Government Operations Committee on April 29th, 2024

[Jenica Atwin, Liberal, Fredericton, NB]

Okay. Thank you.

Can you explain a situation in which a contracting authority might change from a solutions-based supply arrangement to a task-based one or vice versa? When would that happen?

[Alexander Jeglic]

Sometimes the issue is that the client may not be fully aware of their needs and how to actually portray them vis-à-vis the scope of work. There are certainly instances, as we've identified in the report, in which reconsideration of the procurement strategy is appropriate. We had an example in which an ACAN, or an advance contract award notice, was contemplated for one of the contracts. It went to an internal review committee. That committee challenged the use of an ACAN and said they would prefer a more competitive process. Ultimately the procurement strategy was changed in that circumstance from an ACAN to the TSPS task-based, and so documentation was prepared to demonstrate a movement away from an ACAN to a task-based service.

The problem on that specific file arose when, after that happened, it was learned that McKinsey was not qualified under the task-based approach. There was a change in documentation associated with the solutions-based approach, and there wasn't documentation really identifying why that change was made.

[Jenica Atwin, Liberal, Fredericton, NB]

Okay. Thank you.

Can you also explain the relationship between the TSPS and the centralized professional services system, CPSS?

[Alexander Jeglic]

In the centralized system, you have a repository of all qualified bidders. The tool is meant to document, in fact, how many prospective bidders are involved in the process. It's essentially a database. It's the number of specific suppliers that are included as part of the process, which depends on the value associated with the specific offering. The higher the dollar value is, the more open the competitive process.

[Jenica Atwin, Liberal, Fredericton, NB]

What role does CPSS play then in protecting the integrity of government procurement?

[Alexander Jeglic]

It plays a significant role in terms of documentation. In order to document that you've complied with the business rules associated with the CPSS, you need to retain accuracy with respect to the number of bidders you ultimately sent the request to. Again, the number of bidders who should be the recipients of the opportunity is based on dollar value.

You also need to keep on file exactly who it was sent to in order to ensure that those individual suppliers were in fact qualified to bid. For some of the examples we saw, we weren't sure whether in fact all suppliers who should have been identified were identified.

[Jenica Atwin, Liberal, Fredericton, NB]

Thank you.

The report identified several instances in which that documentation was missing or incomplete. In your experience, what obstacles do public servants face in terms of documenting their decisions? How common would this be?

[Alexander Jeglic]

This is a long-standing issue that we've seen in many of our procurement practice reviews. The one distinction that I would note specific to McKinsey had to do with the timing of these documentation lapses. Traditionally we saw a lack of documentation across the board, but in this instance, we saw it at sometimes discrete times within a process, such that we would have documentation present for certain steps of the process, and then at a seminal moment there would be a lack of documentation. That's the part that's concerning, and that brings me back to the negative inferences I was talking about.

[Jenica Atwin, Liberal, Fredericton, NB]

Okay, thank you.

The report also found that the lack of a statement of work makes it difficult for departments to hold a contractor to account in the event of future contractual disputes surrounding the expectations regarding work to be completed. This lack of documentation regarding the specifics of the requirement also creates a risk that contract splitting could go unnoticed since the scope of the original requirement is not clearly documented.

Can you please expand on the risks associated with not having a statement of work?

[Alexander Jeglic]

I'll just situate the question.

It comes from the national master standing offer. There were three documents that were ultimately required as part of the call-up process, and none of them was a statement of work from the department. It was a proposal from the proponent, which in this situation was McKinsey, that ultimately drove the call-up process. Without the lack of a definitized statement of work, it's very difficult to say that the performance is either lacking or has been delivered. In those circumstances, ultimately the government is being led by the supplier, and the supplier provides the proposal, including the pricing, without the grounding of a statement of work, and that's why we found it so concerning.

[Jenica Atwin, Liberal, Fredericton, NB]

Can you also explain that notion of contract splitting that I mentioned and what those consequences would be?

[Alexander Jeglic]

Right, so contract splitting is when—

[The Chair, Conservative, Kelly McCauley]

Mr. Jeglic, I'm sorry; we're basically down to three or four seconds. Perhaps we can get back to it on Ms. Atwin's next round.

