Government Operations Committee on April 24th, 2020

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Thank you. That's very clear and helpful.

In terms of what you've experienced since the COVID-19 crisis began—and I think some of the other questioners and Mr. McCauley were getting at this, too—when were you first given instructions that we needed to really bulk up our procurement around PPE?

[Bill Matthews]

If we reflect back, you would have seen some minor small orders towards the end of January or early February. As for the first big order, a collaborative one with the provinces—this is where the Public Health Agency came in with a big order that involved multiple provinces—it was March 10 or March 11, and that would have been done after several weeks of consultation among the various health authorities in the provinces, territories and the federal government.

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

I'll squidge in one last question. As things stand right now, what is the commodity, the product, that gives you the biggest headaches? Which ones are we most likely to experience a shortage of, or are you comfortable that we have what we need for the next few months?

[Bill Matthews]

It varies by the week, frankly. Two weeks ago or a week ago, if I were here, I would be talking about swabs. That's under control. I think the N95 respirators are one that we are still actively managing. For others like surgical masks, we're very much in control. We have a good supply of good, high-quality masks coming into the system.

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Thank you very much, Mr. Matthews.

Thank you, Mr. Chair.

[The Chair, Conservative, Tom Lukiwski]

Thank you, Ms. May.

We will go to our final two interventions for six minutes.

Madam Vignola.

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

Thank you.

I am going to stay with stockpile management.

I understand very well that PSPC's role is procurement and that you wait for the health sector to ask before you initiate orders. However, I would like to understand the process of supplying and replenishing the stockpiles. Clearly, some equipment was not distributed and had to be discarded. I do not understand how equipment could remain in a warehouse when the expiry date is approaching.

How is it possible that no one in health or your department raised a red flag to indicate that the equipment had to be distributed before it expired?

I would like to understand the whole process.

[Bill Matthews]

Thank you for the question. I have a couple of thoughts on this one.

First of all, process would be number one. Get the goods into Canada, get them cleared through customs and then get them warehoused or counted, so that we actually know what we have. That's part of this process.

As we discussed in earlier questions, there is then a process of quality assurance where samples are tested. The Public Health Agency of Canada makes sure that the goods are indeed up to standard and then they're put into the system for distribution. The vast majority of the goods, once they clear those two processes, go directly out to the provinces. There is a small percentage that is held inside the Public Health Agency warehouse for additional urgencies. If a province needs something urgently, they would be in direct contact with the Public Health Agency of Canada to get urgent distribution.

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

As the expiry date approaches, when there are two, three, four, five or six months left before the expiry date or the end of the manufacturer's warranty, why is it that no alarm system automatically signals that products must be distributed to avoid wasting them?

[Bill Matthews]

It's a matter of understanding that the goods that are coming in now are basically for current use, but the idea is also to have a steady stream of PPE arriving for distribution to provinces and territories. It's not a matter of sending everything out the door all at once, but it's a steady stream. Some of the orders that are coming in now actually relate to orders we placed on behalf of provinces and territories, so those goods would go right to the provinces and territories. The stockpile exists for when there's a critical shortage.

Again, I want to remind members that the provinces, territories and health authorities are busy doing their own ordering at the same time. We are not their sole source of supply.

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

I understand that we have one situation now and we had another before, but the fact remains that a resource was thrown away and wasted and there was no red flag to signal that in advance. From what I hear, nobody called anywhere to say that some equipment was six months from its expiry date and it had to be distributed, in order to renew the inventory and keep it up to date.

Where is the alarm signal in the process? Where is the flaw?

[Bill Matthews]

This is a better question for the officials who run the stockpile in terms of how they deal with the surplus. Keeping the stockpile fully stocked with whatever levels they decide are necessary, that's their responsibility. How they would go through and decide what has expired and is not usable versus what perhaps can be repurposed, I'm not sure you have the right folks at the table to properly answer that question.

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

I also see that we depend a lot on international sourcing. I understand that many Canadian companies in the manufacturing sector, such as the garment businesses, have gone to countries where labour is cheaper.

However, here is my question: will the government review its policy on the percentage of local content? We realize that we are dependent and that it is not necessarily a good thing.

[Bill Matthews]

Thank you for your question.

For goods produced by Canadian industry, that is a question for Health Canada.

Nevertheless, at the beginning of the crisis, a significant number of goods came from other countries. This was our only source in a number of cases. Now we have the capacity to manufacture goods in Canada. This is already being done for hand sanitizer and protective visors, as one member mentioned.

Next up will be gowns. We're seeing a lot of Canadian manufacturing happening on gowns.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much, Mr. Matthews.

Our final intervention for six minutes will be back to Mr. Green.

Matthew, you're up.

[Matthew Green, NDP, Hamilton Centre, ON]

Thank you very much, Mr. Chair.

