EHealth Ontario was criticized for handing out untendered contracts and questionable spending. (CBC)

Ontario is cutting taxpayer-funded perks such as meals for consultants working for the province and forcing all consulting contracts to be opened to competitive bids in the wake of the eHealth scandal, which claimed another casualty Wednesday.

"The rules that we've had in place for government dealings with consulting firms are outdated and clearly inadequate they don't go far enough to protect taxpayers," said Premier Dalton McGuinty. "I take responsibility for this."

"We could have and should have done more to protect taxpayer's money."

Starting immediately, the Ontario government and all its provincial agencies must open all consulting contracts up to tender. The province will no longer foot the bill for hospitality, incidental and food expenses for consultants, though travel and accommodation costs will still be reimbursed.

The changes are in response to outrage over a contracting and spending scandal at eHealth Ontario, which doled out more than $5 million in untendered contracts to consulting firms and had high-priced consultants billing for such expenses as coffees and muffins.

McGuinty said his Liberal government is putting an end to such questionable expenses.

"If you couldn't sit down in front of a family at the breakfast table and say 'I'm submitting a bill for this or for that' and look them straight in the eye, then maybe you shouldn't be submitting that bill," said McGuinty.

However, the new rules won't be retroactive so consultants now under contract, such as those who secured untendered contracts at eHealth, will become so-called "vendors of record." Government agencies can award contracts to vendors of record without going through a tendering process.

The government stressed that it has reduced its reliance on consultants by 41 per cent in the past six years. Consulting expenditures have fallen to $389 million in 2007-08 from $656 million in 2001-02.

Chair's resignation 'honourable': McGuinty

The eHealth imbroglio also claimed another victim on Wednesday, with the resignation of Dr. Alan Hudson from his voluntary role as the chairman of the agency's board of directors.

"He's come to the conclusion, as have I, that he can no longer provide the leadership that we need at eHealth," said McGuinty.

Hudson, who is the lead on a strategy to reduce provincial hospital wait times, signed off on some of the untendered contracts and had links to some of the vendors. Rita Burak, a longtime public servant, will replace Hudson.

McGuinty has staunchly defended Hudson and praised his record in the health field, but he acknowledged that the former board chair has "done the honourable thing" with his resignation.

Hudson declined requests for an interview.

Opposition parties continued their calls for Health Minister David Caplan's resignation due to his handling of the scandal, but McGuinty stood by his minister on Wednesday, saying he still has confidence in Caplan.

Meanwhile, the search continues to replace Sarah Kramer, who departed the agency more than a week ago after seven months as CEO and president. She received a severance package worth 10 months' salary, or about $317,000.

Kramer was lambasted for receiving a $114,000 bonus, more than double the amount allowed at the provincial agency. Hudson signed off on the bonus just four months after Kramer started.

Two reviews underway

The former CEO was also responsible for signing off on many of the untendered contracts during her first months at work. She defended the lack of a competitive bidding process, saying it was justified due to the urgency of the agency's work.

Under the old rules, provincial agencies were required to put contracts up for tender if they surpassed $100,000 unless they involve legal services, an urgent circumstance or a patented product unique to a single supplier.

Ontario Auditor General Jim McCarter has been probing eHealth's spending since late last year and is expected to release his findings before December. A third-party audit is also being done by PriceWaterhouseCoopers.

EHealth Ontario was set up last September out of a merger between the Health Ministry's health program and the Smart Systems for Health Agency, criticized for spending more than $600 million over six years with little to show for it.

SSHA was blasted for its lack of strategic plan and high reliance on consultants, but had begun cleaning up in recent years before Premier Dalton McGuinty's Liberal government folded it into eHealth.

Health experts fear the contracts scandal could further delay important work underway to computerize patient records. The timeline for release has already been pushed back by three years to 2015.

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