Mrs. Vignola, go ahead, please.

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

Thank you, Mr. Chair.

Thank you for being with us, Mr. Jeglic and Mr. Mersereau.

I'd like to say that reading your report was edifying, but it was frightening, really. This is the second time we've seen a procurement process not followed. Also, in your report—I believe it's in paragraph 36—you say that this has been a regular occurrence over the past few years.

Is this a systemic problem? Is it related to the influence that some people may have, or perhaps even collusion?

Is there a lack of staff training?

Is the problem related to all those factors?

[Alexander Jeglic]

Thank you for the question, Mr. Chair. I think the answer is a big one, and I was hoping I'd have the opportunity to raise this.

We are seeing consistent problems across the federal procurement landscape. If you go back even as far as a decade and further, you'll see that many of these issues are repetitive in nature. It's not simply one issue, but what I will say—and this is what I believe the theme for this report is—that perhaps the system has lost confidence in delivering results for the project authority. As a result, people use the system in ways that it shouldn't be used. I don't like to present problems without solutions, so I will say that our office is currently working on potential solutions to these large-standing procurement issues. If given the opportunity, I'd like to talk about some of those potential solutions.

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

Thank you very much.

I will certainly give you an opportunity to discuss it, but one question keeps coming to mind. I would like to ask it before we hear your proposed solutions.

McKinsey is important on a global scale, but in the world of consulting contracts in Canada, it's still a small player right now. It has grown in importance, but it's still small. Companies like Deloitte, KPMG and PricewaterhouseCoopers are much larger, and they get a lot more contracts.

If we reviewed a sample of the contracts—I realize that reviewing them all would take a lifetime, and it could be the subject of a post-doctoral thesis—would we run the risk of seeing the same issues as those described in your report?

[Alexander Jeglic]

Unfortunately, it wouldn't be fair for me to answer that. Not having done the review, I can't anticipate what I would see in other circumstances.

As I mentioned, for the national master standing offer specifically, McKinsey was one of five, so we would anticipate seeing many of the same issues associated with the formation of the NMSO in those other four occurrences, but I can't say with certainty because we didn't do those reviews, unfortunately.

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

That's incredible.

You may not have gone into those specific details. However, when it comes to public servants, the people responsible for contracts, did you find the same names always associated with the same errors regarding the lack of documentation?

Is the problem more generalized?

[Alexander Jeglic]

The genesis for our review always looks at the practices of departments, so we're not typically looking to name individuals, but I think that recently we have started looking more closely at the names of individuals, departments, programs, etc. to see if we can see trends at that level as well. Here we did not see political influence, and we also didn't see many repetitive actors.

Obviously, in the formation of the national master standing offer, PSPC was the contracting authority in all of the call-ups, so there was a unified kind of analysis done by one group within PSPC for that national master standing offer. If you ask for community, that's one community of people that I would identify.

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

Thank you.

Which group is it, then?

[Alexander Jeglic]

Maybe, Derek....

[Derek Mersereau]

PSPC has a group that handles these kinds of procurements that fall under the national master standing offer category. I believe it's referred to as the ZM group. Within the call-ups themselves, you would have noticed in the report of the 19 total call-ups or contracts that were issued under the national master standing offer that National Defence had the largest number. Among those, half them were from one unit, the chief professional conduct and culture unit. There was a concentration of call-ups from that particular unit, as well as for a digital navy program and the Canadian Joint Operations Command unit, so there was some concentration among the contracts.

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

Thank you very much.

Will you eventually undertake a review of that group?

[Alexander Jeglic]

Yes. Again, the purpose of these reviews is to ensure that these practices don't continue, and that's the nature of the recommendations we make. As I've mentioned, the review isn't where it ends. We also conduct a follow-up. For each of the departments that were subjected to a recommendation, we will go back in and follow up with those departments to test whether, in fact, what has been implemented by the department is meant to address the actual issues that we saw. Once we do that process, we do issue a report card, and we transparently report out on what we see after the report is finalized.

[The Chair, Conservative, Kelly McCauley]

Thank you very much.

Mr. Bachrach, please go ahead, sir.