National Defence Committee on Oct. 24th, 2023

[Alexander Jeglic]

Sure. I want to clarify that by “offshore” you mean international obligations.

[Andy Fillmore, Liberal, Halifax, NS]

I do, yes.

[Alexander Jeglic]

Okay.

Essentially, I think this is where the NSE, the national security exception, becomes particularly relevant as part of the discussion, because the NSE, when invoked by the Department of National Defence when doing procurement, disarms certain obligations under international free trade agreements. It doesn't do something similar with domestic requirements, so there are certain requirements that still exist under the government contracts regulations.

That's one of the big differences, and that's not the case in the United States. In the United States, what happens with the invocation of the national security exception is that it actually both disarms free trade obligations and, equally so, creates a disarmament of the national FAR and DFARS.

[Andy Fillmore, Liberal, Halifax, NS]

I just want to make sure that we're getting the message you're sending here. Which is the more streamlined approach then, domestic or international?

[Alexander Jeglic]

What ends up happening is that, as a result, you have taken away certain obligations that exist within free trade agreements by the invocation of the national security exception. You don't disarm any obligations under the government contracts regulations by virtue of the application of the NSE. As a result, the domestic obligations that exist, including competition, still hold true.

[Andy Fillmore, Liberal, Halifax, NS]

Okay. Thank you for that.

I want to stick with domestic procurement here for a moment. What advice would you give Canada to address the expectation that these substantial sums of money that are being invested in defence procurement lead to local economic development and job creation?

I represent Halifax, so the connection is obvious. Mr. Fisher represents Dartmouth, where some of the kits for ship assembly are being assembled. We're very interested in this topic.

How do we reconcile the benefits along with the procurement?

[Alexander Jeglic]

I know you've had a number of witnesses who represent industry. Ultimately, each witness represents their own views in terms of fairness. Obviously, my office is responsible for promoting fairness more generally and broadly. What we try to do is essentially ensure that, where there are domestic processes that are allowed to seek only Canadian participants, it is seen as a fair process.

Again, to reiterate the national security exception, when the national security exception is invoked, it does allow for procurements to be limited to domestic capabilities. One thing I will say is that it's incredibly important to understand what those domestic capabilities are. I have heard a number of previous witnesses mentioning the importance of being able to “direct contract”. In order to make those justifications to direct contract and not compete, you need to be fully aware of what exists in terms of the capabilities of the Canadian supplier.

[Andy Fillmore, Liberal, Halifax, NS]

In your experience, does the industrial and technological benefits program make your job more difficult or less difficult? What's your perspective on the whole ITB program?

[Alexander Jeglic]

My perspective is that the program exists and we have not done—again, I hate to reiterate this point—a review, obviously, of that specific program. However, that being said, because the national security exception allows for this program to exist within all our respective trade obligations and domestic rules, there are no issues associated with fairness.

With regard to the other issues raised by other witnesses about the timeliness associated with limiting the pool of available suppliers, that's kind of beyond the purview of fairness, from our perspective.

[Andy Fillmore, Liberal, Halifax, NS]

Thank you.

[The Chair, Liberal, John McKay]

You have a minute and a half left.

[Andy Fillmore, Liberal, Halifax, NS]

Okay.

I'd like to go back to where I began and the statement about the committee seeing and hearing about a lot of different procurement processes in different jurisdictions around the world. Here in Canada, three departments are involved in an overseeing body. A lot of testimony has indicated that the various reporting structures add time, confusion, delay and so forth.

I don't want to ask you an awkward question, but is there a jurisdiction whose procurement process you admire that you would share with us?

[Alexander Jeglic]

Again, Mr. Chair, that's a fair question.

I don't know that I would express admiration for a foreign jurisdiction's procurement process, but I will say that in terms of the process established within Canada, I know there's been a lot of discussion about whether in fact that needs to be streamlined. I would say that the development of the highest-level official with an exclusive mandate on procurement can only be seen as a good thing.

The Canadian system is unique, in the sense that there are multiple components as part of the system. That requires constant triaging. For procurement messages to bubble to the top, it has to be kind of the hottest issue, and sometimes that doesn't happen. Therefore, the voice of procurement matters might not be as timely and instantaneous as perhaps it should be.

