Government Operations Committee on Jan. 31st, 2024

[The Chair, Conservative, Kelly McCauley]

I call this meeting to order.

Welcome to our century meeting, meeting number 100, of the House of Commons Standing Committee on Government Operations and Estimates.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Monday, October 17, 2022, the committee is meeting on the study of the ArriveCan application.

I remind you, please, to not put your earpieces next to the microphones as this causes feedback and potential injury.

It's 5:40 p.m. I think we have the full two hours of resources, so we're going to get going.

Welcome back, Ombudsman Jeglic. It's wonderful to have you. You are a friend of OGGO and it's wonderful to have you with us.

Mr. Mersereau, welcome to OGGO for the first time.

The floor is yours, sir.

[Alexander Jeglic, Procurement Ombudsman, Office of the Procurement Ombudsman]

Perfect. Thank you very much.

I'd like to begin by acknowledging that the land on which we gather is the traditional unceded territory of the Algonquin Anishinabe people.

Thank you, Chair and members of the committee, for inviting me here today.

I appreciate the opportunity to appear before this committee to shed light on my findings in my office's recent report on the procurement practices of federal departments pertaining to contracts associated with ArriveCAN.

My name is Alex Jeglic. I've been the procurement ombud for just under six years.

I thank the clerk and the committee for inviting me to appear as a witness on the ArrivCAN file.

With me today is Derek Mersereau, the team lead for the ArriveCAN report and acting director of inquiries, quality assurance and risk management.

The Office of the Procurement Ombud is independent from other federal organizations, including Public Services and Procurement Canada.

Here are the specifics of our mandate.

First, we review complaints from Canadian suppliers about the award of federal contracts below $33,400 for goods and below $133,800 for services.

Second, we review complaints respecting the administration of a contract, regardless of dollar value.

Third is to review the procurement practices of federal departments to assess their fairness, openness and transparency, and consistency with laws, policies and guidelines, which is why we're here today.

On November 14, 2022, the House of Commons Standing Committee on Government Operations and Estimates adopted a motion recommending the conduct of a review by my office to assess whether contracts awarded by departments in relation to the ArriveCAN application were issued in a fair, open and transparent manner and whether contracts awarded on a non-competitive basis were issued in compliance with the Financial Administration Act, its regulations and applicable policies and procedures.

Once my office was able to establish reasonable grounds as per our regulatory requirements, the review was launched in January 2023. As per our legislated deadline, my office completed the review of ArriveCAN contracts on January 12, 2024. The report was published online on OPO's website, our office's website, on January 29, 2024.

My office completed a review of 41 competitive and non-competitive procurement processes and resulting contracts, contract amendments and task authorizations or service orders under which work was performed for the creation, implementation and maintenance of ArriveCAN. The review does not include subcontracts as these are beyond the legal authorities of the ombud.

CBSA, the Canada Border Services Agency, was the client department for all 42 contracts. These contracts were established for CBSA by Public Services and Procurement Canada, by Shared Services Canada and by CBSA under its own contracting authority.

Regarding competitive procurement practices leading to the award of contracts, all 23 solicitations reviewed were issued under a PSPC supply arrangement. Overall, solicitation documents were clear and contained information potential bidders required to prepare a responsive bid. For the most part, solicitations, solicitation amendments and responses to questions from potential bidders were appropriately communicated and bids were evaluated and contracts awarded in accordance with solicitation documents. However, mandatory criteria used in one solicitation leading to the award of a $24-million contract were overly restrictive and favoured an existing CBSA supplier.

My office also identified issues relating to the achievement of best value in many procurements. For 10 of the 23 competitive procurements reviewed, the use of overly restrictive median bands in the financial evaluation of bids stifled price competition and resulted in the rejection of some otherwise high-quality bids.

In roughly 76% of applicable contracts, resources proposed in the winning bid did not perform any work on the contract. This is also known as....

[Derek Mersereau, Acting Director, Inquiries, Quality Assurance & Risk Management, Office of the Procurement Ombudsman]

Bait and switch.

[Alexander Jeglic]

When TAs were issued under these contracts, the supplier offered up other resources but not the individuals who had been proposed in order to win the contract. Files for non-competitive contracts included written justification for awarding the contract through a sole-source process on the exceptions to competition provided by the government contracts regulations.

