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Agenda - Finance Advisory Committee - 20211012Town of Aurora Finance Advisory Committee Meeting Agenda Date:October 12, 2021 Time:5:45 p.m. Location:Video Conference Pages 1.Procedural Notes This meeting will be held electronically as per Section 19. i) of the Town's Procedure By-law No. 6228-19, as amended, due to the COVID-19 situation, and will be live streamed at https://www.youtube.com/c/Townofaurora/videos. 2.Approval of the Agenda 3.Declarations of Pecuniary Interest and General Nature Thereof 4.Receipt of the Minutes 4.1.Finance Advisory Committee Meeting Minutes of September 27, 2021 1 That the Finance Advisory Committee meeting minutes of September 27, 2021, be received for information. 5.Delegations Note: Anyone wishing to provide comment on an agenda item is encouraged to visit www.aurora.ca/participation for guidelines on electronic delegation. 6.Matters for Consideration 6.1.Memorandum from Senior Financial Management Advisor; Re: Fiscal Strategy Strategic Action Plan 4 That the memorandum regarding Fiscal Strategy Strategic Action Plan be received; and 1. That the Finance Advisory Committee comments regarding the strategic action plan be received and referred to staff for consideration and further action as appropriate. 2. 6.2.Memorandum from Manager, Financial Management; Re: Proposed 2022 12 Budget Introduction That the memorandum regarding Proposed 2022 Budget Introduction be received; and 1. That the Finance Advisory Committee comments regarding the proposed 2022 budget be received and referred to staff for consideration and further action as appropriate. 2. 6.3.Memorandum from Director, Finance; Re: Procurement Modernization Project Update 15 That the memorandum regarding Procurement Modernization Project Update be received; and 1. That the Finance Advisory Committee comments regarding the procurement modernization project update be received and referred to staff for consideration and further action as appropriate. 2. 7.New Business 8.Adjournment 1 Town of Aurora Finance Advisory Committee Meeting Minutes Date: Time: Location: Monday, September 27, 2021 5:45 p.m. Video Conference Committee Members: Councillor Harold Kim (Chair) Mayor Tom Mrakas Councillor Michael Thompson Other Attendees: Doug Nadorozny, Chief Administrative Officer Rachel Wainwright-van Kessel, Director of Finance Jason Gaertner, Manager, Financial Management Elizabeth Adams-Quattrociocchi, Manager, Financial Reporting and Revenue Ishita Soneji, Council/Committee Coordinator _____________________________________________________________________ 1. Procedural Notes This meeting was held electronically as per Section 19. i) of the Town's Procedure By-law No. 6228-19, as amended, due to the COVID-19 situation. The Chair called the meeting to order at 5:47 p.m. 2. Approval of the Agenda Moved by Councillor Thompson Seconded by Mayor Mrakas That the agenda as circulated by Legislative Services, be approved. Carried Page 1 of 49 2 3. Declarations of Pecuniary Interest and General Nature Thereof There were no declarations of pecuniary interest under the Municipal Conflict of Interest Act, R.S.O. 1990, c. M.50. 4. Receipt of the Minutes 4.1 Finance Advisory Committee Meeting Minutes of June 8, 2021 Moved by Mayor Mrakas Seconded by Councillor Thompson That the Finance Advisory Committee meeting minutes of June 8, 2021, be received for information. Carried 5. Delegations None. 6. Matters for Consideration 6.1 Memorandum from Manager, Financial Reporting and Revenue; Re: Optional Small Business Subclass – Property Tax Staff provided an overview of the memorandum and background information regarding the small business property tax subclass as a relief measure to mitigate the financial constraints caused by the pandemic. The Committee inquired about the potential taxes the discount rate would represent and staff provided clarification. The Committee and staff discussed about the application process, eligibility criteria, and the intended timeline of the initiative. The Committee sought clarification on the responsibility of the appeal hearing process, and staff advised that all appeals would be managed by the Region. There was further discussion about the available options to absorb the financial impact resulting from the proposed small business property tax subclass. Staff advised that the development of a policy and consistent eligibility criteria is ongoing in collaboration with York Region and all nine lower tier municipalities, with more details forthcoming. Page 2 of 49 3 Moved by Councillor Thompson Seconded by Mayor Mrakas 1. That the memorandum regarding Optional Small Business Subclass - Property Tax be received for information. Carried 6.2 Memorandum from Project Management Office; Re: Town’s Major Capital Projects Update Staff provided an overview of the memorandum highlighting aspects of the five major capital projects underway. The Committee referred to the committed contingency amount for the Aurora Town Square project and sought clarification regarding the allocated amount in comparison to the forecasted contingency cost at completion. Staff advised that any future and upcoming risks are yet to be determined at this stage. The Committee expressed preference for the Fire Hall 4-5 construction project contingency presentation format and suggested that more details be provided regarding the allocated contingency amounts in future reports, and staff agreed to follow up. Moved by Councillor Thompson Seconded by Mayor Mrakas 1. That the memorandum regarding Town’s Major Capital Projects Update be received for information. Carried 7. New Business None. 8. Adjournment Moved by Councillor Thompson Seconded by Mayor Mrakas That the meeting be adjourned at 6:18 p.m. Carried Page 3 of 49 100 John West Way Aurora, Ontario L4G 6J1 (905) 727-3123 aurora.ca Town of Aurora Memorandum Finance Re: Fiscal Strategy Strategic Action Plan To: Finance Advisory Committee From: Sandeep Dhillon, Senior Financial Management Advisor Date: October 12, 2021 Recommendation 1. That the memorandum regarding Fiscal Strategy Strategic Action Plan be received; and 2. That the Finance Advisory Committee comments regarding the strategic action plan be received and referred to staff for consideration and further action as appropriate. Background As outlined in the fiscal strategy approved in June 2021, a detailed strategic action plan to achieve long term financial sustainability for the town has been developed. This memo provides an overview of the work to be accomplished over the course of next three years to ensure strong longer term financial management. The strategic action plan includes analytical and policy development work that supports the high-level strategic objectives as mentioned in the fiscal strategy. A comprehensive action plan for the four pillars of the fiscal strategy has been developed and is summarised in Attachment 1. This detailed strategic plan is a living document which will be monitored and updated regularly as the work outlined in the plan is completed and rolled out. The policy and the analytical work outlined in the action plan will establish the financial targets for asset management, reserve management and the use of debt to support town’s future capital needs. The strategic actions which will require council approval are identified in the action plan in attachment 1. Page 4 of 49 Fiscal Strategy Strategic Action Plan October 12, 2021 Page 2 of 2 Reporting and monitoring progress will be important to long-term financial sustainability Another important component for the draft fiscal strategy is reporting and monitoring the progress of the plan. The fiscal strategy needs to be responsive to changes within the community and remain flexible with a long-term. The progress on the effectiveness of the strategic objectives needs to be reviewed at least annually as part of the multi- year budget process. This will ensure that the planning and decision making included in the budget process support long-term fiscal goals. This action plan will be a “living document” which will define the actions to ensure the town sets and stays on a financially sustainable path. Attachments Attachment #1: Draft Strategic Action Plan Page 5 of 49 ATTACHMENT 1 Note: * Council decision is required. Strategic Action Plan The following shows the planned timing for the completion of the strategic actions identified in the Fiscal Strategy. Strategic Actions Proposed Timeline Capital Planning 1 Development of a capital budget framework/policy Q4 2021 2 Asset Management Plan – Development & operationalization: I. Develop a second-generation asset management plan, including definitions of levels of service for core assets (e.g. roads and sewers) and meeting legislative requirements. Q3 2021 II. Develop levels of service for the non-core asset categories* Q1 2023 III. Development of desired performance targets for all asset category level of service measures and its affordability* Q1 2024 IV. Operationalize the asset management Plan to align with the 10 Year Capital Plan Q4 2024 3 The Next DC Study: DC Study and capital plan alignment I. Town staff to ensure that the growth capital projects in the 10-year capital plan are aligned with existing DC study Q4 2022 II. Development of upcoming 2023 DC charge study* Q1 2023 Page 6 of 49 Note: * Council decision is required. Strategic Actions Proposed Timeline 4 Review the affordability of strategic plans and studies to support long-term capital planning I. Staff to estimate the financial and levels of service impacts of each existing master, strategic plans, and studies Various II. Staff to update and track the land acquisition needs for growth related projects based on existing and future master/ strategic plans Various 5 Develop a longer-term capital forecast III. Reconciliation of asset in citywide to asset owner record Q4 2022 IV. Interim R&R long term capital forecast based on the estimated useful life of town’s asset Q3 2023 V. R&R Long tern capital forecast should span up to minimum of 80 years to ensure all asset replacements are forecasted at least once to aid in long-term planning for reserves Q2 2025 Reserve Management 6 Develop a reserve management policy* Q3 2022 7 Review reserve definitions and update capital reserve bylaws I. An initial administrative review of existing reserves should be done to eliminate reserves which are no longer required* Q3 2021 Page 7 of 49 Note: * Council