The Auditor General of Ontario (the Auditor), at the request of the Standing Committee on Public Accounts, conducted spot audits on the use of consultants by MOHLTC, 3 LHINs and 16 hospitals1, and released a special report entitled, “Consultant Use in Selected Health Organizations” (the Auditor’s Report) on Wednesday, October 20, 2010. The 16 hospitals were selected, “… on the basis of size, location, and other operational characteristics, in order to examine a diverse range of institutions” for hospitals across the Province of Ontario.

Specifically, the Auditor proceeded on the following premise:

Our audit objective was to assess whether the Ministry and a selection of Ontario’s LHINs and hospitals had adequate systems and procedures in place to ensure that consulting services were acquired and managed in accordance with sound public sector business practices.

This Bulletin focuses on the application of the Auditor’s Report on hospitals. Also, this Bulletin does not address the use of hospital funds to hire lobbyists, which is the subject matter of another Bulletin released by Borden Ladner Gervais LLP (BLG) today entitled, “Key Features of Bill 122 Affecting The Use of Consultant Lobbyists”.


Application of the Supply Chain Guideline

The Auditor’s Report provided the following summary in respect of the hospitals audited:

We noted far too many instances at the hospitals we visited where sound public sector business practices were not followed in the selection and oversight of consulting services.

The Auditor then immediately references the BPS Supply Chain Guideline (Supply Chain Guideline) which applies to hospitals as of April 1, 2010, and notes that it is now incumbent on hospital senior management and boards of directors, (as well as the LHINs and MOHLTC) “… to establish appropriate oversight to ensure that hospitals consistently comply with these requirements.”

The Supply Chain Guideline, version 1.0, was issued April, 2009, and sets out a “Supply Chain Code of Ethics” as well as 25 mandatory requirements to be followed in respect of procurement policies and procedures (PPP) and is widely expected to be subject to further amendments and clarifications. The PPP is intended to be harmonized with2 each of the Agreement on Internal Trade (AIT)3, Ontario-Quebec Procurement Agreement4, Canadian Law of Competitive Processes and Contract Law5 and Freedom of Information and Protection of Privacy Act (FIPPA)6. As such, the Supply Chain Guideline must be read in conjunction with these, to endeavour to interpret its effect.

For example, the AIT provides for a number of general exceptions to its application to certain procurements, including “procurement of any goods, services and construction that is financed primarily from donations that are subject to conditions that are inconsistent with”, that portion of the AIT, and for “contracts with a public body or a non-profit organization”.7 The Supply Chain Guideline is silent on whether, as part of harmonization, those exceptions apply to the Supply Chain Guideline generally (though that interpretation would arguably flow from a plain reading of the harmonization provision).

To be clear, while certain sections are open to interpretation, the Supply Chain Guideline should be generally followed as a best practice. That said, the provisions of the Supply Chain Guideline, consistent with sound public sector business practices, must be considered in the context of each procurement and there may be times where it is prudent to deviate from the Guideline in certain specific respects. To accommodate such cases in a public sector setting, the hospital should have in place a written process for considering and adopting such deviations, and that as part of that process the reasons for such deviation should be clearly articulated, documented, and approved in accordance with such process and otherwise in a manner consistent with sound public sector business practices. This would likely include elevation for approval to an appropriate level within the hospital’s governance structure (depending on the nature of the deviation).

This view seems consistent with the view of the MOHLTC, which responded to the Auditor’s Report as follows:

The Ministry of Health and Long-Term Care agrees with this recommendation and confirms that hospitals need to have supply-chain codes of ethics, procurement policies, and procedures in place that are consistent with the mandatory broader-public-sector Supply Chain Guideline. (emphasis mine)


Table 1 sets out the “Key Controls for Best Practices” for hospital consulting engagements as provided by the Auditor in the Auditor’s Report and provides an easy to follow check-list.

The Auditor’s Report leaves no doubt that there will be a level of accountability at both the senior management and board levels to ensure that appropriate procurement processes are in place and are being verified from time to time as being consistently applied with deviations duly noted and approved in accordance with hospital procurement policies, and that such procurement policies and procedures otherwise continue to be consistent with public sector best practices.

