Audit into E-health contracts

8/6/2019 Audit into E-health contracts

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Office of the ComptrollerAudit and Consulting Services

l'Jovember010


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Revjc~' of Inf{Jrmatwn Systems Operntj{Jlls Final Reporl2010

1.0 IntroductionDuring the courseof assignmentsn the Depw"tmentof Health, circumstancewere broughtLo he attention of Office of the ComptfolJer DoC) staff regardin,potentia] conflicts of interest, concerns around the procurement process foprofessional er\'ices ndpossibledeficienciesn conU"act anagement ractices.Specifically, concerns were raised withwithin the depm"tmentas wel1 as consultants ha,'ing access toproprietary nformation of other consulting firn1s. Issues brought foJ"wardwithcontI"actmanagementnvolved lack of specific deliverables n COJltI"acts,s v.lellas nadequate ccountability ndmonitoring.The issues aised were centel"ed n tile lrulovatiol1, E-Health and Office ofSustainabilitybranch and the h1formationTechnology Services branch of theDepartmentof Health. The Deputy Minister of Health was made aware of theconcerns aised rior to the commencement f the review.

The objectives of this re,'iew were to:1. determine f employees and contractors ~1orking in the Innovation, E-Healthand Office of Sustainabilit)1and the Infoffi1ation Technolog)' Ser,'ices sectionsof 'the Department of Health are made aWal"e nd signoff on the Pro,'ince'sConflict of Interest Polic)1;2. determine f there aloeconflicts of interest in the lImovation, E-Health andOffice of Sustainability branch and the lIliormation Technolog)' Ser,'icesbranch of the Department of Health;3. determine f recognized contract management practices are being followed;and4. determine f Pro,'incial purchasing guidelines (Public Purchasing Act andRegulation) are being follo~1ed for the acquisition of personal andprofessional ervices.

~~~.0 - --The review was conducted on the opel"ations of the Innovation, E-Health andOffice of Sustainability branch and on the Infoffi1ation Technology Servicesbranch of the Department of Health. The review examined contracts which werein place at April, 2009. Some of these contracts represent renewals ofpreviousJyexpired contI"acts nd as a l"esult,expired contI'acts hat were extendedwilJ also besubject to review.


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Revie\\ of Information SystemsOperations Final Report2010

will focus on contracts for information technology professionalhe revjewserVIces.

We reviewed the organizationalstructureof the Innovation, E-Health and Officeof Sustainabilitybranchas well as he Information TechnologyServicesbranchofthe Departmentof Health.We interviewed the as well as he

and thewas also nterviewedWe reviewed 15 of the 40 IT Professional Service contracts in place in April2009. To ensure compliance with relevant legislation and contract managementpractices, we reviewed:

The procurement process to ascertain compliancePurchasing ct (PPA); with the Pubic

ontracts to ensure tirnelines,specified; were clearlyeliverables and rates

Invoices o ensureproper approvalswere obtainedand rates chargedwereconsistentwith the contract ermsand;Contract extensions/amendmentso ensure deliverables and costs areadequately upported

We consultedwith the Departmentof Supply and Servjces o ensureour accurateunderstandingand interpretatjon of the PPA. As well, we consulted with theOffjce of Human Resources egarding the conflict of interest policy and itsapplication. The Office of Human resources obtained ~

""-.-.-"Criteria were developed o respond to review objecti'fes. These criteria werereviewed andsignedoff by seniormanagement f the department. ...

