Government Operations Committee on March 20th, 2023

[Anita Anand, Liberal, Oakville, ON]

We have the ability to ensure, through our contracting process, that the interests of the Government of Canada and the Department of National Defence are protected. That's exactly what we do through provisions like confidentiality and through provisions relating to conflicts of interest.

We believe in the usefulness of an integrity regime to ensure that suppliers are held accountable for misconduct. By the same token, we have been very careful to ensure that our contracts contain the provisions necessary to protect the interests of the Government of Canada and, ultimately, the people of our great country.

I will say that the singling out of companies is not necessarily the role of the Department of National Defence. That falls within Public Services and Procurement Canada. I welcome suggestions as to what threshold is appropriate should that inform part of the work of this committee.

[Anthony Housefather, Liberal, Mount Royal, QC]

Thank you so much, Minister.

I have another question for you. When Dominic Barton was here, he told the committee that McKinsey never provides policy advice. It's executing what the government wants it to do. Do you agree with this statement?

[Anita Anand, Liberal, Oakville, ON]

I did not hear the statement in its full context, but I will say that it is consistent with the point I made previously, which is that McKinsey provided no substantive policy advice to the Government of Canada. That rests with the ministry at issue. Here, in terms of national defence, the policy decisions and the direction that we are taking—whether it be on culture change or with respect to the Royal Canadian Navy—rests with me, as minister, and the other leaders of the organizations with which I work: the Canadian Armed Forces, as well as the Department of National Defence.

[Anthony Housefather, Liberal, Mount Royal, QC]

From your experience, Minister, with regard to the issue of outsourcing, when there's a decision to outsource, it doesn't come from the political level—does it?

[Anita Anand, Liberal, Oakville, ON]

I had no contact whatsoever regarding any contracts related to third party expertise.

[Anthony Housefather, Liberal, Mount Royal, QC]

Thanks.

Now I have a question for General Eyre if that's okay.

I'd like to ask about the impact that McKinsey's work could have on subsequent procurement decisions in the defence department. Given that some of McKinsey's clients also do business with the Department of National Defence in the equipment procurement and IT space, there have been those who have made the allegation that McKinsey's advice could influence subsequent procurement decisions by national defence in a way that would benefit its other clients.

Could you reassure people that would not be the case?

[Gen Wayne D. Eyre]

Procurement is the responsibility of my colleague, the deputy minister. I'll pass that to him.

[Anthony Housefather, Liberal, Mount Royal, QC]

Please refer it to the deputy minister—no problem.

[Bill Matthews]

Certainly. There are a couple of points here.

Number one, we do have rules in place to make sure that these types of conflicts don't occur, but I want to come back to the nature of the work McKinsey's doing here. It's mostly benchmarking HR-related.... It's not related to capability. I think when you're theorizing about future procurements, etc., nothing I've seen would compromise any of that. We're not talking about capability here.

I do have the real expert to my right if there are detailed questions in terms of how procurement works.

[Anthony Housefather, Liberal, Mount Royal, QC]

Again, I have heard this concern voiced and it doesn't make sense to me in light of our procurement policies. I think it's helpful that you would reiterate that.

What is the time, Mr. Chair?

[The Chair, Conservative, Kelly McCauley]

You have 14 seconds.

[Anthony Housefather, Liberal, Mount Royal, QC]

Thank you very much for being here today. It's very much appreciated.

[The Chair, Conservative, Kelly McCauley]

Thank you, Mr. Housefather.

I will use your 14 seconds.

Witnesses, thanks for being with us today. There were several questions that you were not able to finish. There were also several times when the committee asked if you could provide information back. I hope you will do so as soon as possible.

Before you go, I want to follow up on one of the comments. You're probably aware of what I'm going to talk about. The green book by Bosc and Gagnon is very clear. I want to quote quickly from it. It says, “The Standing Orders do not delimit the power to order the production of papers and records. The result is a broad, absolute power that on the surface appears to be without restriction.”

I have to express my extreme disappointment that this department is one of several from this government that has refused to recognize the supremacy of Parliament and a very clear directive from this committee to provide unredacted documents. I hope you will provide those to us as soon as possible.

That being said, thank you for joining us. I will dismiss the witnesses.

Colleagues, before we suspend, we have a couple of housekeeping points. I need your approval on the following. The first is that, pursuant to Standing Order 108(2), the committee undertake a study of the subject matter of supplementary estimates (C), 2022-23.

