Government Operations Committee on Feb. 8th, 2022

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

I call the meeting to order. I apologize for taking so long. There were a few challenges.

Welcome to meeting number four of the House of Commons Standing Committee on Government Operations and Estimates. Today we'll receive a briefing from the procurement ombudsman.

Today’s meeting is taking place in a hybrid format, pursuant to the House order of November 25, 2021. 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 the best we can to maintain a consolidated order of speaking for all members, whether participating virtually or in person.

I will take this opportunity to remind all participants in this meeting that screenshots or taking photos of your screen is not permitted.

Given the ongoing pandemic situation and in light of the recommendations from public health authorities, as well as the directive of the Board of Internal Economy on October 19, 2021, to remain healthy and safe, the following is recommended for all those attending the meeting in person.

Anyone with symptoms should participate by Zoom and not attend the meeting in person. Everyone must maintain two-metre physical distancing, whether seated or standing. Everyone must wear a non-medical mask when circulating in the room. It is recommended in the strongest possible terms that members wear their masks at all times, including when seated. Non-medical masks, which provide better clarity over cloth masks, are available in the room.

Everyone present must maintain proper hand hygiene by using the hand sanitizer at the room entrance. Committee rooms are cleaned before and after each meeting. To maintain this, everyone is encouraged to clean surfaces such as the desk, chair and microphone with the provided disinfectant wipes when vacating or taking a seat.

As the chair, I will be enforcing these measures for the duration of the meeting, and I thank members in advance for their co-operation.

Just to touch on a bit of committee business before we start, I wish to speak to members about the meeting of the committee taking place next Tuesday, February 15, 2022. We had planned on starting our study on air defence procurement. However, we will not have had time to contact witnesses after the members' witness suggestions are submitted on Friday, February 11.

The analysts have noted that the Office of the Auditor General has written reports relevant to the committee's study of air defence procurement and the national shipbuilding strategy. To ensure that we have witnesses present for next Tuesday, I instructed the clerk to contact the Auditor General's office. They have responded by saying that the Auditor General is interested in appearing but not available. However, representatives of the Auditor General's office can appear on Tuesday, February 15, to discuss their reports related to the committee's studies of the air defence procurement and the national shipbuilding strategy. Just so you're aware, many of those officials were involved quite extensively before this, a couple of years ago, so they can provide information.

If anyone has any questions about this, please contact me or the clerk.

I will now invite the procurement ombudsman to make his opening statement, recognizing that he doesn't have a microphone. We do have two hours, so I will ask you to speak slowly so that the interpreters can get your message out and not have challenges in doing that.

That said, I turn the floor over to you, sir.

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

Thank you very much, Mr. Chair.

I'll start today by acknowledging the traditional and unceded territory of the Anishinabe people of the Algonquin Nation on which we live and work here in Ottawa.

Thank you, Chair and members, for inviting me back to the committee. It is my pleasure to be here, and I hope I can be of assistance.

I'm joined today by the following members of my office: David Rabinovitch, who I believe is also experiencing a little technical difficulty, who's the deputy procurement ombudsman; Margherita Finn, also experiencing technical difficulty, who is the director of procurement inquiries; Amy Dubeau, director of communications; Derek Mersereau, procurement practices review manager; Alain Bazinet, procurement practices review manager; Michael Morden, procurement review manager; Chelsea Young, senior risk adviser; Melissa Cianflone, senior risk adviser; and James McAdam, analyst.

Each of those present with me today has played a key role in one of the reports recently released by my office.

The COVID‑19 pandemic has radically changed the way in which we live and work.

I would like to thank the public servants in all orders of government, all over Canada. Whether in IT, in translation or in administration, they are professionals who have made it possible to work remotely, so that, for example, this committee can do its important work.

I will talk just a little bit about the role and mandate of my office. I would like to start by explaining my role in federal procurement, as some of you were not part of the committee when I was last here almost two years ago.

The Office of the Procurement Ombudsman opened in 2008, with a focus on providing small and medium-sized businesses an avenue of recourse for procurement and contracting issues. My office operates at arm's length from other federal organizations, including Public Services and Procurement Canada. We purchase services related to human resources, finance and information technology, and select other government and corporate services from Public Services and Procurement Canada through service-level agreements.

I report directly to the Minister of Public Services and Procurement, and the minister is required to table my annual report in Parliament. While I report to the Minister of Public Services and Procurement, the minister has no involvement in my office’s daily activities or the content of my reports.

Specifically, my legislative mandate can be broken down into four sections.

One is reviewing complaints regarding the award of certain contracts for goods below $30,300 and services below $121,200. This is when a Canadian business files a complaint about the award of one specific contract. It’s usually a supplier who bids on a federal contract, is not awarded the contract and is not satisfied with the department’s explanation. For contracts at or above these dollar-value thresholds, the supplier can seek redress through the Canadian International Trade Tribunal.

