Government Operations Committee on Feb. 27th, 2019

[The Chair, Conservative, Tom Lukiwski]

Colleagues, I'll call the meeting to order.

Ms. Qualtrough, welcome back to our committee. I think this is your second appearance.

I should say at the outset that we normally have far more members of the fourth estate here, but apparently there's another meeting going on that seems to be taking some of the attention away, but we shall soldier on.

Minister, you know the drill. Could I please get you to introduce the officials who are with you, and I understand you have an opening statement.

Please proceed.

[Carla Qualtrough, Minister of Public Services and Procurement and Accessibility]

Thank you. I will do the introductions via my opening statement.

Mr. Chair and committee members, good afternoon.

I'm very pleased to be here today, and to have the opportunity to appear before you to discuss our supplementary estimates (B) as well as updates on some of our recent accomplishments.

It is a pleasure for me to speak for the first time in the newly renovated West Block. As Minister of Public Services and Procurement and Accessibility, I am proud of how much has been accomplished to restore and modernize the parliamentary precinct.

Joining me today are Public Services and Procurement Canada's new deputy minister, Bill Matthews; our chief financial officer, Marty Muldoon; our associate deputy ministers, Michael Vandergrift and Les Linklater; and our assistant deputy minister of defence and marine procurement, André Fillion.

From Shared Services Canada, we have Paul Glover, who was recently appointed president; Sarah Paquet, executive vice-president; and Denis Bombardier, chief financial officer.

Mr. Chair, these two organizations serve Canadians every single day by providing services and support to other departments and agencies. To support our operations, we are requesting $102.3 million in supplementary estimates (B). This amount is comprised of $75.5 million for PSPC and $26.8 million for SSC.

Allow me to begin with our request related to PSPC, starting with one of the most pressing issues the Government of Canada is facing today, which is stabilizing the Phoenix pay system. While we're making progress, we know there is still a lot of work to do to ensure Canada's public servants are paid accurately and on time, every time.

As I reported to this committee in December, we have significantly increased our capacity to address pay issues, and we have introduced measures to ensure that public servants receive more useful help and support when they call the client contact centre.

I will also inform this committee about the success we've had with our pay pods. You'll recall that this approach assigns compensation advisers to the employees of the specific organization. These dedicated advisers develop departmental expertise and relationships, and work to address all outstanding transactions in an employee's pay file, rather than addressing issues by transaction type. New pay pods were rolled out just last week, bringing us up to 34 departments that are being served using the pay pod model. This represents approximately 154,000 employees. We're also on track to have all 46 departments served by the pay centre using the pod model by May of this year.

Since January 2018, we've decreased the backlog by nearly 160,000 transactions and reduced the overall queue for pod and non-pod departments combined by an average of 25%. Pod departments alone have seen a 29% reduction in their queue, which demonstrates the success of this approach.

I should also add that we've processed more than $1.5 billion in retroactive payments for employees.

We are also supporting employees during tax season by working with Canada Revenue Agency and Revenu Québec to ensure that employees are provided with accurate tax slips. And we continue to offer flexible repayment options for employees who have received overpayments. We are committed to making this situation right for public servants and their families.

For supplementary estimates (B), we are requesting $25.1 million for continued efforts to stabilize the Phoenix pay system. Although we still have work to do, I can assure you that we'll continue working to ensure people get paid accurately and on time.

I now turn to our request for new funds in support of the Receiver General's operation. Every year, the Receiver General incurs costs for processing transactions on behalf of federal organizations. They include the card acceptance fees we pay so that Canadians can make payments to the government of Canada using debit and credit cards, and postage fees to mail cheques to Canadians. These fees have been growing above our normal baseline and they fluctuate every year. We are requesting $13.5 million to address these costs.

Our supplementary estimates (B) also include $2.8 million in new funds to support the integrity regime program, aimed at addressing corporate wrongdoing. This more robust approach to improper, unethical and illegal business practices will come into effect soon following public consultation. The funds we have requested will address the increased workload and operational costs associated with administering the new regime, ensuring that our government conducts business with ethical suppliers and ultimately holds those suppliers accountable.

I'd also note that there are $22.9 million from the sale of surplus real property that PSPC will reinvest to preserve and maintain our real property portfolio and provide tenants with healthy and safe accommodations. This will help PSPC meet the needs of federal organizations and provide sound stewardship of federal buildings on behalf of Canadians.

I'd now like to provide some updates on some of our key achievements.

We have made great progress on our promise to replace Canada's fighter fleet. We worked closely with the Australian government to procure 18 F-18 fighter aircraft, plus equipment to supplement the current CF-18 fleet. We received the first two fighter aircraft from Australia on February 17, ahead of schedule. In addition, just last week we concluded the second round of one-on-one engagement with suppliers for the future fighter program, to purchase 88 modern fighter jets.

