Government Operations Committee on April 29th, 2024

[Larry Brock, Conservative, Brantford—Brant, ON]

Thank you.

[The Chair, Conservative, Kelly McCauley]

Mr. Bains.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Thank you, Mr. Chair.

Thank you to our ombudsman and Mr. Mersereau for joining us today.

You mentioned that in the procurement process, this has been going on for decades. Obviously, you'd like to provide solutions and recommendations. I want to give you that opportunity. However, even in previous committee meetings, when we've asked these questions around procurement, we've learned that the process has not changed in almost 20 years.

Over that time, we've seen people continue to work with departments and people within government departments who have been there for a long time—decades even—and relationships are built. Again, things are happening, so you know someone.... All the people who are getting procurement services know one another. They interchange. They'll do different jobs continually and simultaneously.

How much of that whole relationship building are you seeing? Maybe you can talk about some of the steps you want to take.

[Alexander Jeglic]

Yes, absolutely.

There are multiple layers to your question. How is federal procurement done? Is there a relationship component to federal procurement? The answer is absolutely yes, there is a relationship component to this, and that goes back to the point I was making about vendor performance management. How do you actively track this information about who the good performers and the poor performers are? You need to do that in a transparent way, and that's the problem. It's not being done.

Say you had a particularly bad experience with a particular supplier, and you never want to work with that supplier again. The system currently doesn't have a mechanism by which that could happen. Ultimately, what ends up happening is you use criteria as a methodology by which you create overly specific, restrictive criteria to ensure that the specific supplier cannot participate.

I saw the furrowed brows when I said there is no process to currently stop that from happening. Obviously, if someone is charged criminally, there are, in fact, ways to bar suppliers, but what I'm talking about is not of that nature. I'm talking about a supplier that just doesn't deliver in accordance with the terms and conditions of the contract. There's nothing criminal; it's just a poorly performing supplier.

At the end of the day, people want to deliver on their projects. When they are not given an opportunity to deliver on their project because the supplier that was hired using the process that was given ultimately doesn't deliver, it's frustrating for all people. It's not just frustrating for the taxpayer, but also for the government officials.

I can speak on their behalf for an instant. They're frustrated with the system as well. It's not just the contracting authority, but also the project authority. The project authority wants to deliver on the project and is being told what procurement tools to use. If those tools don't lead to the outcomes it wants, then you have to understand why it's looking at alternatives.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Then what are some of the step-by-step changes you're thinking of?

[Alexander Jeglic]

I think I was identifying two of them, and those are the main two that we've identified, as an office, to say that these are both significant and would have a long-standing impact. The first piece is the transformational change. I can't sit before you today and tell you that I have all of the answers, but I will say that I think there needs to be an outside lens looking at what prospective changes need to take place—someone who is not an active participant in the process. That's why we're advocating for the creation of a chief procurement officer.

The second piece is this government-wide vendor performance management tool, because it will not only eliminate the problem of poor suppliers, but will also reward positive engagements with suppliers. So, good suppliers aren't necessarily treated better, but will be given consideration for their good performance on federal government contracts.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

What does that tool look like?

[Alexander Jeglic]

It's literally called a vendor performance management framework, and it's a transparent government-wide tool where anyone who delivers under a federal contract would be evaluated after completion of the project. A number of models already exist. If you look at other jurisdictions, they would have vendor performance management frameworks, so this isn't something unique that I've created on my own. It's being done in multiple jurisdictions, but it's just not being done at the federal level.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

What examples can you give?

[Alexander Jeglic]

You could look at the City of Ottawa as an example, but there are multiple examples. Again, I hate to sound like a salesman on this one, but on our website we've actually published an initial piece on vendor performance management where we have looked at other such frameworks specific to dispute resolution. However, we are writing another piece on the chief procurement officer that we hope to publish in the next several months, which I would encourage everyone on this committee to read.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Thank you.

[The Chair, Conservative, Kelly McCauley]

We have Ms. Vignola, please, for two and a half minutes.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you very much, Mr. Chair.

Mr. Jeglic, paragraphs 91 and 92 of your office's report more or less say—and I'm summarizing here—that statements of work, or SOWs, defining needs were generally missing in most cases and that the McKinsey & Company outline was the first document filed.

