Public Accounts Committee on March 21st, 2024

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

What steps have you taken to stop public servants from double-dipping?

[Bill Matthews]

There are a couple of things.

One, we have initiated a new two-step process upon hiring to make sure we get more clarity around conflict of interest. We are going to arm employees with questions to maybe help their thinking in identifying potential conflicts. I would rather be in a world where anything that is a possible conflict is disclosed and we have an independent person evaluate that; I think we can ask employees some questions to help them with their thinking.

We have about 50 employees that I'm aware of on the civilian side of the Department of National Defence who have properly declared potential conflicts with additional work they do outside of their day jobs. I'm more interested in finding out about any who have not declared such a conflict and getting transparency on that.

[The Chair, Conservative, John Williamson]

Thank you.

That is your time, Ms. Bradford.

Ms. Sinclair‑Desgagné, you have the floor for six minutes.

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

Thank you, Mr. Chair.

I welcome the witnesses.

My first question will be very short and very direct.

Mr. Matthews, yesterday or the day before, you sent us six additional contracts, apparently found by someone at the Department of National Defence after a manual search and the tabling of a motion.

First of all, these contracts cannot be found on the Open Government website. So, that's the first thing I think is unfortunate.

Second, when we look more closely, we see that these contracts are heavily redacted. When I say “heavily”, it's because in the section where one is supposed to see the name of the resource who did the work, the time they spent on it and at what rate, we only see the final amount.

How is it that the Standing Committee on Public Accounts cannot have access to the identity of people delivering a service with taxpayers' money?

[Bill Matthews]

I thank the member for the question, Mr. Chair.

First of all, the Department of National Defence has a database in which it keeps all information on contracts. However, given that it engages in secret activities, some sectors of the department do not use that database.

We therefore found the other contracts through a manual search because they were not in that database.

It is for reasons of security that we don't put all of the contracts in that database. There are certain groups that do work that we can't disclose publicly because of a security risk. That's the reason we found those after the fact, and I apologize for not finding them earlier.

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

What is rather strange is that on the same day, on June 21, 2022, two contracts were awarded to GC Strategies. Both of them totalled up to the same amount, $395,918.10. The same departmental representative signed them, but for different missions. However, in both cases, the name of the same GC Strategies resource was listed.

So, there's already someone not doing their job when it comes to signing contracts, because the same person signed for both of them.

How can the same Department of National Defence representative award on the same day, probably to the same resource, two contracts totalling up to nearly $800,000?

[Bill Matthews]

The nature of the work is different. I assume the work was not done by the same resource.

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

Could you tell us in writing if it is the same resource or not? Obviously, knowing that this is taxpayer money, we would really like to know which resource worked for the government to the tune of $800,000.

[Bill Matthews]

If the members of the committee deem it important, we can verify if different people did the work. We can provide that information. To my knowledge, they were different people.

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

I would point out that GC Strategies signed the contracts. There are two people on staff at GC Strategies. Furthermore, it shows that the resource belonged to GC Strategies. It could therefore not be a subcontractor. The resource was therefore one of the two people working at GC Strategies.

I'd really like to know why this person's name was redacted, and if it was the same person for the same contract both times.

[Bill Matthews]

GC Strategies did two types of work for National Defence: work related to internal audits and work in the field of technology.

I can verify what the differences were between both contracts and then provide information on the matter to the committee.

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

Very well. Let's move on to the next question.

You stated that, since 2012, you granted 86 contracts to businesses studied as part of the ArriveCAN case. These contracts were awarded to businesses that provided no services, because they are only contracting officers. Two people who deliver no services received $88 million worth of taxpayer money.

How do you explain that, within the framework of your procurement activities, you were not a bit more lucid in terms of finding real resources that could provide actual services, instead of going through an agency or business, whatever you want to call it, which, in the end, retained a commission and delivered no services?

[Bill Matthews]

That's a good question.

As for the services for which money was paid, they were intended to provide human resources.

The fact is that is that there are people who don't want to sign their own contract with the government. They'd rather use a service like GC Strategies or Coradix. I find the situation a bit frustrating.

