be exerted.

If we are going to have a truly independent…. To live to the recommendations of the Auditor General, then we do need to ensure that there’s separation there. Even if we’re going to use a contractor, which is fine — there are very qualified people there — we’re ensuring that the drafting of the terms of reference is also not done by someone who might have some interest in that.

B. Sadler: I agree.

S. Bond (Chair): Yeah. I think those are important points, Adam. I think the point of the report and our comments here are all pointing to the facts that we want the best value for taxpayer dollars, we expect the process to be transparent and there to be independent oversight and, most importantly, a thorough business case that makes the argument.

I think whatever those outcomes point to…. It may well be onboarding. At least I took heart from the Auditor General’s reports comment that it may well have been the best solution; it’s just that we had a hard time being able to discern whether it was or not. What we want to do is fix the “we couldn’t tell whether it was or not.” We want to be clear with British Columbians that this was the best deal we could get using your money.

Does anyone else want to make any comments? I want to thank the committee for doing their homework. That’s really a good start in terms of reviewing the report.

I very much appreciate the Auditor General and her team being here today.

To Bobbi and Pelle and Ian, thank you very much — especially Bobbi, who’s brand-new in her role. We look forward to learning more about the changes, and I think you’ve heard today what matters to our cross-party discussion — transparency, independence, making sure we’re getting best value for taxpayer dollars.

Unless there’s any other…. Mitzi, did you want to…?

M. Dean (Deputy Chair): I’m wondering whether we can confirm now, or whether we do it as a committee afterwards — if we can invite them to come back. I’m really interested in the work that the ministry is going to do and then hearing the transformation as well as the rolling out of the detailed response to the report.

S. Bond (Chair): Thank you. I think that’s a great suggestion. Yes, we can do that. You have just done that by bringing that up, so I appreciate it.

[4:40 p.m.]

I think one of the things that could be very helpful to us is cross-referencing the recommendations of the Auditor General’s Office in any new procurement policies that you bring forward. There were some very clear directions about procurement policies — open, transparent, all of those things.

If the new model comes back to us, it would be good to see how it lines up with the recommendations of the Auditor General.

B. Sadler: Absolutely. Thank you for your feedback.

S. Bond (Chair): Bowinn, did you have a closing comment?

B. Ma: I did at first, but that’s all right. Thank you.

J. Yap: Chair, did you want a motion to close this?

S. Bond (Chair): Mitzi has made the motion, then, that we ask the ministry to return to Public Accounts once they have a new process and be able to demonstrate how it considers the recommendations of the Auditor General.

Is that a friendly…?

M. Dean (Deputy Chair): So moved. Thank you. That’s great.

S. Bond (Chair): Okay, good.

Any other discussion?

Motion approved.

S. Bond (Chair): We look forward to seeing you again when you have a little more longevity in your new role. Thank you for the job today. We really appreciate it. I’m sure it wasn’t easy being new on the file. Thanks, everyone.

A motion to adjourn.

Motion approved.

The committee adjourned at 4:41 p.m.