Insufficient records maintained by Shared Services Canada raised questions as to whether certain service orders under the GC Cloud Framework Agreement followed appropriate procurement practices. There was no documented procurement strategy for work associated with ArriveCAN. Multiple service orders issued to one supplier were treated as separate, unrelated requirements despite the fact that all were associated with ArriveCAN.

A majority of the files reviewed were for professional services contracts through which work was authorized for ArriveCAN under a TA. Overall, the documentation of TAs used for ArriveCAN was complete and for the most part was properly authorized. However, 20 TAs of the 143 reviewed did not include the specific tasks, including descriptions of the activities to be performed.

Resources authorized to work on a contract with TAs must be assessed by the business owner before a TA is issued to ensure that the individual meets criteria for the resource category, as specified in the contract. There were no assessments for more than 30 resources who were named on ArriveCAN-related TAs.

As the client department, CBSA was responsible for the proactive publication, or public disclosure, of contract information on the Open Government website for the contracts reviewed. Information was not proactively published for 17 of 41 contracts reviewed. That's 41%. This result runs counter to broader government commitments to transparency and strengthened accountability within the public sector.

As discussed throughout our report, we found practices for awarding competitive and non-competitive contracts, for issuing TAs and service orders, and for proactive publication of contract information that were inconsistent with government policy and that threatened the fairness, openness and transparency of government procurement. I have made 13 recommendations to address the issues identified with procurement practices associated with the ArriveCAN application.

Thank you for your attention.

I would also like to thank this committee for shining the light on these important procurement issues. It is from a commitment to fair, open and transparent public purchasing that we must improve Canada's procurement system. Systemic reviews and audits are imperative to the proper functioning of the Government of Canada's purchasing powers and the work of committees, such as OGGO, that play an important role in holding both the government and businesses accountable.

My office remains available to collaborate with committee members.

I would be pleased to answer your questions.

Thank you.

[The Chair, Conservative, Kelly McCauley]

Thank you very much.

We'll start with Mrs. Block, please, for six minutes.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much, Mr. Chair.

I join my colleagues in welcoming you here today. Thank you so much for joining us.

I also want to thank you for the work you've done in this report. Even though we asked for it, I know that you took some time and further confirmed that it was work that was very necessary. As you can well imagine, the procurement processes are very complex, but I think what your report did was confirm for many of us around this table that there was misconduct in regard to some of the processes, or the not following of processes, as we understood it. I think your report has confirmed our suspicions in that regard.

I will follow up later around the task authorizations, because I think that's a very important issue, but I first want to point out what you mentioned on page 18 of your report. You mentioned in point 61 what I think is a very bizarre issue. It's that there is no written record of GC Strategies being contacted to submit a bid for their initial ArriveCAN contract. You say in your report, “The only record of communication between the Crown and the supplier prior to signing of the Contract was an email from the supplier with quoted rates for various IT professional resource categories.”

I guess what I'm wondering is this: Can you tell us whether this means GC Strategies was directly contacted in an unofficial manner to submit a bid for ArriveCAN?

[Alexander Jeglic]

I'd be speculating if I wanted to answer your question directly. However, we did note that it is unusual that there was no correspondence on file. One thing we've noted in this and many other practice reviews is the lack of documentation. It sounds administrative in nature, but it is the bedrock of demonstrating many of the tenets of public procurement. How can you be fair, open and transparent if you cannot demonstrate any of those aspects?

Again, documentation is something that you'll hear from me very many times this evening, but it's a legitimate concern, not only in ArriveCAN but in public procurement in general.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much.

At this point, you would say it's very irregular, the amount of non-documentation that there was on this file.

[Alexander Jeglic]

I'll also add one additional characteristic.

Typically, when contracts are directed, as the one you're pointing out, there is, as we mention in the report, less transparency around the process due to the nature of the directed process. It is, however, highly unusual to receive a proposal without any request to receive one, unless it's an unsolicited proposal, which this didn't seem to be.

Derek.

[Derek Mersereau]

I'll just add that the contract you're referring to is actually the second of the three non-competitive contracts issued to GC Strategies. They would have been in CBSA doing work under an existing separate contract, at which point there was some discussion that occurred between officials at CBSA and GC Strategies that wasn't reflected in the documentation in the file.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

I'm sure you've been following the developments in this committee over the last number of months, but something that we have failed to get an answer on is who actually chose GC Strategies. We've, I think, been misled and perhaps even lied to when it comes to the individuals knowing who, in fact, chose GC Strategies.