Two, we can review complaints regarding the administration of certain contracts, regardless of dollar value. We rarely receive this type of complaint, but when we do, it most often pertains to late payment or non-payment.

Three, we can review departments’ practices for acquiring goods and services to assess their fairness, openness and transparency and make recommendations for improvement. These are usually systemic reviews, where we look at roughly 40 procurement files and opine on how the department is conducting its procurement activities overall. There are no dollar-value limitations associated with these systemic reviews, and they include both high- and low-dollar-value procurements.

Four, we provide alternative dispute resolution services, like mediation, to suppliers and federal organizations involved in a contract dispute when both parties agree to participate. This is a highly successful and effective service offered by my office, which is unfortunately underutilized by federal departments. Like our systemic reviews of 40 procurement files that I just mentioned, there are no dollar-value threshold limitations associated with our mediation services. We can mediate contracts valued at $6,000 or $60 million.

As you can see, my legislated mandate is quite specific.

In October 2020, my office signed a memorandum of understanding with the Canadian International Trade Tribunal to ensure that Canadian businesses are granted easier access to available complaint redress mechanisms and made aware of the time frames within which they must file complaints with either my office or the CITT.

The neutral and independent Office of the Procurement Ombudsman has never been so important.

To further improve the effectiveness of my office, I’ve proposed changes to some of the procurement ombudsman regulations. I would like to request that the procurement ombudsman be able to recommend compensation of more than 10% of the value of a contract, up to the amount of the actual lost profit incurred by a complainant. I'd also like to be able to compel rather than ask or request departments to provide documentation necessary for my office to conduct reviews, and that the name of my role and my office be changed from “procurement ombudsman” to “procurement ombudsperson” to better reflect the community I serve.

I would also like to propose an additional change that was not raised in my last annual report, which is that suppliers bidding on contracts awarded under the procurement set-aside for indigenous businesses be given a right of recourse to my office in the event issues arise. I believe that when the set-aside program for indigenous businesses was created, it was not well understood that complaints arising under this program would be outside the jurisdiction of my office and the Canadian International Trade Tribunal. This is a systemic barrier that must be removed.

I also want to make sure procurement stakeholders are aware of how my office can help resolve federal contract disputes.

Despite the restrictions that prevent gatherings in public, my office has continued to make contact virtually with stakeholders in federal procurement. We do so to let them know about our services and to provide them with a platform on which to share their experiences.

We also continued to host our annual summit on diversifying the federal supply chain, to connect suppliers with government and private sector organizations whose services can help them better understand federal procurement and obtain federal contracts. We recently held our fourth summit on January 26-27, which attracted more than 800 participants over the two days.

When we started this summit in 2019, there were limited Government of Canada events that brought together the various government programs and initiatives in one place for suppliers to learn what supports may be available to them. Over the years, we have now begun to see an increase in other supplier diversity events hosted by federal organizations. However, the continued increase in participation and registration at our summit indicates the continued and growing importance of our summit.

The federal procurement realm can often seem daunting to suppliers, and navigating through the various departmental programs and initiatives can be challenging. Our summit offers a “one-stop shop” for suppliers to learn about many of the Government of Canada business supports available to diverse and indigenous-owned businesses.

I have also written to the senior administrators of 83 departments, asking them to add standard language on the availability of the services of the Office of the Procurement Ombudsman, the OPO, to their bid documents, their contracts and their regret letters.

Most small and medium-size businesses that could take advantage of our services are not aware that we exist. There is no better way to remedy that than to include references to our services directly in the procurement documents.

The intent of that language is to provide suppliers with clear information on the way to file a complaint with my office, or to call on our dispute resolution services if there is a problem.

We regularly hear from Canadian suppliers, including small and medium-sized business owners and diverse business owners, about the challenges they face when doing or trying to do business with the Government of Canada. My office compiles the issues brought to us by stakeholders at outreach events, through our website or through our intake team into a top-10 list that we include in our annual reports. This list ensures that federal decision-makers are aware of the most common concerns expressed by procurement stakeholders and enables them to develop practical solutions to the issues raised.

For each inquiry or complaint that my office receives, we explain our mandate to the supplier in case they need our investigation services or our mediation services. We provide them with an answer directly or point them to an organization that can do that, such as CITT, the Competition Bureau or the Information Commissioner. As always, we will be there to review complaints and to provide mediation services so that businesses and departments can get back to business.

My office has a successful track record in mediating contract disputes, and I urge all of you, especially any suppliers listening, to contact us in the event you need assistance in resolving a dispute during the performance of a federal contract. My office remains committed to helping our stakeholders in any way we can. That includes connecting them with the right resources when their issues fall outside our prescribed legislated mandate.

