Government Operations Committee on June 7th, 2021

[The Chair (Mr. Robert Kitchen (Souris—Moose Mountain, CPC)), Conservative, Robert Gordon Kitchen]

I call the meeting to order.

Welcome to meeting number 35 of the House of Commons Standing Committee on Government Operations and Estimates.

The committee is meeting today at 3:41 Ottawa time.

We will hear from the Auditor General, officials from Public Services and Procurement Canada and the Public Health Agency of Canada as part of the committee's study on the government's response to the COVID-19 pandemic.

I'd like to take this opportunity to remind all participants at this meeting that taking screenshots or photos of your screen is not permitted.

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The clerk and the analysts are participating virtually in the meeting today. If you need to speak with them during the meeting, please email them at the committee email address. The clerk can also be reached on his mobile phone.

For those people who are participating in the committee room, please note that masks are required for all staff at all times. MPs may remove their masks only when they are seated.

I will now invite the Auditor General to make her opening statement.

Ms. Hogan.

[Karen Hogan, Auditor General of Canada, Office of the Auditor General]

Mr. Chair, thank you for this opportunity to discuss our audit report on securing personal protective equipment and medical devices during the COVID‑19 pandemic. The report was tabled in the House of Commons on May 26. I am accompanied by Jean Goulet, who was the principal responsible for the audit, and Milan Duvnjak, who was the director for the audit.

The audit focused on whether the Public Health Agency of Canada and Health Canada, before and during the COVID‑19 pandemic, helped to meet the needs of provincial and territorial governments for selected personal protective equipment such as N95 masks and medical gowns, and medical devices such as testing swabs and ventilators. The audit also focused on whether Public Services and Procurement Canada provided adequate procurement support to the Public Health Agency of Canada.

The audit showed that there were issues in planning and stockpile management before the pandemic. For example, we found that the Public Health Agency of Canada had not addressed long-standing and known issues with the systems and practices used to manage and operate the national emergency strategic stockpile.

The agency knew of these issues because they had been raised in audits and reviews going back more than a decade. As a result, the Public Health Agency of Canada was not as prepared as it should have been to deal with the surge in requests for equipment from the provinces and territories triggered by the COVID-19 pandemic. For example, from February to August 2020, the agency could deliver only 4% of the N95 masks and only 12% of medical gowns requested by the provinces and territories.

The audit also showed agility and responsiveness. Overall, the Public Health Agency of Canada, Health Canada and Public Services and Procurement Canada helped address the needs of provincial and territorial governments for personal protective equipment and medical devices. Faced with a crisis, these organizations worked around their outstanding issues with the management and oversight of the emergency equipment stockpiles, and they adapted their activities.

For example, during the pandemic, the Public Health Agency of Canada improved the way it assessed needs and allocated equipment to help meet the demand from the provinces and territories for personal protective equipment and medical devices. It also outsourced much of the warehousing and logistical support needed to deal with the exceptional volume of purchased equipment.

Similarly, Health Canada reacted to the increased demand created by the pandemic by modifying its management of licence applications from suppliers for personal protective equipment and medical devices. Public Services and Procurement Canada also made adjustments by accepting some risks to facilitate the quick purchase of large quantities of equipment in a highly competitive market where supply was not always keeping pace with demand. If the departments had not adapted their approaches to the circumstances, it is likely that the government would not have been able to acquire the volume of equipment that was needed.

Our recent audits of the government’s pandemic response continue to show that when the people who make up the federal public service are faced with a crisis, they are able to rally and focus on serving the needs of Canadians.

However, these audits also show that issues forgotten or left unaddressed have a way of coming back, typically at the worst possible time. Canada was not as well prepared to face the pandemic as it might have been had the stockpile of emergency equipment been better managed. If there is one overall lesson to learn from this pandemic, it is that government departments need to take action to resolve long-standing issues and to see the value in being better prepared for a rainy day.

We made recommendations to the audited organizations and they agreed with all of them.

Mr. Chair, this concludes my opening statement. We welcome all of your questions.

Thank you.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Ms. Hogan.

We will now start our first round of questioning.

The first six minutes go to Mr. Paul-Hus.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Thank you, Mr. Chair.

Good afternoon, Ms. Hogan.

First, I would say that we all understand that the circumstances were special at the beginning of the COVID‑19 crisis and that means had to be taken to act more quickly. This does not take away the responsibility of the civil service and the government to manage public funds well.