decision is required. Strategic Actions Proposed Timeline II. A comprehensive review of all town's existing reserves should be undertaken Q4 2022 8 Develop a long-term reserve forecast I. Development of interim longer- term reserve forecast and required contributions to all reserves to maintain full cost recovery based on available estimated useful life information of the town Assets Q3 2023 II. Staff to develop a final longer-term reserve requirement forecast and required contributions to all reserves which should span up to 80 years to align with the Town's longer term capital forecast. Q3 2025 Debt Management 9 Develop a comprehensive debt management policy* Q1 2022 10 Develop process flows and guidelines for debt management including debt acquisition and managing debt transactions Q2 2022 11 Develop a longer-term debt forecast I. Interim debt forecast for DC funded debt and tax funded debt to align with long-term Capital forecast Q4 2022 II. Long-term debt forecast based on final long term capital plan Q3 2025 Page 8 of 49 Note: * Council decision is required. Strategic Actions Proposed Timeline Revenue Management 12 Develop a strategy to explore opportunities to increase grant revenue I. Develop a process flow of the current and future state grant management program Q2 2023 II. A review of Aurora’s existing grant management capacity including the possibility of third-party service providers Q3 2023 III. Staff to develop a prioritized list of projects that are “ready-to-go” as grant timing can be short Q3 2023 13 Improve investment income on reserves by becoming a prudent investor I. Staff to review and update the existing investment policy* Q2 2022 II. Staff to continue the process to move forward with joining the ONE JIB (joint investment board) * Q2 2022 III. Staff to review and update the existing investment income allocation policy Q3 2022 14 Align future development charge studies with projected growth and a funding strategy I. Development of a process maps and guidelines for the collection and use of development charge and community benefit charge revenues Q1 2022 Page 9 of 49 Note: * Council decision is required. Strategic Actions Proposed Timeline II. Staff to develop a comprehensive tax assessment growth forecast model Q3 2022 III. Development of comprehensive DC revenue forecast model Q3 2023 15 Develop a revenue management policy Q3 2025 16 Develop a longer-term planning approach to user rates for water, wastewater and storm water I. Town staff to conduct comprehensive rate setting study for a) Storm Water b) Water & Wastewater Q3 2022 Q3 2023 II. Develop a longer-term water, wastewater and stormwater revenue forecasting model Q3 2022 17 Review and update operating budget principles I. Staff to update the annual budget principle to include a municipal price index to capture the true inflationary pressures for the town Q4 2022 II. Staff to ensure that the budget principles accurately reflect the current multi-year budget process and identify any improvements Q3 2022 Page 10 of 49 Note: * Council decision is required. Appendix A Existing Master, strategic plans and studies Description Timelines 1 Accessibility Plan Q4 2022 2 Active Transportation Plan Q4 2022 3 Asset Management Plan Q1 2025 4 Aurora Promenade Plan Q1 2022 5 Community Energy Plan Q4 2023 6 Community Improvement Plan Q4 2022 7 Corporate Environmental action Plan Q4 2023 8 Cultural Master Plan Q2 2022 9 Customer Service Strategy and Implementation Plan Q4 2021 10 Development Charge Study Q1 2023 11 Economic Development Strategic Plan Q1 2024 12 Energy Conservation and Demand Management Plan Q3 2023 13 Fleet Study Q2 2022 14 Green Fleet Action Plan Q2 2022 15 Information Technology Strategic Plan Q2 2023 16 Museum Plan Q1 2022 17 Official Plan Q1 2022 18 Parkland Dedication Bylaw Q4 2022 19 Parks & Recreation Master Plan Q4 2022 20 Sports Field Development Strategy Q1 2022 21 Sports Plan Q2 2022 22 Storm Water Management Master Plan Q3 2022 23 Stream Management Master Plan & Tannery Creek Flood Relief Study Q1 2022 24 Trail Master Plan Q1 2022 25 Transportation Master Plan Q1 2022 26 Urban Forest Management Policy Q4 2023 Page 11 of 49 100 John West Way Aurora, Ontario L4G 6J1 (905) 727-3123 aurora.ca Town of Aurora Memorandum Finance Re: Proposed 2022 Budget Introduction To: Finance Advisory Committee From: Jason Gaertner, Manager Financial Management Date: October 12, 2021 Recommendation 1. That the memorandum regarding Proposed 2022 Budget Introduction be received; and 2. That the Finance Advisory Committee comments regarding the proposed 2022 budget be received and referred to staff for consideration and further action as appropriate. Background On June 18, 2019, Council adopted the Town’s updated budget principals and processes. One key change to these documents included the adoption of a multi-year budget framework for the Town of Aurora. The Town’s multi-year budgeting framework aligns with each Council’s term. Council approves the first year’s budget of its term and receives an accompanying forecast of the next three budgets. In the second year of its term, Council will approve a three-year operating budget, including all related tax impacts. Year’s three and four of this budget will be re-affirmed by Council prior to their commencement. A similar process is followed for its rate funded operations. On December 10, 2019 Council approved its first three-year multi-year operating budget for 2020, 2021 and 2022. It has now reached the fourth year of its budget lifecycle being the reaffirmation of the previously approved 2022 operating budgets as shown in Table 1. Page 12 of 49 Proposed 2022 Budget Introduction October 12, 2021 Page 2 of 3 Table 1 Multi-year Key Milestones On April 28, 2020 Council approved a series of changes to the Town’s budget process and format to be phased in over next two year’s budget processes. Furthermore, on December 14, 2020 Council reaffirmed the Town’s 2022 operating budget which included a planned tax rate increase or 2.9 percent. Over the first half of 2021, in support of the 2022 reaffirmation process staff have undertaken an in-depth review of the proposed operating and capital budget to ensure its continued relevance. Analysis Staff have spent the past several months on the development of the proposed 2022 budget and 10-year capital plan to be presented to Council on October 26th, 2021. Both the operating and capital budgets used the 2021 to 2022 Budget and 10-Year Capital Plan as the basis for the budget development. The proposed 2022 capital budget continues to follow the new capital budget principles established last year. This includes requesting capital budget authority for capital projects and capital programs for repair and replacement capital in facilities, fleet, roads and sewer. This budget proposes a total of $192.4 million in capital budget authority which is made up of $181.7 million in previously approved capital projects and $10.7 million for net new budget authority requests. Of this budget authority $83 million is planned to be spent in 2022.The capital budget also proposes a 10-year plan totalling $300.8 million. Year Action Status One Approve 2019 Receive 2020 to 2021 Two Approve 2020 to 2022 Complete Three Re-affirm 2021 to 2022 Complete Four Re-affirm 2022 In Progress Complete Page 13 of 49 Proposed 2022 Budget Introduction October 12, 2021 Page 3 of 3 The operating budget for 2022 continues to experience pressures related to COVID-19. While Safe Recovery grant funding from the province will manage to mitigate many of these pressures, particularly in Community Services, there is also an impact to assessment growth in 2021. The 2021 to 2022 Budget included an assumption for assessment growth of 2.2%. COVID-19 driven construction delays has resulted in the need to revise this down to 1.2%. This resulted in a budget pressure of $521,100 or one percent on the tax levy. Staff have worked diligently to contain this pressure, among other pressures, to meet the tax levy of 2.9% approved last year. Water and wastewater rates are proposed to increase compared to those approved in the 2021 to 2022 Budget. This increase is driven by York Region Council’s recent decision to increase wholesale rates for water and wastewater to 3.3 percent for next several years. Last years budget assumed an increase of 2.9 percent. The 2022 budget is based on information known when this budget was initially being developed. In recent months the Consumer Price Index (CPI) for the Toronto area has increased significantly. The CPI year-over-year increase as of August 31, 2021 was 3.3% for Toronto and 4.0 percent for Ontario. The current recommended 2022 tax rate increase includes 1.9% for town operations, including its management of inflation on existing good and service purchases. It is staff’s intention to manage any excess inflationary operating pressures experienced in 2022 within the overall proposed budget. However, should inflationary pressure remain at these levels, this strategy will not be sustainable. The current proposed operating budget also continues to meet the direction set by Council to not exceed overall tax rate increase 3.0% per year including 1% for the Town’s fiscal strategies of contributing to asset management reserves and reducing the reliance upon non-sustainable revenues such as supplementary taxes (in-year tax growth). Attachments None. Page 14 of 49 100 John West Way Aurora, Ontario L4G 6J1 (905) 727-3123 aurora.ca Town of Aurora Memorandum Finance Department Re: Procurement Modernization Project Update To: Finance Advisory Committee From: Rachel Wainwright-van Kessel, Director, Finance Date: October 12, 2021 Recommendation 1. That the memorandum regarding Procurement Modernization Project Update be received; and 2. That the Finance Advisory Committee comments regarding the procurement modernization project update be received and referred to staff for consideration and further action as appropriate. Background In the 2021 to 2022 Budget Council approved a study capital project for Procurement Modernization. This project includes the following:  A risk assessment including a snapshot review, field study and RADAR report of the current procurement knowledge and process  Process improvement including the development of standard templates, contracts and forms  An assessment of procurement types and thresholds to make procurement more strategic  Development of a new procurement bylaw and process protocols  