To help our stakeholders better understand key issues in federal procurement, my office conducts research studies on knowledge deepening and sharing. During the early stages of the COVID-19 pandemic, my office published a study on emergency procurement to inform both federal departments and suppliers of how emergency procurement practices have been utilized in response to past disasters. Building on our study on emergency procurement, we also published another study on force majeure to provide some clarity to the federal procurement community about the legal framework related to a force majeure clause in the context of emergency procurement.

In closing, I would like to thank committee members again for inviting me and giving me the opportunity to speak about our office's services to Canadians. I urge you to let businesses in your ridings know about the existence of our services should they ever encounter issues or disputes regarding federal procurement.

I'd now be pleased to answer any of your questions.

Thank you.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Jeglic. I appreciate that.

Just as a reminder, when you answer questions, please slow down a little bit. It's just a little bit easier for the interpreters. I know you want to get that information out quickly, but it would be appreciated.

[Alexander Jeglic]

Sure.

[The Chair, Conservative, Robert Gordon Kitchen]

We will go to our first round, and it will be six minutes. We'll start with Mr. Paul-Hus.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Thank you, Mr. Chair.

Good afternoon, Mr. Jeglic. Thank you for joining us.

You will have no difficulty answering my first question. We know that your mandate is limited to contracts valued lower than $30,300 for goods and $121,000 for services.

Do you feel that those thresholds should be raised, given the amounts we deal with today?

[Alexander Jeglic]

Thank you for your question. I will reply in English, if I may.

I think the question is clear whether we should be able to raise our monetary thresholds. I think the answer is equally clear, and the answer is no. The CITT has a clear mandate at or above those thresholds, and as a result of free trade obligations there is a requirement for a mechanism to resolve those disputes. It makes the most logical sense for them to retain that jurisdiction and for us to be mindful of why we were created, which was to provide a redress mechanism for those suppliers who didn't have one with the CITT.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Thank you.

Your 2019-2020 report indicates that you reviewed four of the top 20 federal departments. In 53% of the competitive solicitation processes, there was only one bidder.

How do you explain that?

[Alexander Jeglic]

That's also a great question.

I think it was brought to our attention, so it wasn't something we were expecting to study; it was simply something that came across our review. When we were doing our three lines of inquiry, we did notice that in many competitive solicitations there was only one successful supplier. We started to analyze why that would be, and we boiled it down to a question of simplification.

The primary answer is that the process is so complicated that it doesn't really incentivize competition. But the second reason—and this is something we have also heard—is that suppliers, particularly in service contracts where there is an incumbent, typically are not interested in participating in the process because they find it very time-consuming and believe that the incumbent has an advantage, and therefore don't participate in the process. While that hasn't been fully vetted, those were our suspicions as to why we were seeing that high number of single bids in competitive processes.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

So the process is too complicated.

Given that the process is so complicated, are there a lot of companies that do not have sufficient internal resources to do business with the government?

Your process shows that the same companies always submit bids, because they know how things work and are familiar with the evaluation criteria. So, often, the same companies end up selling their products.

As the ombudsman, you raised this concern in your report. Do you see a form of favouritism on the part of some departments, in always choosing the same suppliers for various reasons?

That observation is in your report. Could you tell us more about it?

[Alexander Jeglic]

It is a fair question. It's something that's raised by our stakeholders. It's not a conclusion that our office has reached, but it is something that we have heard.

I want to be clear that it's not something we tested for specifically, but we do look for bias in the evaluation criteria throughout all of our systemic reviews, and it is something that we see periodically.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Thank you.

In your two last reports, those from 2019-2020 and 2020-2021, you point out that the Department of National Defence ranks second on the list of departments with problems.

What kinds of contracts cause the Department of National Defence to have problems?

[Alexander Jeglic]

To be honest, I anticipated the question.

I'm not sure if David Rabinovitch has been able to join the call, but he has actually done a review of each one of the files, so I might go to David if he's on the call.

David, are you on?

[David Rabinovitch, Deputy Procurement Ombudsman, Office of the Procurement Ombudsman]

Yes, Alex, I'm on.

I can speak to the Department of National Defence. In 2021, we had 36 issues brought to our attention, and it says that in the annual report. I have a list of them in front of me and I'll be happy to go through a few examples, in no particular order.

In one of them, which was the first one that came to us that year, there were three contracts with DND to provide hotel rooms. The supplier was told to reserve 100 rooms and the department notified him that they would only be requiring 10 rooms. The supplier told us that he'd already put down a deposit on all 100 rooms. We looked into it. We spoke with the department and we liaised with the contract officer, and after some further digging, it was revealed that the supplier had never sent the initial invoices to the department. He consulted with his lawyer and changed his course of action, so he dropped it at his end.

