Public Accounts Committee on March 21st, 2024

[Arnold Viersen, Conservative, Peace River—Westlock, AB]

Thank you, Mr. Chair.

With regard to DND, you talked earlier about a registry or a system to maintain records around who your contractors are. Do you rank contractors at all?

[Bill Matthews]

The database I was referring to is one where we actually track contracts awarded. It's so that we can answer as best we can any questions about contract activity and proactive disclosure, etc. The ranking of contractors would be done on a case-by-case basis. When there's a competition, the contractors would bid. There are mandatory requirements: Do you meet them, yes or no? Those who meet the mandatory requirements are then scored on their proposal. There's a ranking on a case-by-case basis.

Public Services and Procurement Canada maintains a regime where any contractors who have been behaving inappropriately are effectively barred from bidding on any government contracts. We obviously would have access to that list and would not award any contracts to anyone or any company on that list.

Do we have a generic ranking of contractors in terms of which ones perform and which ones do not? No, we do not.

[Arnold Viersen, Conservative, Peace River—Westlock, AB]

Do you have a preferred contractor list, perhaps?

[Bill Matthews]

We have contractors that have been awarded through either a standing offer or a supply arrangement because they have pre-qualified, based on the proposals they've made to government, that we will access. Accessing those pre-qualified lists of suppliers is I guess a form of preference, in that they're pre-qualified, so it saves us some work, but I'm not aware of any ranking among those, no.

[Arnold Viersen, Conservative, Peace River—Westlock, AB]

In terms of pre-qualified contractors, is that something that DND pursues with the contractor, or is that something the contractor applies for?

[Bill Matthews]

PSPC would typically launch a process for a supply arrangement or a standing offer. Bidders would then apply and be awarded that.

I'll turn to my friend Troy to tell me if National Defence does any of that.

Shared Services Canada, on the IT side, would also take a similar approach of pre-qualifying bidders. National Defence would certainly look to access bidders on those lists, because it's efficient, but I don't believe we've established anything ourselves at National Defence.

Help me out here, Troy.

[Troy Crosby]

It is possible for an individual department to put in place a similar standing arrangement that can be accessed. We don't typically do this. A number of them are put in place for us by common service providers, those being Public Services and Procurement Canada and Shared Services Canada. We do rely on those.

[Arnold Viersen, Conservative, Peace River—Westlock, AB]

Can you confirm that Dalian was one of these preferred companies?

[Bill Matthews]

Dalian was on multiple supply arrangements and standing offers that I believe were all put in place by Public Services and Procurement Canada and Shared Services Canada. They were absolutely on those lists.

[Arnold Viersen, Conservative, Peace River—Westlock, AB]

They were absolutely on your lists.

[Bill Matthews]

Yes, they were.

[Arnold Viersen, Conservative, Peace River—Westlock, AB]

How does that happen? Is it just because they've had repeated contracts with you? Is it because you've had a long-standing relationship with them?

I guess what I'm trying to get at is the failure to scrutinize David Yeo and Dalian today. Was there a high level of scrutiny in the past that then got relaxed over time?

[Bill Matthews]

The ability for Dalian, or a company like that, to qualify is based on Public Services and Procurement Canada or Shared Services Canada putting out a generic set of requirements. They would then respond with the types of resources they could bring to bear and their pricing, etc. Then there is a ranking of those. Those who qualify effectively get added to the list. The list includes multiple companies, not just the ones we're talking about today. Departments would then be free to make use of that list, should they so choose, for specific requirements, which Defence has done, as we have discussed.

I think a final point on this aspect is that our evidence to date in terms of the contract work done by Dalian is that we got the goods and services we contracted for. Nothing had been flagged from a performance perspective. The issue is completely one of Mr. Yeo not being transparent about his business activities when he joined the government as an employee.

[Arnold Viersen, Conservative, Peace River—Westlock, AB]

This raises some concerns around security more generally. We're dealing with perhaps some fraud happening here. It seems to me that if a company could do business over time with DND, then a relaxing of scrutiny would allow for perhaps other security risks.

Would you say that's a fair assessment, or not?

[Bill Matthews]

I'm not sure I would say that's fair, Mr. Chair. The requirement to obtain and maintain a security clearance remains. It's not that once you get security clearance, you are never checked up on again. There is a periodic renewal, and if there's information that comes to anyone's attention around reasons to suspend or terminate a security clearance for an individual or for a company, that gets done. We've seen evidence and discussed evidence here today about security clearances that were suspended.

