VANCOUVER - BC Hydro fired an independent watchdog rather than deal with his warning about a conflict of interest in a project involving an unspecified amount of public money, documents obtained by The Vancouver Sun suggest.

An exchange of letters between fairness commissioner Michael Asner and Hydro executives indicate that Asner had strong concerns about Hydro's apparent decision to give consulting accountant firm Deloitte Touche an inside track on a major contract to rework Hydro's system of soliciting contract work.

Asner was retained by Hydro to observe the Crown corporation's handling the project.

The project, called Procure To Pay, is a three-stage evaluation and makeover of Hydro's processes for procuring and awarding outside contracts for a wide array of goods and services - including equipment, tree clearing and fish habitat surveys.

According to Hydro, no contract has yet been awarded on the third and final phase.

Asner indicates in a letter to Hydro that his responsibility was to ensure "fair and open competition" and "equal treatment of vendors."

Deloitte Touche won contracts to develop the first two phases of Procure to Pay - and knew as it was writing requirements for the third phase that it would be able to deal itself in as a bidder, according to Asner's letter.

Asner says the conflict "was not a subtle issue" because it violates Hydro's own Code of Conduct Guidelines.

He writes that Hydro failed to compel Deloitte to erect an impenetrable communication barrier - or  'Chinese Wall' - between those Deloitte employees writing Phase 1 and Phase 2 reports and those who might compete for Phase 3, the final stage of the project.

The letter suggests Hydro had a long-term understanding with Deloitte that it would have access to all stages of the project.

"At no time during Phase 1 and Phase 2 was Deloitte informed that they could not use the same project staff for subsequent work," Asner said in a letter to Hydro purchasing manager Adele Neuman.

"Deloitte had been favored in this process by its intimate knowledge of BC Hydro's plans and requirements," Asner wrote.

After one meeting with Hydro employees, Asner opines that "some of those in the meeting did not understand the role of a fairness commissioner."

Asner also indicates he rejected a request by Hydro to change his report in order to overlook Deloitte's involvement in the first two phases of the project.

In one meeting with Hydro, Asner recounts that "I was told that I would not be allowed to submit my report because of my conclusion that Deloitte was unfairly favored."

The documents came to light after a Freedom of Information officer at BC Hydro, following a request by Asner, ruled they were in the public domain.

"I am convinced that without the FOI Act, BC Hydro would have used my confidentiality agreement to keep the documents secret. There is no benefit to BC Hydro in making these documents public," he said in a e-mail exchange Monday with The Sun.

Asner, a Metro Vancouver resident, is an author, consultant and public speaker on handling requests for proposals.

He said he has worked as a fairness commissioner in jurisdictions throughout North America for more than 20 years - and this is the first time he has been fired from those duties.

"Most of this work is in the United States where, in many jurisdictions, it is illegal, against the statute, to accept a proposal from a vendor who contributed to the RFP [Request For Proposals ]."

In a letter of response to Asner, Hydro chief procurement officer Mary Hemmingsen said Hydro dealt with any potential conflicts by stating in the Request For Proposals that it had been crafted by Deloitte and that Deloitte was eligible to bid on Phase 3.

Hemmingsen also questions why it took a number of weeks for Asner to voice his concerns, which were "identified, investigated and resolved."

Hydro communications director Steve Vanagas said in an e-mail on Monday the Crown corporation is "still in negotiations with the proponents who submitted proposals. The total value [of the contract] has not yet been determined as the contract has not yet been awarded."

Vanagas said 22 companies requested copies of the Request For Proposals, leading to the participation of six vendors at a project workshop, and two opted to submit proposals.

"All proponents were aware up-front of Deloitte's prior work on the project," Vanagas wrote. "In any event, all bids are thoroughly and professionally evaluated on their own merits."

ssimpson@png.canwest.com