That is scary. I wonder if the departments know what they want, by when they want it and why they want it. When the vendor determines what the departments want, we have a problem.

Am I wrong?

[Alexander Jeglic]

I would agree with your concern with the lack of specific statements of work for call-ups. That was one of the notations that we had as well. I think part of the answer is that in a traditional master standing offer the good or service would be defined with precision. Therefore what we did see are references back to the generic scope and the creation of the national master standing offer, which, in some ways, is not wrong. It's actually right. It's just what happens next is the important part.

This wasn't a great fit, in our view, for a national master standing offer, because the services included the aspects of intellectual property, but the preponderance did not. You saw that 97.5% of the total value of these call-ups was not related to the proprietary tools, but was related to the expert advisory services associated with the tools. What we question is this. If you look at the chart early on in the report, you'll see a shift where McKinsey was winning competitive contracts, and then when the national master standing offer was established, all of a sudden everything becomes non-competitive. That means that not only were they winning benchmarking prior to the creation of the NMSO, they were winning other contracts associated other than benchmarking. After the creation of the NMSO, everything was related to benchmarking.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you.

It astounds me. I also see that McKinsey & Company was intimately involved in the Century Initiative. However, that initiative suggested that we accept 500,000 immigrants a year without considering the social repercussions it would entail. Mr. Barton talked about this at committee.

The government seems to have turned a blind eye to this, as if McKinsey & Company always suggested how to proceed and we had to go along with it.

Did you also observe that tendency in your report?

[The Chair, Conservative, Kelly McCauley]

Give a brief answer, please.

[Alexander Jeglic]

Mr. Chair, I don't believe so, no.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you.

[The Chair, Conservative, Kelly McCauley]

Mr. Bachrach, go ahead, please.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Thanks, Mr. Chair.

Mr. Jeglic, you asked the question: Why are other companies not bidding? I want to dig into that a little bit. Is it because other companies know the system is being hacked to favour certain companies and they don't feel that it's worth the effort to participate in the process if the outcome is predetermined?

[Alexander Jeglic]

Part of our role in the office is to speak to all stakeholders. One of the stakeholder groups we do speak to is the supplier community. We capture all of the information they provide to us on a yearly basis, and I will say that we had a record number of cases this past fiscal year.

What we hear with clarity is that they do believe there is a restrictive nature in the requirements. Whether they be biased, unfair or overly restrictive are constant issues that are raised to our attention by the supplier community.

To answer your question directly, is that happening? Yes, there are concerns on the part of suppliers that there are defined results before a competition is let. As a result, it diminishes competition, but I also don't think that's the only factor; that's the piece where we do need to lift the hood and understand more.

Before committee I represented the statistic of over five years when we did an analysis of competitive procurements. In 34 of the instances, there was one sole bidder on competitive processes. That's a particularly high number, so our hope is that, in future, we're able to look at that number and unpackage, on the supplier side, why that's happening.

Certainly, I know that the focus of many of my remarks has been on the governmental side, but I do think that there also needs to be an engagement strategy with suppliers to understand why they are not participating in greater numbers, particularly in times of the economy perhaps not behaving as well as one would like.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

I'd love to get into the decision-making or the mindset that leads the people who are responsible for procurement to repeatedly choose the same vendors and adjust the process in order to have an outcome that results in their working with the same people over and over again. I'm wondering about the perception of risk. Obviously, there are risks of working with the same underperforming vendor over and over again, which is that you don't get great results. There's also a risk of dealing with new entrants who you might not have relationships with.

On which side of that risk equation do you see the procurement managers leaning more heavily? Are they avoiding risk by favouring underperforming standing contracts versus a more competitive process where you might end up with a wild card that results in a really adverse result?

[Alexander Jeglic]

When you look at restrictive criteria, I believe that the correct answer in this circumstance is that there is a known supplier that would meet those characteristics. I don't think it's done in the abstract, hoping that an unknown entity can comply with those restrictive criteria. I think that there is a specific vendor in mind when restrictive criteria are created.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Thanks, Mr. Chair.

[The Chair, Conservative, Kelly McCauley]

Mr. Genuis, please go ahead.