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5.0 Conclusion

Based on the findings of the review perfoffi1ed, OoC feels that the concernsbrought orwardby DOH staff aloe alidated.OW' study revealed hat in general, employeeswere not aWaI"e nd were notrequu'ed o sign off on PNB's Conflict of Interest Policy. The re,'iew revealedconflicts of interestexisted n the branchesof the Departmentof Health underre,'iew, Theseconflicts ncluded ProjectManagershaving access o informationof competitorsand contractorsbeing in positions which could afford them theopportunity o influence decisionswhich would impact their firm 0]' competitorfirn1s,

uring the review of contract management rocesses, xceptionswere notedwhere su"ongcontract managementpractices were not enforced. Large costoverrunsand the delayedsigning of agreedstatements f work were among heissues oted cThe review alsouncovered rOne contract re,'iewed had been signed f01"a periodexceeding what was app1"0,'edduring the purchasing p1"ocess s well, anothercontract was JIt has beenshown n law and n policy that an appm"entonflict of interest n thepublic servicecan-ies he same weight as an actual conflict where benefits aJ'ereceivedby partieswhich are not in the public interest.The Treasul")'Bom'd ofCalladaSecretariat rites in their "Apparent Conflict of Interest" document l1at"in cauying out heir official duties,public servants houldmTangeheir affairs na manner hat will _pl'eventeal, apparent, or potentia]conflicts of interest romarising,"

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Findings.06.1 Conflict of Interest Policy A ~'areness

rhe Conflict of 111terestolicy, AD-2915, applies to alJ employee::ontractors f Parts , II and II of the Public Serviceand states: as wel] as

The rel1}Ol/alof col~flicts ~r interest by public officials is central tlmaintenance~f )Jublic tnlsf and colifidence in gollernmenf

th.e

Employees hall not engage in any busl:nessransactionC?f a .fz'nancial rpersonal nature that woz,tld compromise the fair and h.onest discharge oftheir official duties.TheremL,st not be, nor appear to be, any col1flict bernieen the privateinterest of the employee and the employee's responsibili1)! to the public.

Managers and supervisors aloe responsible for ensuring that their immediatesubordinatesare familiar witl1 the provisjons of the policy and must recommendany appropriateaction necessary o ensure compliance. Under the policy, the roleof Senior Executive Officers is to detern1inewhethe1" conflict exists 01. s likelyto exist.Discussionsith he I revealedhatemployees werenot familial"with AD-2915. Prior to the stroot f thisreview,employees ere 110tequired o read he policy eitheron an annua1 asisor at the time of hire. Ensuringcomplianceand understanding f the policy wasnot pal"tof the employee's nnualperformanceeview process ndno sign offs onthe policy were obtained rom employees. he also advisedthat wasunawarehat this policy applied o contractors.Based on discussions with the i -.

some Managers in this branch require staff to read AD- 29] 5 aspart of their annual performance review. stated that has read andunderstands hepolicy and pays close attention to its content due to the fact that a. - I in branch. inally,stated l1at hey are not awaJ"e f any conflicts of interest that exist in tlleir branch.Subsequent o OoC's initia1 discussions with DOH regarding the conflict ofinterestpolicy, an emai] messagewas sent to all employees and contractors n theInnovation, E-Health and Office of Sustainabilitv branch and the Information


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Technology Services branch requiring them to familiarize themselves wjth AD.2915. As well, new employees aloeequired to sign off as proof of havjng J"eadandunderstood the conflict of inteJ"est olicy"

6.2 Existenceof Conflicts of Interestur review alsouncoveredsituations hat would appeal' o violate the conflict ofinterest policy by conferl'ing benefits o contractors eyond l]eir remuneration orservicesprovided. L

~eContractoJ"swho aJ"e ul'Jctioning as Project Managers are reviewing invoices aJ1dtime sheets o ensure that hours and amounts bilJed to theiJ.pJ'ojects are con"ect.This review process gJ"antsProject Managers access to competjtor's J"ates huspotentialJy putting the contracted PJ"ojectManageJ"n an advantageousposition insubmitting future pJ"oposals. rIn addition, contractorswho are membersof Project Steering Committees areinvolved in discussions nd have access o competitor's nfoffi1ation.This ma)'result in an advantage o the contractor or the contractor's employer. rt-,..

r~ ~ - - ...- - - - . There are severa]employeesJ'omcontracted y the DOH to work on the project. ChangeRequestshavebeenapproved y the SteeringCommittee o increasehe valueof the contracts.

Finally, review of the- minutes ndicated hat, ..- 1was a memberof this committee. n , a sole sourceexemptionunder27.1 d) (Urgency),was requestedrom DSS n ol"der o complyWitl1 Federal unding tilnelines. The exemption was for, and thecontractwasawardedo . In November2008, he "

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all the -as the representatjvereplacedof the branch.

