Audit of the Contract Award Process and of Contract Management
No de cat. ST99-93/2025E-PDF
ISBN : 978-0-660-78003-0
Audit and evaluation directorate of the Canadian Space Agency
© His Majesty the King Head of Canada, represented by the Minister of Innovation, Science and Economic Development Canada, .
Acknowledgments
This audit was made possible through the contribution and collaboration of many people. We wish to thank everyone who participated in interviews and data collection, responded to inquiries, and provided information and feedback.
Table of content
- Abbreviations and acronyms
- Introduction
- Opinion
- Statement of Conformance
- Summary of findings
- Background
- Objective
- Scope
- Approach and methodology
- Audit criteria
- Findings and recommendations
- Authority and approval
- Roles and responsibilities
- Governance and monitoring
- Estimation of contract costs
- Data entry
- Proactive disclosure and data integrity
- Documenting procurement files
- Conclusion
- Appendix A – Summary of findings and recommendations
- Appendix B – Action Plan
- Appendix C - Expected results
Abbreviations and acronyms
- CSA
-
Canadian Space Agency
- FAA
-
Financial Administration Act
- OCG
-
Office of the Comptroller General
- OAG
-
Office of the Auditor General
- PSPC
-
Public Services and Procurement Canada
- SSC
-
Shared Services Canada
- TB
-
Treasury Board
Introduction
The mandate of the Canadian Space Agency (CSA) is to promote the peaceful use and development of space, to advance the knowledge of space through science and to ensure that space science and technology provide social and economic benefits for Canadians. To achieve this, the CSA provides the space community with numerous types of opportunities, including contracts. The procurement of goods and services is therefore a critical process for the achievement of the CSA's activities and requires knowledge of the space sector and specialized skills on the part of those involved.
To ensure responsible management of the resources entrusted to it throughout their life cycle, the CSA must comply with the Financial Administration Act (FAA), the Government Contracts Regulations and Treasury Board's (TB's) Directive on the Management of Procurement. These instruments describe contract award and management requirements in relation to procurement activities. The CSA has established internal procedures and a framework for contract awards with the aim of ensuring their implementation.
The purpose of this assurance engagement was to determine whether the CSA's contract award and contract management practices comply with the FAA, the Government Contracts Regulations and TB's Directive on the Management of Procurement. It was carried out from to .
Opinion
In our opinion, the CSA has established contract award and contract management practices that enable it to meet its objectives and comply with the laws, regulations and directives issued by the CSA and the central agencies. However, areas for improvement have been identified and recommendations have been made.
Statement of Conformance
As Chief Audit Executive, I believe that sufficient and appropriate audit procedures have been conducted and evidence gathered to support the accuracy of the opinion provided and contained in this report. The opinion is based on a comparison of the conditions as they existed at the time against pre-established audit criteria that were agreed upon with management. The opinion applies only to the entity examined. Evidence was gathered in accordance with TB's Policy, Directives and Standards on Internal Audit. The procedures followed are in accordance with the Global Internal Audit Standards of the Institute of Internal Auditors.
Summary of findings
The audit has found that the contract award and contract management practices are in place to ensure that the CSA complies with the FAA, the Government Contracts Regulations and the Directive on the Management of Procurement.
We have observed the following:
- 100% of the contracts audited are compliant with the certification authority (section 34 of the FAA), 74% of the contracts audited are compliant with the commitment authority (section 32 of the FAA) and 78% of the contracts audited are compliant with the transaction authority (section 41 of the FAA).
- The roles and responsibilities of stakeholders are documented in the CSA's contracting framework and in its Requisition Guide.
- Nevertheless, the contracting framework has not been updated since the Directive on the Management of Procurement came into force in .
- Certain ambiguities were noted with respect to understanding the roles and responsibilities of the CSA's and PSPC's procurement officers as well as those of managers responsible for the awarding and management of contracts.
- Cost estimates were accurate for 94% of the audited contracts.
- Procurement monitoring and governance mechanisms have been implemented.
- 76% of data entries in the CSA's financial system are accurate.
- Proactive disclosure of contracts valued over $10,000 and positive or negative contract amendments valued over $10,000 on the Open Government website is compliant for 92% of the contracts disclosed.
