Government Operations Committee on Dec. 10th, 2024

[Garry Hartle]

No, I understand that. Let me tell you that part of the process is that we interacted with all these various groups. If we wanted to find out if somebody was a Nunavut company, we phoned the registrar or wrote to the registrar to ask them if this person was on the list. If this person was on the list, they were indigenous.

Various self-government entities maintain their own lists. As auditors, we contact that group to ask them if this person is on their list as a member.

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

Fair enough. I'm not questioning the actual audit of that, first of all. I'm trying to look at what's happening beyond that.

We get what happened. It was identified. It's being dealt with. Beyond that is a greater issue. The integrity commission has been established. Steps are being put forward to try to provide integrity and transparency in the system. At the same time, there's a nurturing of indigenous engagement for their success.

[Garry Hartle]

What I'm pointing out is that those things are already being done. The criteria are published by the department. We have to follow the criteria. If you fall within one of these six categories, you're indigenous. If you don't fall in any of those six categories, you're not indigenous.

As auditors, we also make sure that we've done all the background. I've read all the Supreme Court cases—

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

That's not my point. My point is that we are all entitled to and require audits to do that job. This is what I'm trying to understand: What should we do better? I mean, we're looking at the fraud and we have to make certain that it doesn't continue. We're taking these extra steps to try to prevent it. What are you suggesting should be done?

[Garry Hartle]

I would suggest that you have your departments follow the practice. I mean, if you take away all the ability to audit, people can do whatever they like.

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

We're augmenting the audits. We're actually creating greater restraints.

[Garry Hartle]

I don't see it in this particular case. I mean, you've removed all the external audits.

[The Chair, Conservative, Kelly McCauley]

That is our time, gentlemen.

Mr. Hartle, thanks for joining us. You did mention some reports that I think you submitted to a different committee. If you're able to deliver them to the clerk, now or electronically, that would be wonderful.

Colleagues, we're going to suspend briefly and welcome our next witness.

[The Chair, Conservative, Kelly McCauley]

Thank you for your patience, everyone. We are back.

We welcome back another friend of OGGO, Mr. Jeglic. It's good to see you again.

If you have an opening statement, the floor is yours. Go ahead, please.

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

Thank you.

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

Thank you, Mr. Chair and members of the committee, for inviting me today to discuss an issue central to the integrity of federal procurement oversight, that being the ongoing underfunding of my office.

As you know, OPO, the Office of the Procurement Ombud, is mandated to ensure fairness, openness and transparency in federal procurement. However, without the necessary resources, effectively fulfilling this mission has become nearly impossible, ultimately jeopardizing the trust Canadian taxpayers have in federal procurement.

Since the office's creation in 2008, our budget of $4.1 million has essentially remained static. It has not been adjusted to reflect increased costs, nor has it accounted for the growing volume and complexity of the work that we handle.

Despite the commitment in the last federal budget to uphold and enforce the highest standards of federal procurement and ensure sound stewardship of public funds, our budget saw no increase. In fact, there have been approximately $350,000 in reductions to our budget over the years as part of wider government cutbacks.

While I understand the government's need to find efficiencies across many departments, now is a crucial moment to invest in an office that oversees a $37-billion procurement system.

Underfunding our office is akin to failing to perform basic maintenance on a vehicle, resulting in a breakdown. My office was built to handle the necessary repairs to keep the vehicle running, but unfortunately, we do not have the necessary resources to perform this essential function. With the requested increase to our budget, we wouldn't just perform the routine maintenance necessary to keep the vehicle on the road, but we'd also have the insight and capacity to support selecting the new vehicle. As outlined in my annual report, the time has come. It's time to replace the vehicle. It's time for action now.

In recent years our office has seen an overall increase in cases—contract award complaints, contract administration complaints, requests for mediation services, and ad hoc procurement practice reviews, such as WE Charity, ArriveCAN, McKinsey, bait and switch and, just recently, a potential review of indigenous procurement.

These are all vital areas of procurement that require analysis, and simply put, we are inadequately funded to properly do this.

Additionally, OPO has assumed the workload of the recently dissolved business dispute management program at PSPC, which also provided a recourse mechanism for suppliers in contract disputes.

I want to share with you how this funding shortfall has impacted my office's ability to effectively deliver on our legislative mandate. If left unaddressed, it will continue to have a huge impact on Canadian taxpayers, suppliers and the federal buying community.

To undertake the ad hoc reviews I just mentioned, we had to obtain one-time funding from PSPC, which solved some of the problems but also created new ones. This funding prohibited our office from hiring permanent resources and instead created a patchwork solution. We were forced to hire temporary staff who did not have the experience or time to lead these reviews. Under the one-time funding, we refused to hire consultants to conduct the reviews for many of the reasons you saw in ArriveCAN and McKinsey, as well as the need to avoid conflicts of interest. We need permanent funding that will enable us to hire permanent resources with the skills and experience to lead these important, complex procurement reviews.