In another example, a supplier submitted a quote to the department for a solicitation under ProServices, which is a supply arrangement. It's a contracting vehicle where you have pre-qualified suppliers. He hadn't heard back from the contracting officer, so he contacted our office. We contacted the contracting officer on the supplier's behalf, and the contracting officer gave a debriefing to the chief executive officer of the supplier's company. The issue there was that he hadn't received a response from the department.

Another—

[The Chair, Conservative, Robert Gordon Kitchen]

If you have other examples, if you could put them in writing and submit them to the committee, that would be appreciated. Send them to the clerk, so that he can distribute them to all the members. Thank you.

Do we have a point of order?

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

I would like the comment I am about to make to be on the record.

I understand that, in some situations, witnesses do not have microphones. Nevertheless, that makes it very difficult for their comments to be interpreted. The interpreter is making almost superhuman efforts to do the work properly.

I would like us to make sure that witnesses have headsets.

Given how difficult it is for me to hear properly, would it be possible for me to receive the entire reply in writing, please?

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Ms. Vignola.

We are aware of that and we are hoping that all the witnesses will have microphones. As you've indicated, it's very important for our interpreters. It's very challenging for them. Even when we ask witnesses to speak slowly, it's still a big challenge. I appreciate that and recognize that.

We will now go to Ms. Thompson for six minutes.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you, Mr. Chair.

Welcome, Mr. Jeglic.

I'm going to focus on Transport Canada. I don't know if it's you or one of your team, but whoever is best suited to answer is perfectly fine [Technical difficulty—Editor] of course.

As a starting point, I understand that Transport Canada has developed standardized forms, templates and processes for bidders. What is the significance of standardization?

[Alexander Jeglic]

I can certainly answer that question. One of the big benefits, as you can imagine, is that suppliers often sell multiple goods and services to the same and different departments. In each iteration when they participate in a solicitation process, if the process looks and feels different, then ultimately it takes additional time and effort to respond to those bids. We understand clearly that there are nuances between solicitation processes, but to the extent that the terms and conditions can remain static, it makes the system more efficient.

That was something that we noted as a positive practice within the Department of Transport.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you.

I'm going to tag another question in there, because I think it links. With regard to Transport Canada's practices, how would you say they compare with those of other departments of the same size?

[Alexander Jeglic]

That's a fair question, and we expected that question. We didn't actually evaluate them on a comparative basis. So [Technical difficulty—Editor] is at the end of the five years, and then we follow up with each department to determine whether in fact they have complied with the recommendations. At that point, we'll be issuing what looks like a report card to determine whether the compliance has met the recommendations, and at that point I'll be better positioned.

One area I can certainly highlight within Transport Canada is documentation. As I'm sure you noted, in 30 of 38 files the documentation was an issue. Now, to be fair to Transport, it was also noted that this was very much in the early days of the pandemic, and they did not have access to one of their buildings, which could have contained many of the documents that were missing.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you. That took care of one of the questions, because I did wonder about that.

I want to switch to training and ask you more generally about the importance of training to Transport Canada. Could you then link it to any recommendations you would have that relate to best practices?

[Alexander Jeglic]

Whenever we find issues—and in Transport's circumstance several issues were identified—certainly an aspect of that is to behave differently. Simply creating a document might not be the answer. It has to be reinforced with education. Again, just a document change alone will likely not meet with any different result. It has to be a culture change and understanding that can only be done through education. That doesn't apply to just Transport Canada. It applies to all departments and agencies. It's something that we really underscore.

If you'll allow me, I want to make one point here. The training is incredibly important, because the seminal policy that was the Treasury Board contracting policy is being phased out. It's being replaced by a directive on the management of procurement, which is more principles-based and has less granularity. Training is incredibly important to make sure that as we transition to a new environment, everyone understands what the obligations look like.

I might add that it also makes our office more important, because where the rules are clear, we're simply adjudicating the facts based on the rules. Where the rules are less clear, the interpretation that's required from our office becomes that much more significant.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you.

You touched on this in your opening remarks, but I want to circle back for a moment. On the closure of certain Transport Canada workspaces during the pandemic, can you link into how that would have complicated efforts to retrieve certain documents that were sought by your office? If this is the case, how have you been able to work around or rectify this?

[Alexander Jeglic]

Initially, we did our file reviews in person. We would physically go to the offices to do file inspection in person. Obviously, with the COVID dynamic, that has changed. We've transitioned to doing exclusively online or e-file reviews. While we appreciate that there are departments that have both e-files and paper files, many departments have successfully migrated to e-files. Rather than put a halt to our reviews, we took that into consideration.

One thing you'll likely hear me say many times today is that we report the facts. We identified the number of cases where we saw missing files, but we also noted the fact that it was during the pandemic and that this could respond to some or many of the missing files or documents in those files.