- The documentation of contracts is complete, accurate and up to date for 65% of the files examined. However, for 35% of the files examined, certain documents were missing, namely:
- Two Requisition for Goods and Services forms.
- Nine copies of the contract signed by both parties.
The observations led us to make the following recommendations:
- Clarify and communicate the roles and responsibilities of the various stakeholders in the contract award and contract management process, particularly those of PSPC officers and the CSA's project authority (section 32 FAA) and procurement officer (section 41 FAA).
- Continue efforts to develop tools for proactively disclosing accurate and complete information about contracts.
- Raise awareness among procurement officers about the importance of having accurate, complete and up-to-date files in order to facilitate the monitoring of contract files.
Katherine Ludwig
Chief Audit Executive
Audit team members:
Johanna Gailer, Jérémy Poulin and Audrey Provencher-Côté
Background
The procurement of goods and services is an important aspect of the activities of the Canadian Space Agency (CSA). Space programs require specific and complex processes for awarding and managing contracts, which in turn require stakeholders to have specialized knowledge of the space sector.
The CSA is subject to the Financial Administration Act (FAA), the Government Contracts Regulations and Treasury Board's Directive on the Management of Procurement. These instruments describe management and monitoring requirements in relation to procurement activities. The CSA has established internal procedures and a framework for contract awards with the aim of ensuring their implementation. To implement this framework, the CSA relies on a team of 17 employees from the Procurement and Contracting and Material Management Division. They are responsible for advising CSA employees about procurement management and awarding CSA contracts.
The CSA awards goods contracts up to $25,000; beyond that amount, goods contracts are awarded by Public Services and Procurement Canada (PSPC), which is the federal government's central purchaser. The CSA also awards service and construction contracts up to $3,750,000; PSPC awards contracts above that amount. Moreover, since , research and development (R&D) contracts have been awarded by the CSA. Also, some IT licence contracts are awarded by Shared Services Canada (SSC), which is the common service provider for the Government of Canada for certain goods and services in the information technology field.
The CSA awarded 430 contracts in – for a value of $48.7M:
| Procurement Method | Quantity | Percentage |
|---|---|---|
| Competitive contracts | 212 | 49% |
| Non-competitive contracts | 218 | 51% |
| Contracting Authority | Quantity | Percentage |
| Contracts awarded by the CSA | 208 | 49% |
| Contracts awarded by Public Service and Procurement Canada (PSPC) | 147 | 34% |
| Contracts awarded by SSC | 75 | 17% |
The CSA is currently managing 689 goods, services and construction services contracts.
Objective
The audit project aimed to determine whether the contract award and contract management practices enable the CSA to comply with applicable laws, regulations and directives.
Scope
The audit covered contracts awarded at the CSA between , and .
Approach and methodology
The audit criteria were established according to management best practices and the requirements of the applicable laws, regulations and policies. The criteria and sub-criteria were discussed with the audited entity ahead of time. The audit involved various processes, including interviews and the examination of documents.
We examined 31 contracts awarded between – and –. The sample selection criteria were based on various factors, including the following:
- Contracting authorities;
- Categories of contracts;
- Procurement methods;
- Contract values; and
- Contracts with several amendments.
The sample was selected at random, taking into account the selection criteria mentioned above.
Audit criteria
- Contracts are awarded in compliance with the applicable laws, policies and directives.
- 1.1. There is a procurement process in place to enable the CSA to award contracts in accordance with the requirements.
- 1.2. Contracts valued at more than $10,000 are proactively disclosed in a timely manner.
- There is effective management throughout the life cycle of the contracts.
- 2.1. Governance and monitoring mechanisms are in place to support procurement management.
- 2.2. Contract award and contract management files are documented and the relevant data on the contracts is available.
Findings and recommendations
In this section
Authority and approval
Federal ministers have a duty to comply with the FAA to ensure sound financial management of public funds. In the context of the procurement process, the FAA is applied through three authorities that are delegated to designated positions in federal departments:
- First, employees occupying positions involving delegated commitment authorities (section 32 of the FAA) are authorized to confirm that sufficient funds are available to cover the costs before a contract is awarded.
- Procurement officers have transaction authority (section 41 of the FAA). More specifically, this authority allows departments to enter into contracts by having contracts approved by a procurement officer.
