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Whistle blown on Earnscliffe "scheme" in '95

(PoliticsWatch posted March 16, 2004) OTTAWA -  Documents shown to PoliticsWatch reveal that department of finance officials submitted a request for proposal (RFP) on a renewal of a contract held by Earnscliffe that the whistleblower who appeared before the Commons public accounts committee last week had "considerable misgivings" about. 

Public Works manager Allan Cutler was concerned about the contracting process because finance requested that the company work on a retainer, something he gladly described in documents as a "scheme." 

Correspondence shows that Cutler spent a month battling to have the terms of the RFP changed.

Earnscliffe is widely known to have ties with then finance minister and current Prime Minister Paul Martin and his campaign team. 

Cutler's criticisms of the finance department seems to counter defences made about how finance handled its bidding process by current Finance Minister Ralph Goodale in the House of Commons last week. 

The Conservatives have suggested that a May 1994 memo written by then Martin aide Terrie O'Leary showed that she favoured Groupe Everest for a contract regarding the finance's department's retail debt strategy. 

Last week, Goodale denied that: "First of all, with respect to the memorandum from Ms. O'Leary, it is very clear that the memorandum calls for more competition, not less."

However, Cutler's memo from 1995, roughly the same period of time, suggests that finance department officials were doing anything but increasing competition. 

"There is no clear violation of policy," Cutler explains as being told by a Supply Policy Branch official in a 1995 memo, "but this definitely goes against the intend of policy in competitive bidding." 

Cutler's memos to and from other public works officials, legal advisors and finance officials portray a public servant determined not to bend the rules, despite the protests of others.

The fact that he has kept this level of documentation for nearly 10 years is quite telling about the precise record keeping that Cutler kept and his attention to detail and order. 

Here is a blow-by-blow documented account kept by Cutler of his battle with finance department officials over the bid that Earnscliffe eventually won. 

Document 1 (no date): In a draft of the RFP, Cutler types in his concerns about the call for a retainer and the lack of any details about the amount of work required to Francoise Sinclair of the department of finance's consultations and communications branch. 

Cutler shows that he is concerned enough to seek higher authority. 

"Francoise, as we discussed I am consulting the legal advisor regarding the retainer," he wrote. "It is my understanding that it is necessary to have concrete terms regarding the level of effort, and these must be supplied by you. The level of effort should be reflective of the price to be paid."

Cutler warns the finance official that this would affect the fair bidding process. 

"Under the present scenario, my concern is that only Earnsliffe or a firm using Earnscliffe as a subcontractor will be aware of the actual level of effort required. All other firms would be at a competitive disadvantage. This would defeat the purpose of soliciting competitive bids." 

Document 2: Nov 29, 1995: Memo written by Cutler to a government legal advisor, Gilbert Miville-Deschenes, details his problems with using a firm on a retainer with no work requirement. 

"As we discussed the Department of Finance has requested that we prepare a RFP, in which a retainer of $15,000 per month would be paid," wrote Cutler. "This retainer would be paid regardless of the amount of work requested."

Cutler explains Finance has a reason for working with a retainer, which he doesn't buy. 

"Finance maintains that their department saves money using this means of payment. I have considerable misgivings about using a retainer in a service contract."

Cutler lists three problems with the use of a retainer: he questions the "legality" of using a retainer; he notes that "this is the only case that a retainer has been used in a communications service contract;" and that only Earnscliffe would be aware of the level of effort involved placing other firms at a competitive disadvantage. 

He repeats that it is his understanding that "concrete work requirements" must be present in order for a retainer to be applied.

Document 3: Dec. 5, 1995 memo from Miville-Deschenes to Cutler in response to his previous memo. The legal advisor describes the use of a retainer as a "proposed scheme which is of an unusual kind in terms of contracting within this department." 

Miville-Deschenes explains how things are supposed to work. 

"Normally, the Department pays for services rendered; if there are no services there should not be any payment made."

He then questions the fairness of the proposal.

"With respect to the competitive process, one can question whether there is, in fact, a competition when the amount to be paid is already decided; the only elements of evaluation remaining may not be as objective as one could expect." 

As for the amount of work that is required, Miville-Deschenes describes what finance has proposed this way: 

"It is so imprecise that it is almost lacking an essential element of contracting." 

Document 4: Dec. 5, 1995 letter from Cutler to his boss at Public Works, Mario Parent. In this letter, a vindicated Cutler explains that his concerns about the finance contract are "reinforced" by the legal advisor's comments. Cutler feels compelled to put the legal advisor's use of the term "scheme" in quotes in the letter. 

Cutler also reports that he contacted an official in Supply Policy Branch, who told him there was "no clear violation of policy, but this definitely goes against the intend of policy in competitive bidding." 

Cutler then draws a line in the sand. 

"In view of the circumstances and the legal advice received, I will not issue the RFP for a retainer fee unless I receive written instructions to the contrary." 

The document also includes a handwritten response from Parent to Cutler, dated Dec. 6, 1995 in which he, in effect, tells Cutler to cool it. 


"Before we take any further action Chuck (Guite) recommended that we await Finance Canada comments (Francoise). Please hold any further action.


Document 5: Dec. 12, 1995 memo from Cutler to unknown. In this memo Cutler explains that he received some flack in a phone call from Sinclair at finance over a "10% best value equivalent clause" he wanted in the RFP. 

"I told her that this was (Treasury Board) policy for Public Opinion Research and had to be included in the bid. It is none discretionary. Neither she (finance) or I (PWGSC) have the right to overrule and ignore Treasury Board Policy."

Sinclair differed with Cutler, but the whistleblower held his ground. 

"She told me that this bid was NOT public opinion research and, as such, TB policy for POR does not apply. I told her that this sector has the right to buy only two services: advertising and public opinion research." 

Another line in the sand is drawn. 

"I told her I would not amend the RFP." 

Document 6: Jan. 5, 1996 memo from Cutler to Sinclair. 

It's a new year, and Cutler appears to have lost his battle. 

"Please find attached two copies of the proposal received from Earnscliffe Research and Communications, the only bidder responding to our Request for Proposal regarding the 'communications strategy/policy advice.'"

Document 7: Jan 29, 1996 memo from Cutler to Elly Alboim of Earnscliffe.

"Dear Mr. Alboim:

"This is written to confirm that Earnscliffe Research & Communications is being requested to provide communications strategy and communications advice on policy issues as follows:

"Client: Finance Canada
"Estimated Expenditure: $246,100.00 GST included."

In a postscript, it should be noted that over eight years later Alboim still works at Earnscliffe and was recently rewarded a contract worth up to $20,000 to provide communications advice regarding the upcoming federal budget for Goodale at finance. 

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