Other serious impacts of our funding shortfall include delays in launching our procurement practice follow-up reviews, which are crucial for assessing whether departments have implemented our recommendations. There is no point in conducting systemic reviews and making recommendations for improvement if we don't follow up to ensure the actions have been taken to correct the deficiencies. Results from our follow-up reviews are reported publicly and hold the departments and agencies accountable for addressing problems that we identified in our initial review.

Other serious impacts of our funding shortfall include delays in launching our knowledge-deepening and knowledge-sharing research studies, which provide guidance to procurement officials and suppliers and are essential in establishing the “reasonable grounds” required by legislation to launch our systemic reviews.

The shortfall also gives us limited ability to conduct outreach activities across Canada to ensure that the Canadian businesses we were created to help know that we exist and how we can help them, particularly small and medium-sized businesses.

The shortfall also gives us limited ability to proactively launch procurement practice reviews in important areas such as construction contract administration, defence procurement, indigenous procurement and others that would have a significant impact on procurement.

We have the potential to proactively conduct reviews and make recommendations that aim to improve federal procurement before costly problems materialize. I will stop there, but the list goes on.

Our office has recently put forward our budget request for a third time because the previous two had been declined. We have always acted in a fiscally prudent manner and have requested funds when we knew we no longer had the resources needed to deliver our services. We took a professional approach to be proactive before the situation became critical, but unfortunately we have now entered that crisis point where difficult decisions will need to be taken and critical services will be cut.

In our most recent budget—

[The Chair, Conservative, Kelly McCauley]

Mr. Jeglic, I'm sorry. I need you to wrap up, sir. You're past your five minutes.

[Alexander Jeglic]

Sure.

In our most recent budget ask, we are seeking a phased budget increase in the amount of $1 million for 2025-26, $3.4 million for 2026-27 and an average of $4.7 million annually after that.

Thank you very much. I'm pleased to answer any questions.

[The Chair, Conservative, Kelly McCauley]

Thanks very much. Again, thanks for joining us today.

We'll start with Mrs. Block, please.

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

Thank you very much, Chair.

Thank you, Mr. Jeglic, for being with us today. I know you've appeared before this committee on numerous occasions in the last couple of years. We do appreciate your being available.

We know this is an issue that you've raised with us. In fact, I'm reminded of a letter that I wrote to you in which I was requesting that you look deeper into the contracting with GC Strategies.

At that time, you had announced that your office was launching a review of the practice of bait and switch across government. In that letter, you also highlighted what you've highlighted here today, which is a lack of resources. In fact, you said—and you may have said part of this here today—“My office has operated within its allocated budget, which has remained static for more than 15 years. While we continue to deliver on our mandate, budget constraints have made it difficult. Insufficient sustainable funding has led to staffing shortages that limit our capacity to conduct ad hoc systemic reviews regarding fairness-related risks brought to the office's attention.”

I'll end the quote there.

Given that situation, will you be able to complete your review on the practice of bait and switch with your current funding level?

[Alexander Jeglic]

Bait and switch is one of the ad hoc reviews for which we did receive one-time funding. As I noted in my opening statement, the one-time funding does also create associated risks, because we have to reallocate internal resources. These are high-profile reviews in which we need to be assured that we have experienced leads as the practitioners who are leading these reviews. With the one-time funding, we are prohibited from hiring full-time staff. It has to be temporary.

As I mentioned, I have essentially taken a decision that we will not hire consultants to perform these reviews. That's for many reasons, one of which is conflicts of interest, but there are many other reasons as well.

We do have the resources, and that review has been launched.

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

Thank you.

This was reported by Blacklock's on November 27, 2024, in an article with the headline “$25B Contract System Broken”:

Federal contracting is near “the bottom tier” in accountability and fairness, Procurement Ombudsman Alexander Jeglic said yesterday. Jeglic told the Senate national finance committee that irregularities like sweetheart contracting were symptomatic of a “broken system.”

I guess one could never have imagined what we were going to discover over the last two years in procurement. You listed just a number of them in your opening statement.

Can you tell me two things? The first is, how many ongoing reviews is your office undertaking currently? Second, what do you see as needing to happen in order to fix this “broken system”, as you called it?

[Alexander Jeglic]

I'll briefly go over the statistics, but just for the procurement-related cases that we've seen. I'll use the statistics from 2017-18—which is when I started in the role—to now.

We went from 264 cases to 582 cases. That's a 120% increase. Written complaints went from 26 to 62, which is a 138% increase. We have received 102 written complaints so far this year.