The markup that gets charged on the subcontractors is significant, and I think there is something to be said around getting more transparency around that markup.

I would like to raise another point.

I think that in these arrangements that companies have with each other whereby they subcontract each other—Dalian to Coradix to GC Strategies, and vice versa—I expect we're paying markup on markup. That does not sit right with me, and I think there is some work to be done there.

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

Agreed.

However, it’s not just an issue of commissions, it's also an issue of security clearances, Mr. Matthews. When there is a subcontractor and their security clearance has not necessarily been checked, that can be very problematic. It's obviously a financial issue, but it is also a security issue.

Isn't it?

[Bill Matthews]

I do not agree with that. Every human resource providing services must have their own security clearance, regardless of the work to be done.

I'm quite satisfied that individuals who actually do the work, who come on site for National Defence or work remotely, have the proper security clearance. You can't have people working at National Defence without proper security clearance.

[The Chair, Conservative, John Williamson]

Thank you very much.

Mr. Desjarlais, you're up for six minutes.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you very much, Mr. Chair.

I want to thank the witnesses for being present on this very serious matter related to the vulnerabilities of our public service.

It's a vulnerability that largely has been exploited by private contractors. Mr. Yeo is one of those private contractors who, as discovered by the Auditor General, has been part of a network of contractors and subcontractors that has operated in Canada for some time now. The Auditor General herself had a very difficult time to find the appropriate documents, the appropriate invoices and the appropriate task authorizations. This is something that I think demonstrates a very clear risk to Canada, and a very clear security risk as well, something that's very similar to what my colleague mentioned.

The Auditor General made it clear that the CBSA, for example, the Canada Border Services Agency, did not have the appropriate checks and balances, including security checks, when developing this app. It brings into question how our ministry of defence and the people who work on defence, both on military bases and outside them, are also perhaps engaged in this kind of network of contracting and subcontracting. The worst risk of all in this, of course, is that Canadians are vulnerable to what could be information breaches, which could be data breaches and which, even worse, could be information breaches that could harm our national security.

It's a tremendously serious issue that Canadians are seized with, and it's one that I believe your ministry should provide clarity on in terms of its own actions and its own relationship with how contracting and subcontracting are conducted in this country.

Throughout the report of the Auditor General, which I believe you've read, I hope, Mr. Matthews.... Is that correct?

[Bill Matthews]

Yes.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

In this report and this example of one of the ministries, it suggests that, “The Canada Border Services Agency relied heavily on external resources, which increased ArriveCAN’s costs”. You just mentioned that there was an issue related to the markups of subcontractors. That's certainly one of the issues that the Auditor General made clear, in addition to some security challenges.

In addition to that, we haven't seen any kind of information that would suggest that outsourcing is decreasing or that the level of risk to Canadians is reducing.

Can you confirm to us the total value of outsourced contracts you conducted in your own ministry this last fiscal year? If you can provide information related to the period of time stemming back from 2008, and supply it to this committee in writing, I will also request that.

[Bill Matthews]

Mr. Chair, I think the only question there was at the end, which was, “Can you provide...?” We will certainly do our best to provide information.

I will flag for committee members that National Defence spends roughly $5 billion on contracts. A small subset of that, but still a significant amount of money, is on professional services related to IT contracts. We will try to break that down for the committee so that we can give you those numbers for the past few years.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

You said $5 billion was spent last year on contracting out by the Department of National Defence. Is that correct?

[Bill Matthews]

Yes.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Actually, it was more than that, perhaps.

[Bill Matthews]

It's approximately that. Think about contracts for planes and ships. We're not talking about just IT here.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Sure. I understand that the cost is immense, but you'd think that the cost was also part and parcel of the cost we're actually paying our own public service employees on those very same sites.

We have information supplied by my colleague who sits on the defence committee, Ms. Mathyssen, and was able to get information from your ministry in relation to how much you actually spend on public service employees.

Do you know that you spend more—almost double—on outsourcing than you do on the public employees who work for the ministry of defence? Are you aware of that fact?