Government Operations Committee on June 10th, 2008

[The Chair, Liberal, Diane Marleau]

I call the meeting to order.

On the agenda we have the results of the last meeting, which I wasn't here to chair completely. Now, I'd like to know from the committee members if we can go to the Powell Group right off the bat instead of making our guest wait, and then we'll go on to the rest of it afterwards. What do you think? Is everybody in agreement?

[Some hon. members]

Yes.

[The Chair, Liberal, Diane Marleau]

Mr. Powell, we're going to start with you. We don't want to get into a long-drawn-out debate and have you sitting there--not that it wouldn't be interesting. You can always stay to hear the long-drawn-out debate afterwards, but it's up to you. We don't want to force you to do that.

Mr. Powell is the director of the Powell Group--TPG Technology Consulting Ltd. He approached us because he wanted to come before the committee in relation to our study of the federal government's procurement initiatives.

Mr. Powell, have you ever been before a committee like this before?

[Donald Powell, President, The Powell Group - TPG Technology Consulting Ltd.]

No.

[The Chair, Liberal, Diane Marleau]

Well, welcome for the first time. What we normally do is give you about ten minutes to make a short presentation, but it's totally up to you. Then after that we open it up to questions from the different parties.

Mr. Powell.

[Donald Powell]

Madam Chair, thank you very much. Thank you for the opportunity of appearing here today. I hope the issues I raise will be of interest to you.

This is about a contract called ETS at Public Works. When the ETS RFP was issued in 2006, we were very concerned—even though we had been doing the work for over seven years—that the RFP was structured so that we could not bid, because of project references that were included. At the time we thought it was just an oversight, but in retrospect it now seems to have been a deliberate attempt to prevent us from bidding.

We have three concerns related to the evaluation of the RFP. These are the lack of a fairness monitor, the apparent conflicts of interest, and irregularities in the technical scores. The lack of a third party fairness monitor for this procurement is an issue, and it was discussed here a few weeks ago. This was a violation of PWGSC's own fairness monitoring policy framework, and it certainly didn't match their stated objective of ensuring fairness in procurement. So I think that's a big concern for us.

The second concern relates to the code of procurement, which states that if there is even an appearance of a conflict of interest, then those involved should remove themselves from any decisions involved in that procurement. In the case of ETS, several individuals are in this position: Minister Fortier, due to his previous connections with CGI; Mr. Steven Poole, the CEO of ITSB, the organization within PWGSC that issued the RFP, who was formerly a vice-president of Canada Post and Innovapost, a joint venture that is 49% owned by CGI; and Mr. Jirka Danek, a director general within ITSB and a former vice-president of CGI.

As far as the evaluation itself goes, it's important to understand the results of the RFP. For clarity I will refer to the technical scores used by PWGSC to justify the contract award to CGI as the published scores. There is conclusive evidence that these scores have been tampered with. The authentic scores that were assigned by the evaluation team will be referred to as the legitimate scores. I say this just to keep it clear.

So the evaluation was based on a 65% weighting for the technical score and 35% for the financial score. TPG, my company, was the low bidder and won the financial evaluation. For the published technical scores, CGI was given a high score, nearly 63 out of 65, with IBM three points behind, and TPG nearly six points behind. Due to the high technical score that CGI was given, they were awarded the contract.

Based on the history of government RFPs, these results were very strange, because the difference in technical scores between bidders was so large compared with most RFPs, where they are typically very close.

The evaluation process was completed between September and November 2006. During this period we heard reports that the technical evaluations were very close, with all of the scores being within two points of each other. We also heard that TPG was the winning bidder. Then several events took place that now seem to be very significant. On November 9, 2006, the evaluation was complete. In mid-November 2006, shortly after the evaluation was complete, Mr. Jim Bezanson, the director on the evaluation team, received an unsolicited job offer from Canada Post and left PWGSC shortly thereafter.

Because of the structure of the technical evaluation, Mr. Bezanson was the only member of the evaluation team who knew how the technical scores actually added up. His departure from PWGSC erased the corporate memory of the evaluation team and created a situation in which the technical scores could be changed with low risk of detection. So on November 22, 2006, Mr. Maurice Chenier, Mr. Bezanson's boss, told me that a reconfirmation of the evaluation was going to be done because the results were close.

