This is a paper written for, and presented at, CALS Europe 1994 in Paris. It outlines how the principles, and in some cases the technologies, of the Continuous Acquisition and Lifecycle Support (CALS) initiative were applied to complex custom procurement within the Canadian Federal Government.

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ACQUISITION IN THE CANADIAN GOVERNMENT:
BUSINESS PROCESSES AND SYSTEMS
J.A. Gollner
Project Manager, CALS Office
Public Works and Government Services Canada
Ottawa, Canada
September 1994
ABSTRACT
The Department of Public Works and Government Services Canada (PWGSC)
operates as a common service provider for the departments, agencies and
Crown Corporations of the Canadian Government. One of these common
services is acquisitions. It has therefore fallen to PWGSC to develop,
implement and support an integrated acquisitions system to service the
needs of the government. For one, this integrated acquisitions system
must address simplified procurement of catalogue items through Electronic
Data Interchange (EDI) and the efficient financial settlement between
client and supplier. It must also support the acquisition of customized
goods and services through improved development and distribution of
procurement opportunities and streamlined administration of awarded
contracts.
INTRODUCTION
The Canadian Government annually acquires in excess of ten billion
dollars of goods and services through the activities of PWGSC.
Approximately 20% of this value, while representing the low dollar value
acquisition of simple goods, accounts for 80% of the identified
administration cost for government acquisition. This has made improving
the mechanisms whereby government units acquire basic goods a major
priority. It is here that the government hopes to realize rapid payback
through the adoption of modern catalogue ordering systems and EDI
technology. The above statistics can, however, be misleading, especially
if it leads to the belief that streamlining simple procurement will be
enough.
The cost of the remaining the goods and services annually procured by the
government, those representingS0% of the total annual expenditures, in
fact reflects the net result of the government's traditional approaches
to managing complex custom procurement. Here, the real cost of
administration is seen in the increased contract costs and life cycle
support activities that are borne by the department acquiring the system.
The Crown, as an enterprise, stands to save more by improving the
management of custom procurement than by eliminating all the
administrative costs of simple procurement. It is, however, a much more
challenging target – one requiring some radical solutions.

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SIMPLE PROCTJREMENT
The problem: too many hands
Simple procurement entails the recognizable goods and services that are
consumed within normal offices or in support of existing equipment and
systems. Included would be paper, office furniture, printing services and
travel. In the execution of a typical transaction, say the acquisition of
more pens for an office, there are, under the current regime, specific
activities expected of the end user with the need, their immediate
supervisor, staff within a supply facility (such as the government
operated self-service store) and at least three finance (accounting)
staff. Even this simple transaction will muster a finance clerk in the
user's organization, the supply facility and the central accounting
authority (PWGSC).
The solution: improving the process
Improving the process of simple procurement requires improving the user's
access to the required supplies and, optimally, allowing users to select
products and issue the orders directly to the suppliers for immediate
delivery. For this to happen, a number of things must take place.
First, an up-to-date "catalogue" must be accessible by the users from
their place of work whether that be a workshop floor or an office desk.
This catalogue must contain a current and comprehensive listing of
products, suppliers, costs and delivery methods. Currently, commodity
information is accumulated and maintained by PWGSC through a process of
negotiation with suppliers. This approach was intended to leverage the
volume of Crown acquisitions to realize better pricing. In reality, it
created higher costs (by imposing administrative burdens on suppliers)
and significant administrative overheads. Furthermore, the task proved
too much to be managed effectively with the quality of information
available to clients suffering dramatically. An up-to-date catalogue,
therefore, depends on an automated mechanism whereby suppliers maintain
their own product and pricing information.
Second, the users of the goods must be empowered with the ability to
select and order goods under a certain dollar value (a value identified
to cover the vast majority of requirements). The authority to acquire
effectively all commodities should likewise be delegated to management
within operational organizations. In both cases, a system must be in
place that implements the authorization controls, required under the
Financial Administration Act, and captures the necessary audit data.
Finally, the reconciliation of accounts amongst the supplier, the central
accounting authority and the user's organization must be streamlined and
implemented as an automated process. Effectively, this is the relegation
of the accounting process to a "hands-off' audit function rather than a
deliberation prior to the delivery of goods.

