Government Operations Committee on Sept. 19th, 2024

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

Thank you, Mr. Chair.

My first question is for Mr. Mills. The Auditor General's report identified a risk of dependence on certain suppliers as a result of contract chains. In these cases, a supplier is awarded a new and non‑competitive contract because it was initially awarded either a competitive contract or a non‑competitive contract worth less than the low dollar value threshold.

In your remarks, you said that this approach had been around for years. I believe that, if we were to act on this basis, human beings would still be living in caves. If we still did things the way that people used to do them, we wouldn't be talking to each other using the current technology and we would still be living in caves.

How are processes analyzed to ensure that, even though the same approach has been used for years, it remains efficient, cost‑effective and resilient in the face of current challenges?

[Michael Mills]

I want to thank the member for her question, Mr. Chair.

First, I would say that the focus is on competitive rather than non‑competitive processes. Dominic Laporte, as assistant deputy minister, added processes to help minimize the use of non‑competitive processes for specialized processes, and to ensure that they're used only in exemption cases.

For example, if we have subscriptions such as software—specific software and whatnot—we would be really minimizing the use of these non-competitive instruments specifically for those.

We added rules on contract length, deadlines and amounts. In some cases, it may be necessary to add provisions for extending contracts, particularly when the project is uncertain. Lastly, we focus on competitive processes.

We are also putting more controls on the non-competitive contracts.

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

Thank you, Mr. Mills.

Ms. Boudreau, you spoke earlier about strengthening expectations. We see this often. When a policy is adopted, people expect to see it applied. When people ask who verifies whether the policy is actually being applied, everyone keeps passing the buck. It's fine to talk about strengthening expectations. However, who actually follows up? Is it the department? Does the department know that it's responsible? Does the department expect Treasury Board to do so, given that Treasury Board sets the expectations? Who follows up?

[Annie Boudreau]

The follow‑up is a two‑stage process. The first stage takes place in the departments. All departments have an internal audit sector tasked with reviewing the previous year's reports, following up on action plans and giving management a self‑assessment.

The second stage comes next. Right now, the Treasury Board Secretariat, under my leadership, is conducting a horizontal review of everything related to contracting. We're looking at governance and internal control. This audit will be completed by the end of 2024. The results will be published early next year.

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

Thank you.

Ms. Boudreau, you shared a 2023 manager's guide with us. Who created this guide? Did you consult academics who specialize in human and material resource management? Did you contact any consulting firms that conducted comparative analyses? Who helped create this guide?

[Annie Boudreau]

I'll start, then turn to Mr. Franco, who was there at the time.

We conducted many analyses with the public service in general: contracting specialists, our colleagues at Public Works and Government Services Canada and people in human resources. There's also the Canada School of Public Service, which provides employee training.

I'll give the floor to my colleague.

[Emilio Franco, Executive Director, Procurement, Materiel, and Communities Directorate, Acquired Services and Assets Sector, Treasury Board Secretariat]

The guide was created in the public service. To obtain a good overview of all areas, we spoke with a number of departments. We met with a number of experts in procurement, project management and human resources management and with other people who have set up contracts for professional services.

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

Where do these experts come from? Are they internal?

[Emilio Franco]

They're internal. They come from the departments.

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

Thank you.

[The Chair, Conservative, Kelly McCauley]

Thanks, Mrs. Vignola.

Mr. Bachrach, please go ahead.

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

Thanks, Mr. Chair.

Thanks to our witnesses. Welcome back to OGGO.

This is obviously a complicated topic, and for the members of the public who might be watching—I can't imagine there are too many of those hearty souls—I think we can get lost a little bit in some of the nuance and the detail of it.

I was refreshing my memory of some of the Auditor General's findings, and one that really stands out to me is the idea that, “In 4 of 28 competitive contracts, the procurement strategy appeared to be designed and implemented to suit McKinsey & Company.”

It reminded me of some of the findings related to ArriveCAN, where in some cases the vendor was in communication with the procuring agency around the criteria for the procurement. It's essentially about designing a procurement strategy to fit the needs of certain vendors so that they get the work. I think we can all agree that, when it comes to competitive procurement, that's kind of against the rules. That's not how it's supposed to work. I see nodding. This feels like a bit of a no-brainer, yet this is what the Auditor General says it looks like happened here.

