Government Operations Committee on June 4th, 2013

[Barbara Glover]

Companies reorganize. That's a fact. We try to look carefully when there is a conviction at who the affiliates are. We use a control test and we try to apply it quite rigorously. It's not always transparent. When we talk about a public company, it's fairly easy to do. When we talk about private companies, it gets more challenging. In fact, we use our forensic accountants in my shop as well as consult with our legal services colleagues to examine the transactions, and really, whether it's bona fide, which is to say whether the affiliate is still an affiliate or not.

In terms of company directors, there can be a test of how the control is exercised. As an example, a company director could move to another company but they may still be exercising control over an affiliate.

I don't know if that answers your question.

[Bernard Trottier, Conservative, Etobicoke—Lakeshore, ON]

Yes, that's helpful.

Does PWGSC reward companies that do compete in a fair and transparent manner by creating a register of authorized suppliers?

[Michelle d'Auray]

No, we don't create a register of companies good, bad, or indifferent. The closest thing we come to a register, if I can put it this way, is when we have standing offers or supply arrangements where pre-qualified firms are listed for a specific procurement. That is another question that other jurisdictions have grappled with—creating lists versus not creating lists. As we're finding in jurisdictions, as soon as you create a list, put a name on a list, it becomes dated and you have to start all over again.

We prefer currently what I would consider to be our dynamic model, which is that every time a contract is up, we actually check every time there's a contract amendment. There's a process where we validate. It is a constant updating of our own information, as opposed to having a list that can be pretty static or stale-dated fairly quickly.

[Bernard Trottier, Conservative, Etobicoke—Lakeshore, ON]

Thank you very much.

[The Chair, NDP, Pat Martin]

Thank you, Bernard.

For the Liberals, next is John McCallum.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you.

Let's suppose that one or more executives of a company are convicted of a crime, so that bans the company from doing business. But those bad people, as it were, subsequently leave the company or are fired, would the company be reinstated or would it continue to be banned?

[Michelle d'Auray]

With regard to executives of a company, unless they have a controlling interest in the company, it does not apply to employees of a company. It applies to the company as an entity or to its board of directors with a controlling interest.

[John McCallum, Liberal, Markham—Unionville, ON]

But somebody has to be convicted of the crime. Is it only the directors, not the CEO?

[Michelle d'Auray]

Barbara, you can expand on this, but if the CEO is a director with an interest in a company, then yes, a conviction would apply to the company. The company as an entity can also be convicted, but these measures do not apply to employees of a company.

[John McCallum, Liberal, Markham—Unionville, ON]

Okay. But let's say the CEO is convicted and that bans the company from doing business and the CEO then leaves and sells his or her interest, does that mean the company would then be reinstated?

[Michelle d'Auray]

Yes. If it's the individual, in this instance the CEO, who was a director of a company and that director is no longer there, then yes, the company would be allowed.

[John McCallum, Liberal, Markham—Unionville, ON]

I would have thought that if there were a culture of corruption, if you wish, the simple removal of that one person might not make the company honest overnight, yet they're allowed to do business as usual. Is that correct?

[Michelle d'Auray]

It would be but then it doesn't preclude us from taking additional measures to ensure that the processes are transparent and making sure the integrity of the invoicing or of the activity is sustained.

I don't know if you wanted to add to that, Barbara.

[Barbara Glover]

There are two possibilities. The officer is fired or leaves or quits, and the company still has a culture of a lack of integrity. In that case, we have a range of measures. Under our measures, we would still do business with that firm but there's a fairly long list of things we could do to monitor contracting invoices, to raise the level of delegation of who is signing off on contracts or invoices. We could talk to the company and specifically make requests of them around improving, say, the values and ethics of the company, and we have done that.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you.

Who makes the decision whether the public interest exemption will be granted or not?

[Michelle d'Auray]

It is on a case-by-case basis. It is in fact.... I believe there's an integrity committee that my colleague, Barbara Glover, chairs.

[John McCallum, Liberal, Markham—Unionville, ON]

Can you tell me, since this began in November 2012 how often have public interest exemptions been granted and under what types of situations?

[Michelle d'Auray]

We have granted these exemptions in three instances. Once was because the company was a sole supplier in a remote region and there was nobody else available to provide the service or the good. The second instance was where there was a specialized test that no other company could do. This was in the domain of health diagnostics. The third one was, again, an instance where there was only one supplier of a particular good. There was nobody else in Canada who could provide the supply.

So, there are three instances.

[John McCallum, Liberal, Markham—Unionville, ON]

Finally, on the fairness monitors, I gather that the program was established in 2005, but I believe similar things happened before then. What was the change? How did things change in 2005?

[Michelle d'Auray]

The reason this was established as a program per se and given to the sector that Ms. Glover heads is that the fairness monitoring was done on an ad hoc basis and the contracts were issued by the branches that were actually undertaking the activity. We wanted to strengthen and separate the functions from the actual procuring or leasing or contracting sectors in order to be able to create an additional level of independence.

The program was established as a program as opposed to an ad hoc series. There was a structure put around it—criteria, processes, publication of the report. It was really structured as a separate stand-alone program and was done with our colleagues in the integrity branch.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you.

[The Chair, NDP, Pat Martin]

Very good, John, thank you. That's five minutes and thirty seconds.

Next for the Conservatives is Mr. Jacques Gourde.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Thank you, Mr. Chair.

My thanks to the witnesses for joining us this morning.

When big companies, those employing between 1,000 and 2,000 employees, provide services to the Government of Canada and are tainted by allegations or charges or are found guilty because of the actions of one, two, three or four individuals, do they run the unfortunate risk of losing all their contracts?

[Michelle d'Auray]

The measures we have come into play when the offences are committed or businesses or the heads of businesses are convicted. The measures do not affect the employees as such.

But, as my colleague indicated, if the employees of a company are found guilty of various offences, we can and do increase our vigilance towards the activities of those companies even if the company is not prohibited from doing business with the Government of Canada, or at least with Public Works and Government Services Canada.

We take additional measures in terms of monitoring and auditing. We have also, on several occasions, asked companies to adopt our codes voluntarily and to take the steps that we recommend.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Could the new integrity framework end up restricting the number of companies able to provide specialized services? For some services, we know that very, very specialized people are required and there are not necessarily a lot of suppliers because the market may not be big enough to support that kind of work. Could that complicate things?