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Implementing a system for simple procurement
There are projects underway within PWGSC to implement, in varying
degrees, the components required to support an automated simple
procurement system.
Electronic Procurement and Settlement / Electronic Payment Authorization
As a general strategy, the Electronic Procurement and Settlement (EPS)
system envisions the deployment of credit instruments (lines of credit)
across the government to facilitate the direct purchase of goods and
services from suppliers or other departments. Under the EPS plan, the
procurement action is followed through to its final conclusions with the
settlement of departmental accounts and the payment of suppliers. There
remains the requirement for the user to authorize an order and to accept,
as satisfactory, the goods or services delivered. The Electronic Payment
Authorization (EPA) system will implement just such a mechanism ensuring
that the essential elements of financial control are enforced with a
minimum of administrative overhead.
Common Departmental Financial System
The Common Departmental Financial System (CDFS), nearing completion, will
replace a variety of legacy financial systems and provide a single venue
for departments to manage their budgets and reconcile expenditures among
government agencies. Ultimately, CDFS will provide the foundation upon
which modernized financial processes will be implemented on a government-
wide basis. PWGSC is also developing extensions to the financial
environment allowing for payments and remittances to be transacted
automatically.
Electronic Data Interchange / Catalogues
There will be a heavy reliance upon Electronic Data Interchange (EDI) and
online catalogues to facilitate both the selection of products and the
issuance of orders electronically. EDI will support the invoicing process
(if it continues to exist) and is currently being tested as the mechanism
for allowing suppliers to update their catalogue entries.

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COMPLEX CUSTOM PROCUREMENT
Complex custom procurement is used to describe all acquisitions which
cannot be managed as simple orders for standardized goods or services.
This covers all acquisitions that require a unique description of
requirements and which result in a customized contract. Under this
umbrella, one would include contracting for plumbing services to replace
300 feet of pipe to meet a revised building code. One would also include
some of the government's most ambitious undertakings such as the Canadian
Patrol Frigate, the Income Security Program or, more notoriously, the New
Shipborne Aircraft (EH-101).
The problem: lack of information sharing
The process is all too familiar. A requirement is identified within an
operational unit or an objective is set by the elected government. The
requirement evolves, by stages, into a concept of operations and a
funding proposal, and, from there, into a design and a specification.
Depending upon the size of the acquisition, even the formative stages of
a program can be hampered by poor communications between involved
parties, euphemistically known in Ottawa as "stakeholders".
There are, of course, the big hurdles where the product of one group
(i.e. Department of National Defence) is submitted for review and / or
implementation by a second group (PWGSC). This is known as throwing the
brick over the wall. It is a good way to describe what actually happens.
Neither party can see the other's environment and is therefore ignorant
of what may constitute hard realities in that domain. Neither party
traditionally avails itself of the input of the other while they perform
their part of the process. Finally, the respective parties have evolved
techniques and philosophies for grappling with their mandates which are
rarely compatible with other views of the world.
If this were not enough, the traditional insular approach to managing the
component parts of a major acquisition -finance, engineering, operations,
logistics, procurement, and industrial benefits – results in the
increasing relevancy of the input from these groups as they become
experts in servicing their own ends. For example, the contracting
expertise of PWGSC, the government's contracting authority, would, in all
honesty, have to be described as rudimentary.
The end result of all this is a process characterized by delay and
conflict, and which consistently increases costs and risks while reducing
program quality. All too frequently, the traditional process leads a
program into obsolescence and then termination. This applies to the small
custom contract as completely as to a Major Crown Project (MCP) -the
differences are those of magnitude not type.
The root of these problems is the lack of information sharing. The
consequences are seen in increased costs and risks as incurred by both
the Crown and the suppliers. It would not be difficult to assert, even
without substantiation, that the wastage associated with the custom
procurement process annually exceeds the total dollar value expended on
simple acquisition (i.e. greater than 20Yo of total expenditures).