Ensuring compliance with trade treaties  Deployment training for implementing the new bylaw, templates and process The Procurement Law Office was retained to assist with the project. They have experience in working with many municipalities across Ontario to help them improve their procurement knowledge and processes. Page 15 of 49 Procurement Modernization Project Update October 12, 2021 Page 2 of 9 The Procurement Law Office has completed the RADAR report which is included in Attachment 1 and staff are currently reviewing the templates and procurement policy upon which the new bylaw will be developed. Analysis The RADAR report provides an overview of the current state of the procurement process at the Town. This report looks at procurement throughout the organization as all departments are involved in the procurement of good and services. The report identifies the weaknesses and proposes solutions to make procurement more effective and strategic. The following provides a high-level overview of the findings in the RADAR report in Attachment 1. Four critical risk areas were evaluated in the development of the RADAR report The first evaluation for the RADAR report includes the four critical risk areas for procurement which include: 1. The failure to meet operational needs 2. The failure to stay within budget 3. The failure to deliver on time 4. The failure to follow the process rules These areas are evaluated based on the field study which included interviewing managers from across the organization and members of the Executive Leadership Team. The results of this evaluation had Aurora score a 1.5 out of 4 indicating areas for improvement in all four risk areas as shown in Figure 1. Based on these scores the report cites the following key findings:  “Overall, current institutional score card is 1.5 out of 4 due to the current misalignment of managing costs, time constraints, operational needs, and process rules.”  “Lack of transparent means for tracking expenditure in an easily accessible manner and the use of rosters heightens the potential over-spend on recurring purchases.”  “The inordinate emphasis of procedural compliance, when compared to operational needs and time constraints, is producing marginal results and placing future operational needs at risk of significant failure.” Page 16 of 49 Procurement Modernization Project Update October 12, 2021 Page 3 of 9  “There is an absence in the overall co-ordination requirement to better ensure the timely planning and execution of procurement projects.” Figure 1 Critical Risk Area Assessment The report further breaks down the four critical risks into eight critical target areas including measures for 24 diligence indicators The overall score is broken down further into either target areas and each of these are broken down further to be able to provide actionable feedback for improvement. The eight critical target areas include:  Institutional Governance  Project Governance  Forms and Formats  Document Drafting  Bidding Risk  Contract Management  Training  Innovation Page 17 of 49 Procurement Modernization Project Update October 12, 2021 Page 4 of 9 These areas are scored from apparent rule breach in red on the outside of the circle to exceptional which is closer to the centre of the circle as shown in Figure 2. Figure 2 Seven Tier Scoring System Aurora’s scores for the 24 areas evaluated ranged between good and inadequate with some indicators having two scores based on the mixed evaluation of that area. The goal is to pull these scores closer to the centre to have a minimum of good in all 24 areas through the implementation of the findings of the project. Figure 3 shows the scores for Aurora. Page 18 of 49 Procurement Modernization Project Update October 12, 2021 Page 5 of 9 Figure 3 Aurora’s Snapshot Scoring in the Eight Target Areas Recommendations are provided to improve all eight critical risk areas The following summarizes the recommendations identified in the report for each of the eight critical risk areas and identifies the score(s) for each of the diligence indicators. Each indicator is graded from A being exceptional to F as a potential rules breach and X as apparent rules breach. All of Aurora’s grade fall between C to E as detailed in Table 1 below. Page 19 of 49 Procurement Modernization Project Update October 12, 2021 Page 6 of 9 Table 1 Critical Risk Area Grades and Improvement Recommendations Diligence Indicator Grade A-F & X Recommendations for Improvement Institutional Governance: Indicators 1-3 1 Accountability Controls C/E Implement a revised procurement policy (i.e. bylaw) Ensure a clear link to code of conduct Align the policy with trade treaties Prohibit contract splitting through better planning/accountability Establish a procurement governance committee including staff from various departments 2 Integrity Indicators E 3 Open Competition Requirements E Project Governance: Indicators 4-6 4 Project Planning and Procedures C/E Clearly outline roles and responsibilities for all parties involved in procurement Develop guidelines for selecting right procurement template (type e.g. RFP, RFT etc.) Reduce duplicated approvals Set appropriate expectations for timing 5 Project Team Roles and Responsibilities D 6 Clear Requirements and Formats E Forms and Formats: Indicators 7-9 7 Range of Formats D Update and implement new templates Include full range of formats e.g. negotiated RFP for insurance Use pre-qualification to establish rosters 8 Template Contract D 9 Awareness of Format Use E Page 20 of 49 Procurement Modernization Project Update October 12, 2021 Page 7 of 9 Diligence Indicator Grade A-F & X Recommendations for Improvement Document Drafting: Indicators 10-12 10 Drafting Process Flow E Implement a clear project design-planning process based on expenditure and complexity Establish a streaming system Clearly identify roles in drafting Use of plain language 11 Drafting Roles and Responsibilities E 12 Document Readability E Bidding Risks: Indicators 13 to 14 13 Contract Scoping E Better align scoping and scoring Manage the collect and disclosure of material information during the process Enhance the defensibility of bid evaluations and award 14 Material Disclosures E 15 Evaluation Defensibility D/E Contract Management: Indicators 16-18 16 Contract Administration D/E Establish contract management procedures Define clear rules for scope increase Develop a process to manage supplier performance and disputes Establish a supplier suspension process 17 Scope Management D 18 Performance Tracking and Debarment E Page 21 of 49 Procurement Modernization Project Update October 12, 2021 Page 8 of 9 Diligence Indicator Grade A-F & X Recommendations for Improvement Training: Indicators 19-21 19 Hiring Standards E Recommendations for hiring in procurement Augment procurement resources to provide support Develop “Procurement 101” training for all and new hires Negotiation training for Legal and Procurement and other key staff Expand use of Negotiated RFP (e.g. Insurance) 20 Procurement Training E 21 Advanced Negotiation Training E Innovation: Indicators 22-24 22 Broader Organizational Awareness D Improve awareness of procurement practices Leverage procurement-centric technology Automate design and drafting platform Automated requisitions and approvals 23 Business Process Improvement C/E 24 Effective Use of Technology C/E The next steps include reviewing the procurement policy upon which the new bylaw will be based Staff are working with the consultant on reviewing the procurement policy and protocols. This policy outlines the content that will be used to develop a new recommended procurement bylaw for Council’s review and approval. Page 22 of 49 Procurement Modernization Project Update October 12, 2021 Page 9 of 9 This new bylaw will address many of the recommendations for improvement that have been identified by the consultant and feedback received from staff across the organization. It will also enable Procurement Services to become strategic partners for their clients. Attachments Attachment 1 – RADAR Report – Town of Aurora Page 23 of 49 Procurement Law Office 1 Suite 406 - 781 King Street West, Toronto, Ontario M5V 3L5 www.procurementoffice.com 416-700-8528 | paul.emanuelli@procurementoffice.com Discussion Draft RADAR Report Risk Assessment, Diagnosis, and Recommendations Date: May 12, 2021 To: Town of Aurora (the “Town”) Attn: Anna Ruberto A.Our Deliverables In accordance with the methodology and approach set out in our Statement of Work, we have: 1.reviewed the Town’s procurement-related policies, procedures, and templates and prepared a Snapshot Review of the Town’s procurement operations as set out in the attached Snapshot Review Presentation slides and the Snapshot Diagnostic Tool spreadsheet; 2.conducted field study interviews with a total of 14 Town staff; 3.conducted two separate self-assessment surveys of procurement staff and broader organizational representatives to consolidate their views on existing procurement practices as set out in the two attached survey result summaries; and 4.consolidated our findings and recommendations from the above sources in this RADAR Report. Our deliverables also include a briefing session during which we will present a summary of our findings and recommendations, answer your questions, and discuss potential next steps should the Town decide to implement the recommendations. B.Overall Assessment and Snapshot Review Process (i)The Four Critical Risk Factors and Four-Point Benchmarks Our Institutional Reviews are intended to assess existing procurement practices and tailor recommendations for future improvement in the context of the following four risk factors inherent in public sector context: 1.the failure to meet operational needs; Attachment 1 Page 24 of 49 Procurement Law Office 2 2. the failure to stay within budget; 3. the failure to deliver on time; and 4. the failure to follow the process rules. At the institutional level, each of these factors can be assessed on the following four-point benchmarking scale: 1. Significant Failure 2. Marginal Results 3. Meets Expectations 4. Exceeds Expectations By conducting an overall assessment of the four critical risk factors on the four-point scale, we can provide a global picture of how the institution is balancing its institutional practices and score them as below: Page 25 of 49 Procurement Law Office 3 At the institutional level, our assessment of the overall risks created by the Town’s existing