So then we go to February 2007, several months later. At that time we heard that CGI, and not TPG, was the winning bidder. We also learned that the published technical scores were not close, as we had previously heard, but that CGI had a large advantage over both IBM and TPG.

In March 2007 we had a conversation with Jim Bezanson, who by then had been at Canada Post for three months. Mr. Bezanson told us that the ETS technical scores had been very close, and he was surprised that CGI might have an advantage over the other bidders.

From this information, it was obvious that the scores had been changed after the legitimate evaluation, without Mr. Bezanson's knowledge. We then attempted to obtain documents relating to the evaluation, which would confirm what Mr. Bezanson had told us. We filed numerous access to information requests, several CITT complaints, a complaint with the PSIO, and appeals to the Information Commissioner to obtain the necessary documents. None of these efforts was successful.

Only in the last few weeks, after 14 months of effort in dealing with these institutions, have we obtained the detailed evaluation scores for all bidders. These documents provide conclusive evidence of irregularities in the evaluation process.

In reviewing the individual scores assigned by the five evaluators, we find that the TPG scores do not match the published results at all. Any analysis of the scores assigned by the actual evaluation team shows that the results were indeed very close, exactly as Mr. Bezanson had told us.

The majority of the evaluation team--three out of five evaluators--gave TPG scores high enough for us to win the RFP by a substantial margin. With these high scores, it is impossible that TPG could end up with a published technical score far behind the other bidders.

In looking at the documents, it is obvious how the TPG scores were reduced. There were 217 evaluation criteria. For four or five of these criteria, the published scores for TPG are far lower than they should have been based on the legitimate scores. In one case the legitimate scores were 77, 80, 100, 100, and 100 out of 100, while our published score for this item was 49. This could not be a valid result and is obviously the result of tampering.

The questionable scores made the difference between winning and losing the contract. It is also certain that these low scores could not have been assigned by the evaluation team.

Our issues did not stop at the contract award. The contract was awarded in October 2007. The desire of senior officials in PWGSC to ensure that CGI retain this contract became even more obvious during the contract implementation. Senior officials in PWGSC ignored their legal obligations in implementing the contract by not enforcing many of the mandatory requirements defined in the RFP and by changing other requirements to help CGI. CGI failed to provided the required 159 resumés of the qualified resources who were to do the work. They also submitted the resumé of a TPG resource without his permission, another violation of the RFP terms. They failed to provide the qualified staff at the time of transition as specifically outlined in the RFP. They failed to complete the transition by December 21, 2007, as specified in the approved transition plan.

Immediately after our contract ended, PWGSC implemented a blackout of system changes in order to assist CGI, which was also not in the RFP specifications. In all these cases, the contract with CGI should have been terminated, but senior officials in the department simply ignored these issues of non-compliance.

As it became clear that CGI would not be able to meet the RFP requirements to provide qualified personnel, PWGSC became a recruiting agency for CGI. The PWGSC contracting authority asked TPG personnel to respond to a CGI potential employee form and submit to interviews with CGI. This was not the process defined in the RFP and was not lawful. In spite of our objections, PWGSC management and staff repeatedly contacted TPG personnel and encouraged them to call CGI to seek employment. PWGSC management was fully aware that these actions were unlawful.

Finally, on December 21, the last day of our contract, PWGSC allowed our contract to end with almost no replacement staff available from CGI. This irresponsible action was taken to help CGI subsequently recruit TPG personnel, and it put at risk the interests of millions of Canadians. Whoever made this decision is guilty of gross mismanagement.

In summary, I hope everyone here agrees that misappropriation of $400 million is an important issue, as it is more money than all of the recent procurement scandals combined. Since March 2007 we have asked for an open, transparent, and fair investigation into what happened. The opposition parties have made the same request through press releases and statements. The press has asked for an investigation. The government has refused.

Wrongdoing on the part of some public officials did not end at the early stages of the procurement but continued after contract award. Is filing a lawsuit and spending hundreds of thousands of dollars or more on legal fees the only way to obtain transparency and fairness in our country?

To understand the procurement process and how PWGSC actually operates, the committee will really need to investigate how procurements can go wrong and force transparency where the government has imposed a veil of secrecy.

Thank you.

[The Chair, Liberal, Diane Marleau]

Thank you, Mr. Powell.

Mr. Holland.

