Public Accounts Committee on Feb. 27th, 2024

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Thank you very much, Chair.

I was afraid that I had missed important elements of our hearings by not being present last week. My apologies to all my colleagues.

I am very happy to be here today, and I greatly appreciate the testimony we are hearing not only from our deputy auditor general, Mr. Hayes, but also from the procurement ombud, Mr. Jeglic.

It's very important to the public accounts committee that we have a clear understanding of the procurement process and the fact that it is independent of all political interference. Indeed, that is what you have seen to date, albeit that there were other issues happening that were of great concern.

Last week, I was with the Canada-Africa Parliamentary Association in Tanzania, and there is great interest from parliamentarians there about our public accounts committee, how we work with independent officers of Parliament and how we proceed with our work.

I am glad to see that PSPC has suspended the task authorization authority for all 87 departments and agencies that it contracts for when it comes to IT professional services. I think we agree that IT is definitely a very problematic area of procurement, not just for the CBSA and the companies involved in ArriveCAN, but for everybody. PSPC is doing this until it signs new agreements that incorporate the rule changes that you have suggested.

First, I'd like to get your reaction to this. It seems very dramatic, but do you feel that it's appropriate?

[Alexander Jeglic]

It's certainly aligned with what we saw with CBSA. That's why we made the recommendation we did.

We didn't request that they do so for all other departments and agencies, but I think they would have a better vantage point based on their interactions with other departments and agencies that weren't subjected to this review.

Am I happy with the outcome? I'm happy that they've complied with the recommendation. In terms of the need to add additional departments and agencies, I can't comment on that.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

That was the kind of question I would have liked to put to PSPC. Unfortunately, they were here one day and not permitted to provide their testimony, and I missed the subsequent meeting. It was definitely a concern of mine that the oversight did not seem to be adequate, even during that emergency period.

I see that a number of your recommendations deal with document retention. It seems to me there should be a system with a fail-safe, that it has to happen.

PSPC says that it introduced a new electronic procurement system last year that will ensure all documents are kept together, rather than having to rely on public servants attaching emails to the right files. That does seem a little ad hoc.

Have you had a chance to evaluate this new system and do you think it will be helpful?

[Alexander Jeglic]

We have not been able to review the new system. We've received briefings on this system and some of its capabilities at its early stages and throughout implementation.

Do I think it will assist in documentation? Absolutely. Can I comment on it's effectiveness? I cannot.

The one thing I will say is that there was a change. Before, the rule that would apply to most federal government contracting was something called the Treasury Board contracting policy. That has since been phased out. Effective May 2022, there was a phase-in period of one year.

The new directive makes clear, based on roles and responsibility, who has the obligations associated with documentation. It makes clear that the documentation obligation lies with the contracting authority. The contracting authority, as I mentioned, in 30 of these instances, was PSPC. In seven instances it was Shared Services and in four instances it was the CBSA itself.

I saw Derek indicating that he wanted to add something and I feel like I've been dominating the conversation.

[Derek Mersereau (Acting Director, Inquiries, Quality Assurance and Risk Management]

In relation to the new system PSPC referred to, it's an SAP Ariba system. I will note that the $25-million contract awarded to GC Strategies was issued through that system. This is how we were able to know there were 40 eligible suppliers to bid, and that's where we saw the information that 10 indicated they had an interest in bidding but didn't.

As you can see, there are still issues associated with that procurement process. It sounds good and can improve practices, but the system itself won't lead to all the improvements that have to happen.

[The Chair, Conservative, John Williamson]

Thank you very much.

Leading our third round is Mr. Nater.

You have the floor for five minutes.

[John Nater, Conservative, Perth—Wellington, ON]

Thank you, Mr. Chair.

Thank you to our witnesses for joining us today.

I will begin with a quick comment, having read the procurement ombud's report and the Auditor General's report and having heard testimony at this committee and at OGGO.

It's frankly shocking that an agency falling under the Public Safety portfolio has allowed such a culture to be established, where documentation isn't in existence. It's shocking that successive Liberal ministers have allowed this to come to fruition without a meaningful change coming from the top. I offer that as a comment off the top.

The concept of embedded contractors within CBSA and various other departments has been brought up as well. I would be curious to know whether the procurement ombud is aware of other situations within CBSA where embedded contractors are actively working and could have an influence on procurement contracts.

[Alexander Jeglic]

Specifically, are we aware of other embedded contractors at CBSA? The answer is no. That doesn't mean there aren't other embedded contractors. I would suggest there likely are.

In terms of insulating them from having a repeat of these types of issues, I think everyone across the procurement community is now acutely aware of some of the risks and pitfalls associated with having these embedded contractors and in particular having them involved as projects evolve.

[John Nater, Conservative, Perth—Wellington, ON]

Would your office have the capacity to undertake a review of all contracts at the CBSA specifically related to information technology?

[Alexander Jeglic]

This is where I'm going to make my plea.

I've said this before. Our office has an incredibly important mandate. I think the work the office does adds significant value in all four areas I highlighted in my opening remarks. There are 27 employees within my office and they've been under incredible strain, if I'm being honest, for a fairly significant amount of time. While I acknowledge absolutely that there is a need for us to continue the work we're doing, I'm a bit reluctant to openly acknowledge.... I think people would be kicking me under the table if they thought I was going to say we can undertake another review.

