This report deals with the generator set contract award and performance process at the Office municipal d’habitation de Montréal (hereinafter “OMHM”).
The OMHM is a municipal body that manages housing for low-income residents on the Island of Montréal. As part of its mandate, it must award contracts resulting from public calls for tenders aimed at replacing or adding generators to be installed in its buildings. The generators are used to provide electrical power to a building in case of a power outage and are required by the Building Code. The investigation conducted by the Office of Inspector General focused on contracts at three (3) stages of the generator set procurement process, namely:
- Professional services contracts awarded by the OMHM to engineering firms for the drafting of documents for calls for tenders exclusively or incidentally aimed at installing or replacing a generator set;
- Work performance contracts resulting from these calls for tenders awarded to general contractors;
- Subcontracts between general contractors and generator distributors.
The OMHM first awards a professional services contract to an engineering firm for the design of electrical specifications for the OMHM’s upcoming call for tenders. These electrical specifications feature the technical characteristics of the generator to be installed in the building. A public call for tenders is then issued by the OMHM for replacing or adding a generator set, which may also include other types of construction work, bid on by general contractors. The general contractors are responsible for proposing in their bid a generator that meets the requirements of the specifications prepared by the engineers. To do so, they contract with a generator distributor to acquire a model that complies with the technical specifications.
The Office of Inspector General’s investigation has shown the close relationship between the engineers responsible for the design of the specifications and the generator distributors, as well as how this relationship affects the integrity and healthy competition of the future public call for tenders.
The investigation revealed that engineers responsible for designing these specifications for the OMHM were seeking out the assistance of distributors for designing the specifications until the call for tenders was published. Due to this collaboration, the distributor can thus influence the drafting of the specifications by having requirements included that will benefit its product in the future call for tenders. The Inspector General believes that the investigation findings must be reported to the OMHM so that measures can be taken to prevent their recurrence and ensure fair treatment of competitors in these calls for tenders.
First, the Inspector General noted that distributors were taking part in drafting the generator set specifications at the request of engineers that were actually hired by the OMHM to perform this work. The engineers that were interviewed explained that this practice is necessary, since the distributors are experts on how a generator operates. For the distributors, this work appears to be part of a more comprehensive strategy aimed at maintaining good relations with engineers and increase their sales opportunities. Distributors also did not hesitate to contact engineers during the publication of the call for tenders to mention the aspects of the specifications which they considered the least satisfactory.
The investigation also revealed that portions of the specifications prepared by the distributor were then found in their entirety in the final specifications of the public call for tenders. The distributors involved in drafting the specifications could thus propose requirements that benefited their products during the call for tenders. The specs may pertain to the motor power rating, choice of alternator, or the reference product in the specifications. For three (3) of the tenders that were reviewed, the specifications available on the SEAO electronic tendering site were a copy of those obtained from the distributor, without any changes being made.
The Inspector General has determined that this collaboration between engineers responsible for the design of the specifications and the distributors extends beyond simply gathering information on the generator models available on the market. This is how distributors carry out at least part of the engineers’ mandate involving the drafting of the generator set specifications. This practice is unacceptable, because it increases the risk that the resulting specifications will benefit the distributor that was consulted when the call for tenders was published.
There is an apparent conflict of interest when a distributor proposes descriptive characteristics for a call for tenders in which its product could be purchased by bidders. Therefore, there is reason to be concerned that the requirements proposed by the distributors will not be unbiased because of the potential gain that would result from the upcoming call for tenders.
Engineers seeking such assistance distort the very purpose of professional services contracts awarded to them by the OMHM as independent consultants. They are responsible for determining their client’s needs and drafting specifications in terms of the performance or functional requirements of the generator set to be installed in the OMHM’s buildings.
Prior to the release of this report, the Office of Inspector General met with OMHM officials to present the investigation’s findings to them. This led to proposals by the organization to avoid future recurrences. Some of the measures include amendments to the professional services contracts involved by the investigation to reiterate the legislative requirements for drafting specifications. Compliance with these requirements will mitigate the risks identified during the Office of Inspector General’s investigation. The Inspector General is also recommending amendments to the contract documents to prohibit any person involved in preparing the tender documents from bidding or being a subcontractor in the resulting contract.