[Mark Holland, Liberal, Ajax—Pickering, ON]

Thank you, Madam Chair.

Thank you, Mr. Powell, for your presentation. As this committee studies procurement, certainly the information you bring before committee is important and concerning.

You raise a number of different issues. One issue is the appearance of bias or the appearance of a conflict of interest in the evaluation of bids in a contract awarding process. I wonder if you could expand on the nature of that conflict as you saw it, or on the appearance of that conflict.

[Donald Powell]

The three individuals who might appear to be in a conflict of interest all have associations with CGI. Given what happened in the evaluation, it's only reasonable to wonder if those relationships had an impact.

Minister Fortier, of course, did work for CGI before he became the minister. We believe he's associated and friends with some of the senior CGI officials.

Mr. Steven Poole, who's the CEO of ITSB, the entity within Public Works that issued the RFP, was at Canada Post and Innovapost. He was part of the setting up in Innovapost, where the partner company was CGI. CGI owns 49% of Innovapost.

The third individual is Mr. Jirka Danek. Mr. Danek is the largest shareholder in a company that's a direct competitor of ours and is a former vice-president of CGI. He may have been in a position to benefit from the results of this RFP.

Those are the three individuals we have concerns about.

[Mark Holland, Liberal, Ajax—Pickering, ON]

I guess the appearance of this conflict of interest is that much more concerning because of the lack of fairness and openness and transparency that went on. Perhaps you could elaborate on that. Does that deepen your concerns in this regard?

As well, perhaps you could tell the committee whether or not the lack of fairness, openness, and transparency here is an isolated case--not just from your own experience but others with whom you're talking--or is typical of what you're seeing. Is it just indicative of this case and perhaps associated with the apparent conflict of interest?

[Donald Powell]

As far as I'm concerned, this is an isolated case. We've been competing for government RFPs for 20 years. Certainly until now we've always thought we were treated fairly. This is an extremely large contract, important to a lot of people. That perhaps makes it different.

We were aware of some of the conflicts of interest as the RFP was being competed for, but it certainly would never have occurred to me that people would take the step of changing the scores. But that's what they did.

Now, exactly who did what internally to the department, we don't know. All I can say is that I think it's an isolated case. The coincidence that three of these individuals have ties to CGI and then CGI gets this extremely high technical score and we get a really low technical score.... It's very hard to believe that's a coincidence.

[Mark Holland, Liberal, Ajax—Pickering, ON]

Yes, it's certainly very concerning to me. I think it's something we have to look into a lot more.

I know that my colleague Mr. Silva has some questions as well.

[Mario Silva, Liberal, Davenport, ON]

Thank you, Madam Chair.

We do have a process in place for the procurement ombudsman. I just want to know whether you felt that's actually fulfilling the mandate, whether it's in fact meeting the needs of the suppliers.

[Donald Powell]

The procurement ombudsman is a new entity. I believe it was only staffed within the last three or four months, even though the position was defined a year or more ago. So in terms of our ETS contract, that wouldn't be of value, or it certainly wasn't of value, because it wasn't in place.

It's also my understanding that the role of the procurement ombudsman is to deal only with small procurements and not with very large ones. So that, of course, wouldn't be a concern. It may be of value for the contracts that fall within the scope, but for something like ETS, I don't believe it would be of any value.

[Mario Silva, Liberal, Davenport, ON]

All right. Thank you very much.

[The Chair, Liberal, Diane Marleau]

Madame Faille.

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

Thank you, Madam Chair.

I would like to thank you for being with us.

The facts you've stated before our committee this morning are very disturbing and cause a great deal of concern. As you know, the committee has met many of the representatives whose weaknesses you've reported today. Among others, the people from National Defence told us last week that, in view of the amount involved in the contracts, a person reviewed the process, ensured that everything had been done in compliance with the rules and everyone had been able to participate fairly in the call for tenders.

Ms. Liliane Saint Pierre, from Public Works and Government Services Canada, told us that, normally in the case of substantial contracts, a person was designated to ensure that the process was properly conducted.

Do you know whether such a person was appointed in the case of your contract?

[Donald Powell]

The only entity I know of that would fill that bill is the fairness monitor. Even at that point, the fairness monitor's role typically would end at the end of the evaluation and not proceed into the contract award process. So, short of filing a lawsuit, I don't know of anyone you can complain to if the contract isn't implemented the way it was supposed to be.

