National Defence Committee on Oct. 24th, 2023

[Alexander Jeglic]

The issue is that if you're external to government, those evaluators are actively signing new conflict of interest declarations so it's top of mind right before conducting an evaluation. That same process isn't true if you're a member or an employee of the Department of National Defence. As a result, we wanted it to be top of mind for all evaluators. On those procurements where you're not doing a blind evaluation and you actually know who the bidders ultimately are, you need to be mindful of the fact that conflict is at the top of the priorities in terms of having an effective and fair evaluation process.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Okay.

When you have found improper bids have been awarded, who signs off on these bids? Is it DND, Treasury Board or PSPC, or is the complicated relationship of all three part of the root of how improper bids are awarded?

[Alexander Jeglic]

For the purposes of our systemic review, all of those contracts would have been awarded by the Department of National Defence. That's how we scoped it in, that they're both the contracting authority and also the ultimate recipient.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Okay, so it's on DND when there's an inappropriate bid.

[Alexander Jeglic]

Absolutely.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

We heard this morning about the acquisition of Reaper drones being delayed three more years. We're 22 years now after the timeline when this piece of equipment was identified as one that the Canadian Forces needed.

What factors can lead to that kind of unacceptable delay in procurement?

[Alexander Jeglic]

Mr. Chair, unfortunately I can't comment on this specific circumstance.

However, if given the opportunity, I have some ideas as to how the procurement process can be improved in general.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Go ahead right now.

[Alexander Jeglic]

The first thing I would say is to publish an accurate, transparent project pipeline for non-NSE projects, so a refreshed version of the defence investment plan that can be relied upon and trusted by industry.

Second is to include full life-cycle planning in solicitations and contracts addressing obsolescence and interoperability.

Number three is to apply a risk-based approach to all defence projects, increasing delegations. I know that—

[The Chair, Liberal, John McKay]

This is very good stuff. I know you'll work it into another answer, for Mr. Collins or someone else.

Mr. Collins, you have five minutes.

[Chad Collins, Liberal, Hamilton East—Stoney Creek, ON]

You can continue, sir.

[Alexander Jeglic]

I appreciate that.

Thank you, Mr. Chair.

I would say, embed a TB analyst as part of the major projects procurement teams, to raise any issues in real time and reduce TB subrequirements.

There's the payment of partial bid costs for compliant bidders for major projects. That goes to address some of the things we were talking about before about 34% of competitive processes having only a single bidder.

Create clear accountabilities between all of the respective actors. We know that's a complicated system.

Reduce the number of mandatory criteria to only those that are essential. We see that when mandatory criteria are overly restrictive, that creates a smaller pool of available bidders.

Use accepted exceptions to competition where appropriate. Do not make decisions in fear of litigation, and allow the dispute resolution mechanisms to play their roles. You heard me mention using the CITT appropriately. Mimic what worked during times of emergency procurement, which was centralization versus regional procurement.

Increase delegations.

Here's another area where our office can be particularly relevant. Use a hackathon-style event. “Hackathon” is a term my children use. I'm not sure I'm using it appropriately, but I'm pretty sure I am. Use that to bring together all the actors. You've brought forward many witnesses before you, each of whom has their own incentives for being here. Bring all of those actors together over a weekend to address critical issues. Those are the types of things that are done during a time of emergency, and defence procurement requires something similar.

Prioritize the creation of a government-wide vendor performance regime. Again, I can't underscore this enough. We do not have a government-wide vendor performance regime. We want to work with the best suppliers possible. You do not want to use the award process as a mechanism to avoid dealing with poor suppliers. The award process was not designed to play that role. We need a vendor performance mechanism that will reward good performers and not reward poor performers. It can't be limited to a single department; it has to be more appropriate across the board.

Engage industry in non-project-specific discussions, including capacity in Canada assessments. We had a previous question about Canadian capacity. I think it's really important to have frank dialogues about what is possible with Canadian industry currently, and what's possible in the future. That's why having that trusted pipeline of projects is so important. I heard industry say that they want contracts in hand. If you have a trusted pipeline that you can rely on, it may actually meet that need.

Again, there was a question about best practices in foreign jurisdictions. That's something you need to continually refresh yourself on. There are other allies working diligently to ensure that defence procurement is working as efficiently as it can within their countries. Get timely information from our allies.

Require multiple procurement-related courses for RMC graduates. If I could have one global theme as the take-away message, it would be that we need to recruit and invest time in those recruits coming out of university now. The reason is that I actually heard DND say it's a nine-year incubation period to be able to work on complex projects as a PG. That's an incredibly long period of time. If we invested more time and effort in university-related programs that could have sophisticated, complex, defence-related procurement as their focus of study.... We know there are jobs that exist. The question is creating more of these programs.

