Government consultant paid $13M for $10M in savings – Telegraph-Journal – 20 June 2017
Article by Robert Williams
Photo by Robert Williams
It is extraordinary that this is happening. They’re issuing contracts for over $12 million without any clear objectives, without any clear measurables, without any clear deliverables, that seem to have been drawn up by the consultant on the consultant letterhead. – David Coon
New Brunswick’s auditor general is blaming a “culture of complacency” and a “troubling disregard” for procurement rules for a consultant being awarded $13.2 million in contracts and only finding an unverified $10.1 million in annual savings.
The contracts between the Department of Social Development and the consulting firm were expected to result in $47 million in savings, according to Auditor General Kim MacPherson, who delivered her annual report to the legislature Tuesday.
Although MacPherson declined to name the consultant — she said her report zeroed on poor government practices, not the company in question — cabinet minister Serge Rousselle told reporters later it was the global firm Ernst and Young, or EY.
EY did not immediately respond to messages for comment Tuesday.
MacPherson said she was “concerned about a culture of complacency” considering the department that helps vulnerable people had “relied solely on the consultant to evaluate project quality.”
“It’s a very troubling disregard on many counts,” MacPherson said in a press conference afterwards. “The most troubling is the whole chain of events around procurement and what appears to be a total disregard for the legislative framework.”
Rousselle blamed the former Conservative government for the controversy, who were in power when the 2013 contract was signed.
“At the end of the day, it should have been actual savings,” he told reporters in a scrum afterwards.
Tory critic Ernie Steeves, who was not part of the former Tory government, told reporters in Fredericton the former administration had tried to do its best.
“Those people made decisions that they thought was best for New Brunswick at the time — every government does,” Steeves said. “The auditor general comes in and corrects decisions that are improperly made.”
Green Party leader David Coon said he was amazed by the auditor’s findings.
“It is extraordinary that this is happening,” said Coon. “They’re issuing contracts for over $12 million without any clear objectives, without any clear measurables, without any clear deliverables, that seem to have been drawn up by the consultant on the consultant letterhead.”
MacPherson said the contract, a cost-reduction strategy for the department which started in 2013, had been rushed ahead using an “emergency-urgent” exemption without allowing for proper competitive process. The contract for the first of three phases was for $100,000.
EY had already been working with the department prior to the contract, and MacPherson said the “relationship was developing.”
A second agreement, also made using the same exemption, was signed for $112,000. The exemption was granted by the former Progressive Conservative government to “achieve aggressive budget reduction targets for 2013-14,” according to the report.
The third phase of the contract was signed on Aug. 28, 2013 for nearly $12.3 million.
The original contract, which was for two years, was extended for a third year in 2015 by the new Liberal government. MacPherson said the new government “missed an opportunity to amend the terms and tighten it up in 2015.”
The department allowed EY to evaluate its own project quality and ended up paying an extra $1.3 million for what the auditor general deemed should have been part of the original contract.
It also racked up $600,000 in travel expenses without receipts required by government policy, and $700,000 when it exceeded the original purchase order.
EY was paid $5.8 million, or 15 per cent of the anticipated savings, in performance fees based entirely off of projected income as opposed to actual income, the auditor said.
Of the 22 savings initiatives the auditor general found, only four had actually been implemented.
As of June 2016, only 22 per cent of the projected savings, or $10.1 million, were reported. However, even those numbers could not be confirmed, MacPherson said.
At the completion of the extended contract, a total of $13.2 million had been paid.
When asked if anyone would be reprimanded, Rousselle responded, “I will not get into human resources issues.”
MacPherson made 13 recommendations for the department, and three for Service New Brunswick.
The department and Service New Brunswick have agreed to the recommendations, and have told the auditor general all the changes will be in place by April 2018.