Government Operations Committee on June 3rd, 2024

[Arianne Reza, Deputy Minister, Department of Public Works and Government Services]

Good afternoon, and thank you for the opportunity to discuss PSPC's main estimates for fiscal year 2024-25.

Before we begin, I would like to acknowledge that we are meeting on the traditional unceded territories of the Anishinabe Algonquin people.

Today I'm joined by Associate Deputy Minister Alex Benay, Assistant Deputy Minister Simon Page, Assistant Deputy Minister Catherine Poulin, Assistant Deputy Minister Dominic Laporte and Chief Financial Officer Wojo Zielonka.

Mr. Chair, PSPC has a wide-ranging mandate related to government procurements, managing government buildings, administering pay and pensions for the public service and more. In order to support these activities, PSPC is requesting a net amount of $4.8 billion through these estimates. This is a net increase of $449 million from the previous year.

The majority of that amount, more than $3.3 billion, will be spent on property and infrastructure activities, including major rehabilitation projects across the country. The amount of $767.9 million is for payments and accounting initiatives, which include supporting the Government of Canada's pay administration program. PSPC remains dedicated to achieving pay stabilization and eliminating the backlog of pay issues. Also, as this committee has heard, we are making progress on the next-generation human resources and pay system.

Mr. Chair, $181.7 million is being sought for the running of important procurements. This includes our work with key partners advancing the national shipbuilding strategy and other key defence procurements.

It also includes our continued work to modernize the federal procurement system with a focus on increasing the participation of small and medium-sized businesses as well as suppliers from under-represented groups, including indigenous businesses. The current focus is to ensure that 5% of the value of federal contracts is awarded to indigenous businesses. Indigenous Services Canada is the federal department responsible for procurement strategy for indigenous businesses and has determined that the government on the whole is exceeding the target.

Furthermore, PSPC is looking for ways to increase the discipline exercised in federal procurement, particularly as regards professional services. As you know, PSPC relies on its product expertise and qualified personnel in managing more complex and riskier procurement projects.

PSPC also introduces procurement mechanisms and strategies across government that help departments make efficiency gains.

We've made many improvements to our processes and procedures by relying on the recent reports of the procurement ombud and the Auditor General, as well as our own internal reviews, particularly with regard to record-keeping and the transparency exercised out of a concern to strengthen process controls.

A new entity, the Office of Supplier Integrity and Compliance, began operations on May 31. Thanks to it, we can now respond more effectively to cases of supplier misconduct and unethical behaviour.

As for fraud detection, PSPC continues to improve its tools, which include data analysis, and to expand the ways in which it uses them. As mentioned, we have previously referred many fraudulent overbilling cases from 2022, 2023 and 2024 to the RCMP, and other internal investigations are under way.

Although those investigations are still open, I can assure you that, depending on what they reveal, those cases will also be referred to the RCMP where appropriate.

Going back to main estimates, I would also like to note, as part of the refocusing of government spending initiatives for this fiscal year, that the planned spending reduction for PSPC will be $148.2 million.

Mr. Chair, the department has many other priorities stemming from budget 2024. That includes leading on the new public lands for homes plan, for which the department is now working out the details.

Budget 2024 also featured proposed funds to support Laboratories Canada and parliamentary precinct projects as well as new funds to move forward on a new pay and HR system and to expand the translation bureau's capacity.

Mr. Chair, we're pleased to answer your questions about the work under way at PSPC and our main estimates.

Thank you.

[The Chair, Conservative, Kelly McCauley]

Thank you very much.

We'll go to Mrs. Block, please.

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

Thank you very much, Chair.

Welcome here, yet again. I know you have been here on numerous occasions as a result of the many studies that we have undertaken, and I do note that in your departmental plan, fraud and other wrongdoing remain key risks for your department. As well, as noted in the departmental plan, PSPC is taking “steps to strengthen its approach to better know who the Government of Canada conducts business with and the potential risk that they may pose.”

Ms. Reza, you just stated in your opening remarks that there are a number of other investigations taking place, and, if and when necessary, they will be referred to the RCMP when that is determined.

We know that a few weeks ago, or maybe a number of weeks ago, it was announced that three names had been referred to the RCMP for investigation related to approximately $5 million worth of contracts. What was the reason for the referral to the RCMP?

[Arianne Reza]

As you noted, we do have a very strong commitment to detecting, preventing and looking for fraud. Therefore, as part of some of the recent initiatives that we've seen since about 2018-20, we've really been using data analytics tools. As part of that, we were able to use that tool set to look at data analytics, mine the data and find cases of overbilling.

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

Overbilling was the reason you referred these cases to the RCMP. Is that correct?

[Arianne Reza]

That is correct.

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

Thank you.

That was the wrongdoing that was detected and prompted you to refer this to the RCMP. Has the RCMP confirmed that they are investigating or charging these individuals?

[Arianne Reza]

Let me start by saying that once we refer the cases to the RCMP—there have been four that have been referred since 2022—they become matters of RCMP investigation. We have no insight into it.

Ms. Poulin, do you have anything to add?

[Catherine Poulin, Assistant Deputy Minister, Departmental Oversight Branch, Department of Public Works and Government Services]

No, you have covered it very well.

The cases are now in the hands of the RCMP for them to pursue or not.

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

Thank you.