As I said, in this case the fairness monitor was not assigned. Beyond that, I don't know of any mechanism.

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

The research staff have also provided us with documents concerning, among other things, the complaints process of the Canadian Foreign Trade Tribunal, or CITT. It appears that you have won on a number of occasions. In the last case, I believe it was determined that the contract should not have been granted to CGI. Despite that, the contract was awarded.

Can you explain to us what happened?

[Donald Powell]

There were several actions we took at the CITT. When they dealt with the substance of the matter, they agreed with us, but they didn't offer any remedy as to how to correct the situation. In that case, they agreed that Public Works had changed the scoring methodology from what was defined in the RFP. But their conclusion was that it didn't hurt anything and there was no remedy.

We did the four CITT complaints. The last one was still outstanding and there was no decision from CITT. Then Public Works declared the procurement to be urgent.

When they do that—and this is just a memorandum from the department to CITT—it basically overrules the CITT process, and the stop contract award is washed out. So that's what they did to get around the CITT.

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

When they were asked whether they were circumventing the CITT's decisions, those people told the committee something different last week, which is quite disturbing. We clearly see here that they did not conduct an in-depth review of your claims.

Can you explain to us why they did so?

They told the committee that, in reviewing complaints or applications, they obtained all the documents that were used up to the awarding of the contract. This morning, you alleged that the figures were altered, that the clauses of the contract were not complied with. Normally, they should have seen that and obtained the required documents.

[Donald Powell]

Well, I agree with what you're saying, but it isn't what happened.

I'll very quickly step through what are perhaps two of the most significant complaints we made. The first one was on this issue of a reconfirmation and the potential conflict of interest. The CITT, in this case, ruled that we were too late in filing these complaints. In the case of Mr. Danek, for example, he had been hired in June 2006, and they said we should have complained then. This was very early in the RFP process, and if we had complained then, I'm sure people would have made sure we lost no matter what. So that's not really a practical way to operate. We actually complained when we heard that we'd lost, but they decided that it was too late then.

So we took that matter to the Federal Court, which agreed with us and decided that the CITT had been patently unreasonable. But it was six or eight months later by the time we got that ruling, and it didn't seem worthwhile going back to CITT on that issue.

The second major issue was this issue of the change in the scoring methodology, which we saw from one of the Public Works documents. The CITT agreed that the change had been made, and we sent a number of letters to them saying that we thought then that we needed to review the entire evaluation process to see how much of this was done and what the real impact was.

What happened was that Public Works submitted some kind of a spreadsheet on a confidential basis to CITT, so we couldn't see it, and the CITT basically said, oh, that's good enough, we don't need to see anything else.

So it is an inherent weakness in the CITT process that when you're complaining, you need to see the documents to know what happened and to prove what happened. The government has all the documents; we don't have them, and we have no power to get them.

So that's what happened.

Then they agreed that it was a bad thing that had been done by Public Works, but there was no remedy they could recommend, so it just stopped there.

Those were perhaps the two most significant CITT complaints.

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

This is about transparency and fairness, but we see this morning that there really wasn't any transparency. If the process had been fair and equitable, you would have obtained the documents requested through access to information much more quickly. You would have had the documents at all times for review purposes.

At the start of your last answer, you mentioned that there had been a reconfirmation process. That's the first I've heard about such a process.

Can you tell us whether it's a customary practice?

[Donald Powell]

No, the reconfirmation was unusual and not something that I had ever heard of before. And it's clearly not defined in the RFP. In fact, that was one of the bases of our first CITT complaint.

Now, I don't know what a reconfirmation is and I don't know exactly what was done, but I was in a meeting with Mr. Chenier and he told me personally that they were doing a reconfirmation because the results were close. That's all I know about it.

In terms of the transparency, I must admit I was very surprised, given all of the concerns in the last few years about transparency. The access to information request is over a year old now; it's probably been 14 months since we put in the first one. We did get the evaluation documents a few weeks ago, but they are still only about 20% of the documents we asked for.

The reasons some were withheld included the economic interests of Canada, though it's hard to understand how those apply in this case. We went to the Information Commissioner, and the Information Commissioner agreed, yes, it was in the economic interests of Canada to withhold those documents. I can't understand it, but that's what happened.

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

Merci.