- Finally, employees who occupy a position with a delegated certification authority (section 34 of the FAA) are authorized to certify that the contract has been properly performed; that the services have been rendered or the goods received; that the price, quantities and quality respect the terms of the contract; and thus certify the eligibility for payment of an invoice received as part of the contract.
It is important for departments to comply with the FAA in order to respect budgetary rules and avoid unplanned deficits. Moreover, not complying with the FAA could demonstrate poor management of public funds and lead to a loss of public confidence.
Section 32 – commitment authority
We observed in examining the 31 contracts that for 23 contracts, the power to commit funds was exercised in accordance with section 32 of the FAA. For those 23 contracts, the Requisition for Goods and Services form had been signed by an authorized person before the contract was approved. However, we noted that for five contracts, the Requisition for Goods and Services form had been signed by an employee without delegated authority to commit funds, and for three contracts, the Requisition for Goods and Services form was not in the contract file.
Section 41 – transaction authority
We also examined 18 contracts for which the CSA had the power to execute. The other 13 contracts in the sample were approved by PSPC and SSC. Accordingly, we were unable to audit the approval of these contracts. For 14 contracts and amendments examined, we found that they had been approved by a procurement officer with the power to execute (section 41 of the FAA). However, we observed that three contracts were approved by an employee who lacked the appropriate delegation level, and for one contract, the copy of the contract on file was not approved.
We also noted that 30 contracts had been approved before the start of the work or the receipt of the goods. However, for one contract, the contract began before the date the contract was signed, but a clause to this effect was included in the contract. It is important that both parties sign the contract before the start of the work because in the case of a misunderstanding, it could otherwise be difficult to demonstrate agreement between the parties on the terms of the contract with respect to the execution of the work or the receipt of the goods.
Section 34 – certification authority
We have observed that for most of the contracts audited, the power of certification complied with the FAA requirements. To be more specific, the 31 invoices examined had been signed in a timely manner by an individual with the correct delegation level. Furthermore, all of the supporting documents were attached to the invoice at the time of certification.
Conclusion
In conclusion, when we examined compliance with the certification power (section 34 of the FAA), we found that the CSA was 100% compliant. Despite this, areas for improvement were identified with respect to sections 32 and 41 of the FAA. For 26% of the 32 items examined, the commitment of funds had not been signed by an authorized person, and for 32% of the contracts audited, section 41 had not been signed by an authorized person.
Roles and responsibilities
The Directive on the Management of Procurement provides that contracting authorities must ensure that the roles and responsibilities of stakeholders involved throughout the procurement process are well defined and clearly communicated. It is important for the CSA to comply with this requirement to ensure that stakeholders involved in the procurement process have a good understanding of their roles and responsibilities, so that they can perform their tasks effectively and efficiently, thereby enabling the CSA to have a process for awarding and managing contracts that meets the requirements of the Government of Canada.
During the audit's examination phase, we were able to observe that at the CSA, the roles and responsibilities of the various stakeholders are defined in documents such as the CSA's contracting framework and its Requisition Guide. These documents list the responsibilities of the Procurement and Contracting and Material Management Division as well as the roles of managers, project leads and technical authorities. Moreover, they mention the importance of respecting the contracting process and the delegations of authority. These documents are available on the CSA's intranet site, making them easily accessible to employees. However, we found that the most recent update of the contracting framework dates back to , before the Government of Canada's Directive on the Management of Procurement came into effect in . We note some differences between the new Directive and the CSA's contracting framework, such as the reference to the former Procurement Directive. In addition, the framework is silent on proactive disclosure for Indigenous contracts.
We have also observed that procurement officers sometimes have a mistaken understanding of their responsibilities. For example, we have observed that for eight contracts, the procurement officer had signed the section referring to section 32 of the Financial Administration Act (FAA) of the Requisition for Goods and Services form. That said, signing this section allows for funds to be committed before a contract is awarded, and it should be signed by the employee occupying the position which has the delegated authority to commit the funds.
We have also observed that the roles and responsibilities of the CSA's procurement officers versus those of PSPC's procurement officers when PSPC is awarding a contract for the CSA are not always well understood. For example, we have observed that two contracts were issued by PSPC, without the funds having been committed by the CSA, the CSA's procurement officers having been informed or the contracts' having been entered into the Department's financial system. Consequently, when the contractor's invoice was received by the CSA, there were no funds available with which to make the payment.
