Former Alberta Justice minister Jonathan Denis appears to have ordered his staff to reopen a government contract to address the demands of an industry association that was lobbying rural Conservative MLAs.

Against the initial advice of their own legal and procurement branches, senior Justice officials reopened the contract to transport bodies for autopsy administered by the office of the chief medical examiner.

Senior Justice officials then allowed the Alberta Funeral Service Association (AFSA) to effectively dictate some of the amended contract terms, a fact conceded by the department's acting assistant deputy minister.

"I agree that we wouldn't normally want to put vendors in the driver's seat," Rae-Ann Lajeunesse wrote in a July 15, 2014 email, "but occasionally an odd situation occurs that requires an unusual solution and, in this case, minister (Denis's) direction is guiding us on this."

Justice officials went further, allowing the AFSA to vet the rewritten contract before it was publicly posted, even though other companies not associated with the funeral service association would also be seeking to provide services under that public contract.

The result is a revised contract which formalizes additional costs in the hundreds of thousands of dollars each year of the three-year contract and ignores some concerns raised by former chief medical examiner Dr. Anny Sauvageau and her staff.

All of this is revealed in internal government documents obtained exclusively by CBC News. The documents provide a rare inside look at how an industry association successfully pressured a government department to reverse policy and abandon its earlier effort to control spending.

"(This) violates rules that are in place but also pretty much every good governance standard in terms of secrecy and dishonesty and ethics and waste prevention," said University of Ottawa law professor Duff Conacher, co-founder of Democracy Watch and a legal expert in democratic governance.

Image | Duff Conacher

Caption: Democracy Watch co-founder, Duff Conacher, said Alberta Justice's handling of the revised contract was unethical and wasteful.

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"The government essentially said, 'We will let the service providers write the contract and provide a lower level of service for a higher cost.' Which is completely against the public interest and, of course, a huge waste of money," Conacher said.

CBC News showed key documents to Conacher and to Wildrose MLA Jason Nixon, the critic for democracy and accountability.

"It appears that to appease someone politically, they were being given inappropriate access during a contract negotiation and I think that should be troubling for all Albertans," Nixon said.

CBC News has confirmed both the auditor general and the public interest commissioner are investigating the contract. It is also a central issue in the $5.15-million lawsuit filed by Sauvageau, who claims her objections to the revised contract were a major factor in the government's decision not to renew her employment.

Denis declined comment. His lawyer said that it would be inappropriate for his client to say anything because the Sauvageau lawsuit is still before the courts.

In an emailed statement, Alberta Justice defended reopening the contract. It said the funeral industry raised valid concerns about the initial contract, which it said, "did not reflect the reality of work conditions faced by body transport providers and instituted requirements that would hinder the services provided."

The statement said the new revised contract ensures proper quality control and fair treatment of funeral home companies.

"The new contract was developed based on principles of reasonable pay for the services demanded," the statement said.

Bodies from accident scenes or sudden deaths where there are questions about the cause of death must be transported to a medical examiner's office for autopsies.

Internal Justice department memos show that for years there had been complaints from next of kin, police and medical examiner's staff about the fees and the service provided by some rural funeral homes.

In 2012, the chief medical examiner decided it needed a contract to control costs and set standards for the transportation of bodies in rural Alberta.

In Calgary and Edmonton, those transportation services are provided under contract by one large specialized body transportation company. But for decades in rural Alberta, body transportation services have been supplied mostly by funeral homes with no contract.

Fees for body transportation are set by the provincial Fatality Inquiries Regulation. In a memo, Sauvageau said that for years the previous chief medical examiner's office had simply paid whatever funeral homes invoiced.

Under the regulation, funeral homes are to be paid $300 for the first 20 kilometres of the trip plus $1.13 a kilometre for the remainder of the trip. But several memos refer to a practice of invoicing the office $300 for each of multiple legs of the same trip, a practice referred to by some medical examiner's staff as taking a body on a "milk run."

The medical examiner's office produced a contract which would require funeral homes to pre-qualify to be allowed to provide body transportation services. It also set the single $300 payment for transportation prescribed by the Fatality Inquiries Regulation.

Most of the more than 150 funeral homes which provide the service are represented by the AFSA.

Wildrose MLA Jason Nixon said funeral home owners wield political power in rural Alberta because they are often key members of the local business community, which have traditionally supported the Conservative party.

Image | Jason Nixon

Caption: Wildrose MLA Jason Nixon said it was inappropriate to allow one industry association to negotiate the terms of a publicly tendered contract.

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The AFSA outright rejected the contract, which took effect May 1, 2014. The main issue was fees.

The internal department documents reveal how the AFSA launched a successful lobbying campaign to force the department to capitulate to its payment demands. This despite the fact a financial analysis showed the new contract provided an industry standard profit margin of between 25 and 46 per cent.

The documents show the AFSA was granted a direct meeting with Denis and deputy minister Tim Grant on July 2, 2014.

Sauvageau was not invited to that July 2 meeting. Despite her repeated protests, the contract was reopened and the AFSA was allowed direct access to department officials in revising the terms of the contract. In October, Sauvageau demanded to be removed from the process.

"This is gross mismanagement of public funds," Sauvageau wrote in an Oct. 11 email. "There are no financial analyses to justify these decisions, solely a desire to please inappropriately an industry that has proven a powerful lobby to the Minister."

By November, the contract had been rewritten to the satisfaction of the AFSA. It dropped the single $300 fee plus mileage originally proposed and instead acceded to the AFSA demands for a $300 payment for each leg of potentially multiple trips for the transport of the same body.

According to the department's own analysis, this could cost the medical examiner's office up to $480,000 in each of the contract's three years.

"Once I receive your approval I will seek (acting assistant deputy minister Rae-Ann Lajeunesse's) approval prior to removing the existing (contract) from the Alberta Purchasing Connection site and posting the new (contract)," Van Repchinsky, Justice's director of procurement wrote in a Nov. 6 email to AFSA president Sheila Van Alstyne and representative Marlon Wombold.

The revised contract was posted Nov. 14.

Conacher said the contract should be cancelled because it doesn't serve the public.

"In the long term, they will save money and get better service by breaking the current bad contract and making it into a good contract," he said. "And that is what they should do."