procurement practices is as follows: This overall assessment is supported by the findings contained within our Snapshot Review process and Field Study as further described below. (ii) Snapshot Review Methodology The Snapshot Review is an assessment of the Town’s existing procurement practices in the following eight key target areas: (i) institutional governance; (ii) project governance; (iii) forms and formats; (iv) document drafting; (v) bidding risks; (vi) contract management; (vii) training; and (viii) innovation. The Snapshot Review contains a series of specific due diligence indicators that measure an institution’s procurement practices against broadly recognized industry best practices. The standard-setting sources that inform this analysis include: 1. a synthesis of over four decades of case law rulings drawn from the Canadian International Trade Tribunal and from every jurisdiction and level of court in Canada, along with leading international case law decisions; Page 26 of 49 Procurement Law Office 4 2. Canadian legal standards and trade treaty obligations from a broad range of treaties, including the Canada-European Comprehensive Economic and Trade Agreement (CETA), the Canadian Free Trade Agreement (CFTA), along with federal and provincial statutes, directives, and guidelines; 3. international best practices drawn from leading sources, including World Bank and OECD recommendations, guidelines, and standards, the UN Model Procurement Law, and procurement treaties and statutes from a broad range of jurisdictions; and 4. good governance recommendations from public inquiries and from Canadian and international public audit reports. By applying broadly recognized standards to selected sample documents from the Town, the Snapshot Review provides a preliminary assessment of your procurement practices based on a seven-tier scoring system that can help inform future initiatives for improvement, and also serves as a benchmark against which you can measure the success of those initiatives. While the Snapshot Review draws on a broad range of standard-setting sources to assess your practices against 24 due diligence indicators, it is not intended to: (a) provide an exhaustive review of the Town’s procurement practices; or (b) provide a conclusive legal opinion on those general practices or on any specific sample document. (iii) Snapshot Results: Snapshot Review and Diagnostic Tool Findings The results of the Snapshot Review are presented in the Snapshot Review Analysis Diagram, which synthesizes our findings in a quick-reference visual format. The Snapshot Review Presentation slides further illustrate how the diagram is constructed by plotting the scores for each of the 24 due diligence indicators within the eight critical target areas, and includes examples of Snapshots of other public sector institutions for the purposes of comparison. The Town’s Snapshot reflects and summarizes the scoring of approximately 200 sub-criteria. In some cases, multiple scores are shown for a specific due diligence indicator where there was significant variation in the scoring of the sub-criteria in that area. Page 27 of 49 Procurement Law Office 5 These factors are scored according to a seven-tier grading system. Based on a scoring of the 24 due diligence indicators falling across the eight target areas identified above, the Town’s overall Snapshot assessment is as follows: All of the detailed sub-criteria, along with the assigned scores and comments, are set out in the Snapshot Review Diagnostic Tool document, which is attached along with the Snapshot Review Presentation. (iv) Field Study: Procurement Department and Broader Organization Reports We conducted the above-noted interviews with procurement professionals from the Town’s Procurement Department and representatives from various other the Town business units to discuss the Town’s procurement operations and processes. In this report, we will use the term “business units” to refer to the Town’s departments, divisions, or units other than the Procurement Department. We also asked the interviewees and other the Town employees to complete our online surveys. The survey results are useful to illustrate the level of awareness across the Town with respect to procurement matters and the level of employee confidence in the Town’s procurement operations. Page 28 of 49 Procurement Law Office 6 The survey results were incorporated into our Field Study and relied on as part of the findings and recommendations contained in this report. C. Executive Summary of Key Recommendations Based on our findings and observations, our key recommendations are as follows: 1. Institutional Governance - Revised Procurement Policy We recommend that the Town consolidate and update the content from the existing procurement-related policies and adopt a procurement policy that clearly sets out the approval authorities and the roles and responsibilities of all the Town employees engaged in procurement. The consolidated policy should: a) articulate the role of senior management across all business units in supporting the role of the Procurement Department and protecting the Town’s interests by ensuring compliance with governing rules in respect of its procurement operations; b) incorporate an updated version of the Town’s Code of Conduct; c) establish a supplier code of conduct to address rules and expectations with respect to the conduct of suppliers, including prohibitions against illegal or unethical bidding practices and rules with respect to lobbying and disclosure of conflicts of interest; d) update stipulated monetary thresholds for low-value purchases, invitational competitions, and open competitions, and outline appropriate exceptions to requirements to conduct competitive processes that align with applicable trade agreements; and e) prohibit contract-splitting and improper contract extensions and scope changes, and emphasize responsibility and accountability for accurately scoping requirements and estimating the value of a procurement. We recommend that the Town establish a procurement governance committee made up with members from the Procurement Department and key business units, that will meet on a regular basis to facilitate communication and discussion with respect to the Town’s procurement issues. This committee should be responsible for addressing discrepancies in procurement practices, engaging in strategic planning to Page 29 of 49 Procurement Law Office 7 increase collaborative procurement, and encouraging stability, continuity, and consistency in the relationship between the Procurement Department, Legal Department, and the business units. 2. Project Governance - User-Friendly Procedures We recommend that the Town establish clear and consistent procedures that direct users through the various stages of the procurement process, set out the specific requirements that need to be met at each stage, and assign clear roles, responsibilities, and accountabilities for meeting those requirements. The procedures should: a) clearly outline the roles and responsibilities of the Procurement Department in providing procurement expertise and services to the business units in a consistent and timely manner, managing and overseeing the competitive process and facilitating communications with bidders; b) clearly outline the roles and responsibilities of the business units in providing advance notice of upcoming procurement requirements, participating in the planning process, drafting unbiased specifications and clear requirements, collaborating on the development of appropriate and defensible evaluation criteria, and fully participating in fair and transparent evaluation processes; and c) establish clear instructions and guidelines for (i) selecting the appropriate competitive procurement template; (ii) drafting and assembling competitive procurement documents; (iii) conducting the competitive processes; (iv) establishing and managing qualified supplier rosters; (v) preparing for and conducting negotiations; (vi) conducting debriefings; and (vii) handling procurement protests. 3. Forms and Formats – New Tendering Templates and Frameworks We recommend the Town develop and implement an updated set of solicitation document templates and make use of a full range of procurement formats. We recommend that the Town increase its use of prequalification processes to establish rosters of prequalified suppliers under framework arrangements for the purchase of regularly required goods and services through expedited second-stage competitions. 4. Document Drafting – Procurement Design-Planning We recommend that the Town mandate a clear project design-planning process that requires project teams to confirm contract scoping, pricing structures, evaluation criteria, contract structures, and tendering formats as the first stage of the procurement planning process. This design-planning should be mandated to project teams as a pre-requisite to proceeding to full solicitation drafting and, for major project, as a prerequisite to initial spending authorization. The level of advanced planning and allocated staff resources should be directly tied to the level of expenditure, complexity, and long-term significance of the specific contract. The Town should establish a streaming system for projects to direct them to the Page 30 of 49 Procurement Law Office 8 appropriate stream based on major project expenditure and complexity, recurring tendering, and below- threshold small expenditures. 5. Bidding Risks We recommend that the Town establish policies, procedures, and protocols to deal with bidding risks in the areas of contract scoping, material disclosures, and evaluation defensibility, including protocols: a) requiring the clear alignment of contracting scoping and pricing structures; b) managing the collection and disclosure of material information during the bidding process; and c) enhancing the defensibility of bid evaluation and contract award processes. 6. Contract Management We recommend that the Town establish and document procedures for contract management, including: a) procedures establishing roles and responsibilities for day-to-day contract management and monitoring of milestone dates; b) clear rules for extending or increasing the scope of existing contracts; c) procedures for evaluating and documenting supplier performance issues and managing contract disputes; and d) a process for suspending suppliers from participation in future procurement processes on the basis of unsatisfactory performance or inappropriate conduct. 