I know last week the minister said that we could expect future announcements. Has the department identified any other cases that may be referred to the RCMP, or are those investigations still under way, as you stated in your opening statement?

[Arianne Reza]

Yes, they're still under way and they're still in the range of between five and 10 as was publicly announced in March.

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

Thank you.

It has been 100 days since the Conservative "arrive scam" motion was passed to get money back from the fraudsters. What is the role of PSPC, if any, in recovering these funds?

[Arianne Reza]

We would support CBSA if they found any ineligible actions, any inaccuracies or any fraud. We would support them as the contract authority to be able to seek restitution. Letters to that effect have gone out to the suppliers.

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

Letters have gone out, and you support CBSA.

Are you aware if any money has been recovered to date?

[Arianne Reza]

I am not aware if any money has been recovered. I don't want to speculate at committee, but I would anticipate that there would be a result of the RCMP investigation.

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

Thank you.

I know the government couldn't spend money fast enough on "arrive scam" when they felt it needed to get out the door. Now we've been waiting a fair length of time to get that money recouped.

I want to turn to other testimony that was provided at a previous committee.

I believe, Ms. Reza, you were in attendance when we were discussing the procurement ombudsman's report on the government's contracting with McKinsey. Of particular focus was the national master standing offer that was established by the government for McKinsey's benchmarking services. At that time, you were asked about one of the call-ups from ESDC, which was worth $5.7 million and was personally approved by the minister of PSPC at that time.

The procurement ombudsman found that the responses to the Treasury Board's seven standard questions when a large procurement is conducted “did not establish a link between McKinsey's exclusive rights to its benchmarking solutions and ESDC's operational requirements.” He also stated that “ESDC's reasoning did not provide a sufficient basis for PSPC to reasonably conclude that McKinsey held exclusive rights to the extent that it was the only supplier able to supply the benchmarking services.”

I know, Ms. Reza, that you were the one who sent the justification to the minister. We have now seen that document. Again, there is no sufficient justification for the call-up. It's simply a string of statements with no corroborating evidence that the call-up was necessary. In fact, there are three pages for submission data to justify the contract. For this $5.7-million contract, the first page was not filled out fully.

How do you reconcile this? Do you have any documentation showing how the justification was made that was not offered to the ombudsman at the time of his report?

[Arianne Reza]

Thank you very much for the question.

I want to start at this place: Because of the financial delegation—the value of the contract being above officials—it went to the minister in that context. The procurement officer signed off saying that the justification provided was satisfactory. The fact is that there are no resellers of McKinsey's benchmarking services. That is a proprietary dataset. Furthermore, in Treasury Board policy on large transformation projects, having that independent benchmark is required. The justification from a PSPC perspective and that of the client was sound.

I can pause here.

[The Chair, Conservative, Kelly McCauley]

I'm afraid that's our time.

Mrs. Atwin, go ahead, please.

[Jenica Atwin, Liberal, Fredericton, NB]

Thank you very much, Mr. Chair.

Thank you to my colleagues, and to Ms. Reza and officials for joining us again today.

Roughly 70% or $3.3 billion of Public Services and Procurement Canada's requested authorities for 2024-25 would be for the core responsibility of property and infrastructure. This core responsibility also accounts for roughly 80% or $3.2 billion of the department's revenues and other reductions.

How would the department use those funds to improve access to affordable housing—with the emphasis on “affordable”?

[Arianne Reza]

Thank you very much for the question. I'll start, then turn the floor over to the chief financial officer.

The appropriations you referred to are part of the ongoing government business of running our real property portfolio. PSPC is the largest office-holder in the Government of Canada. We also undertake many large construction projects—like you see here on Parliament Hill, or building the science and infrastructure subset, Laboratories Canada and other large construction projects. That money is mostly apportioned to keeping those large capital projects on track and moving to completion.

In terms of affordable housing, budget 2024 announced new measures that will provide PSPC with the capacity to move into the space—to look at some of the lands we have, and mobilize and accelerate. We'll look at how to use those lands and repurpose them into affordable housing.

Wojo, did you wish to add?

[Wojo Zielonka, Assistant Deputy Minister and Chief Financial Officer, Finance Branch, Department of Public Works and Government Services]

As the deputy minister stated, in prior years, we didn't really have funding for affordable housing. It's mostly what has been announced in this year's budget. In the budget announcements, it was very focused on lands for housing initiatives. Those will be reflected in supplementary estimates; they aren't reflected in our main estimates.

[Jenica Atwin, Liberal, Fredericton, NB]

Great. Thank you.

Do you know if there's consideration for having a more ambitious target than the 54% for the indicator of the percentage of Crown-owned buildings that are in fair or better condition?

[Arianne Reza]

This is an excellent question because there is an established ladder in terms of building conditions. We look to try to see that it's fair to moderate to make sure that we can modernize the workspace, and to make sure that we can look at offsetting our carbon emissions. So there's a whole grade in there of effort and activity, and as you indicated, that is our target, but it may be reviewed during the upcoming year, especially as we move to try to convert some of our office holdings into housing.

[Jenica Atwin, Liberal, Fredericton, NB]

Great. When does the federal government expect to achieve 100% total accessibility score for Crown-owned buildings, in line with the new standard?

[Arianne Reza]

We'll have to come back to you in writing with that answer.