In addition, during interviews with the various stakeholders involved in the contract award and contract management process, we observed that the roles and responsibilities of stakeholders involved in the contract award and contract management process are not always well understood and are sometimes ambiguous. In particular, we noted that for two contracts, the stakeholders worked directly with PSPC procurement officers without informing the CSA's procurement officers that contracts would be awarded. As a result, as mentioned in the previous paragraph, the contracts were not recorded in the CSA's financial system in a timely manner.
Conclusion:
On the whole, we observed that the roles and responsibilities of stakeholders should be clarified. More specifically, the procurement procedures manual should be updated to reflect the practices of the new Directive on the Management of Procurement and clearly identify the roles and responsibilities of the CSA, PSPC, procurement officers and project managers.
Recommendations
We recommend that the CSA's Service Management and Administration Directorate clarify and communicate the roles and responsibilities of the various stakeholders in the contract award and contract management process and more specifically those of PSPC, the project authority (section 32 of the FAA) and the CSA's procurement officer (section 41 of the FAA).
Governance and monitoring
The Directive on the Management of Procurement states that effective governance and oversight mechanisms should be in place to support the management of procurement. Implementing governance and monitoring mechanisms is important because it ensures transparency in decision making and actions related to the procurement process and ensures that the expected results are achieved.
We found that the CSA has implemented governance and oversight mechanisms. Since , the CSA has a procurement management committee that meets monthly to discuss, make decisions and implement measures regarding the activities of the Procurement and Contracting and Material Management Division. We also found that a Contract Review Committee has been in place since and is responsible for reviewing and approving contracts that meet certain criteria listed in the committee's terms of reference, which were updated in . The committee's decisions are documented in a form attached to the contract file. These two committees are made up of employees from the CSA's Procurement and Contracting and Material Management Division.
Moreover, all contracts valued at more than $5M must be approved by the CSA's Integrated Investment Review Board (IIRB), whose mandate is "to provide the sound stewardship necessary to ensure that CSA's investments achieve value for money and generate the expected investment results."Footnote 1
Conclusion
In short, the CSA has governance and oversight mechanisms in place that enable it to make decisions and take action with respect to the procurement process in a transparent manner and to achieve its expected results.
Estimation of contract costs
The Directive on the Management of Procurement states that contract cost estimates must be established and valid. Failing to comply with this requirement could result in cost overruns for the Department.
We examined the evolution of costs for 31 contracts. For 29 contracts, the estimated costs corresponded to the total costs of the contract. However, we found for two contracts, the total costs were greater than the initial contract value. For one contract with an initial value of $120,000, option years were exercised for a cost of $382,211. The total cost of the project was $502,211. However, the amounts for the option years were not mentioned in the original contract. For the other contract, which had an estimated value of $287,435, a review of task authorizations and a change in the Statement of Work resulted in an increase of the value of the contract to $574,872. The total cost of the project was $862,307.
Conclusion
We found that the cost estimates for CSA contracts were compliant for 94% of the contracts examined. Nevertheless, we observed that for 6% of the contracts audited, the total costs exceeded the estimated amounts.
Data entry
The Directive on the Management of Procurement states that the contracting authorities are responsible for ensuring that the data on contracts entered in the financial system is accurate. Not having accurate data in the financial system could result in the publication of incorrect information during the proactive disclosure of contracts.
We therefore examined the integrity and completeness of the data (value, award date, etc.) relating to the 31 contracts recorded in the department's financial system. The goal was to ensure that the data in the department's financial system was accurate and matched the contract data.
| Types of data | Accurate | Inaccurate |
|---|---|---|
| Dates (Award, start and end) | 58% | 42% |
| Categories (goods, services and construction) | 94% | 6% |
| Values | 77% | 23% |
Conclusion
We found that the error rate varied based on the type of information entered into the CSA's financial system, which could result in the disclosure of contract data containing errors.
Proactive disclosure and data integrity
Proactive disclosure is a requirement of the Directive on the Management of Procurement. The Directive stipulates that information on contracts valued over $10,000 and on positive and negative amendments valued over $10,000 must be proactively published. The Directive also states that the data included in the proactive publication of contract reports must be materially accurate and complete. Failing to comply with the Directive may demonstrate a lack of transparency towards the Canadian population regarding the use of public funds.