Were you ever given any indication by CBSA as to who made contact with GC Strategies and asked them to submit a bid?

[Alexander Jeglic]

Again, thank you for the question.

We have no additional information as to what's been discussed at this committee previously on that issue. That's unfortunately why we had to disclose the information in the manner that we did in the report.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

I have one last question. I'm not sure if I have any more time than that.

Did you find any record highlighting that Deloitte was not being considered, or had been bumped or put on a time out when looking for a company to undertake this work?

[Derek Mersereau]

Deloitte really didn't show up in much of the documentation.

In respect of the competitive contract that GC Strategies won as the only bidder, Deloitte had indicated they were interested in bidding, but then chose not to submit the bid. With respect to that solicitation, that's where we point to overly restrictive mandatory criteria.

There was no indication of Deloitte being in a penalty box or anything like that, as we heard at the committee.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you.

With the very few seconds I have left, have you contemplated any of the Botler allegations as part of your findings here?

[Alexander Jeglic]

As with everyone, we were obviously an interested party watching all of the OGGO committee hearings. We did listen to the allegations being made and obviously took it into account in the sense that we understood them. However, they weren't incorporated directly into the report, no.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much.

[The Chair, Conservative, Kelly McCauley]

Thanks very much.

We have Mr. Sousa, please.

[Charles Sousa, Liberal, Mississauga—Lakeshore, ON]

Thank you for being here today.

I very much appreciate the report. It's extremely helpful in terms of what you've produced as an ombudsman, what you've reviewed and what this committee has been trying to ascertain.

The recommendations are all very reasonable and actionable. I think the appendix of your report, on page 31, references the various departments that are in fact implementing or in the process of implementing some of those very recommendations they saw and you have rightly put forward.

Your findings point to concerns with regard to a lapsing of the processes for handling IT services contracts. There is no allegation, however, of corruption, as far as I can tell from what I've read, and there's certainly no suggestion that there was political interference. Some are working hard, I think, to misconstrue one of your findings—namely that, in 76% of the contracts examined, resources were part of the original bid and then ultimately they used different suppliers, or there were swaps, as you cited in your opening statement.

Some may try to say that means that people paid under those contracts didn't actually do the work, when, in fact, I think that's categorically false, because only people who carry out the work were actually paid. I just want to get clarity on this finding, on where those resources of 76% of contracts were between the time of the contract award and then the task authorization—that lapse.

I have three questions in particular, and I'm hoping I have time.

One, this is allowed under the rules for certain cases; however, the issue you seem to have brought forward, obviously, is that it's maybe happening too frequently. Is that correct?

[Alexander Jeglic]

Yes, I would indicate that 76% is much too frequently.

[Charles Sousa, Liberal, Mississauga—Lakeshore, ON]

Did you find any evidence that the resources or the subcontractors were paid for work that was never performed?

[Alexander Jeglic]

No. There is certainly some reporting happening outside of this committee, which I think I would like to clarify, hopefully, in an answer that I provide. Perhaps, if you'll allow me, I can clarify.

[Charles Sousa, Liberal, Mississauga—Lakeshore, ON]

Absolutely.

[Alexander Jeglic]

As we mentioned in our opening statement, this concept around procurement circles is typically called “bait and switch”. It's a known occurrence. However, there is a significant problem with it, and that problem is as follows.

When you're bidding...and here, the selection methodology was 70:30, indicating that it was 70% technical and 30% price, meaning that the technical component is incredibly important, and the technical component is built up predominantly by the resources. When they are bidding, they provide for resources that ultimately are going to receive the highest technical score possible, so they might be awarded a contract based on technical resources that never perform any work.

Then, unfortunately, in the way the process worked in these instances, the resources that were provided did not have to meet the same merit criteria that the original resources did. Therefore, it would have a significant impact on fairness. While it's not the issue that's being reported outside of this committee, it's still a very significant and concerning finding.

[Charles Sousa, Liberal, Mississauga—Lakeshore, ON]

As a result, PSPC is tightening the rules as you've recommended. To be clear, on the previous rules you examined, when the substitution was made, the incoming resource had to have the same or similar qualifications as the ones originally listed. Is that correct?