I would like to ask you about paragraph 10.100 of your report, where it says: “We found that the value of the advance payments made in the contracts we examined [...] totalled $618 million.”

Do you agree that the $618 million in advance payments to companies was surely exceeded?

[Karen Hogan]

I can only imagine that that is indeed the case, given that this $618 million represents the payments made in advance for the contracts we audited, 39 of 85.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Surely we can estimate that the amount is closer to $1 billion. Do you agree with me?

[Karen Hogan]

I couldn't make an estimate, because I don't have all the data. This is not an accounting comparison.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

That's fine.

Were all the contracts you audited for personal protective equipment and medical supplies specifically related to COVID‑19?

[Karen Hogan]

That is correct. All of the contracts that we audited included one of the items that we looked at in our audit, i.e. medical gowns, N95 masks, screening swabs and ventilators. We did not include all equipment that was purchased in our sample.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Fine, thank you.

You also say this in the report: “[...]Public Services and Procurement Canada took steps to recover amounts that were paid in advance when no goods were received.”

In the documents you've seen, how many contracts were there where the Government of Canada had to initiate proceedings to recover its advances because the material had not been supplied?

[Karen Hogan]

In our sample of 39 contracts, advance payments were made in 14 cases. We found that one contract was paid in advance but the equipment hadn't yet been received. Public Services and Procurement Canada is taking action with regard to this company.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

I suppose that this case concerns Tango Communication Marketing. We know that a legal process is under way. The case is public. Is this about Tango?

[Karen Hogan]

No, I don't think that this company is involved.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Okay. So another company is in that situation.

[Karen Hogan]

In the case of Tango, I believe that the equipment was received, but the quality wasn't acceptable. There will probably be an exchange or a refund.

For this contract, no equipment was received.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

So the government made advance payments, but didn't receive any equipment. Do you have any idea how much the contract is worth? Is it several million dollars?

[Karen Hogan]

We've been asked to keep that information secret, since the process is still ongoing. However, it's indeed a few million dollars.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Okay, thank you.

The report refers to the emergency delegation of authority. You said the following in paragraph 10.98:

We found that the department could not always demonstrate that its officials properly followed the new emergency delegation of authority. In 41% of the original contracts examined (16 out of 39), the documentation did not show whether approval was given at the appropriate level of authority.

As mentioned, you looked at the results of the contracts where advance payments were made. However, did they meet the Treasury Board standards? We can see that, when advance payments were made, the audits weren't always done properly. What are the results?

[Karen Hogan]

We conducted audits for the 14 contracts where advance payments were made. We looked at whether certain audits were done.

Several audits can be conducted when it comes to procurement. Not all these audits were done for procurement contracts during the pandemic. For example, a company's financial integrity or financial capability should have been assessed, as required by the procurement policies. However, we found that this analysis was done in only 50% of cases, or for seven contracts.

That's why we recommended that this assessment always be done, even in the event of a pandemic where the government decides to assume some risk in order to act more quickly.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

As Auditor General, do you see the potential for corruption or major errors when approval processes aren't well documented?

[Karen Hogan]

Normally, the follow‑up process should be well documented in cases involving delegation of authority. However, because the documentation was missing, we couldn't confirm that this happened. I want to emphasize that this should be done better. In terms of the financial capability analysis, I believe that, when an advance payment is made, an analysis should be done, even during a pandemic.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Thank you.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Paul-Hus.

We'll now go to Mr. Drouin for six minutes.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Thank you, Mr. Chair.

I want to thank the Auditor General, who always takes the time to visit us to talk about the reports. I greatly appreciate her work.

Ms. Hogan, you recommended that Public Services and Procurement Canada should always have the opportunity to check whether the financial viability of suppliers was taken into account. I know that this was done for some contracts, but not for all the ones that you audited. I assume that you're making the recommendation for that reason.

Did you notice whether the suppliers whose financial viability was assessed delivered the equipment more quickly than the suppliers whose financial viability wasn't assessed? Do you understand what I mean?

[Karen Hogan]

I think that I understand what you mean.

We audited 14 contracts where advance payments were made. For seven of those contracts, we assessed the financial viability of the supplier. However, I don't believe that we looked at the timeliness of the equipment delivery. Many things must be considered, including the time required for manufacturing and the availability of the equipment from the supplier.

That said, we assessed the speed of delivery for the various contracts. However, I don't have details regarding the seven contracts where we didn't conduct the analysis.