Government Operations Committee on Nov. 18th, 2020

[Matthew Green, NDP, Hamilton Centre, ON]

Mr. Chair, it might also be a good time to [Technical difficulty—Editor].

[Dan Danagher]

Do you want me to try to hold the mike closer to my mouth?

[The Clerk of the Committee, Mr. Paul Cardegna]

If you could try that, Mr. Danagher, we'll try to see if it works or not. The issue is that the sound quality is not sufficient for our interpreters to interpret.

What I'm going to suggest is that you try again. We're going to ask you to try to speak as slowly as possible, and we'll see if our interpreters can hear, and then we'll see if that works. Do try to hold the mike closer to your mouth, but not directly right at it, and we'll see if that works.

[Dan Danagher]

Thank you. I will try to speak a little clearer and louder.

Thank you, again, for the question. Just to confirm, we do have a very robust global security framework that is constantly assessing the threats and the risks abroad, and we are always assessing our vulnerabilities. This equipment was not seen as overly sensitive equipment, so the national security exemption that we had did not apply. It fell within a paradigm that basically allowed it to be competed out in the open in that way.

Does that answer the member's question?

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

It does indeed. I'm just hoping you can expand a little bit more on what level of risk was thought that this equipment could provide.

[Dan Danagher]

Essentially, because the equipment stands alone in a room and is screening visitors' equipment, their briefcase, a bag or something like that—

[The Chair, Conservative, Robert Gordon Kitchen]

Mr. Danagher, excuse me for interrupting again. It seemed to come through a little clearer when you spoke a bit slower. That way the interpreters could pick you up. I realize I'm breaking up your usual cadence, but if you would try that out, I'd appreciate it.

[Dan Danagher]

Okay. I will do my best to slow down.

This equipment is in the public access zone outside of our chanceries, just in the very exterior of our chanceries. It is used to screen visitors' belongings. It is not typically plugged into our network and it doesn't handle classified information. As a consequence, it doesn't fall within two of the key questions of the government policy on information security. It was just put out to a broad tender, as you heard earlier.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Great. Thank you for that.

Mr. Chair, how long do I have left?

[The Chair, Conservative, Robert Gordon Kitchen]

Mr. Weiler, you have another 30 seconds.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Just quickly, maybe the witness from PSPC, Mr. Ieraci, could mention how a standing offer is different from a contract, per se.

[Lorenzo Ieraci]

Thank you, Mr. Chair, for the question.

A standing offer is essentially a pre-qualified tool where multiple suppliers have been selected to provide goods or services at predetermined prices under established or set terms and conditions. A standing offer is actually not a contract. There is no obligation on the part of the Government of Canada to procure anything using a standing offer. In fact, a contract is only entered into when the Government of Canada issues what is referred to as a “call-up” to the supplier. A call-up is basically an order for a certain amount of goods or services in accordance with the terms of the standing offer.

Until such time as a call-up is offered, there is no obligation on the part of the Government of Canada with regard to that procurement instrument.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you for that. Thank you, Mr. Weiler.

Ms. Vignola, you have six minutes.

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

Thank you very much.

I paid close attention to what you were saying, and I understand that the standing offer had no security-related requirements, as it concerned equipment that would be used for visitors.

However, we now agree that we don't need a large piece of equipment to listen to everything that is happening and is being said within a company, especially embassies, which are, after all, pretty hot information spots.

That said, the Border Services Agency has awarded five contracts to Nuctech since 2017, despite the fact that the company was convicted of dumping in 2010. The company has a history of corruption in Namibia, and it has already used honey traps repeatedly to indirectly attract investors. In 2017, it was forced to collaborate with the Chinese intelligence service, like every other Chinese company.

Despite all this, it was been awarded five contracts since 2017 and is now being given access to a standing offer. I would like to understand how a company with such a background can be seriously considered for a standing offer.

That is beyond comprehension, and I really want to understand.

[Lorenzo Ieraci]

Good afternoon.

Thank you for your question.

I don't know whether the question is for the representatives of Public Services and Procurement Canada, but I will answer it anyway.

