Government Operations Committee on Nov. 18th, 2020

[Dan Danagher]

Thank you, Mr. Chair, for the question.

I can't obviously—and my position doesn't make me an authority to—answer all aspects of Canada-China relations.

I can speak to this acquisition and the fact that it's very, very important for us to have reliable, trusted companies providing us this type of equipment. We are a learning organization. We'll learn from whoever brings items like this to our attention. In this instance, we conducted I would say a responsible review, and we've taken the correct action moving forward.

[Kelly McCauley, Conservative, Edmonton West, AB]

You say “a responsible review”.

We all know. We saw what Huawei did to Nortel. We see the costs taxpayers are bearing to clean out the old Nortel building of bugs placed by that state before DND comes in. It is not a secret that the Chinese state is an adversary to us. How is it possible that we could have made a decision that overlooked the fact that a Chinese Communist state-owned company was putting technology into our embassies?

I'm sorry. It's not a learning experience. We all know this. How is it possible? What other examples are there that possibly are happening that we're not aware of and that are compromising Canadian security or embassy security or financial or commercial secrets?

[Dan Danagher]

Thank you again for the question.

I think the question gets to the heart of the Deloitte report, which is not anti-Nuctech or anti-China. It is pro-security, and it forced us to re-examine our paradigm. You may not like the answer, but that is the way forward for us. It's to make these decisions based on a more rigorous security assessment than we've done for this type of equipment in the past.

[Kelly McCauley, Conservative, Edmonton West, AB]

Should we automatically use an NSE for security equipment, then, for Global Affairs, so that we don't run into this?

[Dan Danagher]

We did request and we have an NSE for all of the equipment in our security and high-security zones in our missions around the world. This is equipment that, as I said, was in the public access zone and was assessed probably in a more naive era of looking at this type of equipment. As my colleague at the CSE points out, the technology changes very rapidly and we are now aware of risks that we weren't aware of previously.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. McCauley.

Thank you, Mr. Danagher.

We will now go to Mr. Kusmierczyk for six minutes.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Thank you very much, Chair.

I really do appreciate the discussion we've been having today. It's a fascinating conversation, in essence, about how we manage risk and how we balance that with balancing the tens of billions of dollars in trade that takes place between our two countries. This is really an interesting discussion.

I bet many of us wish that our own BlackBerry company was in the business of making X-ray machines. We know that it's a Canadian company that is well trusted. If only they made those machines....

I do have a question about the Canadian International Trade Tribunal, which issued a determination on October 26 following a complaint that they received from a potential supplier. I guess this is a question for PSPC.

I want to get a sense of what the basis of the tribunal's involvement was in this procurement process. Was it security or was it something else?

[Lorenzo Ieraci]

Thank you, Mr. Chair, for the question.

Obviously, I'm not an expert on the Canadian International Trade Tribunal, so I'll share the information that's publicly available.

A complaint was filed with the tribunal with regard to the request for standing offers, both elements of it: group 1, which was for the X-ray machines, as well as group 2, which was for walk-through metal detectors. The Canadian International Trade Tribunal is the vehicle, the remedy or the place where companies can go if they have concerns with regard to the way that a procurement was undertaken.

A complaint was filed with the Canadian International Trade Tribunal. It was accepted for review. The tribunal undertook their review and issued their rulings. In essence, it basically found that the evaluations undertaken by Public Services and Procurement Canada were reasonable. Basically, the way I would put it is that they found in favour of the Crown, so the complaint that was raised was not upheld—if that's the appropriate term.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

I understand that you mentioned that you're not an expert in the work of the CITT, but I'm just wondering what PSPC's role is in the complaint review process. Does PSPC come forward as a witness in any way, share documents? I'm just curious about what that relationship is between the CITT and PSPC.

[Lorenzo Ieraci]

When a complaint is filed with the Canadian International Trade Tribunal, the complainant provides their rationale for the concern that they are raising with regard to the procurement that was undertaken. If PSPC is the procuring organization, then as part of the CITT's process we're given the opportunity to provide what I believe is called an institutional response, which is basically our explanation of what happened in terms of the procurement process, in order to provide the tribunal with information on the procurement.

The information that we provide as a department, as well as the information that's provided by the complainant, I would assume, is reviewed by the tribunal, and then they issue determinations.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

The report that we received, the briefing, indicated that the CITT has not yet made its reasons for its determination public. Do you have a sense of when that will come forward?

[Lorenzo Ieraci]

My understanding is that it occurred within the last day or two. The rationale or the explanation for the CITT's determinations is usually made available on their website, and my understanding is that it has happened within the last day or two, but I don't have the specific date.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Okay, that's terrific.

PSPC was awarded costs as a result of this determination. Does that happen frequently? Is that a regular occurrence or is this a unique happenstance?

[Lorenzo Ieraci]

That's a good question. I can't speak to the regularity of it. Representatives from the tribunal might be able to explain this better.