She goes on to say they found “that McKinsey...was not a pre-qualified vendor under the supply arrangement originally considered.” The contract requirements were then modified “to be able to use a different supply arrangement”, and no documentation was found “that would support the change in approach.”

There are two things that could be happening here. One is that they made the right decision and they just didn't show their work, and the other is that they made the wrong decision and they actually put their thumb on the scale for McKinsey.

Which of those two scenarios is the true one? Which one reflects the reality of what happened in two of those four cases?

[Dominic Laporte]

It's important to keep in mind that we were dealing with various departments, so many departments were part of that finding of the OAG. I can assure you that this is common. A procurement officer will ask questions, will shift, basically, and will provide advice to the client. If, for example, McKinsey was not qualified under a particular solution, it's normal to look at the requirement the client is trying to achieve to basically make sure we have the right instruments. I wouldn't want to draw inferences on that. I think it has to be put in that context.

On top of that, something we are asking our procurement officers to do much more is to challenge and to document. If a decision is made, we don't want to be in a situation where negative inferences are being drawn. We want to be able to document why that advice was provided and what the rationale was for it. We're putting the emphasis on a challenge function and challenging the client to make sure the reason they're doing a certain procurement strategy is the right one and it fulfills the obligations of transparency and fairness.

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

I appreciate that, Mr. Laporte, but it doesn't seem to get to the question, which is that the Auditor General found “the procurement strategy appeared to be designed and implemented to suit McKinsey”.

Perhaps a more pointed question would be this: If that was indeed the case, would it have been inappropriate?

[Dominic Laporte]

Indeed, that would have been inappropriate if it was the case. I think some of the findings also and what we were putting in place—

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

I'm sorry. Was that, yes, it would have been inappropriate?

[Dominic Laporte]

It would have been inappropriate.

Looking back at other practices, we did put in place a non-competitive standing offer with McKinsey. We were going with McKinsey and basically advertising for these contracts based on the proprietary rights and information that was there. I think it's important to situate that.

In terms of the other contracts that were competitive, I want to point to the fact that they were done by various departments, so I'm not able to comment on the motivation for why a certain procurement strategy was chosen.

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

Let's switch gears to the joint TBS-PSPC internal review that, as you were saying, found many of the same things the Auditor General found, which is good. You're looking at the same information and you're coming to the same findings.

I'm curious about what spurred the internal review. What was the timing of that relative to the work of the Auditor General and the procurement ombudsman?

[Annie Boudreau]

The internal review was requested by the Prime Minister. He asked the Minister of Public Services and Procurement and the President of the Treasury Board to conduct a review of McKinsey.

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

Was this happening concurrently with the Auditor General's and procurement ombudsman's reviews?

[Annie Boudreau]

The Minister of PSPC requested that the OPO do a review. It was at the request of the minister. It was requested of the AG by this committee, if I'm not mistaken, to do a review of McKinsey.

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

My recollection of how this played out was that it became known publicly that McKinsey had gotten all of this work and it looked odd. It looked abnormal. It looked like they were getting a lot of government work. The controversy around the magnitude of that outsourcing spurred the government to demand all these answers. Is that a fair recollection?

You have internal audit processes. We have the internal auditor here with us. This goes back years and years. Prior to the internal TBS-PSPC review that the Prime Minister demanded, did none of those internal audit processes find these really egregious shortcomings in the procurement process that was being carried out? The things we've heard at previous meetings—

[The Chair, Conservative, Kelly McCauley]

We're past our time, but maybe we can get a brief answer.

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

Can I just add one more thing?

We heard that the agencies procuring the contracts didn't understand the rules and the people doing the procurement didn't understand the rules. Did you not find that prior to the big public controversy?

[Sheri Ostridge, Assistant Comptroller General, Internal Audit Sector, Treasury Board Secretariat]

Good morning, everyone.

Every department has a risk-based audit plan, and procurement can be looked at and would have been looked at. I wouldn't have the results of all the audits over time, but obviously this was new information that we needed to take action on.

I can't speak to what all the findings of other departments were in the past, but the plans are risk-based. If a department does have an issue or risks are significant in an area, there would have been procurement audits done in the past. There are a number that go on every year.