Just weeks after entering into a 10-year $100 million deal with IBM for outsourcing of the province’s back-end finance department operations, the government is embarking on a “strategic procurement initiative” that appears to be written specifically to benefit IBM. That initiative seeks to contract out the management of short-term IT projects costing over $15 million annually.
Moreover, as part of the procurement initiative, the province is changing its procurement process, such that all potential bidders must use an “e-sourcing tool” to obtain tender offers and to make bids. The e-sourcing tool was developed by a US-based company called Emptoris, which was bought by IBM last year. As used in Nova Scotia, the e-sourcing tool is licensed to the international professional services company Deloitte, which operates in a decade-long “alliance” with IBM.
In practical terms, any company bidding on a tender offer from the province must first register through Deloitte to obtain the e-sourcing tool, then use the tool to submit the bid. The bid then sits not on the province’s computers, but on a server controlled by Deloitte. If bidders need assistance, they are directed to telephone the IBM-Emptoris customer support number.
Contingent IT labour
Last Thursday, notice of a request for proposals was placed on the province’s procurement website. That RFP is looking for a firm to manage the “contingent IT labour” used by the province. That is, the province is looking for a firm to coordinate the contracting out of approximately 153,000 hours in labour, costing over $15 million annually, for short-term IT projects.
“We currently do business with over 700 IT consultants or consulting groups, for very specific things,” explains Gary Porter, the project lead for the strategic procurement initiative. “They’re typically in areas where there’s a short-term need—there would not be a case to have internal staff dedicated to it, because for the short-term nature. And secondly, it may involve an expertise that we currently do not have in government but require for a short period of time.”
Currently, each government department and agency contracts out for short-term IT labour as it needs it, and there’s no “big picture” coordination. Nobody is looking to combine projects or to achieve volume discounts, so there likely are large savings to be obtained through a systematic, province-wide coordination of such projects.
But why not simply do that coordination in-house instead of contracting it out?
“I don’t think that that’s necessarily the approach that we want to see,” answers Porter, “simply due to the other priorities that exist and the resources available and the expertise available to do this work.”
Planning for the strategic procurement initiative began in September, says Porter. Interestingly, this was precisely when the province was winding up negotiations with IBM for the outsourcing of the finance department’s SAP operations. (SAP is the computer program used for planning and managing financing.)
The broad terms of the deal with IBM are known: The province will outsource SAP operations to the company at a cost starting at $8.4 million the first year, and will give the company up to $12.4 million in payroll rebates. In total, the decade-long contract will cost the province at least $100 million, and likely much more. In return, IBM will establish a “global delivery centre” in Halifax, hiring a minimum of 100 people. In order to receive all the promised payroll rebates, IBM would have to hire up to 400 workers.
But the province has refused to make the contract with IBM part of the public record, so we don’t know what other clauses are in the contract. Perhaps there’s a condition that the company must locate the global delivery centre in the office tower above the convention centre now under construction. Or, maybe there’s an additional condition that says the province must contract out management of its contingent IT labour force.
“No,” answers Porter, when asked if the RFP for the strategic procurement initiative was written specifically with IBM in mind,. “Keep in mind that there are absolutely no companies we have in mind for this work. This is a fair, open and transparent process.”
But whether the RFP was crafted specifically for IBM or not, certainly the newly announced IBM global delivery centre in Halifax—which is arguably subsidized by the $100 million finance department outsourcing deal—gives the company a good chance to win the contingent IT labour management contract.
E-sourcing tool
Even more problematic than the contract for management of contingent IT labour is a second part of the strategic procurement initiative: a dramatic change in how the province goes about procurement.
Up until very recently, the province simply posted all tender offers and requests for proposals on its procurement website. Anyone—an interested vendor, a curious citizen, a nosy newspaper reporter—could click on a link to open a PDF file that contained the full tender. Tender offers were public in the most public of ways, fully accessible to everyone, without a government gatekeeper managing the flow of information. Anyone and everyone could obtain the information immediately, without asking permission, without saying why they wanted it and without being tracked.