As mentioned earlier, since there was no security-related requirement to move forward, the procurement process used to award the standing offer retained Nuctech, one of the companies that submitted a bid, as one that met all the requirements. As far as procurement goes, we carried out an assessment through the integrated program and, as the company was not flagged in that respect, it was eligible to receive the standing offer.

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

So, if I understand correctly, Mr. Ieraci, despite that history of dumping, bribes and honey traps, there was no note anywhere in the entire government to indicate that this company may not be a good candidate.

No light went off anywhere when the company ended up among the lowest bidders with such a history of dumping?

I am not putting the blame on officials. I really want that to be clear. I want to improve the process, and I want our security to be ensured.

So despite this company's entire history, no red light went off. No one noticed the fact that the company was still on our lists and should no longer be there because it cannot be trusted.

How did that happen?

[Lorenzo Ieraci]

Thank you for the question.

Yes, we all want to improve systems and ways of doing things to protect Canadians security.

Issues had been raised about Nuctech, and we had information on that company. Unfortunately, in terms of procurement, we had limited options to award the standing offer, since the company has shown that it met all the requirements. That is one of the areas we are currently looking into with our colleagues from other departments to determine whether there is a way to reduce risks.

That said, as I mentioned earlier, at the beginning of a procurement process, we cannot know what company will win it. So one of the ways used to reduce risk is to properly determine the security level at the outset of the process.

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

Okay.

So it is a matter of properly establishing the security level, and Nuctech met that level. So there is no continuity with....

[The Chair, Conservative, Robert Gordon Kitchen]

Excuse me, Ms. Vignola. You have 30 seconds.

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

Okay.

At Nuctech, and I suppose at other businesses, as well, there have been cases of dumping, and there is suspicion that the company received subsidies from its government to enable that.

Does PSPC have a process to determine whether a company has received subsidies from a foreign government that help it slip through the net?

[Lorenzo Ieraci]

Thank you for your question.

We are looking into the issue of government subsidies when it comes to many countries. That is often a point of friction with countries, not only with China, but also with other countries such as the United States or European countries. Different definitions of what is considered an acceptable subsidy or not are things we are looking into closely.

To tell you the truth, this is a fairly complex area, since countries have found numerous and various ways to subsidize companies. That is something we are looking into closely, and foreign countries subsidizing national industries is an issue almost every country in the world is facing.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you.

Mr. Green, you have six minutes.

[Matthew Green, NDP, Hamilton Centre, ON]

Thank you very much, Mr. Chair.

What's most interesting to note is that we seem to be back at square one when it comes to procurement, now that Global Affairs has decided not to avail itself of the standing offer. It leads me to ask the question of whether somebody at either Global Affairs or PSPC clearly didn't do their homework ahead of time. They would have gone ahead with purchasing from Nuctech if the media hadn't broken the story.

Whose responsibility was it to do the homework on this?

[Dan Danagher]

Mr. Chair, I think that's a good question.

The assessment started with Global Affairs. Global Affairs assessed this procurement in a way that complied with policy. The procurement started without us requesting a national security exemption. Now, whether or not a national security exemption would have led us to a different outcome is another question. I can't speculate whether it would have.

It does start with the assessment, at the beginning, of whether or not this conformed with policy. For whatever reason, it was the paradigm at the time. Those two questions, once they were answered, were deemed sufficient to go ahead with the procurement that resulted in Nuctech getting the standing offer.

On review, we stopped it.

[Matthew Green, NDP, Hamilton Centre, ON]

Maybe you can help me through this. It might be more appropriate for PSPC, because with PSPC, pursuant to the ineligibility and suspension policy, they may sometimes deem a company ineligible or suspend it from entering into certain contracts if it's engaged in specified offences within specified time frames. The policy may also apply to a company—or in some cases its subsidiary—that was convicted of similar offences in the past three years in a jurisdiction other than Canada.

Once you brought on Deloitte and you did your review.... Maybe this is for PSPC. I don't know. Has Nuctech or its subsidiaries been convicted of offences specified in the ineligibility and suspension policy or of similar offences in a jurisdiction other than Canada within the past three years?