There have also been a number of major developments in Canada's national shipbuilding strategy. On February 8 we announced that Lockheed Martin Canada had been selected for the design of 15 new Canadian surface combatants that will be built at Irving Shipbuilding's Halifax shipyard. This is the largest and most complex procurement ever undertaken by the Government of Canada, and it was done in an open and transparent manner. With this contract, design work is proceeding, which will be followed by construction in the early 2020s. In addition, we are advancing construction work on other large ships on both coasts, generating substantial economic benefits across the country and revitalizing a world-class marine industry that supports Canadian innovation.

As noted earlier, we have also worked hand in hand with our parliamentary partners towards a successful transition of the operations of Parliament to the West Block and the newly restored Senate of Canada building. This will allow major restoration work to begin on Centre Block so that it can continue to serve as the seat of our democracy and proudly welcome future generations of Canadians.

Mr. Chair, let me now turn to Shared Services Canada. SSC has made tremendous progress over the last few years. Now led by Paul Glover, and with the appointment of Luc Gagnon to the newly created position of Chief Technology Officer, SSC is entering the next phase of its evolution. This new office will help SSC deliver a more coherent vision of modern and secure digital government.

To that end, SSC has closed nearly 180 legacy data centres, replacing them with new state-of-the-art enterprise data centres. This is resulting in more efficient and less costly IT operations for the Government of Canada. SSC also continues to support its clients in the implementation of the government's “cloud first” policy. There are now over 40 active cloud computing accounts that are helping to provide modern and efficient IT services to Canadians.

SSC completed the first phase of an e-cabinet initiative that allows ministers to access their secure documents from their tablets anywhere, any time.

In 2017-18 alone, more than 1,200 employees joined the department. This provided vital additional capacity to meet the growing technology demands of federal organizations.

Today we are requesting $26.8 million in supplementary estimates (B) funding. This request includes $20.3 million for cyber and information technology security initiatives to respond to the most pressing gaps in government systems. This funding will continue to allow SSC to provide modern, reliable and secure information technology infrastructure and provide world-class digital services to Canadians.

Public Services and Procurement Canada and Shared Services Canada have diverse yet equally important mandates. We are thankful for the many devoted and skilled public servants who help fulfill these mandates.

With the additional funding we are requesting today, these organizations will be better able to meet the needs of their client federal departments and agencies, and ultimately, all Canadians.

Thank you. We look forward to your questions.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Colleagues, before we get into questions, I have a quick housekeeping note.

As you know, we got a bit of a late start for today's meeting. We were debating Mr. Peterson's private member's bill, so we can all blame him.

[Voices]

Oh, oh!

[The Chair, Conservative, Tom Lukiwski]

Madam Minister, I know that you stated, at least in our schedule, that you would be here until 4:30 p.m. Of course, we won't have the full hour with you unless you are willing to extend your stay a little longer.

[Carla Qualtrough]

I am, for sure.

[The Chair, Conservative, Tom Lukiwski]

That would be great. If we could get through at least the complete round of questioning, that would be much appreciated.

We will now start the questioning with a seven-minute round of interventions.

Madam Ratansi.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Thank you, Minister, for being here.

To ensure that I do not interrupt in the seven-minute round, I will ask you a few questions all together so that you have a response for me.

In interim supply under vote 1b, you are requesting $2.6 million to strengthen the integrity regime. I want to know a few things for our edification.

When was it put in place? What does it intend to do? When it was originally designed, what were some of the challenges? What are you doing to overcome those challenges? Those are four questions in a row for you to answer.

[Carla Qualtrough]

Thank you. I'll do my best.

Basically, the integrity regime is a suite of administrative tools to protect the integrity of procurement and real property agreements. It was put in place in July 2015 by the previous government. The purpose was to take action against improper, unethical and illegal business practices and at the same time hold companies accountable for their misconduct. Doing this, effectively addressing corporate wrong-doing, really protects the integrity of markets and addresses barriers to figuring out how to deal with these companies.

When I became minister of PSPC, the plans for the review of the integrity regime were very much under way from my department. That was, if you recall, in July 2017. That meant that we were consulting, and we were updating the integrity regime which had been introduced two years earlier.

We did a lot of industry engagement. As I understand, it was done by the previous government before the integrity regime was put into place. We kept that industry engagement ongoing. It's been this kind of iterative process. They had what was called an industy engagement group, and they met with the previous government twice before July 2015.

We continued to meet with this industry engagement group. We heard about a number of—I don't know if I would elevate them to concerns—challenges that they were facing, both in understanding the goals and what was happening within the regime, and also in terms of what was perceived by industry to be a rigidity in the policy itself.

Based on feedback from the industry, we decided to do a broader consultation on corporate wrongdoing, including the integrity regime. That included 70 submissions, and over 300 organizations and individuals who participated in the consultations. We really took a massive public approach to all of the amendments.

Do you want me to go into the amendments that are proposed?

[Yasmin Ratansi, Liberal, Don Valley East, ON]

You made a statement saying that the previous regime was rigid, that you faced some criticism from the industry.

Am I hearing you correctly? Did you face criticism from the industry for the previous integrity regime that was put in place?