Please click here to view table

Consistent with Table 1, the Auditor noted a number of deficiencies in respect of hospital procurement policies with respect to contractor procurement, contracting and contract administration practices. The auditor noted that most hospital procurement policies lacked specific requirements designed to promote the cost-effective use of consultants:

  • Assignments were not required to be well defined and properly justified before consultants were engaged. Part of the justification process should be articulating the needs of the hospital, defining the scope of an engagement, and ensuring that the hospital’s needs cannot be met internally. Assignments that are not well defined can lead to scope creep and a general lack of control of the contractor by the hospital.  
  • Adequate contractual arrangements with fixed ceiling prices to be established were not required.  
  • Payments were not required to be tied to specified deliverables or otherwise followed to confirm payments were consistent with contract requirements.  
  • Consultant performance was not required to be properly managed.  
  • Contracting practices did not document the reasons for or otherwise address undue continued reliance on specific contractors or the unmonitored use of “follow on” contracts to continue to use specific contractors for follow on work without the requirement for a further procurement process.  

Further, the Auditor noted that:  

  • Most hospitals did not require that their boards of directors approve either large contracts with consultants or single-sourced contracts, or that senior management regularly report to the board on their use of consultants.  
  • Most hospitals the Auditor visited had deficiencies with respect to their planning, acquisition, approval, payment, and/or contract management of consultants. Non-competitive procurement practices and follow-on assignments to extend existing contracts were used extensively to acquire and retain consultants, and fair, open, and transparent procurement practices were often not follo wed. Consultants were frequently engaged without establishing comprehensive contractual arrangements.  
  • Many operational and capital-related consulting-ser vices engagements were single-sourced and allowed to grow from small assignments to ongoing projects totaling several million dollars without sound competitive procurement practices.  
  • Controls over payments were often inadequate to ensure that payment was made in accordance with agreements and key deliverables, and expenses were often not supported by details and receipts. In some cases, consultants charged for expensive meals, alcohol, and accommodations, and for conferences and unauthorized fees, without questioning by hospital staff. Hospitals also prepaid for services in some cases.  

BILL 122

In response to the Auditor General’s findings and recommendations, the Government of Ontario introduced Bill 122 on October 20, 2010. Bill 122 seeks to, among other things, require all Ontario hospitals to:  

  • prepare board-approved reports on the hospitals’ use of consultants pursuant to directives to be issued by the Minister of Health and Long Term Care which specify the information, form, manner and timing and recipients of such reports;  
  • post information about expense claims on the hospitals’ public websites as required by directives to be issued by the Minister of Health and Long Term Care;  
  • comply with directives issued by the Management Board of Cabinet with respect to expense rules and the procurement of goods and services; and  
  • prepare and submit board-approved attestations attesting to the completion and accuracy of reports required on the use of consultants, compliance with the prohibition on engaging lobbyist services, and compliance with expense claim and procurement directives issued by the Management Board of Cabinet.  

Every obligation of a hospital under the Act will be deemed to be an obligation it is required to comply with under the terms of the service accountability agreement required under section 20 of the Local Health System Integration Act, 2006.  

While most of the details of the bill remain to be implemented through regulations, directives, and guidelines, the bill sufficiently creates a rough framework that is aligned with many of the Auditor General’s recommendations. The government anticipates moving Bill 122 quickly through the process to proclaim into law by the end of 2010.  


There is no doubt that, as in the private sector, there is a role for the effective use of consultants by hospitals in many roles.

It is important, however, that hospital senior management and boards of directors take note of the Auditor’s Report, and evaluate and otherwise confirm that their procurement policies and procedures are consistent with public sector best practices for procurement including, as applicable, being consistent with the Supply Chain Guidelines.

The Auditor General’s Report on Consultant Use in Selected Health Organizations can be downloaded at http://www.auditor.on.ca/en/reports_en/consultantuse_en.pdf