[Some hon. members]

Agreed.

[The Chair, Conservative, Kelly McCauley]

I also need your approval that the proposed budget in the amount of $2,500 for the study of the subject matter of supplementary estimates (C), 2022-23, be adopted. I don't believe we will actually spend any of that money, but we have to approve that before we can move forward.

[Some hon. members]

Agreed.

[The Chair, Conservative, Kelly McCauley]

Colleagues, thank you very much.

We will suspend very briefly. We will try to get back as soon as possible so that we have as much time with the PBO as possible.

Thank you.

[The Chair, Conservative, Kelly McCauley]

Colleagues, we are back in session.

I would like to welcome our guests from the parliamentary budget office.

I understand you have an opening statement for us, Mr. Giroux.

The floor is yours for five minutes, please.

[Yves Giroux, Parliamentary Budget Officer, Office of the Parliamentary Budget Officer]

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

We are pleased to be here to discuss our report on the supplementary estimates (C), 2022-23, which was published on February 23, 2023.

With me today is our lead analyst on the report, Kaitlyn Vanderwees.

The government's supplementary estimates (C) outline an additional $10.3 billion in spending, which brings the total proposed year-to-date budgetary authorities to $443.3 billion, which is a $29.4 billion or 7.1% increase over the preceding fiscal year.

Voted authorities, which require approval by Parliament, total $4.7 billion. Statutory authorities for which the government already has Parliament's permission to spend total $5.6 billion. Given that there are only weeks remaining in the fiscal year—I should say days—this means the money will need to be spent by March 31.

Including these estimates, 90% of the total money that was earmarked in budget 2022 for this fiscal year will be available for departments to spend in supporting 114 initiatives. The single largest component requiring Parliament's approval is almost $1 billion for National Defence. Over half of this is to support the Ukraine war.

The government is also asking for an additional $81 million for professional and special services, which includes spending on external consultants. This brings total planned spending in this category for the current year to $21.4 billion. As of November 2022, nearly $10 billion have been spent on professional and special services this year, a record level compared to previous years over the same period. The 2023‑24 main estimates indicate that planned expenditures on professional and special services will remain steady at $19.5 billion in 2023‑24.

Frozen allotments refer to money that has been approved by Parliament, but for which access by departments is restricted by the government, for example, until some specific conditions are met. These supplementary estimates indicate that $7.7 billion in money already approved by Parliament is now administratively frozen by the Treasury Board. This represents a $2.2 billion increase from the final supplementary estimates presented last year.

Both frozen allotments and total overall unspent budgets reached record levels in 2020‑21 and 2021‑22. This is principally attributable to the federal pandemic response, which saw an unprecedented increase in approved spending and considerable uncertainty regarding whether all the approved funding would be required. Our internal monitoring suggests that lapse amounts in 2022‑23 will remain higher than pre-pandemic levels.

My colleague and I will be pleased to respond to any questions you may have regarding our analysis of the government’s estimates or other Parliamentary Budget Officer work.

Thank you.

[The Chair, Conservative, Kelly McCauley]

I appreciate your being with us, as always.

Mrs. Block, you have five minutes.

Colleagues, quickly, the first round will be for five minutes, and then we'll try to do three minutes and two and a half minutes for the Bloc and NDP.

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

Thank you very much, Mr. Chair.

Thank you for joining us, Mr. Giroux.

In your report on the supplementary estimates (C), you wrote, “Over $800 million in new cash is intended to pay for professional and special services, which includes spending on external consultants.”

As you are more than likely aware, this committee has undertaken a study of the government's contracts with McKinsey and will be following that, we hope, with a broader look at outsourcing by this government.

Does your office know approximately how much of the $800 million is going towards management consultants?

[Yves Giroux]

No, we don't have that level of detail. We only know the overall amount going to consultants.

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

Okay.

Is the $21.4 billion the total spent by the government on external consultants?

[Yves Giroux]

Yes, it is, to the best of our knowledge, although some of it could lapse, which we will only know several months after the fiscal year.

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

Thank you.

In your report, you also mention that one of the primary reasons for the increase in statutory authorities in the supplementary estimates is “due to higher interest costs on unmatured debt”.

In your view, is the government taking steps to reduce this debt in order to lower the interest costs, or have interest costs just continued to rise?