Government Operations Committee on June 10th, 2024

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

Gotcha. I did want to ask a question. Inside your report, you talked about the “chains of non-competitive contracts”. Can you explain what that means, and what are the risks specifically with these chains of contracts?

[Karen Hogan]

I just want to be clear that this is a word that we used to describe it. We didn't know a better way to describe what we were seeing. It isn't a term that's commonly used.

For me, it shows that if you issue the first contract in a competitive way and then issue subsequent contracts in a non-competitive way, you're limiting competition. As I said, the default of competition to drive better value for money is important.

More concerning is the chain of contracts where the first contract is a small contract that called on an exception under the contracting rules—if it's under a certain dollar threshold, there was no need for competition, as it wouldn't provide better value for money—but then used a subsequent exception for the follow-on contracts that were of a larger dollar value, in the millions of dollars. That starts to question whether or not they thought at the beginning what the need was that they needed to fill.

It comes down to that fundamental starting question. It constantly asks if you are then more dependent or creating a dependency on a vendor if you're issuing multiple non-competitive contracts. How are you ensuring best value for money if none of them are being competed?

I think it brings in so many rules when we see the chains, which just raised a lot of concerns for us.

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

In any of the 97 contracts that you looked at, did you see any political interference, such as interference from elected officials or politicians?

[Karen Hogan]

No, we did not see political interference in the contracts that we looked at.

We did see that a minister was involved in one procurement because it was a non-competitive procurement above the threshold that the public service is allowed to issue on its own. In accordance with the rules, they went to the minister, the minister authorized it and then the government issued the contract as it normally would have through its regular processes.

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

Were politicians—elected officials—driving the decisions to offer these contracts to this vendor or any vendor that you saw? Were they the drivers of those decisions?

[Karen Hogan]

We did not see that there was a push from a political aspect to direct any contracts to McKinsey.

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

These decisions were made by public servants, public officials or bureaucrats, as they're often called. Is that correct?

[Karen Hogan]

That's correct. The decisions that we saw were made by public servants.

Even in the six contracts that appeared to be designed to suit McKinsey & Company, it was the public service that made those decisions.

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

Great. Thank you.

[The Chair, Conservative, Kelly McCauley]

Thank you, Mr. Kusmierczyk.

Mrs. Vignola, go ahead, please, for two and a half minutes.

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

Thank you very much, Mr. Chair.

Ms. Hogan, I'd like to come back to the duty Public Services and Procurement Canada has to examine things critically.

This organization has the ability to ask questions about contracts. Does it have the power to call a contract into question?

Can it verify that all steps have been followed, and if not, require that this be the case before proceeding with the contract?

[Karen Hogan]

Public Services and Procurement Canada's responsibility is to challenge the tool used for procurement. We often found that it had not questioned the fact that many contracts were awarded in a short period of time.

However, we also need to take a step back. The ultimate decision rests with the department requesting the service, even if Public Services and Procurement Canada questions it.

On the other hand, when the value of a contract is below the threshold at which a competitive process must be launched, as is the case with the contract chains we've just discussed, Public Services and Procurement Canada is not informed. It may only be aware of the existence of the contract if the department informs it.

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

So it's a power to question, but in the end it's not really binding, because the department has the final say.

Did I understand you correctly?

[Karen Hogan]

This is correct in the case where a contract has been awarded individually by another department.

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

The notion of benchmarking was often brought up by saying, for example, that we couldn't have chosen anyone else because the chosen company specialized in this type of analysis.

After all, Canada is nearly 160 years old. Isn't it capable of having its own tools and using its international contacts to do comparative analyses and see where the best practices are?

[Karen Hogan]

Many private sector companies specialize in benchmarking.

I would expect the public service to have information. After all, Statistics Canada has been accumulating data for years.

That said, we often want to look outside the public service for information to find out what the private sector is doing and compare that with what's happening in the public sector.

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

All right.

Thank you.

[The Chair, Conservative, Kelly McCauley]

Thank you.

Mr. Bachrach, go ahead, please.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Thank you, Mr. Chair.

I was going to ask a question similar to that of my colleague's around the role of PSPC. It seems possibly defensible that some people within specific departments might not be familiar with all the procurement rules, but you would think that the department that is solely responsible for procurement would know all the rules and would be able to challenge the departments if they saw those rules being flagrantly broken.

Is PSPC not living up to its purported reason for being? Like, this is the whole model that we have, and it doesn't seem to be working.

[Karen Hogan]

We did find in this audit that they could have done a better job at challenging many of the organizations, especially when multiple contracts appeared to be issued for similar work in a really short period of time, but there are things that they're not aware of. As I mentioned earlier, if a contract is issued below a dollar value threshold, only the department that issued that contract would be aware of it. There is no big central repository for all that information.

Let's look at the national master standing offer, for example. I believe the deputy minister was at the committee before testifying on how she didn't believe the call-ups required a documentation. I had a very lengthy conversation with her about it. The national master standing offer is just an offer. It's not the contract. When the contract happens, it should be required. I think following the procurement ombud's work, she actually changed the requirements and now is reminding every department that they should provide that justification.

So I think this is a learning opportunity, as certain tools are used more often, that rigour needs to be put into documenting decisions.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

How many seconds do I have left, Mr. Chair?

[The Chair, Conservative, Kelly McCauley]

You have 35 seconds.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Okay.

Coming back to McKinsey, it seems like sometimes you end up with this bias in organizations toward vendors that are either the biggest or have the most high-profile reputation, because it's seen as the safest option. If something goes wrong, nobody can blame them for choosing such a reputable, high-profile firm as opposed to an upstart or one with less of a reputation or less of a profile.

Is that something you see in procurement decision-making? Is there a bias toward higher-profile firms because it's seen as being the safest choice?

[The Chair, Conservative, Kelly McCauley]

Please give a very brief answer.

[Karen Hogan]

I'm not sure I can say that we saw that in these 97 contracts. I think I would call into question the national master standing offers. They existed with other organizations as well for benchmarking services, so there were other companies at the disposal of departments. I would have expected that they would have documented why McKinsey over the other national master standing offer companies.