7. Training – Enhanced Staffing and Training We recommend that the Town augment the existing level of procurement support resources provided through the Procurement Department to improve service delivery levels to the business units, facilitating strategic procurement planning, and ensuring that sufficient full-service-full-cycle support is given to complex, high-value, and high-priority procurements. Following the development of a clear procurement policy and procedure framework, we recommend that the Procurement Department launch an organization-wide “Procurement 101” training program and implement an ongoing communications strategy to receive feedback from the business units and ensure that revisions to procurement policies and procedures are communicated in a timely and comprehensive manner to be actioned by the Procurement Department. This training should incorporate the key recommendations for Ontario municipal procurement training programs identified by Ontario Associate Chief Justice Frank N. Marrocco in his November 2020 Transparency and the Public Trust: Report of the Collingwood Judicial Inquiry. Page 31 of 49 Procurement Law Office 9 8. Business Process Improvement and Innovation We recommend that the Town leverage procurement-centric technology to facilitate its procurement operations by: a) automating the design and drafting process to help facilitate document version control; b) adopting an e-bidding platform to facilitate bid evaluation processes; and c) streamlining the approval processes through automation of requisitions and approvals, with recognition of electronic signatures. D. Detailed Observations and Recommendations Based on the feedback we obtained through the Field Study interviews and surveys, in combination with the results of our Snapshot Review, our detailed findings and observations are as follows: I. INSTITUTIONAL GOVERNANCE As discussed below, the Institutional Governance category addresses the first three due diligence indicators: (1) Accountability Controls; (2) Integrity Indicators; and (3) Open Competition Requirements. 1. ACCOUNTABILITY CONTROLS: Does your organization have the proper internal governance policies and procedures in place to keep pace with emerging due diligence standards? Our observations and recommendations in this area are as follows: a) Roles and Responsibilities: We recommend that the Town consolidate and update the content from the existing procurement-related policies and adopt a procurement policy that clearly sets out the approval authorities and the roles and responsibilities of all the Town employees engaged in procurement. Our review found the following: i. A clearer definition of roles in the existing policy in regard to institutional roles and responsibilities, especially for the procurement department is required. The scope of roles and responsibilities typical for public procurement operations were not well understood by interviewees across the organization. ii. Our Field Study noted significant delays as decision-making during the project planning process was transferred between different individuals in the organization. The Field Study also indicated that the current procurement design, drafting, posting, evaluation, and award process results in multiple dead ends since the current system lacks a clear tracking and reminder system to identify when a process is stalled with a specific individual. iii. Field Study interviewees expressed frustration with what they saw as a regulatory compliance role assumed by the Procurement Department, coupled with a ‘gotcha’ Page 32 of 49 Procurement Law Office 10 mentality that appeared to prioritize the identification of infractions over the provision of procurement related services. b) Delegation of Authority: The Town needs to implement more effective delegation mechanisms involving fewer mechanical approval checkpoints and greater authority and accountability at the project team level. A greater distinction between the level of oversight required for day-to-day transactions and major projects needs to be recognized. Low and Mid-Value procurements can be largely downloaded to the business units, with light oversight from the unit assigned procurement team member, which would allow the Procurement Department more time to focus on larger, more complex procurement projects. In our review, we observed: i. an insufficient level of delegation of authority and responsibility for achieving procurement objectives; ii. an inordinate amount of approvals that were causing significant delays in the procurement process with no corresponding improvement to accountability, transparency, or oversight; and iii. no clear institutional mechanisms to fix broken processes and avoid recurring bottlenecks. 2. INTEGRITY INDICATORS: Does your organization have the necessary safeguards in place to address procedural improprieties, including unfair advantage, conflict of interest, and evaluation bias, and to protect against bid-rigging and collusion? Our observations and recommendations in this area are as follows: a) Conflict of Interest, Lobbying, and Post-Service Confidentiality: Conflict of interest, lobbying, and post-service confidentiality should all be addressed in updated policies and procedures. In our review, we observed that: i. Conflict of interest is addressed in a form generated by the bidding system, however it is not sufficiently detailed, and should be updated to include concepts such as: recent employment, assistance in drafting a proposal, and potential downstream conflict for future employment. ii. The Town does not appear to have a documented code of conduct for its suppliers. iii. Confidential information is treated in general terms, but with no reference to post-service restrictions. iv. There was no documentation that covered the risks, or tell-tale signs of bid-rigging or prevention. Concepts such as withholding the bid-takers list were not found in the documentation provided. Page 33 of 49 Procurement Law Office 11 v. A Code of Conduct, including concepts such as not accepting gifts from potential or current suppliers was not found in the documentation provided. 3. OPEN COMPETITION REQUIREMENTS: Does your organization have the appropriate policies and procedures in place to comply with its open competition obligations and avoid procurement challenges based on inappropriate sole-sourcing, improper local preference, and biased specifications? Has your organization established open framework agreements to consolidate its purchasing while facilitating open competition? Our observations and recommendations in this area are as follows: a) Direct Awards: The development of more detailed sole-sourcing policies and procedures, including documented business cases and appropriate approvals for non-competitive procurements are required, and should include clearly identify legitimate categories for expediting direct awards, while also requiring proper planning to avoid artificial urgency and repeated contract-splitting and sole-sourcing cycles. In our review, we observed the following: i. Our Field Study revealed frequent occurrence of solicitation processes that result in no bids and led to short-term initial sole-source contracts that are then extended annually without competition for multiple follow-on years. ii. Many Field Study interviewees held an unrealistic view of the necessary timeframes required to plan and execute open tendering procedures, without distinction between actual tendering timelines and the time required at the front end of the drafting process to receive specifications and to design the solicitation. iii. The Field Study interviews revealed difficulty with tracking smaller, more frequent purchases that fall under the $10,000 threshold. This has led to instances when the aggregate of the purchases has then fallen above thresholds, unbeknownst to the business unit at the time of purchase. The development of treaty compliant open framework rosters for areas of repeat purchasing is recommended. iv. The Town does not appear to have a sole-source approval form that reflects recognized grounds for direct award that could enable a fast-track approval in appropriate circumstances. v. Many Field Study interviewees expressed frustration that the $10,000 ceiling for direct awards is too low. b) Solicitation Posting Periods: While the existing procurement policy is clear regarding the requirement to openly tender contracts, it should be updated to meet current trade treaty standards for the length of the open period. Page 34 of 49 Procurement Law Office 12 c) Biased Specifications: There is no clear policy or procedure that establishes the requirement for neutral specifications. The Town should establish clear rules and protocols to address this requirement and avoid narrowing competition and shrinking its future supplier pool. Further, the reliance on ‘or equivalent’ in specifications should be avoided, and in areas where more than one brand could be used, a request for proposal may be more appropriate. d) Consolidated Purchasing: The Town needs to establish policies and procedures for the creation and administration of supplier rosters in repeat-purchase areas under long-term, open framework agreements. In our review, we noted that: i. There do not appear to be any protocols for identifying areas of possible aggregation in spending. ii. The existing policy does not provide enough detail on how to establish frameworks and manage second-stage contract assignments with prequalified supplier rosters. Our Field Study confirmed a lack of understanding or application of proper open framework practices to manage supplier rosters. iii. The desire to use group purchasing and piggy-backing provisions by the business units in an effort to save time and money is concerning as the Town remains accountable for any sole-sourcing spending under these arrangements, even if it does not engage in due diligence to confirm whether those group purchasing arrangements are treaty compliant. II. PROJECT GOVERNANCE As discussed below, the Project Governance category addresses the next three due diligence indicators: (4) Project Planning and Procedures; (5) Project Team Roles and Responsibilities; and (6) Clear Requirements and Formats. 