That has all changed.
Notice of tenders and requests for proposals are still posted on the procurement website, but clicking the link brings interested parties to a new page that says that in order to obtain the full tender offer or request for proposal, we must first receive the e-sourcing tool. And in order to do that, we must give identifying information to Deloitte, which will then deliver the e-sourcing tool electronically.
“We are working in partnership with Deloitte with this project,” explains Porter. “Deloitte has the licence for the e-sourcing tool that they brought to this project, and so really the Deloitte team has brought that tool for us to use as part of the process.
“What it does for us is help us manage the number of RFPs that we have out at one time,” continues Porter. “It helps us make any changes that may be necessary to one of the RFPs in real time, it allows the vendor community to gain access and bid electronically on the RFPs that we have issued and it allows us to more easily exchange communications and messages with the people who have shown and taken an interest in the RFP process—so our messages will be delivered consistently and timely. And it simply helps us manage this process in the most efficient way that we possibly can.”
Porter doesn’t seem to understand the objection that the e-sourcing tool is effectively a gatekeeper, an intermediary between citizens and public information. If nothing else, it causes significant delay. The Coast asked to obtain the e-sourcing tool in order to get the contingent IT labour management request for proposal on Friday. Four days later, we’re still waiting to receive it. Moreover, the process is cumbersome: a separate tool must be requested for each and every tender offer.
“Remember, the tool was designed for bidding on government work,” says Porter. “We have nothing to hide in relation to the RFPs that we’ve issued. They’re public documents. This process is meant to be an open, fair and transparent process…The purpose of the public tender notice board is to make the community aware of when we are purchasing goods and services. That’s the intent.”
We then have the following exchange with Porter:
Porter: We’re not aware of any businesses that have shown an interest in these RFPs that had any difficulty in acquiring access, and it may be that they’re accustomed to using tools like this.
The Coast: I use the internet everyday, thanks. On what server does it sit?
Porter: I don’t know. That’s a level of detail…
The Coast: Is it sitting on Deloitte’s server or on the province’s server?
Porter: I really don’t know. The important piece for us is there’s a connection at the public tenders office, a link to the tool.
The Coast: Yea, here’s why I ask: the help number for the tool is for IBM…
Porter: The tool that Deloitte has licence on was developed by Emptoris
and Emptoris was bought by IBM, so that’s why…The Coast: See, this is why it matters where the e-bidding tool is sitting, on what server?
Porter: It’s sitting on the Deloitte server. I just had someone answering from the Deloitte team, and they say it’s sitting on the Deloitte server.
The Coast: Isn’t there a security concern here? You’re asking someone to manage this contingent labour force, a non-public organization. So they’ll be submitting bids, and I would suspect that IBM would be one of these companies, and it’s sitting on a server that IBM has access to—won’t they be able to know what all the bids are and be able to under-bid it?
Porter: No. No, there’s no connection to the, er, Deloitte is in partnership on this process with us, and there is not a conflict of interest there.
The Coast: So you’re saying Deloitte won’t bid on this?
Porter: No, Deloitte will not bid on this. That would be a conflict for them.
Porter admits that it would be a conflict for Deloitte to bid on the contract for management of contingent IT labour, so why wouldn’t it also be a conflict for IBM to bid on it?
After all, Deloitte proudly announces on its website that it is in “alliance” with IBM. “Deloitte and IBM have teamed to create joint offerings focused on the needs of federal, state and local government organizations,” explains the website. “These offerings leverage the IBM software portfolio to help public sector clients in their efforts to develop efficient, cost-effective solutions to their financial, performance and information management needs.”
Two companies, IBM and Deloitte, are now not only the gatekeepers for the procurement process, but also serve as the repository for all bids offered for every provincial tender in Nova Scotia. This should profoundly concern the public.
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This article appears in Nov 29 – Dec 5, 2012.
Details, details.
Nova Scotia isn’t used to people asking for all the details. The government wishes people like Tim would just go away and stick to reporting press releases.
