Government Operations Committee on July 23rd, 2020

[The Chair, Conservative, Tom Lukiwski]

Colleagues, I'm calling this meeting to order.

Welcome to meeting number 23 of the House of Commons Standing Committee on Government Operations and Estimates. Pursuant to the order of reference of Saturday, April 11, we will continue our meeting on the government's response to the COVID-19 pandemic.

Colleagues, we have one housekeeping bit of business. I will be taking 15 minutes at the end of today's meeting to go into committee business. There are a few things about our upcoming study, under the motion that was passed July 9, on the WE Charity issue. I'm thus going to excuse our witnesses at about 2:45 p.m.

Witnesses, be prepared for that.

Then we'll take 15 minutes, colleagues, to go over committee business at that time.

For the benefit of our witnesses, I would ask you again, when you are speaking—and I'm sure you're all familiar with the procedure—that if you start in one official language, you complete your entire presentation or answer the question in the language in which you started. If you're switching between French and English, you can do so by alternating English to French on the channel. However, my strong suggestion to you is to keep to one language only when you're making a statement or answering a question. That would greatly assist our interpreters.

Colleagues, as well, you have all received just very recently Mr. Matthews' opening statement in both official languages. However, many of you may not have had an opportunity to read through it yet. In that case, I'm going to be asking Mr. Matthews to deliver his opening statement.

Hopefully, Mr. Matthews, it's no longer than 10 minutes.

Then we will go directly into questions.

With that, colleagues, I will turn it over to Mr. Matthews.

Mr. Matthews, the floor is yours.

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

Good afternoon, Chair and members. Thank you for inviting me back.

Mr. Chair, I hear you loud and clear on the length of opening remarks. I will be less than 10 minutes, I promise.

I do have a number of colleagues with me here today. I'm not going to name them all. Given that we have a fair amount of time to get through today, I thought I would bring some additional people with me just in case there are questions on the broader obligations of the department.

I will mention Michael Vandergrift, the associate deputy minister, as well as Ms. Arianne Reza, who is the assistant deputy minister of procurement, because you'll be hearing from those two for sure, I think. The others I will introduce if I need some help in answering questions, if that's okay, Mr. Chair.

[The Chair, Conservative, Tom Lukiwski]

That's fine.

[Bill Matthews]

Since I was last here on June 16, we've seen a gradual easing of restrictions across many provinces. While there may be a drop in active cases since my last appearance, we must remain cautious and prepare for a second wave.

From previous appearances, the members will be aware that the government has used a two-pronged approach for procuring personal protective equipment and supplies: purchasing and importing from overseas suppliers, and fostering a domestic supply chain with eager and willing Canadian manufacturers.

There were some challenges along the way, but our approach has shown signs of success. I have spoken to this committee before about the volatile market and intense competition for PPE around the world, and our experiences early on led us to adjust our approach on the ground in China, as well as other countries, to secure supply chains, particularly those from new suppliers.

A steady flow of orders has made its way to Canada, with more than one hundred flights of supplies from China, along with maritime shipments for items such as hand sanitizer, gloves and gowns. Although not at the pace we were seeing over the spring and early summer, we will continue to see shipments come through, both by air and by sea, as long-term orders continue to be filled.

Our overseas orders are being increasingly supplemented by domestic purchases, thanks in part to a call-out in early March to suppliers for much-needed goods and services during this crucial time. Our procurement experts engaged directly with thousands of these suppliers. Through the combined efforts of my department—PSPC—and ISED, the government has entered into 147 contracts, including 137 contracts with Canadian companies, as a result of that call-out.

Companies such as GM Canada, The Canadian Shield and Fluid Energy have stepped up to start making the necessary goods and supplies, including completely new products that have required the retooling of production lines. Because of companies like these, 44% of the dollar value of contracts is for goods that are being made in Canada, including surgical gowns, non-surgical masks, face shields and hand sanitizer.

PSPC is now in a much stronger and more stable position, and that has allowed us to shift our procurement strategy to increasing our purchases of domestic supply for key commodities. With our most immediate needs now filled, PSPC has closed its call to action and is returning to competitive procurement opportunities where requirements permit.

For instance, we have recently launched a series of tenders for goods such as non-medical masks and face shields, and these have attracted hundreds of bids. One of these, a request for proposals for cloth masks, is open exclusively to indigenous-led businesses, helping to spread economic opportunities to under-represented groups throughout the country.

