Government Operations Committee on Oct. 3rd, 2022

[The Chair (Mr. Robert Kitchen (Souris—Moose Mountain, CPC)), Conservative, Robert Gordon Kitchen]

As it is 11 o'clock, I will call the meeting to order.

Welcome to meeting number 31 of the House of Commons Standing Committee on Government Operations and Estimates. The committee is meeting today to begin its study on the outsourcing of contracts.

We have representatives here today from the Treasury Board of Canada Secretariat, Public Services and Procurement Canada, and Shared Services Canada.

Today's meeting is taking place in a hybrid format, pursuant to the House order of June 23, 2022. Members are attending in person in the room and remotely using the Zoom application. Regarding the speaking list, the committee clerk and I will do our best to maintain a consolidated order of speaking for all members, whether they are participating virtually or in person. I'd like to take this opportunity to remind all participants of this meeting that taking screenshots or photos of your screen is not permitted.

I'd like to welcome the witnesses. For opening statements, we will start with the Treasury Board, then hear from PSPC, and finally SSC. You will each have five minutes to make an opening statement.

We will start with Mr. Franco.

You can begin.

[Emilio Franco, Executive Director, Procurement, Materiel, and Communities Directorate, Treasury Board Secretariat]

Thank you, Mr. Chair.

My name is Emilio Franco. I'm the executive director responsible for procurement policy within the office of the comptroller general at the Treasury Board of Canada Secretariat.

I'm pleased to be here today with my colleagues from Public Services and Procurement Canada, as well as Shared Services Canada.

I will begin by explaining how the Treasury Board Secretariat supports the management of investments and procurement.

The Office of the Comptroller General is responsible for providing functional direction and assurance on financial management, the management of our services and acquired assets, and internal audits across government.

Specifically with respect to services and acquired assets, the Office of the Comptroller General provides policy and guidance to investment planning, projects and procurement.

Government procurement ensures that the Government of Canada has the necessary tools and expertise to successfully deliver programs and services, while ensuring best value to the Crown through fair, open and transparent processes.

The procurement of services is used to complement the work of Canada's professional public service and enables the government to acquire special expertise and meet fluctuations in workload. Shortages in certain groups and specific geographic locations also make the use of professional services necessary to maintain operations. For example, service contracts are put in place for nurses to deliver temporary health care in northern Canada, where support is critically needed. Service contracts are also put in place for firefighters brought in to help quell forest fires in British Columbia. The government also requires services to operate and maintain our assets and facilities, such as cleaning our buildings and repairing our vehicles.

While Treasury Board sets the policy direction for government procurement, deputy heads of federal organizations are responsible for ensuring the resources are in place to deliver on their respective organizations' mandates. This means that the decision to use procurement to meet operational requirements rests with the departments and falls under the responsibility of the respective deputy head. Ultimately, departments must exercise due diligence and the effective stewardship of public funds when awarding contracts, which are required to be issued in a fair, open and transparent way in accordance with the Treasury Board's policies, laws, regulations, guidelines and frameworks concerning procurement.

In closing, let me reiterate that procurement is an essential part of how the Government of Canada delivers programs and services to Canadians. The government has the processes, systems and controls in place to ensure that procurement is conducted in a manner that upholds the values of fairness, openness and transparency while meeting public expectations in ensuring best value.

Thank you again for the invitation today. I would be happy to answer your questions concerning the Government of Canada's procurement policies.

I'll pass it to my colleague.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Franco.

We'll now go to PSPC. I'm not certain who the speaker is for PSPC, but it looks as if it's Ms. Royds.

You have the floor.

[Mollie Royds, Associate Assistant Deputy Minister, Procurement Branch, Department of Public Works and Government Services]

Thank you.

Good morning, Mr. Chair and members of the committee.

Thank you for giving me the opportunity to speak to Public Services and Procurement Canada's outsourcing procedures in my role as associate assistant deputy minister of procurement.

I am joined today by my colleagues. Kim Steele is PSPC's assistant deputy minister of digital services and chief information officer, and Ron Cormier is director general, business and technology solutions sector.