What are all those anti-Harper folks in the NDP going to say about this latest move ?
This is worthy of Harper. I’m very suspicious of this
I don’t know enough about this deal to comment on it specifically one way or the other, but it sure would be nice if we didn’t “take the bait” and focus on these relatively small amounts of money (relative to the overall budget) every time someone shines a light on them. Why not, instead, undertake to do the hard work of ensuring we get value for our investment from ALL labour associated with our public services. We need to look at the size, cost and effectiveness of our public service relative to others of similar sized populations.
Every single time someone seeks efficiency they look in the same places. Why not start with the place where 90+ percent of the public expenditure on labour resides? Why not put in the effort to understand whether we are getting good value for all the money we invest there? Its easy to point out the cost of coffee, or consultants or airline tickets. These amounts are trivial compared with what we spend on the public service and we have absolutely no idea whether or not that is well invested.
This is one bitchin, bad-ass piece of journalism. Kudos to you, Tim Bousquet – thank you for telling it like it is.
PaulaMinnikin, don’t forget, aside from the salaries of public servants, there is also the the very large contingency of the private sector that acts as consultants to government, which includes yourself. I’m sure the dollar amount of consultants in government expenditures is *not* trivial. This actually might be a good place for government to cut back since there is some very good talent – currently employed in government positions – that can be found for less money than consultant rates.
Blitzen, note that I post in my own name and am an adult willing to stand behind and take full responsibility for my comments, opinions and suggestions.
I am also a consultant who has, on two occasions over the past 7 years done pieces of work, of which I am proud, for government. If the right opportunity presented itself, I would do so again. The lion’s share of my business, however, is for the private sector in my areas of specialty which, generally speaking are technology and governance.
It has been my observation that most, but not all, consultants are hired for pieces of work and that they must complete those pieces of work to a certain standard in order to fulfill their contracts and be paid. When they work for government, they are generally paid below market rates for that work. There are no benefits etc paid to these people. I have witnessed contractors- real live human beings that live and work in this community- being asked to work in closets, in tiny cubicles and given appalling working conditions simply to assuage the union rules that state how many square feet of space employees need to have. I have also seen teams where you wouldn’t know who was the worker or the contractor. It runs the gamut.
My point here is that to tackle the problem of runaway government spending that we can ill afford, we need to look at everything.
Many people think government workers are paid less than contractors. In my experience, this simply isn’t true if you look at the fully loaded labour cost of two people in similar roles.
My comments are written as a taxpayer and citizen and I stand behind them. We – all of us – need to ensure we are thoughtful and that we consider all effort expended and seek to determine where the best value for dollar spent can be found. It may be that in some areas the best model for delivering services is within the public service, and it may be that in others the most efficient model includes the private sector. But it is a fools errand to think that we can find enough efficiency in less than 10 percent of the budget to solve all of our woes. And as that road has been travelled often, one might considered that we have already entered the land of diminishing returns.
Blitzen, I am always open to a full, open and adult debate, face-to-face.
PaulaMinnikin, I think we actually agree more than we disagree.
My point is that you can’t openly criticize public servants without being transparent about the fact that you do provide services to government and are, in effect, receiving taxpayer dollars. I certainly admire the fact that you are a successful businesswoman and likely a role model to many young women. But others on this board may not know your unique perspective.
I have worked within government. When you are not in the public service, it is easy to criticize and undervalue the work that gets done. I’ve eaten my words many times. Public servants are under attack and that is wrong, because accountability comes from the top, as it does with any corporation. Morale is low in the public sector because of the actions of the decision makers. There are more public sector workers who want to see government DO THE RIGHT THING than those who simply want to collect a paycheque.
I am transparent. That would be why I post under my own name. I encourage others to do the same. I believe that all services governments procure should be sought at the best value for dollar. I believe that includes work performed under any payment scheme; contract, employee, hourly, piece work or any other form. If you read my original post, you will note I said that there is a wide range of experiences upon which to draw and that I feel strongly that focussing on any one format of payment is not the best way to drive efficiency. How you pay someone does not determine the value of their work.