In addition to the regulation, I think there are some practical realities. I have put forward a request for additional funding to allow us to undertake some of these reviews. We received one-time funding last year to undertake both this review and that of McKinsey, but it's a one-year funding allocation that expires at the end of this fiscal year.

To answer your question, we could absolutely consider it. Can I tell you definitively that we would do it? I cannot.

[John Nater, Conservative, Perth—Wellington, ON]

I appreciate that.

I would offer as commentary that it's interesting how the government was able to find $80 million for the arrive scam app but can't find enough money to properly source a procurement ombud. That's pretty disappointing.

With the CBSA having gone through extensive studies by both the Auditor General's office and the procurement ombud, would you suggest that now may be the time for Treasury Board to revoke the delegated procurement authority the CBSA currently possesses?

[Alexander Jeglic]

It would be unfair for me to make that comment.

We had the opportunity to make recommendations. I think the recommendations we made reflect what we saw in the report at the time. We didn't suggest that Treasury Board revoke the contracting authority of the CBSA in its entirety.

I will say this. The previous member highlighted one of the recommendations with a real consequence, which is the authority for the CBSA to issue task authorizations on their own account. That's a significant recommendation. I anticipate seeing positive results. It will encourage the CBSA to regain their authority by acting in a diligent and appropriate manner.

[John Nater, Conservative, Perth—Wellington, ON]

Mr. Hayes, do you have any perspective from the OAG?

[Andrew Hayes]

The CBSA has provided an action plan in response to our recommendations. I think it's important to give the CBSA an opportunity to fix the weaknesses we have identified. I would also say that as much as it is important to have controls in place, it is dangerous to over-control because you can grind everything to a halt.

I think it will be important for us as the OAG to follow up on the recommendations in the action plan that the CBSA has submitted.

[The Chair, Conservative, John Williamson]

Be very brief, Mr. Nater.

[John Nater, Conservative, Perth—Wellington, ON]

Thanks, Chair. I'll leave my 10 seconds for another round.

[The Chair, Conservative, John Williamson]

The chair thanks you.

Ms. Yip, you have the floor for up to five minutes, please.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

Thank you.

Thank you for coming yet again, Mr. Jeglic.

Your first two recommendations have to do with the median bands for prices. These are measures to avoid contractors who lowball their prices in order to win the contract and then jack up their prices halfway through the job, when it is too late to stop.

Can you speak about the factors that you consider when deciding what the right balance is between finding the best price and finding one that won't change halfway through the job?

[Alexander Jeglic]

The issue we had with the median bands was that a change was made with the formulation that originally or normally happens—that's the median price plus 30% or minus 20%—for acceptable financial offerings. What ended up happening here was an alteration in the band, and it became....

I'm sorry. Have I misspoken?

[Derek Mersereau]

No. That's correct. It was set to minus 10%.

[Alexander Jeglic]

Yes. It was set to minus 10%.

There is a problem in the sense that the clause meant to address this issue was geared towards the previous amount. Therefore, if someone made a competitive price offering, there was no opportunity for them to validate their price point and suggest that they could in fact deliver the services at that price point. In essence, it de-emphasized or de-incentivized people from bidding low. There was a higher incentive for them to bid high because it was less risky. If you sat outside of those bands, you would receive a zero financial score.

You alluded to the reason this methodology was implemented. One was to prevent lowball offers. What that circumstance would present is someone bidding at a price so low that when the task authorization is requested, no resources are provided by that supplier because they're not able to do so at that price point. That would cause time-wasting and frustration on the part of the department or agency.

I would suggest that the median bands issue was meant to address this lowball issue. It was a valid attempt, I think. In execution, it certainly didn't play out as anticipated. As a result, it has had some unintended consequences, which we noted to be that in four instances, competitive-priced bids were given zero point allocations, with no opportunity to rectify or explain the price, and were therefore not considered, even though on the technical side they were very strong.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

I'd like to talk about the changes that were made to resources in 76% of the contracts between the time of contract award and the task authorization. Is this allowed under the rules for certain cases? Does it happen frequently?

[Alexander Jeglic]

This is a good question. It's in relation to whether we can give you baseline data. We have no baseline data by which we can tell you that 76% is more or less than the baseline data. I will say that 76% strikes me as incredibly high. If we find the baseline data to be any higher than 76%, then I will have a very different opinion on how significant this issue is. If this is an outlier and the baseline turns out to be much lower, I think it's indicative of something somewhat unique to ArriveCAN. Without doing the review, it's a bit difficult for me to comment.

That being said, is it within the rules? As mentioned in a previous question, it's the frequency with which this is happening that causes the concern. If it were just happening on a one-off basis—there's a significant time lag, the contract is awarded, months or even a year goes by and those resources are no longer available—then yes, there is a mechanism by which they can and should be replaced in those circumstances. However, where it looks and starts to feel like a business practice of identifying the best resources in the hope that this allows a specific vendor to obtain the contract, and they have no intention of providing those resources in the performance of the work, then I think it is problematic.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

Did you find any evidence that resources or subcontractors were paid for work that was never performed?

[Alexander Jeglic]

That's another important clarification. That was not something we identified in our report. Unfortunately, in some circumstances that's how it was reported, but that's not, in fact, what we found.