As you are aware, Public Services and Procurement Canada, or PSPC, procures goods and services on behalf of departments and agencies throughout government. These procurements range from office supplies to military equipment and everything in between. The department buys, on behalf of other federal organizations, some 24 billion dollars' worth of goods, services and construction each year from nearly 10,000 suppliers.

Public Services and Procurement Canada works in conjunction with Shared Services Canada to procure information technology services for departments and agencies that offer digital services to Canadians, and we do this in the context of the laws, regulations, policies and directives that govern procurement; including those set by our Treasury Board Secretariat colleagues.

As with all of our contracting actions, Public Services and Procurement Canada seeks to enhance access, competition and fairness in a way that aims for the best value to the Crown and the Canadian people.

The department’s procurement processes are implemented with the goal of accountability and integrity, and there are checks and balances in place to ensure government contracting withstands the highest scrutiny.

Additionally, every effort is made to make sure that our processes are open and fair to bidders.

That scrutiny extends to contracting out for services, including professional services and information technology services. The decision to make-or-buy, which is often referred to as outsourcing, is made by our clients, and can be done for several reasons. They include accessing specialized skills or knowledge that may not exist in departments, including skill shortages in information technology areas of expertise, which are in high demand across the government and the private sector.

These services may also be contracted out if there is a need to transfer knowledge that is not available within the public service, or to provide surge short term capacity that cannot be met with the human resources in place in departments.

Before IT services are contracted out, the client departments are responsible for making all reasonable efforts to use existing or new employees of the public service. They are, therefore, responsible for making the make-or-buy decisions. Once they have made that decision, we manage the procurement process.

In doing so, PSPC has mechanisms in place to ensure that cost estimates and contract values reflect actual expenditures. For example, for task-based contracts, such as the contracting of human resources, expenditures are tracked against submitted time sheets, which the clients review to ensure that the hours worked are accurate and reflect the work completed. For solution-based requirements, such as conducting studies and producing advisory reports, contracts are often based on firm prices, and competition establishes pricing and provides the assurance of value for money.

I should note that small to medium enterprises make up the vast majority of Canadian suppliers that receive government contracts, approximately 88%. Along with the department's work to ensure that small and medium enterprises are engaged in federal procurement, PSPC procurement specialists are leveraging the government's buying power to support social and economic goals. This includes helping to generate jobs and growth and to increase the participation of under-represented groups. For example, to help the government meet the target of awarding 5% of federal contracts to indigenous businesses, procurement specialists may choose to restrict their supplier search to only those suppliers who have identified as indigenous. This is in line with the procurement strategy for indigenous businesses.

PSPC is also developing a supplier diversity program, which is a core component of the supplier diversity action plan announced by the government in January of this year. I know that these topics will be explored by this committee at upcoming meetings.

To conclude, I would like to emphasize that PSPC remains committed to ensuring that our procurement processes are open, fair and transparent. This extends to contracts for human resources and IT services. In the end, this will ensure the best outcomes and best value for Canadians.

Thank you.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you very much.

We will now go to Shared Services Canada.

[Patrice Nadeau, Assitant Deputy Minister, Networks and Security Services, Shared Services Canada]

Thank you, Mr. Chair and members of the committee, for your invitation to appear today.

I am happy to be able to address you today, and answer your questions along with my colleague.

I'm the assistant deputy minister of networks and security at Shared Services Canada. I am joined today by my colleague Samantha Hazen, assistant deputy minister and chief financial officer.

The current digital landscape is a highly complex system of network infrastructure. Shared Services Canada is modernizing our IT infrastructure. To realize the vision of a digital government, we must deliver end-to-end digital services to public servants and Canadians. A high-performing and resilient enterprise network is a key underpinning enabler of a digital government.

Technologies are rapidly changing. It is essential that the Canadian government keep pace, and as the COVID-19 pandemic has shown, it's even more critical in a crisis. SSC has taken an enterprise approach to modernization. This means that SSC continues to consolidate, standardize and modernize networks across government. We are ensuring that our strategy is aligned with current best practices and is adaptable to future requirements for our network and security services.