6.3 ContractManagementDiscussjons with the DOH as wel] as review of contractor's jnvoices indicatedthat adequaten erna] controls are in place to ensure hat contractors are paid thecouect amountand proper approvals are obtained.There were 110exceptions lloted by OoC whell comparing the per diem ratesspecified in the contracts to the actual rates charged all the illvoices. AIl invoices

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Final Report20111I{cvie," of Information SystemsOperations

reviewed had proper spending authority approval and showed e\/idence that theywere reviewed by t11e roject manager to ensure t11e lJocation of hours charged tot11e roject was correct. Timesheets were generally attached to t11e n\/oices forsupport.DoC found exceptions round tl1e paymentprocess or tl1e

- , , project. A purchase rder for thisproject in the amount f $395,000plus HST was ssuedon October28th,2008 forPhase I of the project. Payments were made according to tl1e terms of thepurchaseorderand by May, 2009 the $395,000plus HST had been paId to thevendor,During May/June of 2009, invoices totalling approximately $150,000 were paid to. ~'ithout a corresponding increase in the purchase order. Thepurchase order was amended on July 21, 2009 to increase its value by $1.45million for Phase2 of tl1e project. Although billings fO1'Phase 2 of the p1'ojectbegan in May 2009, a Statement of '\J\70rk O1' his phase was not signed untilNovember 251h,009. The second phase of this project spam1ed pP1.oximate1y 2months (Apri12009 to March 2010), meaning the conu'l:lctorwas working withouta sigI1ed Statementof '\J\70rk or 8 of the 12 months of the second phase of theproject.Concernsaround ontractmanagementwere identified relating to the

- The contract or this project was awmodedothrough RFP for an original amountof $3.1 million.A numberof changeequests ecommended nd appro\1edy the Project SteeringCommittee ncreasedhis amountby an additional$3.8 million.The rationale for increases s documented n eithe]"a sho]"tmemo from the p]"ojectmanage]" or on the Change Request fornls, Interviews with staffsuggested that the DOH should have been mOl"eaggressive in holdingaccountable to thei]" nitia] estimates, Sollie of the docu]nentation drafted by thep]"oject nanage]"SUppo11inghe initia] $2 million Phase II increase wasonly created afte]' concerns from the ," of Contracts and Revenue we]"ebrouuht forward to the ,Although the documentation ustifies the increase in overalJ project costs, OoCbelieves that the causeof some cost overruns are the responsibility of the vendorand should not ncrease ees charged to PNB. Reasonsdocumentedon an October15, 2008 Inter-Office memo and on an ApriJ 12th,2010 Project Change RequestForm which were presented to the, - to supportincreases n fees nclude:


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"Assumptionsmade by/ in providing tJleir initiaJ estimatesnevermaterializedand/or were found to be invalid basedon the analysis v.'ol'kdol1e n Pha.~e and 2 of theproject.""Loss of resources 011 development team- A few of thedevelopment team have moved on to new opportunities outside of

It appearshat. initial1y underestimatedIle cost of completing tIle project.However, signed a legally binding contract o provide the servicesat anagreedprice. Basedon the above indings and interviews conducted,DoC feelsthat the contractedamount should not have been ncreasedas the terms of tIleoriginaJcontractdo not provide the ability fo]. to inc]Oeaseegotiated eeswithout a changen scope.In additionandof particulm" oncern o DoC, s the act that who-bas severalcontractswith the DOH including. Resem"ch onductedby OoC in the spring of 2010 onwebsite.evealed hat identified I among ts! " CulTent]y, this inforn1ation no longe]' appears on theirwebsite.