[Carla Qualtrough]

What we heard on a couple of different levels was that there is—because the policy hasn't yet been changed—a 10-year fixed debarment term and that industry was amenable to potentially broadening the scope of the triggers that could potentially cause debarment. They requested some flexibility in the fixing of the term.

We looked at international best practices. In the United States, for example, it's a three-year debarment. In Quebec, it's a five-year debarment. At the World Bank, it's a 10-year debarment.

What we were hearing from industry was that having a fixed 10-year period didn't allow us to take into account any kind of mitigating circumstances that might be present, i.e., that this behaviour had been done a number of times, the corporate structure had changed or the board had turned over, things that might lead to maybe an admission of guilt; who knows the type of crime that we're talking about.

It was really a response to some concerns raised about the lack of flexibility in the 10-year term.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Have you started the second round of consulting? Have you made changes?

Have you accommodated, or are you stuck with the previous regime?

[Carla Qualtrough]

In the fall of 2017, we held a public consultation. As I mentioned, we heard 70 submissions from 300 organizations. It was really quite extraordinary, the feedback we got.

We then took that feedback in and produced what we called a “what we heard” report. It was effectively a public summary of what we'd heard in the various submissions as to how we could improve the integrity regime. We then went back into government and drafted a new draft ineligibility and suspension policy, which is the policy that governs the integrity regime. We put that out for consultation last fall.

We are now in the process of reviewing the submissions we had on that second round of consultation, based on our draft policy.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

How many corporations have been barred from doing business with the Government of Canada since 2015? Do you know?

[Carla Qualtrough]

I want to have an accurate number, so I'm going to ask Michael.

Michael, would you know that?

[Bill Matthews, Deputy Minister, Department of Public Works and Government Services]

I'll kick it to Michael if I get it wrong—if that's all right.

My understanding is that it's three at present that were under the regime.

[Carla Qualtrough]

That's what I was going to guess, but I didn't want guess.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

How many employees are responsible for overseeing the corporate accountability?

[Bill Matthews]

Mr. Chair, as the member mentioned, there is money being requested in the supplementary estimates to augment the team, but currently it's 35 employees. With the dollars in the supplementary estimates, that could grow up to 60. That group right now handles about 26,000 verifications and validations a year. The money being requested relates to the new draft policy. If it is implemented, it will require additional resources because there's more work required and there's a broader scope of offences and things like that. It's currently 35 and could grow to 60 depending on what happens with the new policy.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

With the new funding, you expect to increase from 35 to 60. Is that right?

[Bill Matthews]

I would say up to 60, because the new policy is in draft. We don't know what the final policy will say, and the workload will very much depend upon the final policy. The broader the scope of offences and the more linkages to international organizations and provincial laws, the more employees you need for enforcement.

I understand we're out of time.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Thank you.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Mr. Nicholson, welcome to our committee. You have seven minutes.

[Rob Nicholson, Niagara Falls, CPC]

Thank you very much, and thank you, Minister and all those with you here today.

Minister, you have a very busy portfolio, I have to say. You've been in this portfolio for, I think, about a year and a half now, and there is lots going on.

You did talk in your opening statement—and I wanted to go to that first—about the Phoenix pay backlog. It seemed to me that you have, I think you said, about $25 million as part of these estimates to work on this.

I'll tell you what concerns me. It's an article I saw just a couple of days ago. It was reported on CBC that there was a document “prepared in August 2018 for a deputy minister in Employment and Social Development Canada (ESDC) ahead of a meeting with the Treasury Board official in charge of helping find a system to replace Phoenix.” It says, “As the federal government forges ahead to replace the Phoenix payroll system, internal documents obtained by CBC News through access to information suggest clearing the backlog could take another three to five years,” and then it goes on to say that it actually “could take 10 or more years for the system to achieve 'overall stability'.”

It's one thing to be waiting 10 years for the rehabilitation of one of our Parliament Buildings, but this Phoenix estimate seems way out of line. Don't you agree? I mean, three to five years.... Many of these employees have suffered enough, and I'm sure you've heard from them, just as I have. It has to be very discouraging to see that report. What are your thoughts on that?

[Carla Qualtrough]

I have a couple things.

First of all, I share your sense of worry on behalf of public servants. It does continue to keep me up at night, and it continues to keep my team laser-focused on our efforts both to stabilize the system—and by that I would mean to ensure that the software/hardware policy infrastructure is in place so that we can confidently say people are being paid accurately—and to address the backlog. As I said, we've reduced the backlog by 160,000 transactions. Our current dashboard, which is publicly available, shows 275,000 outstanding transactions with financial impact and another 75,000 with non-financial impact.

I am aware of the media reports, and I will say that those numbers are in line with what both the comptroller general and the Auditor General have reported. As I said to this committee, I am more optimistic than that. I think if you see that we've reduced the queue by 29% in the past year, knowing that we'll be at full pod by May...I mean, I guess we could all do the math. I think it's somewhere around three years, but it's not three to five, and it's not up to 10. If you add on to that the reality that we are in the process of replacing Phoenix with the next generation of pay system, there's no scenario where 10 years from now we will still be working on Phoenix.