[The Chair, Conservative, John Williamson]

Thank you very much.

That is your time, Mr. Viersen.

Ms. Shanahan, you have the floor for five minutes.

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

Thank you very much, Chair.

Again I want to thank the witnesses for appearing before us today so that we can have a better understanding of how to prevent this kind of fraud, for lack of a better word.

I know there are investigations going on into unethical activity, and I appreciate, Mr. Matthews, your emphasizing that the thing that was really egregious—even if there was no other wrongdoing—was the fact that Mr. Yeo took it upon himself to decide that he didn't have a conflict of interest, so he was not going to declare it. He made that very clear to us in his testimony on Tuesday.

The fact of the matter is that the prevalence of contractors also working for the public service or vice versa.... You mentioned the difficulties in the recruitment of the expertise that we need. As people move to retire, you can see a situation in which someone would continue working part time and also become a contractor. Certainly, both the employer and the employee would benefit from that arrangement.

How can we prevent this kind of egregious, unethical activity from happening, with the employer not having a full line of sight on the activities of the person in question?

[Bill Matthews]

Chair, I'll mention a couple of things.

One is that yes, it's clear in the letter of offer that conflicts should be disclosed, and you have 60 days to do so. I think there are various times—once a year—when employees are reminded of their obligations and asked to redisclose.

I think one of the things that could or should happen is being more aggressive in reminding employees of their obligations. We talked earlier today about possibly helping employees with their thought process in identifying potential conflicts. There are some questions they should consider when assessing their own conflicts.

I would rather be in a place where employees disclose anything that might be an issue and give an independent person a chance to decide whether it's a conflict or not. Obviously, managers should be reminded that if they learn anything about their employees while they're managing them on a day-to-day basis, they should ask them if they've disclosed it. When they have not, I would expect the manager to initiate a discussion around disclosure.

It's raising awareness of employees and reminding managers that if they become aware of the business activities of their employees, they should be proactively asking if they have disclosed them, and maybe flagging the annual requirements through performance assessments and performance agreements. Make it shine in flashing lights a bit more to remind employees of their obligations. All of that would be helpful.

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

Indeed, in training it would probably be helpful as well to point out what those scenarios could look like, because it's hard to believe, but I think these situations can occur when somebody innocently thinks they are not doing harm. However, in the case of Mr. Yeo, we were certainly flabbergasted by the extent of his activities.

With regard to the data analytics that you referred to at PSPC, we know there are considerable investigations going on there, and they didn't start this week; they've apparently been going on for quite some time.

Can you explain that process to us?

[Bill Matthews]

Sure. It is led by PSPC. That data analytics piece is critical. They've been at it for four years or so. As procurement documents become digitized and submitted online as opposed to on paper, PSPC is maintaining a database through which you can do some analytics and look for cross-matches of subcontractors to see if they're in multiple contracts.

One of the things I think we will have to consider at National Defence, because we issue contracts ourselves, is how we share our data with PSPC to make sure that they also have access to our data so that they can look for those possible conflicts. Shared Services Canada is in the same boat.

If a contractor joins the Department of National Defence and needs access to our network—their own email address, etc.—one of the other things we're talking about doing is looking for duplicate names across the system. Individuals may be showing up on multiple departments' emails. It may be a case of a very common name and two different people, but as those types of analytics become more accessible, we'll have more information in our databases and in our systems.

These are early days, but we will work to make sure that we collaborate with PSPC and Shared Services Canada so that we're sharing the same information set.

[The Chair, Conservative, John Williamson]

Thank you very much. That is time.

Ms. Sinclair-Desgagné, you have the floor for two and a half minutes.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

Thank you, Mr. Chair.

I think the conflict of interest form that Mr. Yeo filled out when he became a public servant would be of some use to this committee. Would you be willing to send this form, which must be signed within 60 days of being hired?

[Bill Matthews]

Okay.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

Perfect. Thank you.

I want to follow up on the first point I raised regarding the two contracts signed by GC Strategies. I know you will get back to me on the resource in question.

GC Strategies is a two-person business. If the resources are not those two people, that means National Defence knew that GC Strategies would subcontract out. In that case, why not hire the subcontractors directly?

[Bill Matthews]

It's clear that the people who did the actual work are not the two owners of GC Strategies. We checked. Furthermore, some people do not want to respond to government calls for tender. They prefer to use a company like GC Strategies to go through the process, and we cannot force them to do otherwise. There are people who prefer to work on contract rather than as employees.