4. PROJECT PLANNING AND PROCEDURES: Does your organization’s planning and approval process avoid approval bottlenecks and effectively integrate key decision-makers and subject matter experts into the early stages of project planning? Our observations and recommendations in this area are as follows: a) We recommend that the Town mandate a clear project design-planning process that requires project teams to confirm contract scoping, pricing structures, evaluation criteria, contract structures, and tendering formats as the first stage of the procurement planning process. This design-planning should be mandated to project teams as a pre-requisite to proceeding to full solicitation drafting and, for major projects, as a prerequisite to initial spending authorization. In support of this recommendation, our review found the following: Page 35 of 49 Procurement Law Office 13 a. While the current procurement policy is clear that early planning is required for procurement projects, our survey results and Field Study observations noted a lack of understanding of the procurement planning process and inconsistencies in practice. b. In our Field Study we noted that there was unnecessary duplication of approvals in areas where the purchase order or approved budget was already in place, with the Procurement Department unnecessarily inserted within that process in a regulatory oversight role after the higher-level budget approval. c. Our Field Study found that many business unit expectations regarding the necessary time required to conduct a proper open tendering process and award a contract were unrealistic. Use of open framework arrangements should be used to accelerate recurring purchases from pre-qualified suppliers. d. Concern was also raised in the Field Study that there have been instances of non-current templates residing on the intranet, leading to lost time and duplication of effort unnecessarily. 5. PROJECT TEAM ROLES AND RESPONSIBILITIES: Does your organization’s project governance process require the clear documentation of roles and responsibilities in order to avoid role overlaps and accountability gaps? Our observations and recommendations in this area are as follows: a) We recommend that the Town update its policies and procedures to more clearly identify project team roles and responsibilities. In our review, we found the following issues reflecting an unclear identification of project-level roles: i. The Procurement Department appears to serve as a de facto procurement regulator within the organization. They are required to enforce the By-law, which is seen by the business units as overly onerous, which had led to an overall general level of frustration across the organization with the Procurement Department. ii. The Field Study identified areas in which the mandate of the Procurement Department appeared to expand more out of operational necessity than advanced strategic planning to include areas outside of the scope of procurement contracts. iii. Many Field Study interviewees wanted procurement staff to be more integrated into their project areas so procurement staff could develop a deeper understanding of business unit needs and help with the end-to-end administration of the contracting process. iv. There is no policy in place to address the proper identification and management of external service providers. Page 36 of 49 Procurement Law Office 14 6. CLEAR REQUIREMENTS AND FORMATS: Do your organization’s project planning protocols mandate the preparation of clear requirements, realistic costing, and scheduling estimates, and the selection of appropriate contracting structures and tendering formats? a) We recommend that the Town establish a contract scoping and pricing protocol that requires project teams to engage in proper design-planning to ensure that contract requirements align with appropriate pricing structures and contract structures. This scoping exercise should be completed prior to engaging in more detailed document drafting. In our review, we found: i. Field Study interviewees described a blending of the planning and drafting stages of the procurement process, with a lack of understanding that the failure to establish clear scoping and pricing structures could result in downstream drafting delays and contract administration issues. b) We recommend that the Town mandate a proper design planning process that puts consideration of the key elements of design planning ahead of drafting any solicitation. c) We recommend that the Town include clear policy and procedures in regard to the use of the following: i. how to determine if bid security is required, and in what amount; ii. how to determine if performance security is required, and in what amount; and iii. whether pre-bid conferences or site visits are required. III. FORMS AND FORMATS As discussed below, the Forms and Formats category addresses the next three due diligence indicators: (7) Range of Formats; (8) Template Content; and (9) Awareness of Format Use. 7. RANGE OF FORMATS: Does your organization use a broad range of tendering formats based on domestic and international standards? Our observations and recommendations in this area are as follows: a) Use of Tendering Formats: The Town should deploy a full range of updated tendering formats, including negotiated RFP formats, to better meet its more complex procurement needs. In our review, we found: i. The Town has no format selection procedure or protocol in place and that the Town uses a limited number of tendering formats. ii. All solicitation samples provided were in Contract A, with clear irrevocability provisions. Page 37 of 49 Procurement Law Office 15 iii. The Town has provisions in their solicitations for negotiation, but as all documents are squarely in Contract A, this is a high risk practice that should be discontinued. iv. The Town does not appear to be using the two-staged Best-and-Final Offer (“BAFO”) processes that are industry standard for complex procurements. Negotiated RFPs should be integrated into the institution’s procurement format use. v. The Request for Information sample provided, although containing proper provisions to limit future contracting obligations, still contained Contract A language in the electronic documentation generated by the bidding system, which can be high risk and confusing to respondents. 8. TEMPLATE CONTENT: Do your organization’s standard template terms comply with the expanding body of standards flowing out of treaties, statutes, directives, good governance guidelines, and case law developments? Our observations and recommendations in this area are as follows: a) Gaps in Current Templates: We recommend that the tendering templates be updated with a new suite of up-to-date formats. In our review, we observed the following non-exhaustive list of missing elements in the current templates: i. There is no reference to a bid dispute process. ii. The submission form is missing many standard submission form items. iii. The templates require a more fulsome treatment of the process flow details from the review of mandatory submission requirements, through to the assessment of rated criteria and pricing submissions, through to the selection of top-ranked proponents and the negotiation of contract awards. i. The templates contain optional process paths, such as demonstrations and interviews that are left up to the discretion of the Town, which exposes the Town to allegations of arbitrary and ad-hoc in-process decision making. Page 38 of 49 Procurement Law Office 16 9. AWARENESS OF FORMAT USE Does your organization have a clear understanding of the legal and practical implications of using different tendering formats? Our observations and recommendations in this area are as follows: a) Selection of Appropriate Formats: A procedure should be established to better inform the use of a broad range of fit-for-purpose tendering formats across the organization. In our review, we found that: i. There appears to be no policy or procedure in place guiding project teams in the selection of the proper tendering format. ii. The absence of non-Contract A RFQ and negotiated RFP formats reveals a potential lack of understanding of the risks of using binding formats for all procurements. iii. The existing procurement policy states that low bid evaluations should be used when project teams have a clearly defined scope, even though it is industry standard to award many defined-scope contracts based on scoring price and non-price factors. iv. There was little overall awareness of the need to select the specific tendering format and strategy based on the unique elements of each specific project. IV. DOCUMENT DRAFTING As discussed below, the Document Drafting category addresses the next three due diligence indicators: (10) Drafting Process Flow; (11) Drafting Roles and Responsibilities; and (12) Document Readability. 10. DRAFTING PROCESS FLOW: Does your organization have a clearly defined document drafting process that avoids duplication and delay and enables accelerated drafting? Our observations and recommendations in this area are as follows: a) The Town should establish policies and procedures that define a clear step-by-step planning and drafting process for its solicitation documents. In our review, we found that: i. There is no clear drafting process flow in the procurement procedure. There is no guidance for optimizing administration of proper planning and drafting. ii. The Town’s policies and procedures do not mandate clear protocols for managing the editing process and maintaining version control when preparing solicitation documents. iii. The current policy and procedures do not clearly state that the project team is responsible for the drafting of scope, pricing, and evaluation criteria, or alternatively, is responsible Page 39 of 49 Procurement Law Office 17 for the management of third parties to which this function has been contracted. This lack of clear business unit responsibility resulted in many Field Study participants inaccurately attributing delays in the drafting process to the Procurement Department when those delays were more appropriately attributable to the business units. iv. Our Field Study interviews confirmed that the involvement of the Procurement Department in pre-drafting design-planning was ad-hoc and informal, if it was occurring at all. 11. DRAFTING ROLES AND RESPONSIBILITIES: Does your organization have clearly identified roles and responsibilities for the drafting and assembly of its solicitation documents? Our observations and recommendations in this area are as follows: a) General Drafting Roles: The