The department has secured significant amounts of PPE and other medical equipment and supplies to support front-line health care workers across the country for both short- and long-term needs. PSPC is also helping to meet other needs for PPE beyond the health sector.

In June, the department launched a supply hub to bring together organizations buying and selling personal protective equipment. This hub connects Canadian organizations from coast to coast to coast with federal, provincial, territorial and other resources and information about PPE, including important guidance on what PPE is needed for specific occupations and work settings.

Earlier this week, Minister Anand announced the essential services contingency reserve, which is an emergency backstop that will provide organizations with PPE on a cost-recovery basis. It is intended to prevent significant disruptions in services to Canadians. This contingency reserve will help essential service sectors—such as agriculture, transportation, energy and manufacturing—bridge urgent and short-term gaps to avoid any significant disruptions in services to Canadians.

This is also part of the safe restart agreement recently announced by the government. Under this agreement, the government will waive any costs for requests from provincial and territorial governments to use the contingency reserve. This reserve will begin operations on August 3.

I can assure the committee that the department is working non-stop to ensure that Canada has the supplies and equipment it needs to combat COVID-19. I also want to take this opportunity to reaffirm our commitment to transparency and accountability in our efforts to procure these supplies. To that end, PSPC is working progressively towards releasing in the coming weeks a more detailed account of our efforts in keeping Canadians safe.

To conclude, Mr. Chair, as the pandemic situation has evolved, so has the department's strategy. What remains constant is our effort to do everything possible to acquire the necessary goods and services needed for our essential health care workers and other government departments.

Thank you, and I'm now happy to take your questions.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much, Mr. Matthews.

We will start with a six-minute round of questioning. Our first intervenor will be Mr. Aboultaif.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Thank you, Mr. Chair.

Good afternoon, all.

Thank you, Mr. Matthews, for your presentation.

Where in the government's priorities is the procurement of life-saving ventilators?

[Bill Matthews]

Thank you, Mr. Chair.

I should mention to members that the web page reporting what PSPC does in its procurement activities was updated this morning, so I would encourage members to take a look at the updated quantities.

What we're seeing with regard to ventilators is that on the domestic front, as you'll recall, members, there was an effort by Canadian companies to start up manufacturing. It's a little bit behind schedule, frankly. Two of the domestic manufacturers now have the required regulatory approval and have started to deliver, but it's slower than originally scheduled. That's not a shock, given that they were taking on new manufacturing processes and supply lines, etc.

There are also orders that have continued to come in from international sources. The number of ventilators received, as of the web page that was updated this morning, is 409. There have been 40,500 actually ordered.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

The report I have in front of me—before you mentioned your update—is that you only received 0.9% of the quantity ordered. Is that number still valid?

[Bill Matthews]

The number was updated as of this morning, so that would be 409 out of 40,500, and there have been about 200 or so come in since the last web page update. The domestic ones were scheduled to ramp up over the summer, so this is kind of back-end weighted. Still, it's the lowest percentage of the ones on our list.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

This is only 1%. The 0.9% number I have in front of me is correct, based on the numbers you provided. Don't you think that these are very, very important to have? What we have is not really giving us enough protection should, God forbid, there be a second wave coming.

[Bill Matthews]

I think to properly answer that question you'd have to turn to what's actually going on with our friends at the Public Health Agency of Canada. There are still ventilators in the stockpile that provinces could ask for if needed, so there's not a shortage right now. However, we are certainly working actively to accelerate the delivery of the ventilators we have ordered. It's an ongoing effort on our part.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Based on your knowledge and information of the current stock or current inventory that you have right now, how long could we survive if a second wave of the pandemic comes through?

[Bill Matthews]

I think that's actually a question better posed to the health professionals, the Department of Health, the Public Health Agency of Canada. Just in terms of burn rates and where provinces sit, that would be more a question for the medical experts.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Then there's no communication between you as the supplier and the health agency as the recipient of the product—the client, basically—about the demand or what is needed. How can we suggest that we're very prepared if that line of communication is not open?

[Bill Matthews]

The line of communication starts with the ordering. In terms of quantity and what types of products, the orders actually come through the Public Health Agency. It's aware of the delivery schedules. As I mentioned, there are ventilators in the warehouse right now.

