BCLDB fails to adequately allow private companies to compete for government contracts: Auditor General

B.C.’s monopoly liquor distributor fails to provide non-preferential treatment 73% of the time

carol bellringer
Carol Bellringer is B.C.'s Auditor General | BCauditor.com

Staff at B.C.’s government-monopoly alcohol distributor and wholesaler recently failed to provide directly awarded contracts in a non-preferential way 73% of the time, but their actions did not explicitly constitute corruption, illegal activities or kickbacks, B.C.’s Auditor General Carol Bellringer said July 10.

“Without competing [contracts,] there was a preference given to one supplier without it being an open competition, so it’s preferential in that sense,” she said.

The vast majority of the British Columbia Liquor Distribution Branch's (BCLDB) contracts go through a government-wide portal known as BC Bid. It enables all organizations to bid on government goods and services, the BCLDB told Business in Vancouver.

Bellringer's study focused on 74 contracts directly awarded between April 2016 and July 2018 that were worth about $25 million and did not go through BC Bid.

Had she found examples of illegality, Bellringer would have gone to police, she said at a press conference. Instead of discipline, she is recommending that an unspecified number of BCLDB employees get more in-house training so they understand when contracts have to be put out to tender and what documentation is required.

Bellringer is not recommending that the BCLDB hire trainers or expand its workforce to provide the training but rather that managers put more focus on ensuring that staff know processes and have more foresight regarding upcoming spending.

Examples of contracts that were wrongly provided to private suppliers without first going out to tender included a situation where there was an annual staff appreciation day.

Staff received items with the BCLDB logo printed on them. By the time the event’s organizers decided to do this, they didn’t have enough time to procure the items competitively, Bellringer said.

The BCLDB justified directly awarding the $57,000 promotional-item contract as “an emergency” to meet its deadline but Bellringer rejected that explanation.

“When an event is annual, it is predictable,” Bellringer said. “Therefore the [BCLDB’s] classification of this direct award as an emergency doesn’t meet the expectations.”

In 54 cases, BCLDB staff failed to provide enough documentation to show that contract awards were impartial, she said.

One example of this related to what was originally an eight-year contract worth $8.5 million for software for retail operations and related technical support.

“It was later amended to increase the maximum value to $14.2 million,” Bellringer said. “This change to the contract wasn’t competed, meaning that the [BCLDB] did not consult the market to see who else could meet their needs. As a result, the [BCLDB] could not demonstrate that the higher cost represented good value for money or that the supplier was the only source for the product.”

The BCLDB explained to BIV in an email that Bellringer's "conclusion was based on a lack of evidence available in the physical files."

In many cases, the BCLDB said in its email, the Office of the Attorney General acknowledged that the BCLDB did comply with the government's Core Policy and Procedures Manual and its processes, such as legal reviews, "but failed to include documentation of these actions within the physical files."

The BCLDB said in its email that it has taken actions to correct the situation, including:

• Revising internal procedures to ensure that in future appropriate background documentation will be collected and filed prior to awarding direct contract;

• Incorporating a cost-benefit analysis into what it calls its "direct award justification template;"

•Modifying its direct award justification template to ensure that it documents analysis that staff have taken to verify existing corporate supply agreements;

• Updating its standard operating procedures to ensure that evidence of legal advice is kept in contract files; and

• Planning to add more training for members of its sourcing and vendor performance team.

Bellringer said at her press conference that there are times when directly awarded contracts are justifiable, such as when:

• the contract is with another government department or branch;

• the ministry can prove that only one contractor is qualified, available or capable of providing the goods or services;

• there is an unforeseeable emergency;

• a competitive process would interfere with security, order or human, plant or animal life; and

• a public process would jeopardize government confidentiality, cause economic disruption or be contrary to the public interest.

"Those five exceptional circumstances are intended to be exceptional," Bellringer said. "You wouldn't expect [directly awarded contracts] to be a volume this high."

In addition to wanting staff to be trained to include documentation to files when awarding contracts, Bellringer wants the BCLDB staff to understand the need to put contracts out for tender to get value for money and possibly be able to buy in bulk across government departments.

Her report did not address whether BCLDB procurement has improved or gotten worse following the current BC NDP government coming to power in July 2017.

The B.C. public service puts out government contracts valued at about $6 billion each year, according to Bellringer.