With regard to PPRs, which are the procurement practices reviews, such as the one for McKinsey, we've conducted 41 since our office opened in 2008, but we've actually done 20 in the last five years, so it's a significant increase. For the procurement practices reviews follow-ups, which have unfortunately been captured in this financial crunch, we want to launch them within two years of completing the initial review. We've not been able to meet that time frame, so accountability is lacking.

For complaint reviews, again, we went from four to 38 this year. Now, 38 is a bit of an anomaly. That is certainly well above what we would normally see, but again, we went from four in 2017-18 to 38 this year.

For ADRs, alternative dispute resolution requests, we went from nine to 11. There's an increase in all areas.

To answer your second question, which was about fundamental issues, this is an area that I'm extremely passionate about, because I've been in the job long enough that I've been able to see a significant trend, and the trend is troubling. Rather than formulate band-aid solutions, it's time to call for transformational changes. That's essentially what we've done in our annual report, but it's not enough to just call for transformational changes. We have formulated what we believe are some seminal changes.

In addition, in anticipation of our annual report being tabled, we wanted to consult broadly. We identified 10 experts, including a broad section of the buying community within the federal government, and asked them for the top five foundational changes they believe are necessary.

We provided them with our five. If you'll allow me, I'll read them. They shouldn't surprise you. I'll do it very quickly.

Number one is to establish a chief procurement officer position, which is something I've mentioned a number of times. This is to make sure that there's accountability in federal procurement.

Number two is to create a government-wide vendor performance management system. I think it would address many of the issues we're hearing about even today.

Number three is to develop one universally applicable set of procurement rules. There are too many rules. People just don't know which set of rules to follow.

Number four is to establish a framework for data collection to increase the transparency of federal procurement. Again, data collection has been incredibly problematic.

Number five is to make use of artificial intelligence advancements to modernize federal procurement tools and systems.

Those are the five we've put forward, but we are consulting. I'd be happy to return to the committee to give you the results of our consultations. We have a plan for how to implement these into solutions.

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

Thank you.

[The Chair, Conservative, Kelly McCauley]

You mentioned “after the consultation period”. When would that be?

[Alexander Jeglic]

We're currently undertaking the consultations. We have a deadline of December 31 to complete the consultations. We'll then amalgamate the information.

The next stage of the process is to convert it into a knowledge-deepening and knowledge-sharing piece to provide context and background on each one, and an implementation plan for how these can actually be successfully implemented within the system.

[The Chair, Conservative, Kelly McCauley]

Mr. Bains, the floor is yours.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Thank you, Mr. Chair.

Thank you, Mr. Jeglic, for joining us once again and sharing with us the important work that you do.

You talked about certain officer positions you would like to fill. Can you share how many full-time equivalents you would need to adequately fulfill the mandate you just shared with us?

[Alexander Jeglic]

I can, absolutely.

Currently we have 31 full-time employees, with 23 of these being indeterminate. That means that eight are casual or part-time positions.

Our funding request puts forward 27 new FTE positions over three years in a phased approach. There would be a $1-million spend in the next fiscal year of 2025-26, $3.4 million in 2026-27 and $4.7 million in 2027-28.

Those 27 positions would actually make the existing eight positions permanent, so it's 23 plus 27. Of those positions, nine would be dedicated specifically to procurement practices reviews, three would be for review complaints, seven would be for alternative dispute resolution, three would be for knowledge deepening and sharing and five would be for outreach.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Is there any way that we have internal...? Some of the people who are part time could be trained to do those roles, or is it that you need to fill these from outside?

I understand you talked about not having consultants. Could you share what the risk is with the conflict of interest as well?

[Alexander Jeglic]

I'll explain the conflict of interest first.

If you have an outside body retained to do reviews of procurement files, ultimately they are looking at commercially confidential information provided by suppliers. Suppliers, when they participate in the process, may have signed on to an audit right. However, there isn't necessarily an understanding that those audit rights would extend to third parties, specifically within our office. Therefore, that creates a conflict of interest.

From a timing perspective, these systemic reviews are long-term reviews. They take one year to complete. I think the nightmare scenario for us is to have resources that are temporary in nature complete a third or half of the work, and then ultimately be pulled elsewhere by a full-time opportunity. Then we have to replace someone midway through a long-term process.

It's not as lengthy on reviews of complaints. On reviews of complaints, it's 120 working days. Nonetheless, these are long-term projects, and it is a real risk to lose resources.

If I may, I'll just highlight that two years ago, we lost eight resources within one fiscal year. That may not seem significant, but these were eight full-time employees. When you have 23, losing eight is very significant. It really strained our office and, I would suggest, harmed us in future years to be able to deliver successfully.