To get where we want to go, SSC has been investing in the development of standards, IT infrastructure, contracts consolidation, and technology simplification and standardization, as well as a modernized procurement strategy. SCC has established a robust project management process that involves assessing all potential options to deliver new services or address new needs. After looking at best practices, capacity and existing solutions, SSC determines the process that best allows it to deliver products and services that are cutting-edge and aligned to global best practices and offer extensive support and functionality to users.

As we continue to effectively modernize how we deliver digital services to Canadians, we are increasing our workforce and investing in attracting and retaining talent from across Canada. We are committed to continuing to train our existing workforce to adapt to a rapidly changing IT landscape and emerging needs. Our employees are our greatest asset.

The complexity of our IT infrastructure and the speed with which we are modernizing do not always allow us to use in-house expertise. When working with external service providers, our employees provide the guidance necessary to ensure success in all of our initiatives.

Over the past two and a half years, we have adopted digital solutions to unprecedented challenges at lightning speed. In these times of rapid changes to technology and security, speed and scale matter. Execution and implementation matter. In order to effectively deliver on our initiatives, we comprehensively assess our business objectives and determine the best way to meet them.

These are situations where we must rely on commercially available resources in order to focus on the strategic side of a project. Examples would be the mobile device service, which offers three types of cellular plans and a broad selection of mobile devices, and the Government of Canada's wide area network, which is a fully managed network service that interconnects our partner or client locations across metropolitan, regional, national or international boundaries.

When we are required to outsource, SSC conducts transparent, open and fair processes as per the Government of Canada's policy on the planning and management of investments and the directive on the management of procurement. Our employees are critical in ensuring that these processes are successful. Whenever possible, SSC uses competition to get the best value for Canadians.

Industry has been and will continue to be a critical stakeholder as we work to transform the federal government's information technology infrastructure systems. SCC's procurement strategy involves leveraging private sector expertise through early engagement, flexible process and the ability to mitigate the risks.

Our agile procurement process 3.0 is a highly collaborative approach to procurement that will also help the Government of Canada with its socio-economic and climate-related policy objectives. Our strategy includes reducing the barriers to entry for small and medium-sized enterprises and companies run by women, Black or indigenous people, persons of colour and other under-represented groups.

In 2021-22, 66% of SSC-funded contracts, valued at approximately $746 million, were awarded to small and medium enterprises. Of these, 90% of the total number, which is also 90% of the value of those contracts, were awarded to Canadian small and medium-sized enterprises. There is an impressive array of Canadian small and medium enterprises, and we are encouraged to cast a wider net in procurement opportunities to tap into that knowledge and innovation. SSC is committed to getting more Canadian companies involved in competing for government contracts.

Shared Services Canada is working hard to create economies of scale, more secure and reliable services, faster turnarounds, enhanced collaboration, reduced risk and an agile procurement process that is fair and transparent, ultimately better serving Canadians.

Thank you.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Nadeau.

We will now go into our questions. We will start with Mr. McCauley for six minutes.

[Kelly McCauley, Conservative, Edmonton West, AB]

Mr. Chair and witnesses, thanks very much.

I have to start with just a point that none of you are here in person for this very important study. Perhaps in the future we'll see the folks actually come into committee.

Treasury Board, I would like to start with you. What was the spending of the last fiscal year on consulting companies such as Deloitte, etc.? It had been reported that the year before it was $16.7 billion, I think. What was it last fiscal year, please?

[Emilio Franco]

Thank you for the question.

Unfortunately, I don't have the numbers in front of me, Mr. Chair. The information is available in the public accounts.

We're happy to get back in writing with the specific numbers, if the committee wishes.

[Kelly McCauley, Conservative, Edmonton West, AB]

Yes.

For the public accounts, of course, I know the letters of representation have been signed off on, but they haven't been published yet. Parliamentarians, unfortunately, do not have access to them yet. Maybe you could let us know.

I'm going to stick with the general outsourcing to the consulting companies. Over the last five, six, seven years, the size of the public service has grown quite rapidly. Without benefits, salaries are about $50 billion.

If we use.... Two years ago, the dollars spent on consulting companies rounded up to $17 billion. That's almost a 34% add to our cost for providing what perhaps many people think the public service should be offering.