6.4 ProcurementProcessOur revjew jncluded testing of 15 contI"acts o ensure compljance wjtb the PubljcPurchasing AcL.Where contracts selected were renewals or extensjons of prevjousagreements, he renev.'a]was traced back to the origjnaJ agreement.The contracts eviewedwere procured l11'oughIuof1natics,RFP as well as soJe-sourcing. n general, ontracts estedappearedo be procured n accordancewiththePublic Purchasing ct. (PPA)Our review did however reveal violations of the PPA, In particular, in .Tune 008,a contract was signed witIl - for tile period July I, 2008 to .Tune30th,2010 with 2 optional 1 year renewals, At the time of signing this contract, theDepartment of Health did not have proper approval from DSS, A memo fromDSS found ill tI1e contractor's file clearly states tIlat the apP]'oval is only untilMarch 31, 2009 at which time: it was felt by DSS, that the department should bein a position to ejther go to public tender, rec]'uit a qualified resou]'ce 0]' eliminatethe requirement for tI1e ]'esou]'ce o provide se]'vices to the Department, DSSconfirmed that the DOH did not have the authority to ]'eleasepayment beyondMat'ch 2009 at tile time of signing, OoC questioned tile -

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who was unable o explain why a two yeal' conuacl wassigned ~'ben,at the timeof signing, approval~'as only granted Ol' he first 9 monthsof the contract.The pcu-ticulcu-ontI-actbegan with DOH in Janum"y 007 [OJ-a period of 3_5months with a cost of $24,000- Cun-ently, the same original purchase ordeJ-continues o be extendedand s now at $463,000plus tax andset to expire n June2011-In addition, 5 of the 15 contI"actseviewed were extended everal times beyondthe original contractperiod. This includesa situation where a contract orjginallyacquired under Infoffi1atics for a perjod of 5 months was subsequentlyso]e-sourcedand extended or a total of 13 additional months.The exemption wasobtained or reasons f absence f competitionand because ervicescould only besupplied by a partjculat"vendor, Howevel', whel1 he Infol'matics col1tract wasoriginally acquired,only 4 vendol"swel'e contacted or responsesof which twovendorsproposed resource,Basedon the linuted sem'cho acguil'e J1e liginalcontI"act,DoC finds it difficult to conclude,with any degreeof certainty that theser\'icecould only be suppliedb)' one vendor. The contI"act as for ~'ork on theprojectand he ~'ork ~'asaVl'ardedo

Finally, our reviewof the procurement rocessuncovered An ernail (attached)was found in which the:ontractorprovides

As stated n theRegulation 94-157),


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0 SummaryofRecommendaf1:ons' .,

Employee291')" nn IhouLd s'ign off as'r emvlo)lees. this' ,and contractorI anmtaJ basis.

T/1.eZr J1.lutal peJ:formr:znce revzthe SeniorExecutive )fficer ojthemselves. ocumenation shc

/7.Cll'ingcould:mc!understood)r]Jo/-ated as' ]JarW. As stated 111 LJ-L

my col~f/icl ~finteres1lId be maintained siluc 711 l1 whic/7 the'l' llt:i

Managers and directorsdt:finition C!fan ff apparenrlr,rrl111o,.,t /"17., t].,;o t/"l7");r '")1'

rhould .familiarizecol1jLicf q[ inlcres'l1;..1"0...1 1.." 1"1..",7',.""..

rhemselvej' with th.e m.eaning anI, A suggestec! eading co/.uc!be th,1")'Boarc! of Canada Sec1-etariat.

\' sh.ould not occup,'ituation is unavoidt;'~formation whichs information,

management pe. th.econtracto .'itions' 111ithin he department.should be stricth' limited to the11Jitharticulacce

ContractoJI1Th.erehefinancialcompetitor

C~f pr~ject steering committees,hey sho'Ltnding th.e contracting/outsourcing of al~

VI'h.erecontractorsare memberstake part in any discussions S/,lrrfor the pro.;ect. l1)orl,

tionships with otheror joint venture t)'veContractorsshould be required to disclose bl-lsiness elcontractorsworking n the departmentwh.en partnershij;rplntin111'lvn p1-il'tl' (px- )

Stee;f a Project Manager or member ~f caZs'oa partner or principal of a cons,from hirinf? other contra.c(orsfrom (h.e

'ing Committeefi rl11 the dpnn is a contractoi111011t t'J1r1r,I,-1 r" 2nd'O""'11 /1

Contract manager,s'sh.ould enL\'ure hat the requirem.entsAct are ,follo\1Ied.Docum.entation sh.ou.lcl e maintainexemptionsparticularly when th.e exemption for Spec(fi,i.1' used

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bevurchase th.ea)/menf of am' am.ount,inedpriorlEI 1nt hp " ,..--all1' 'lented nl 01'\-1 h.oul ,btainec he commen,~signedwi r drafted byI'hen cant III ,iate

lQ'"\'In]v cont!r 'endors

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Audit into E-health contracts