Evaluation of the Cost and Profit Assurance Program
Office of Audit and Evaluation, Public Services and Procurement Canada: September 15, 2016
The Cost and Profit Assurance Program (CPAP) provides assurance services on domestic and international contracts for the Government of Canada and foreign governments. The program provides assurance on the integrity of pricing and payments of government contracting; and, provides advice and analysis to support innovation in procurement policies and practices.
In 2012, the CPAP received a Special Purpose Allotment of $3M per year for five years ($15M in total) to provide cost audit services in support of defence contracting with the Government of Canada (i.e. domestic).
Though the majority of the assurance work conducted by the program is on defence contracts, the program may also conduct assurance work on non-defence contracts on a fee-for-service basis, when requested.
Evaluation scope and methodology
The objectives of the evaluation were to assess the relevance and performance (including the achievement of immediate and intermediate outcomes) of the CPAP's activities through five lines of evidence: program document review; literature review; financial analysis; interviews; and an independent review conducted by Office of Audit and Evaluation auditors.
Evaluation constraints and limitations
There are limitations to social science research, and the program's overall performance could have been measured in a number of other ways. The evaluation was unable to compare the program's performance against an identical program in another jurisdiction.
- Contract costs charged to Canada are reasonable profits are not excessive
- Client departments and international stakeholders are satisfied with the services provided (for example timely and credible assurance, support in facilitating recovery of payments, addressing system weaknesses and providing advice)
There is a continuing need to undertake cost audits of defence contracts. The program identified potential overbillings and needed improvements in a number of supplier accounting systems. The program also meets the continuing need to discharge Canada's obligations outlined under the Canada – U.S. Defence Production Sharing Agreement.
The evaluation found that the program aligns with federal priorities and Public Service and Procurement Canada's (PSPC) strategic outcomes. The CPAP's activities related to helping to ensure fair and reasonable cost and profit coincides with federal priorities and PSPC's strategic outcome. The program's activities are consistent with the authorities vested in the Minister of PSP under the Defence Production Act (DPA).
While the authority for conducting cost audits is not explicitly stated in the Department of Public Works and Government Services Act or any other legislation, nor is the current demand for service high, analysis of non-defence contracts indicates the potential risk of overbilling. This potential risk provides a measure of evidence of potential value of cost audit activities in relation to non-defence contracts.
The program is achieving its outcomes related to the conduct of objective and credible assurance engagements, but the timing and timeliness of these engagements could be improved.
The evaluation found assurance engagements undertaken by the program contribute to the identification of potential overbillings.
The CPAP supports Canada in meeting its international obligations although some stakeholders noted a desire for improved timeliness and reporting.
To properly measure performance of the program, a more appropriate performance measurement framework would be of benefit to the program.
With respect to non-core activities of the program related to providing advice and insight to support procurement, the evaluation found that although this work is limited in scope, it did provide value to PSPC's procurement functions.
With respect to program economy, the program has worked towards managing its structural deficit by performing work on a fee for service basis, although the current blended funding model creates a risk of incurring deficits.
The program has worked to produce a similar level of program output compared to its United States equivalent.
With respect to program efficiency, decreased program labour rates over time indicate improvements in resource utilization, but the evaluation was not able to conclude on program efficiency due to a lack of data against which to benchmark the program.
The current delivery model is limiting the program's effectiveness and the department's ability to appropriately manage relationships with stakeholders.
Decisions regarding the program's mandate and who its primary client is are required to inform future funding and best organizational fit and design.
- To maximize contribution of the program to outcomes and broader procurement modernization objectives in both defence and non-defence contracting, the Assistant Deputy Minister (ADM), Defence and Marine Procurement and the ADM, Procurement should clarify its mandate and continue to implement initiatives that support the program in adapting to a more strategic and value-added role. This clarification should consider the nature and timing of CPAP's assurance work in the contract life-cycle, as well as greater engagement with Acquisitions Branch management, contracting officers, industry and stakeholders in support of the achievement of expected audit results
- To clarify authorities for non-defence contracts so that risks of overpayment can be mitigated, the Assistant Deputy Minister (ADM) Procurement in collaboration with the Treasury Board Secretariat, should clarify accountabilities for non-defence procurement contract management, including conduct of risk assessments, determination of assurance requirements, authority to re-assess costs and profits, and authority to recover overpayments. Once clarification is complete, the ADM Procurement should consider the appropriate framework and funding mechanisms to support assurance work on non-defence contracts
- To facilitate achievement of outcomes related to assurance work, the ADM, Defence and Marine Procurement and the ADM, Procurement should establish mechanisms to support cooperation of suppliers, in particular in relation to requirements for timely provision of access to documents and support for resolution of disputes
- To demonstrate value of the program, the ADM, Defence and Marine Procurement and the ADM, Procurement should establish a performance measurement strategy and report regularly on results achievement. This framework would more accurately reflect the strategic and value added accountabilities of the program
- To facilitate the recovery of overpayments, the ADM, Defence and Marine Procurement and the ADM, Procurement should establish processes to support consistency in the approach to recoveries and consequences for suppliers for non-reimbursement of overpayments
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