We've heard today Amazon first characterized by the minister as a Canadian company, then, of course, corrected to say that it was a company that had Canadian operations. We know that the owner of Amazon has profited, I don't know, something like $24 billion during COVID. We know also, at least to my best knowledge, and somebody here perhaps can correct me, but I don't believe they pay any federal taxes.

What do we have in place to ensure, based on the descriptions we've had on their logistics, that even though they're doing this at no cost, there isn't an ability for there to be self-dealing on their platform?

Notwithstanding the fact that they're still going to be selling these items, is there any possibility or has the potential been explored of self-dealing between the Amazon platform and the logistics work they're doing with us for the federal government?

[Bill Matthews]

There's a lot in that question, some of which I cannot answer in terms of income tax, and so on. However, in terms of the arrangement that the government has reached with Amazon and partners, it's dedicated to allow for, basically, ordering and distribution of the federally acquired goods and services—or sorry, goods, not services. It's distinct from their regular operations.

What's unique about Amazon in this case is their outward-facing retail platform that would let provinces and territories effectively put in orders for PPE to the national warehouse. That's the unique feature there. As has been mentioned, the warehousing and distribution is Amazon and Canada Post plus Purolator. It's very much a distinct arrangement at no profit for the first few months, and we'll go from there. It's very much distinct. I wouldn't view it as being mixed in with their regular operations.

[Matthew Green, NDP, Hamilton Centre, ON]

I just can't see how, on the back end of their logistical supply chain, they wouldn't have information. We've heard about the price gouging for all the PPEs on the market, and they are providing, at no federal tax implication, perhaps the largest online avenue for that in the private sector.

I'm very concerned that there have been three reported cases of COVID in the Canadian operations. I'm very concerned about the reports of significant labour violations in the United States, in Paris and in their global operations. What do we have in our abilities, in our tools, given that they are now a direct supplier of service to us, to ensure that they are providing a Canadian standard of public health-respected workplace environments, knowing that they're going to be having 1,000 new hires?

Business is brisk. How do we ensure that our suppliers, such as Amazon, are going to be maintaining the type of public health safety that we're going to need in order to head off any potential significant vector for COVID distribution around the country, literally door to door?

[Bill Matthews]

It's an interesting question.

I think the answer would be the same for all industry. They have to find ways to keep their workforce safe as they do this very important work, and they are equally interested, as are we, in keeping the workforce healthy.

In discussions around how they would organize themselves to deliver this service, there were discussions about the workforce—and they will continue—but obviously they have to respect whatever rules are in place from a public health perspective in order to properly protect their employees.

[Matthew Green, NDP, Hamilton Centre, ON]

We know that they've made billions and trillions of dollars off the supply chains. We know that if they have in their stockpiles a certain number that comes to a place of depletion they'll have automatic systems in place to be able to restock those things.

Going back to the national emergency strategic stockpile, it has been suggested through this committee now multiple times that there's no real role for this ministry in the operations, that this is solely on PHAC. I'm going to go ahead and make the statement that, in fact, it's very clear there has been a mismanagement of the stockpile.

I need to know this: In the independent recommendations, the assessments, the recommendation to move from nine warehouses to six, the warehouse in Regina was one that was closed, but what are the other ones that were closed, and were those stockpiles also disposed of?

[Bill Matthews]

I think those questions are better placed with the Public Health Agency or Health Canada. I'm not sure I can help you with those questions.

[Matthew Green, NDP, Hamilton Centre, ON]

I know some people might say this is all retroactive, that it's hindsight, but has there been any discussion, given the scale of the emergency, of having an integrated committee so that it doesn't leave the sole responsibility for PHAC to run the national stockpile? Has your ministry reached out to their ministry to say, “Hey, we do this stuff day in and day out. We understand logistics. Perhaps we should be involved in this for future emergencies?” Has that conversation happened?

[Bill Matthews]

The ongoing relationship with the health agency and our agency is one of procurement, so there is a hand-off in terms of when they order things. We have a dialogue with them about what's coming and when, and then how it arrives in Canada and gets placed into their system. Obviously, we helped the Public Health Agency in negotiating the arrangements with Amazon, Canada Post and Purolator. There is ongoing dialogue in terms of how we work together.

[Matthew Green, NDP, Hamilton Centre, ON]

My last question is a very clear one. Are you aware of what the minimum supply of the emergency stockpile is, and are there any mechanisms in place that would flag for you whether or not it has reached those critical points, or are you solely relying on PHAC? If that's the case, we have a significant problem here, understanding what's just transpired over the last year and a half.

[The Chair, Conservative, Tom Lukiwski]

Mr. Matthews, if you can answer that in 10 seconds or less, I'll let you go ahead. Otherwise, I would ask that you give a written response to Mr. Green's question through our clerk.