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The solution: process change comes first
Implicit in the above description of the complex custom procurement
process is the importance of effective information sharing. This
observation leads to the obvious conclusion that the Crown must deploy
standards and a modernized technical infrastructure to facilitate that
information exchange. This investment must wait, however, until some very
basic decisions are made in the area of how business objectives are set
and implemented in a government environment. It does not take long before
one recognizes that the many of the inconveniences, even absurdities,
within the system are reflections of inconsistencies inherent in the
nature and form of our government. While no one, one hopes, would attempt
to address these issues in order to improve the efficiency of government
administration, there remain areas where real change can be implemented.
PWGSC has, for example, undertaken a number of initiatives to address the
more glaring problems.
Common Purpose Procurement
One area where there has traditionally been a high wall against
communication is in government and contractor relations. Common Purpose
Procurement (CPP) is a procurement strategy developed by PWGSC together
with Treasury Board (the funding authority) for use in complex custom
procurement scenarios. In essence, CPP encourages departments, having
identified a requirement, to form an interdepartmental executive team
which, together, solicit an industry partner to see a program from
inception to completion and even through to the end of the system's life
cycle. As an example of how it can work, the Reserve Integrated
Information Project (RIIP) selected an industry consortium to support all
aspects of the program based upon a six-week solicitation period and a
twenty page (maximum) management proposal. Treasury Board has been
actively promoting the CPP strategy within a variety of departments to
confirm its viability as a standard procedure. Having been involved with
a number of CPP initiatives (including RIIP), I have some reservations
about its current form but I, nevertheless, applaud the attempt to do
things differently. At its root, CPP attempts to eliminate the barriers
to the free flow of information between stakeholders. In the case of
RIIP, it resulted in a joint Crown / Contractor Project Management Office
(PMO) with a management structure that did not differentiate between
government employees and contractors.
Special Operating Agencies
Special Operating Agencies (SOAs) were originally formed to give certain
parts of the government the flexibility to operate as business units
serving the evolving needs of government departments. Effectively, SOAs
must successfully recover their operating costs and are therefore driven
to adopt a management regime modelled on industry rather than government.
One example is Canada Communications Group (CCG), formerly the Queen's
Printer and one of the original SOAs, which has become among the
government's most progressive service providers. Whereas some SOAs did
not succeed in delivering services as effectively as industry and are
passing into history, CCG created a service model worthy of emulation in

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many parts of the government. In areas such as printing legislation, its
traditional role, CCG has stayed in business by remaining responsive and
cost effective. What is interesting with CCG, however, is the approach
taken to new services where its role is less of a service provider than a
broker between client departments and industry.
In areas such as the development of films or other communications
programs (areas requiring specialized expertise), CCG operates as a
knowledgeable project manager and contracting agent (CCG remains a part
of PWGSC). It is the hope of CCG, that from the client's perspective, a
user will come to CCG and, rather than encountering a wall, will
encounter a value-added service that results in efficient contracting and
quality deliverables. An example will serve here. Last winter, the
Department of National Defence identified the urgent requirement to
develop a Document type Definition (DTD) for technical information. By
involving CCG as the project manager and contracting agent, DND was able
to focus upon the development of a DTD as opposed to dealing with the
traditional procurement process. DND was testing the DTD with operational
data and commencing the revision process before the procurement paperwork
would have been complete had they gone another route.
What makes this approach different is the level of expertise CCG deploys
in supporting the acquisition process, CCG makes it possible for
operational managers, knowing only their requirements, to contract
successfully for sophisticated services and equipment. From an industry
perspective, the opportunities brokered by CCG are clearly defined and
properly funded. The strategic deployment of expertise, effectively the
sharing of information among government bodies, reduces the risks
incurred by industry and the user, and thereby lowers the final cost of
the acquisition.
Systems to support complex custom procurement
As mentioned previously, the investment in systems to facilitate an
improved communication environment for participants in the custom
procurement process has taken a back seat to identifying new ways of
doing business. There are some initiatives, however, worthy of note.
Open Bidding Service (OBS)
The electronic posting of all procurement opportunities exceeding a
certain dollar value ($50,000) for review by registered suppliers to the
federal government. It has been operational for more than two years and
is ready to undergo a series of enhancements.
Automated Buyers Environment (ABE)
A highly integrated working environment for PWGSC Buyers which will,
initially, allow Buyers to concentrate on servicing user requirements and
developing useful expertise rather than processing paper. As it evolves,
the ABE should include direct links to the OBS and extensions into the
working environment of users.

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CONCLUSION
PWGSC CALS Office
PWGSC recognizes that, in its plans to improve the acquisitions process
within the Government of Canada, it is attempting to implement the
principles of concurrent activity, information sharing and enterprise
integration that underlie the CALS initiative. The standards and business
model of CALS are directly applicable to our domain. In partnering with
major stakeholders such as the Department of National Defence and
Treasury Board, it is the hope of PWGSC that, through CALS, the value
realized by government expenditures can increase even as spending budgets
shrink. Given the wastage inherent in the current situation and the
potential of current initiatives and CALS to achieve savings, we believe
that it is possible to downsize and improve concurrently.