Town needs to establish more detailed protocols for managing roles and responsibilities during the solicitation drafting process. In our review, we found that: i. There are no documented protocols, procedures, or guidelines in place to govern the procurement document drafting process, assign roles and responsibilities, and assist business units in the proper scoping and detailing of requirements. ii. There is a need for improved collaboration in the preparation of solicitation documents and to clearly delineate roles and responsibilities among procurement staff and the business units. b) Specification Drafting: The Town’s policies and procedures should be updated to more expressly deal with the rules around neutral specifications and the related responsibility of technical subject matter experts. In our review, we found that: i. The Town’s policies and procedures need to identify subject matter experts as being responsible and accountable for the incorporation of technical content, in relation to the actual subject matter of the procurement contract or the need to prepare neutral specifications. ii. The Town’s policies and procedures do not adequately address the need to avoid biased specifications and the responsibility of subject matter experts to ensure that their specifications avoid unnecessarily restricting market competition. Page 40 of 49 Procurement Law Office 18 12. DOCUMENT READABILITY: Does your organization ensure better readability by using plain language in the main body of its tendering documents and properly incorporating technical content within appendices and schedules? Our observations and recommendations in this area are as follows: a) Drafting Protocols: The Town should establish a plain language drafting protocol to ensure that solicitation documents are clearly organized with the use of plain language where appropriate in the main body of solicitation documents. V. BIDDING RISKS As discussed below, the Document Drafting category addresses the next three due diligence indicators: (13) Contract Scoping; (14) Material Disclosures; and (15) Evaluation Defensibility. 13. CONTRACT SCOPING: Does your organization ensure that its solicitations are designed with clearly drafted requirements, properly aligned pricing and scoring structures, and well-tailored legal agreements? a) Use of Appropriate Contract Terms: A review of the sample solicitations raises concern regarding whether the Town’s standard contract terms are appropriately tailored to the different types of goods and services being procured. This reflects a need for greater staff training and awareness of the boundaries of contract standardization so that project teams set aside enough time during the procurement cycle to allow for the necessary customization of contract terms for more complex procurements. 14. MATERIAL DISCLOSURES: Does your organization have the appropriate material disclosure protocols built into its drafting and tendering processes? a) Material Disclosure Protocols: The Town needs to update its policies and procedures to address material disclosure duties in its tendering and contracting processes. Our review found that: i. There is no treatment of material disclosures in the existing procurement policy. ii. There is no procedure in place for managing pre-bid conferences and site visits. Thorough procedures and protocols are recommended to manage the inherent risks associated with pre-bid meetings and site visits. 15. EVALUATION DEFENSIBILITY: Are your organization’s evaluations based on clear compliance standards, transparent scoring mechanisms, and defensible award processes? a) Evaluation Protocols: The Town should establish policies, protocols, and procedures to enhance the defensibility of bid evaluation and contract award protocols. Our review found that, among other things: Page 41 of 49 Procurement Law Office 19 i. Some requirements are being front loaded as mandatory submission requirements where, to avoid compliance issues, they are better suited as pre-conditions of award limited only to presumptive awardees. ii. No policy or protocols are in place that cover the logistics of group scoring. iii. There are no detailed policies and procedures in place for the cancellation of a bidding process, negotiation of contract awards, or managing of bid disputes. iv. The method of evaluating pricing is not clear in the sample solicitations provided. v. The collection of non-price information in low-bid, Contract A formats is confusing, and potentially risky as there is no transparent mechanism for factoring in the non-price information into the selection of the low-bidder. vi. The blanket use of reference checks that are not transparently integrated into the procurement process and accompanied by clear scoring criteria is not recommended since this practice creates bid protest risk, particularly when included in in Contract-A formats that are subject to lost profit claims by losing bidders. VI. CONTRACT ADMINISTRATION As discussed below, the Contract Administration category addresses the next three due diligence indicators: (16) Contract Administration; (17) Scope Management; and (18) Performance Tracking and Debarment. 16. CONTRACT ADMINISTRATION: Does your organization have a proactive and clearly defined accountability structure for the contract administration stage of the procurement process? a) Contract Administration Protocols: The Town should establish policies, protocols, and procedures to enhance the administration of its contracts. Our review found that: i. No documentation was provided indicating that there is a procedure for managing contract disputes. ii. Our Field Study found a lack of clarity around responsibility and accountability for different aspects of contract management. iii. There is no established process for assessing whether scope changes are sufficiently connected to the original scope of work or constitute unauthorized non-competitive procurements. Page 42 of 49 Procurement Law Office 20 iv. While contract extensions and scope increases are authorized under the By-law, the Field Study revealed that in practice the related approval processes tend to be time consuming and overly onerous. v. Although the existing procurement policy speaks to measuring and recording supplier performance, the Town does not appear to have a contractor performance tracking mechanism to document supplier performance, nor does it have sufficiently robust debarment procedures in place to transparently deal with poorly performing contractors. 17. SCOPE MANAGEMENT: Does your organization have proper scope-management practices to protect against improper scope increases? a) Scope Management Protocols: The Town should establish policies, protocols, and procedures for properly managing contracts and protecting against inappropriate scope-changes. Our review found that: i. While the Town’s policies and procedures contain clear internal approvals and requirements for amending the terms of a contract, concerns have been raised in regard to whether they are being tracked properly, while at the same time the Field Study revealed frustration that the Procurement Department was policing this process too heavily. ii. The policy and procedures speak to the risk of amending contract terms beyond 10% of the original expenditure; however, there do not seem to be mechanisms for measuring requested changes against the original scope. 18. PERFORMANCE TRACKING AND DEBARMENT: Does your organization have the performance tracking measures in place to deal with problematic contractors and properly bar them from future work? a) Performance and Debarment Protocols: The Town should establish policies, protocols, and procedures for properly tracking contractor performance and executing debarments of poorly performing contractors. Our review found that: i. There is no formalized procedure instructing staff on how to evaluate and monitor contractor performance. ii. There was no supplier code of conduct provided for review, nor does a search of the website reveal one that is available to suppliers to review. iii. The process and procedures for debarment of suppliers is not sufficiently robust. For instance, there is no documented process requiring that notice be provided to a supplier, along with an opportunity to respond, prior to any formal debarment decisions. Page 43 of 49 Procurement Law Office 21 VII. TRAINING As discussed below, the Training category addresses the next three due diligence indicators: (19) Hiring Standards; (20) Procurement Training; and (21) Advanced Negotiation Training. 19. HIRING STANDARDS: Are your procurement hiring and retention practices properly targeted to the knowledge, skills, and experience required to meet current procurement due diligence standards? a) Hiring and Training Standards: We recommend that the Town develop its job descriptions based on levels of experience in the seven skill sets identified below and that these skill sets inform future hiring of new staff and training of existing staff: i. Institutional Governance: Knowledge and experience in public sector institutional governance standards, including procurement accountability controls, integrity protocols, and treaty compliance practices. ii. Project Governance: Knowledge and experience in project management principles, including managing internal approvals, defining roles and responsibilities, and developing and executing clear project plans. iii. Forms and Formats: Knowledge and experience in a broad range of tendering formats, including the Request for Quotation, Invitation to Tender, Prequalification Frameworks, and negotiated Request for Proposals. iv. Document Drafting: Knowledge and experience in defining drafting roles, managing workflow, and creating readable documents within a multi-member project team. v. Bidding Risks Management: Knowledge and experience in creating clear contract scoping and pricing formats, managing material disclosures, and developing clear evaluation criteria and process rules. vi. Contract Administration: Knowledge and experience in defining post-award contract administration roles, integrating scope management practices, and implementing contractor performance tracking systems. vii. Leadership and Innovation: Knowledge and experience in promoting compliance across the organization, tracking industry trends, and championing the adoption of advanced practices, procedures, and technologies. b) Benchmark Scoring: We recommend that the Town