[Andy Fillmore, Liberal, Halifax, NS]

Thank you. I believe—

[The Chair, Liberal, John McKay]

You're pretty well done.

[Andy Fillmore, Liberal, Halifax, NS]

Okay. I'll leave it there.

Thank you very much.

[The Chair, Liberal, John McKay]

Thank you, Mr. Fillmore.

Madame Normandin, you have six minutes, please.

[Christine Normandin, Bloc, Saint-Jean, QC]

Thank you, Mr. Chair.

Thank you for being here, Ombudsman.

I have a general question for you. When the committee asks ombudspersons about the authority they have, most of them say that all they can do is make recommendations because they don't have enough resources to impose real change.

Would you say the same thing about your office? Are you missing the tools to be more coercive when you see something you're not happy with?

[Alexander Jeglic]

Mr. Chair, that's a good question. It allows me to speak on one of the issues we've asked for in terms of regulatory changes.

It's not so much the power or the teeth associated with the recommendations. It's the right to compel documentation from departments. That is something we have been actively seeking for some time. We have examples of where we know that the documentation has not been provided to us upon request, so it takes many iterations to receive the required documentation.

In terms of your question specifically about recommendations, I will say that we're pleased to see that our recommendations are traditionally followed in almost all circumstances. On the systemic reviews, that is the benefit of the two-year follow-up. We follow up after two years to describe whether implementation has been complete on the recommendations we've made.

We will be submitting report cards on all 17 departments and agencies that we've reviewed. You'll be able to get a sense of whether they've complied with the recommendations in whole, in part or not at all.

[Christine Normandin, Bloc, Saint-Jean, QC]

I want to pick up on documentation, since it's something I was going to raise.

If I understand correctly, generally speaking, parties that aren't satisfied with the outcome of a contract will turn to your office for mediation, even though there's no real way to remedy the harm that's been done.

Do you have the authority to take action before a contract is concluded?

[Alexander Jeglic]

To answer the first part of your question, our mediation is, in fact, limited to the administrative component, once you're in contract administration. If your complaint is about the award of a contract, we don't have authority to provide ADR services, but we have other review mechanisms.

That being said, our mediation services are incredibly successful. Pre-COVID, when we did mediation only in person, we had a 90% success rate in resolving whatever issues arose. As I said, there are no dollar value thresholds associated with the mediation we perform. As a result of COVID, we had to pivot slightly and perform online mediation. Our success rate went down slightly. Those of you who have actively participated in mediation appreciate that there is a benefit to being in person, but we still have a success rate of over 75% conducting mediation online.

You heard me say it's an underutilized aspect of our mandate. We know there are significant issues in contract administration across the federal government. We've been working diligently with departmental heads to make sure that information about our mediation services is proactively disclosed in contracts and that information about the dispute resolution mechanisms they can seek is in regret letters.

We have actively been working to address any concerns that have been raised about the availability or the usefulness of our services.

[Christine Normandin, Bloc, Saint-Jean, QC]

I want to turn back to the documentation that you aren't always able to get.

Do the organizations, the Department of National Defence, for instance, give you a reason as to why they aren't providing the documents? Do you make requests that simply go unanswered?

If there are reasons, I'd like to hear some of them.

[Alexander Jeglic]

To be absolutely fair to the Department of National Defence, we undertook this review pretty much during the height of COVID. DND was predominantly a paper-based department. As a result, there were certain buildings that were closed to them, so it took time for them to identify documentation. That being said, COVID alone was not an excuse for what we saw. We saw documentation issues beyond what COVID could explain away.

To answer your question directly, for the most part, additional requests were answered. However, you have to understand that we have a limited time to do our review, so asking over several months impacts our ability to analyze new documentation provided. In this way, there is an impact.

[Christine Normandin, Bloc, Saint-Jean, QC]

I just want to be sure I understand. The fact that the organization provided the documentation isn't good enough if it took a long time to do so. In some ways, it's a stalling tactic to hinder your work. Is that correct?

[Alexander Jeglic]

Absolutely.