To examine this requirement, we performed two analyses of contract data disclosed between , and . We performed an initial data analysis in . It revealed that 840 contracts out of 1,370 were disclosed accurately. However, 296 of the contracts disclosed contained inaccuracies, and 234 contracts were not disclosed on the Open Government website. This translates into a 39% error rate.
Next, we shared the results of the data analysis with the CSA's Procurement and Contracting and Material Management Division to keep them informed of the findings. Then, data on contracts valued over $10,000 and contract amendments valued over $10,000 or at $10,000 and under, from to , were published again in .
Following this update, we performed a second data analysis in . This one revealed that the CSA had improved with respect to accuracy of disclosed information. This time the error rate obtained was 8%. More specifically, out of 1,472 contracts disclosed, 111 contained errors relating to their value, category or date of award. We also found that five contracts were not disclosed. Consultations are ongoing within the CSA to bring this error rate down.
Conclusion
The CSA discloses its contracts valued over $10,000 and contract amendments valued over $10,000 or at $10,000 and under on the Open Government website. However, we have observed that publications are sometimes erroneous and that some contracts are not disclosed, despite the efforts made in to remedy publication errors.
Recommendation
We recommend the CSA's Service Management and Administration Directorate to make the procurement officers more aware of the importance of capturing accurate and complete data and pursue their efforts to develop tools for proactively disclosing accurate and complete information about contracts.
Documenting procurement files
One of the requirements of the Directive on the Management of Procurement is that the procurement records be accurate, comprehensive and up to date to facilitate management oversight and audit. It specifies that at least the following documents, but not limited to, should be found in the files:
- A copy of the duly executed contract or contractual arrangement;
- The rationale for the procurement strategy options and the identification of decision-makers involved;
- A record of assessments and evaluations, decisions, approvals and dates;
- Justification for using limited tendering and for using a non-competitive process.
Compliance with these requirements is important to facilitate oversight of contract management, to ensure transparency and due diligence and to show that the CSA is making sound procurement decisions.
Our examination of the 31 contract awards and contract management files revealed that 20 files were accurate, complete, up to date and saved in the department's document management system. However, we observed that 11 files (35%) were incomplete. We found that the Requisition for Goods and Services forms for awarding or amending contracts were not attached to the files of two contracts, and that for nine contracts awarded, the CSA did not have the copy of the contract signed by both parties, namely, the procurement officer and the contractor, in its files.
Conclusion
Examining the documentation led us to note that each contract had files in the department's document management system. However, we observed that for 35% of the files, the Requisition for Goods and Services forms were missing, and copies signed by both parties were not in the files.
Recommendation
We recommend that the CSA's Service Management and Administration Directorate raise awareness among the procurement officers about the importance of having accurate, complete and up-to-date files to facilitate the monitoring of contract files.
Conclusion
The audit aimed to determine whether the contract award and management practices enable the CSA to comply with the applicable laws, regulations and directives. We found that the CSA has implemented contract award and contract management practices that allow it to comply with the FAA, the Government Contracts Regulations and the Directive on the Management of Procurement.
We have nevertheless noted areas with potential for improvement, with respect to roles and responsibilities, proactive disclosure and ensuring that files contain the proper documentation.