The ventilator purchase was a long-term arrangement; we're expecting a steady supply all the way into 2021. We're actively monitoring the delivery, but at the current stage, we're not seeing a shortage of ventilators, if that is your question.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Isn't it logical to suggest, or at least to think, that we need to know.... I mean, they place the orders. What is the anticipation? They place the orders based on what? Is it that they'll get their product in two months, three months, six months? They know their numbers. You probably don't, which you should, I believe. If they've placed the orders, that means that there's an expectation that they can fill their stock within a certain time period. So far, it's been since March, four or five months now, and we still have less than 1%. Where's the problem?

[Bill Matthews]

There are a couple of elements to this question, Mr. Chair. Number one, the delivery schedule that was agreed upon was not all at once. It was staggered out into 2021, but as I've indicated, domestic has been slower to deliver.

On the international ones, the market itself has been one that has been very tight, so our international orders have been delayed as well. As I mentioned, in the last couple of weeks we've seen an increase of 200 come in, and we're expecting that number to grow more rapidly than it has in the past.

I'll stop there, I think, Mr. Chair.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

I will close on this. I think this is very important, and I would like to have some feedback from Mr. Matthews on how we are moving forward, what the expectations of deliveries—of receiving the product—are, and what the current inventory level that we have right now is. I think that would be beneficial.

Thank you.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

We'll now go to Mr. Zuberi.

Mr. Zuberi, welcome to our committee. You have the floor for six minutes.

[Sameer Zuberi, Liberal, Pierrefonds—Dollard, QC]

I'd like to thank Mr. Matthews for giving his testimony and his time here with the committee. I'll have a number of questions.

Feel free, Mr. Matthews, to supplement what you were speaking about in your opening statement. You can use this time to elaborate upon that if you want to.

With respect to a second wave, I'd like to know what is being done to prepare. Could you elaborate on that?

[Bill Matthews]

Thank you for the question.

This really speaks to the ongoing delivery of PPE. As mentioned or touched on in my opening remarks, the strategy was twofold: order internationally, but also stand up domestic production. We are still seeing orders come in, and many of our orders actually extend into 2021 so we can ensure there's a steady stream of supply. What we've seen to date is also that domestic production has ramped up in a number of areas. We've spoken about that before at this committee.

On face shields, we're very successful in terms of getting our own domestic capacity. We also have the ventilators, which we've just touched on. There's domestic capacity there. I believe this committee will remember that we have had discussions about domestic capacity coming online for surgical masks at the end of July, with one particular deal in N95 masks towards the end of August or early September. That's all ramping up, and I did not mention hand sanitizer, as well as some other things.

Really, the second wave thing is to make sure we still have orders coming in. Obviously, we can place more orders if we need to, but products are still coming in. The warehouse space itself is full. We're actually securing additional warehouse space for our client, the Public Health Agency of Canada, which gives you an indication of the stock that's coming in.

I should have stressed this in my opening remarks and I did not. This is over and above what provinces and territories are ordering, and they are still the primary provider of PPE for the medical system.

Again, we are all very much in a backstop world, but we've continued to order and it's going very well. If you look at what came in during June—one flight a day—big, big numbers started to come in, and you'll see the updated web chart that I mentioned earlier today, but orders will continue to arrive in the coming weeks and coming months.

[Sameer Zuberi, Liberal, Pierrefonds—Dollard, QC]

Thank you.

You touched upon domestic companies. Can you elaborate a bit on the percentage of contracts going to domestic companies and give us some examples of domestic companies you're dealing with?

[Bill Matthews]

Yes, certainly. I will start, and thank you for the question.

There are two ways to look at the domestic contracting. Number one is by number of contracts, and number two is by dollar value. By dollar value, domestically manufactured products are above 40%. Part of that story is that some of the more high-dollar-value items are made in Canada. We've mentioned ventilators already. Gowns have also had a big domestic success story, and they're a big part of that as well. If you're actually looking at the number of contracts, I think you're at about 20% to 22% of domestic contracts in terms of the number of contracts as a percentage, but it's 44% by value.

For the companies, we go across the board, and I will turn in a moment to my friend Ms. Reza for some examples. I mentioned in my remarks General Motors on surgical masks. You have Fluid Energy for hand sanitizer. You have Bauer for face shields. You have Canada Goose for gowns.

Arianne, I'm drawing a blank on the company from New Brunswick that makes the reagents for us, so can you pipe in, please?

[Arianne Reza, Assistant Deputy Minister, Procurement, Department of Public Works and Government Services]

That would be LuminUltra.

[Bill Matthews]

Thank you.

It's across the categories. The one thing that has not yet come online and will come online shortly is the domestic manufacturing for N95 masks. That will be starting up in late August, early September, and it will be a critical component as well.