Does the Treasury Board have a sense of concern about this almost ghost department making up such a large amount and about the criticisms that a lot of these reports should be done by our ever-expanding public service? What does it say about the size of our public service if we have to outsource so many contracts to the Deloittes of the world?

[Emilio Franco]

Thank you for the question.

As I mentioned in my opening remarks, there are a number of reasons why service contracts may need to be put in place. I mentioned the examples of nurses for temporary health care in northern Canada or firefighters for British Columbia. Also—

[Kelly McCauley, Conservative, Edmonton West, AB]

Sorry, sir, I'm going to interrupt.

I'm talking solely about contracts to the Deloittes and the McKinseys, etc. The nurses hopefully do not come through Deloitte. I just want to stick to those ones.

[Emilio Franco]

Thank you for the question.

As I mentioned, the decision to procure rests with the departments. I would turn to the departments if you have questions regarding specific contracts that may have been put in place.

[Kelly McCauley, Conservative, Edmonton West, AB]

Does Treasury Board have any role, apart from setting a general framework? Does Treasury Board, as a guardian of the public purse, ever follow up on any of these contracts that are sent out?

[Emilio Franco]

Thank you for the question.

As you highlight, Treasury Board does set the administrative policy framework for procurement, which is guided by principles of fairness, openness, transparency and integrity. Although TBS does set this policy framework, in practice the accountability rests with deputy heads.

[Kelly McCauley, Conservative, Edmonton West, AB]

Does Treasury Board, as the keeper and guardian of the public purse, ever do any follow-up on the billions of dollars being spent?

I want to give you an example. We had a controversy that we actually studied in this committee. It was about PSPC and Global Affairs sending a contract to a Chinese state-owned tech company to do security work for our embassies. The government then hired Deloitte and paid them a quarter of a million dollars to do basically a four-page report with a recommendation to not contract out sensitive security tech to despotic regimes.

Who is overseeing this? It's Treasury Board's responsibility overall, but who is overseeing this massive increase in outsourcing to ensure that Canadians are getting value for their money and that they are actually following the Treasury Board guidelines, if Treasury Board itself is not doing it?

[Emilio Franco]

Thank you for the question.

The administration of government contracts is subject to internal audits by the given departments, as well as the Auditor General. The findings of those reports are—

[Kelly McCauley, Conservative, Edmonton West, AB]

Are those audits outsourced to Deloitte as well, or are they actually done by public service?

[Emilio Franco]

I cannot speak to the specifics of an individual audit, but the Government of Canada does make use of public servants for internal audits, and it does make use of contractors to conduct audits.

[Kelly McCauley, Conservative, Edmonton West, AB]

Would you make public those audits to this committee, please, if any are done through Treasury Board? I'm sorry if I missed that part. Was it solely done by the AG?

[Emilio Franco]

There are audits conducted by the internal audit organization of each departmental organization, many of which are published on their respective departmental websites. Of course, the Auditor General's reports are public for all. If there is a specific audit report this committee is interested in reviewing, I'm happy to take that away and have the department get back with a response.

[Kelly McCauley, Conservative, Edmonton West, AB]

Thanks.

I'm going to switch over to Public Works, please.

I want to give you an example. I have an order paper here, and this is only one of four we've put.... This one is about 500 pages, listing all of the contracts given out to various consulting firms. This one is Deloitte. I'm looking at three dates, a week apart, each one worth $72,000 for scene security and event security services. Basically, Deloitte was hired three separate times to see if the contract was awarded fairly and in a transparent manner. It's a quarter of a million dollars, repeating the same item three times in a row.

Do you find that justified, PSPC?

[Mollie Royds]

Thanks very much for the question, Mr. Chair.

As was alluded to in our opening remarks, there are a variety of reasons why we outsource specific tasks, whether it's for specialized skills or a surge capacity or other elements that are lacking in our in-house expertise—

[Kelly McCauley, Conservative, Edmonton West, AB]

There are 15,000-odd employees—

[Mollie Royds]

I'm afraid I don't have the specific line item that is being referred to here, so I would have to look at that particular information. As I said, when we outsource to a consultant company for specific work, that is generally in line with that rationale. Again, as a common service provider, we do this on behalf of other government departments and our clients, who are the holders of the technical requirements.