implement the following public procurement knowledge and experience scoring matrix developed by our office, which is based on the following five benchmarks scored out of a 100-point scale: Page 44 of 49 Procurement Law Office 22 i. Years of Experience: Individuals should be credited with two points per year of public sector experience up to a maximum of 20 points. Individuals with only private sector procurement experience should be credited with only one point per year up to a maximum of ten points, since the lack of public sector experience means that there will be significant additional development required for that individual to function in the public procurement context. ii. Core Competence: Core competence should be scored out of 40 points divided equally between tendering knowledge and contracting skills: § Tendering Experience: The 20 Core Competence points for tendering experience should go to a proven background using different tendering formats. Three points should be allocated to basic experience in using simple tendering processes, such as Request for Quotation formats; three points should go to experience in using Request for Supplier Prequalification processes and establishing Framework Agreements; and another four points should go to experience using construction tendering and fixed-bid “Contract A” process contract formats. The remaining ten points should be allocated to experience in using negotiated RFP formats, with at least five of those ten points going to experience using advanced multi-staged negotiated RFP formats. § Contracting Experience: The other 20 Core Competence points should go to assessing the scope and depth of experience in different types of contracts. While the range of required contracting experience may vary depending on the needs of the specific organization, most large institutions typically require experience with general contracting, construction contracting, and technology contracting. When scoring for contracting experience, only five points should go to experience with basic goods and services, including general consulting services, and basic construction, using standardized design-bid-build stipulated- sum contracts. The remaining 15 points should typically be divided equally between: (i) advanced construction projects, including construction management, design-build, and integrated project delivery formats; (ii) complex technology projects calling on industry-specific knowledge of business process mapping, business continuity, confidentiality and privacy, intellectual property rights, and limitation of liability issues; and (iii) other specialized areas, ranging from specialized commodities to revenue-generating concession arrangements to emergency response contracts to architectural, banking, insurance, benefits, and advertising contracts. iii. Advanced Factors: Strong skills in writing, presenting, and negotiating are the most probative factors for separating advanced performers from the rank-and-file of the procurement industry. The final 40 remaining points should be allocated to these factors, Page 45 of 49 Procurement Law Office 23 with the first 20 points scoring an individual’s portfolio and track record of publications and presentations, and the final 20 points scoring the individual’s negotiating experience. The 20 points for writing and presentations should reflect demonstrated thought leadership in the industry. For scoring the 20 negotiation experience points, up to ten points should be allocated to experience as an active member of the negotiation team in a complex project within the last five years. The final ten points should be allocated to experience in leading a negotiation team in those same situations over the last five years. 20. PROCUREMENT TRAINING: Are your core procurement and legal staff receiving the up-to-date training necessary to ensure that your institution is keeping pace with industry developments and meeting its due diligence duties? a) Procurement Training Program: The Town should establish a procurement training program for all staff that are involved in the procurement process. Our review found that: i. The Town is lacking a procurement training program. ii. The Field Study raised concerns over the consistency of procurement orientation sessions for new employees. Our Field Study interviews noted an inconsistent approach by supervisors to ensuring that new employees read and understand applicable procurement rules and procedures. iii. Feedback obtained through the Field Study suggests that the Town’s public procurement obligations are not well understood by the broader organization and there is a lack of understanding across the organization about the appropriate division of roles and responsibilities between the Procurement Department and the business units. 21. ADVANCED NEGOTIATION TRAINING: Do your core procurement staff have the advanced negotiation training required to properly manage more complex procurement projects? a) Negotiations Training Program: The Town should establish a negotiations training program for key procurement staff in the Legal and Procurement Departments, along with staff in key business unit areas, in support of the successful execution of complex procurements projects. Our review found that: i. Negotiated RFP formats are not being used. The broader use of flexible formats would be more appropriate for more complex procurements. ii. There is a lack of protocols or guidance provided regarding the appropriate procedures for using negotiation in a public sector procurement context. Page 46 of 49 Procurement Law Office 24 VIII. INNOVATION As discussed below, the Innovation category addresses the last three due diligence indicators: (22) Broader Organizational Awareness; (23) Business Process Improvement; and (24) Effective Use of Technology. 22. BROADER ORGANIZATIONAL AWARENESS: Is your organization proactively promoting a broader organizational awareness of proper procurement practices? a) Organizational Awareness Initiative: The Town should establish an initiative to better ensure broader organizational awareness of the procurement function and its importance to overall strategic objectives of the organization. Our review found that: i. There is significant room for improvement in terms of increasing the Procurement Department's traction within the Town and the business units’ overall commitment to understanding and complying with legal obligations and best practices in public procurement. ii. Field Study interviewees and survey respondents indicated that procurement rules and processes are not clearly communicated, and the Procurement Department is not using effective tools to communicate with the broader organization. iii. There are no apparent communication plans or protocols in place to effectively disseminate information regarding procurement rules and procedures across the broader organization. The Field Study revealed that updates to the current versions of templates and forms are not shared, which leads to an unnecessary duplication of effort and process delays. iv. The head of procurement holds a manager’s position, which is an insufficiently senior position within the hierarchy of the organization. This limits the ability to ensure a broader organizational traction and awareness of the procurement process and procurement rules. 23. BUSINESS PROCESS IMPROVEMENT: Is your organization implementing procurement-centric business process improvement that embeds strategic design-planning and project management disciplines into the planning and execution of its procurements? a) Business Process Improvement Initiative: The Town should establish an initiative to integrate procurement-centric business process improvement across the organization. Our review found that: i. The Town should implement a clear design-planning process for high value procurements that aligns with the annual budgetary process to better ensure advanced planning and appropriate resourcing for major projects. Page 47 of 49 Procurement Law Office 25 ii. The Town would benefit from clearly documented project management practices and procedures to reduce the time required to run a bidding process and award a resulting contract. 24. EFFECTIVE USE OF TECHNOLOGY: Is your organization keeping up with industry practices and leveraging procurement-centric technological innovations that can enhance and accelerate its tendering cycles? a) Leveraging Procurement-Centric Technologies: The Town should implement procurement- centric business process improvement through the implementation of procurement-centric technologies, including solicitation drafting and design software, electronic evaluation platforms, and, where appropriate, electronic reverse auction platforms. Our review found that: i. Other than fulfilling its obligation to electronically post open competitive procurement opportunities on Biddingo.com, the Town does not appear to be leveraging procurement- centric technology to facilitate its procurement processes. ii. The Procurement Department’s external website site has minimal information and includes no link to the policy or procedures. The page also does not contain information about current or past opportunities. iii. Field Study participants mentioned that procurement review and approval processes remain primarily paper-based and difficult to follow. iv. There is no automated drafting tool in place to aid in the drafting process. v. There does not appear to be an electronic evaluation tool being used by the Town, although electronic submissions are accepted through Bids and Tenders. vi. It is unclear whether the Town is accepting Bid Bonds through proper electronic means. vii. Electronic auctions are not in use at the Town. While the current level of expenditures may not justify the immediate deployment of this technology, substantial savings could be achieved as operations expand if contractors were mandated to use electronic reverse auctions within their own supply chains and if the Town used electronic reverse auctions as the second-stage of its own future framework agreements. Page 48 of 49 Procurement Law Office 26 E. Next Steps During our briefing session scheduled for Wednesday May 12, 2021, we will present the Snapshot Review and discuss the findings and recommendations set out in this report. Please let us know if you have any immediate questions or concerns. Paul Emanuelli General Counsel and Managing Director Procurement Law Office Page 49 of 49