My understanding is that in instances where the tribunal finds in favour of either the company that's filing the complaint or of the federal contracting department that is responding, part of their mechanism or part of their process is to award costs. They have a specific cost structure. To put it in perspective, if memory serves me correctly, I think it's $575, or something like that. I think that has to do with the Canadian International Trade Tribunal regulations, which mandate or oversee the way the tribunal operates.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Okay. I'm sure the cost is there to make sure there are no excessive or egregious cases that are brought before it. I'm sure it serves a little bit as a deterrent for vexatious complaints being brought forward.

This is a question for PSPC. What are we doing to support Canadian businesses to take advantage of the procurement process?

[Lorenzo Ieraci]

Thank you very much for the question.

I was the director general with the office of small and medium enterprises. Public Services and Procurement Canada is doing a number of things, but in the interest of time I'll only highlight two of them.

The office of small and medium enterprises exists to help Canadian companies to understand the federal procurement process, to be able to find opportunities that exist on the Buyandsell website, and to be able to get assistance in terms of understanding the federal procurement process. Public Services and Procurement Canada has regional offices across Canada where Canadian companies can avail themselves of the services of the office of small and medium enterprises, in order to be able to help them participate in federal procurement.

In the interest of time, that's the one I will highlight specifically.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you very much, Mr. Ieraci.

Now we will go to Monsieur Blanchette-Joncas for six minutes.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr. Chair.

As always, I'll begin by greeting you, my fellow colleagues.

I also want to acknowledge the witnesses and thank them for participating in this meeting. Today we're discussing the Nuctech security equipment contract, an issue that I consider very important.

I'll first turn to the witnesses from the Canada Border Services Agency.

Will the agency review its current contracts with Nuctech in light of the concerns raised regarding the standing offer for security screening equipment? In particular, does CBSA have any concerns with respect to the equipment provided by Nuctech?

[Scott Harris]

Thank you very much for the question.

We have done a review of the equipment that we have in operation from Nuctech and we looked at the contracts that have been fulfilled in this space. We have leaned into our colleagues at CSE and elsewhere to gather their expertise to make sure we have done that.

We have satisfied ourselves that we have had no security breaches or incidents of concern with this equipment to date. We are looking forward to strengthening the contracting regime around this. For example, we are working with our partners in Public Safety and at Procurement Canada, and public safety more broadly, to enhance the contracting security guidelines to ensure that transportation technology—more specifically X-ray detection equipment in the port of entry space—is considered within that policy.

We will be looking to move forward with a national security exemption for our operations in this space. Equally, we are looking to accelerate our life cycling on this to ensure that we can move forward with ensuring that any new equipment or any equipment we have in operation meets those new security guidelines.

I will add that in the meantime, we have obviously reviewed our mitigation strategies, which I mentioned earlier. As you can never fully eliminate risk, it's important for us to ensure we have the right operational procedures, departmental security procedures and tools in place for our staff, so we can mitigate any residual risks that may be there.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you for the information, Mr. Harris.

I'll ask a slightly longer question this time. The information is very important. Feel free to let me know whether you want me to repeat anything afterwards.

My question is for the Canada Border Services Agency representatives.

In November 2019, CBSA awarded a contract worth $2,378,062 to Nuctech. The contract is related to a tender notice issued by Public Services and Procurement Canada on behalf of CBSA for the acquisition of a medium-footprint mobile large-scale imaging system for use at the Emerson, Manitoba port of entry to enable the non-intrusive inspection of large objects, such as marine containers, transport trucks and passenger vehicles, using high energy X-rays.

According to the request for proposals, the required delivery date was March 31, 2020, and the contract would include an option to purchase five additional systems along with additional licence warranties. The competitive procurement strategy was the best overall proposal. There were no security requirements for the contract.

My questions are as follows:

Did Nuctech provide the mobile large-scale imaging system to CBSA by March 31, 2020?

Is this system currently in use at the Emerson, Manitoba port of entry?

[Scott Harris]

Thank you for the question.

It was not provided to us prior to March 2020, but we have received that equipment. It is not in Emerson, but it is elsewhere. It is not currently in use. It is what is referred to as a mobile large-scale imaging device. It is meant to scan large commercial pallets. It is mobile, so it can be deployed as needed. As I said, on a go-forward basis we're looking at our life cycling of this in light of the new security requirements that we are moving forward with.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you for the clarifications, Mr. Harris.

Does CBSA plan to acquire additional systems from Nuctech by March 31, 2025?

[Scott Harris]

Acquire more X-ray detection equipment...? Just to clarify, do you mean more broadly or are you specifically again referring to Nuctech equipment?

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Regardless of the equipment, do you plan to acquire additional systems from Nuctech for the Canada Border Services Agency by March 31, 2025?

[Scott Harris]

It's my understanding that our current contracts are fulfilled, so any new equipment that we acquire on a go-forward basis will be acquired under the new guidelines for contract security.