There is a program like that which exists at the University of Ottawa and is run by the Telfer program, but there need to be more of them. That's the issue. It cannot be isolated to one program. I know that traditionally—again, I don't want to speak out of turn—we were sending people to participate in programs in Australia. We need to garner these programs in Canada and establish them.

On the RMC specifically, procurement ultimately impacts everyone, so having every graduate coming out of RMC have not just a basic introductory course on procurement but advanced knowledge of procurement will help them, regardless of what stream they pursue at the RMC.

I greatly appreciate the opportunity to present you with that list. Thank you.

[The Chair, Liberal, John McKay]

Thank you, Mr. Collins.

I think we just had our report written for us.

Thank you for that, Mr. Jeglic. It was very helpful.

We'll go to Madame Normandin for two and a half minutes, please.

[Christine Normandin, Bloc, Saint-Jean, QC]

Thank you, Mr. Chair.

I want to come back to the matter of justifying a decision to sole-source a contract, as opposed to putting it out to tender.

As I understand it, even if you make a recommendation that the Department of National Defence, say, provide an explanation as to why it opted for a sole-source contract, you have to rely on the department's good faith.

Is there a legislative or other way to make sure that the department doesn't have a choice about whether to provide an explanation when it decides to award a sole-source contract? What kinds of controls are available?

[Alexander Jeglic]

Mr. Chair, that's a good question. In terms of justification for sole-sourcing, I think it is very important to highlight the need to have robust justifications and make those justifications transparent. If that were happening, the veil of secrecy that's associated sometimes with some of these direct contracts would be lifted. Again, make transparent exactly why there is perhaps only one supplier that's available. What is the public policy that dictates that it's in the public interest to direct a contract?

We're coming out of a time during COVID when the emergency exception was utilized for a wide variety of procurements. Directly about your question, what legal safeguards could we implement so we could make sure that all departments have robust justifications for the invocation of these exceptions?

That being said, these exceptions are actually part of the regulations, so I don't want to give the impression that exercising an exception is somehow wrongful—it is not. There are absolutely reasons why you should use those exceptions, but the problem lies in the justification and the transparency of that justification.

[Christine Normandin, Bloc, Saint-Jean, QC]

Who, then, is the best person or body to examine the explanation and say whether it's adequate or not?

[Alexander Jeglic]

Here's where I can go internationally. You heard me make reference to the United States and how they go about invoking the national security exception and what that means domestically for them. They actually allow for additional oversight from the GAO, the entity within the United States that could go in and actually verify the justifications in place for directing some of these procurements.

In Canada, it's not as clear. The CITT does not have the authority to review the justification, perhaps, of the invocation of the national security exception, which in and of itself is not a justification to direct a contract, but sometimes forms part of the analysis that underpins why that contract might in fact be directed.

[The Chair, Liberal, John McKay]

Mr. Angus, you have two and a half minutes, please.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you.

I represent people in James Bay and the lower part of Hudson Bay, and there are still very bad memories of when the Mid-Canada Line was put in. All the contractors came up, the military came up, and they left massive environmental damage.

We're now looking at the NORAD modernization in Nunavut. With the chance of northern communities being able to participate, northern businesses are going to face a number of difficulties. In order to make sure that this is not another exercise in Canadian northern colonialism, what steps need to be taken to ensure that northern communities in that region are able to financially benefit and participate in the investment that's going on?

[Alexander Jeglic]

Mr. Chair, that's a good question. Ultimately, there should be provisions in the contract that need to be enforced. It's just a question of enforcing those provisions. So, ensure that those provisions exist, make sure that those investments are in fact made, and then there has to be enforcement of those provisions.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Have you looked at any of the barriers? We're finding these enormous barriers in the far north. We find it with big mining projects, too. The whole system is set up so it fundamentally excludes the first peoples, whose land it is.

Have you looked at any of this? Have you been able to provide any ideas in order to make sure we are not dealing with this as a problem down the road, but we deal with it before it happens?

[Alexander Jeglic]

Absolutely. We are in touch, obviously, with issues associated with indigenous suppliers. There are new requirements under the directive on the management of procurement that require a 5% allocation of federal contracts to be awarded to indigenous suppliers. It's really important to note that this is.... I don't want to call it progress, but a certain requirement is now established.

Part of our role can be ensuring accountability that this is, in fact, happening. As an office, that is where we can play an active role.

[The Chair, Liberal, John McKay]

Thank you, Mr. Angus.

Now we have Mrs. Kramp-Neuman.

[Shelby Kramp-Neuman, Conservative, Hastings—Lennox and Addington, ON]

I'm going to pass my time to James Bezan.

[The Chair, Liberal, John McKay]

Mr. Bezan, you have five minutes.