Appendix A – Summary of findings and recommendations
| Audit Criteria | Audit sub criteria | Summary of Findings | Recommendations |
|---|---|---|---|
| Contracts are awarded in compliance with the applicable laws, policies and directives | There is a procurement process in place to enable the CSA to award contracts in accordance with the requirements. | The review of compliance with the certification authority (section 34 of the FAA) found that the CSA was 100% compliant. Despite this, opportunities for improvement were noted with respect to sections 32 and 41 of the FAA. For 26% of the section 32 examined, the commitment of funds had not been signed by an authorized holder and for 32% of the contracts audited, section 41 had not been signed by an authorized holder. We found that the roles and responsibilities of stakeholders are defined but need to be clarified. Specifically, the procurement procedures manual should be updated to reflect the practices of the new Directive on the Management of Procurement and to clearly identify the roles and responsibilities of the CSA, PSPC, procurement officers and project managers. |
We recommend that the CSA's Service Management and Administration Directorate clarify and communicate the roles and responsibilities of the various stakeholders in the contract award and contract management process and more specifically those of PSPC, the project authority (section 32 of the FAA) and the CSA's procurement officer (section 41 of the FAA). |
| Contracts valued at more than $10,000 are proactively disclosed in a timely manner. | We observed that the error rate varies depending on the type of information entered into the CSA's financial system, which may result in the disclosure of contract data with errors. The CSA discloses its contracts valued at more than $10,000 and contract amendments of over or under $10,000 on the Open Government website. However, we have observed that publications are sometimes erroneous and that some contracts are not disclosed, despite the efforts that were put forward in to compensate for publication errors. |
We recommend the CSA's Service Management and Administration Directorate to make the procurement officers more aware of the importance of capturing accurate and complete data and pursue their efforts to develop tools for proactively disclosing accurate and complete information about contracts. | |
| There is effective management throughout the life cycle of the contracts. | Contract award and contract management files are documented and the relevant data on the contracts is available. | The document review observed that each contract had files in the departmental document management system. Nevertheless, we observed that for 35% of the files, forms for requesting goods and services were missing and copies signed by both parties were not on file. | We recommend that the CSA's Service Management and Administration Directorate raise awareness among the procurement officers about the importance of having accurate, complete and up-to-date files to facilitate the monitoring of contract files. |
| Governance and monitoring mechanisms are in place to support procurement management. | We observed that the CSA has governance and oversight mechanisms in place that allow it to make decisions and take actions regarding the procurement process in a transparent manner and to achieve expected results. We found that the cost estimate for contracts at the CSA was compliant for 94% of the contracts reviewed. Nevertheless, we observed that for 6% of the contracts audited, the total costs exceeded the estimated amounts. |
N/A |
Appendix B – Action Plan
| Recommendations | Responsibility | Management Response | Action Plan | ||
|---|---|---|---|---|---|
| Organization | Function | Action plan details | Date completed | ||
| We recommend that the CSA's Service Management and Administration Directorate clarify and communicate the roles and responsibilities of the various stakeholders in the contract award and contract management process and more specifically those of PSPC, the project authority (section 32 of the FAA) and the CSA's procurement officer (section 41 of the FAA). | Service Management and Administration Directorate | Procurement and Contracting & Material Management Division | Recommendation accepted |
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Indicators of Achievement
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| We recommend the CSA's Service Management and Administration Directorate to make the procurement officers more aware of the importance of capturing accurate and complete data and pursue their efforts to develop tools for proactively disclosing accurate and complete information about contracts. | Service Management and Administration Directorate | Procurement and Contracting & Material Management Division | Recommendation accepted |
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| A.2.3 The Procurement team (Quality Assurance) will monitor compliance throughout the year to ensure that data is entered accurately in SAP. | Ongoing | ||||
Indicators of Achievement
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| We recommend that the CSA's Service Management and Administration Directorate raise awareness among the procurement officers about the importance of having accurate, complete and up-to-date files to facilitate the monitoring of contract files. | Service Management and Administration Directorate | Procurement and Contracting & Material Management Division | Recommendation accepted |
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Ongoing | ||||
Indicators of Achievement
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Appendix C - Expected results
In determining whether contracts are awarded and managed in compliance with the FAA, the Government Contracts Regulations and the Treasury Board's Directive on the Management of Procurement, we expected to find the following:
- The commitment authority (section 32 of the FAA) is exercised by an authorized person and is obtained before a contract is approved.
- The authority to transact and award a contract (section 41 of the FAA) is exercised by an authorized person in a timely manner.
- The authority to certify a payment (section 34 of the FAA) is exercised by an authorized person before an invoice is paid.
- The roles and responsibilities of stakeholders involved throughout the procurement process are well defined and clearly communicated.
- The cost estimate has been drawn up and is valid.
- The contract data entered in the departmental financial system is accurate.
- Contracts valued over $10,000, as well as contract amendments valued over $10,000 or at $10,000 or under are disclosed in a timely manner on the Open Government Portal, and the information disclosed is accurate.
- Procurement records are accurate and complete, and kept up to date to facilitate monitoring.