As I said, when its been needed, I have, on two separate occasions, provided consulting services to government. I also said I would do so again if the right opportunity arose. I stand behind that work and the value for money provided.
I would also tell you that you wont’ have to look very far within government to know that I have VERY often given freely of my time when asked, out of a sense of civic duty. There are many other consultants that do so as well. There are also consultants I know who have only worked for government for a very long time and who would find it impossible to find work in the private sector. These same statements hold true for employees.
The point here is simple: its time to focus on outcomes rather than inputs. That’s one of the most tried and tested ways of delivering success.
The bigger story here, though, isn’t a $15 mil tender. Maybe it is cheaper to contract out the hiring of temporary IT workers, I don’t know. I would doubt it (I can’t see how the redundancy of contracting out the act of contracting things out could possibly be cheaper), but you never know.
The bigger story here is that it’s now that much harder to get information about these tenders. It took The Coast 4+ days to get their hands on that “e-sourcing” tool, isn’t that a little ridiculous for a digital transfer?
The other problem is that Porter never came right out and said whether or not IBM would, in theory, have access to the server that these tenders are placed on. Intelligently, he redirected the question.
Porter admits that it would be a conflict of interest for IBM to bid on this Contingent Labour contract. But does that put them out of the running for any future tenders using the IBM-owned, Deloitte(in association with IBM)-administered software? One would assume that, with a shiny new “global delivery centre” in Nova Scotia (that needs to employ 400 people to get all of their tax rebates) they’ll be looking to bid on a few more IT tenders.
The issue becomes one of access. IBM might never bother accessing those servers (if they are able to, an answer wasn’t spelled out) and looking at tenders to undercut them, but if they CAN, that’s a big problem.
What about the IBM-owned, essentially IBM-administered, e-sourcing tool? What happens the first time that “technical issues” cost a rival bidder (either in the form of long wait times to get the tool or issues with the bidding process) a tender?
It might never happen. It probably won’t. But the fact that I had to use the words “might” and “probably” are the issue, and issue that could have been easily resolved by not paying Deloitte for a piece of technology that’s, frankly, not needed.
ok I think the new system needs a chance. Frankly the province has been very progressive is purchasing. Some of the recent initiatives in recent years show transparency and a willingness to change. Things such as the reverse trades showsa and Barry B’s p[redessors initiatives ( Rick something). So lets see where it goes. This whole initiative is such a contrast to our HRM.
and please I really dont want someone talking about transparency who sat on the CWG bid committee. I would be ashamed and embarrassed to admit I was part of that closed door waste of $10 million with a crew so closely associated with the TCL and all of the recent scandals
For the record I volunteered countless hours to help the city I believe in win the right to represent Canada. I never filed a single expense claim and was only involved in the domestic bid: which I am proud to say we won. Check your facts before you make accusations. I have published my name. I am proud of what I have accomplished. What have you done, brave man hiding like a cowering child behind a fake name.
You are the lowest of the low. A coward. Your opinion means nothing because it belongs to no one.
And yes I do beleive we should give this system a chance. But I also believe it is not enough to focus all the efforts on less than 10% of the budget and I stand by that and can back it up. When you get some courage to be an adult and a responsible member of society, let me know.
Paula,
sorry I was out of line. I have some great issues with Fast Freddie and the way he went about things starting with the CWG and some things that happened there and obviously some of the other more public events since. I should not of made such a comment. I should of not taken a shot like that.
Still not sure where this out of the blue procurement thing came from. Never heard a word about it then boom. That is the topic here. Seems like a good idea and reduce a pile of paperwork. BUT not sure yet.
IBM is to have a Global Delevery Centre in Nova Scotia and hire up to 500 employees. One would assume that the jobs would stay in Nova Scotia. However some of the provincial employees that are accepting the IBM offer are infact doing so with a commitment from IBM that they will be relocated out of province.