Public Accounts Committee on April 9th, 2024

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

You were moving CBSA workloads to the cloud, but Dalian had hired you to do that.

Dalian is, notionally, an indigenous company, which means it benefits from indigenous set-asides in procurement.

Is Amazon an indigenous company? Were any of the employees who worked on this project for Dalian indigenous?

[Nicole Foster]

No, we are not an indigenous company. There may have been employees who were indigenous who worked on the project, but I can't say yes or no.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Do you have a sense of what percentage of your overall workforce is indigenous?

[Nicole Foster]

We do in Canada, but I don't recall that number off the top of my head.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

As a ballpark, is it the same as the proportion in the overall population? Is it a little higher or a little lower?

[Nicole Foster]

That would be a good ballpark, but I'm honestly not sure.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Okay.

What I'm trying to understand about the procurement system here is that Dalian identifies as an indigenous company. It benefits from indigenous set-asides in getting procurements.

In the case of these projects with CBSA, in the process of getting this contract they may have benefited from that set-aside. You said they hired you to do the work, and you are not an indigenous company.

It seems like a good deal for you. You were hired to do work. It seems like a good deal for Dalian in that they don't have internal IT capacity. They presumably didn't add value to the project. They made money; you made money. However, because of their involvement, taxpayers paid more, and this seems like a pretty significant manipulation of the indigenous set-aside rule.

Do you have a sense of why Amazon didn't just get this contract directly to move those files to the cloud? Is it because of a requirement around indigenous procurement, or is there some other reason why you didn't get that contract directly?

[Nicole Foster]

We don't have this ability on what the overall scope of work was that Dalian was hired to do by the Government of Canada. There could have been a much broader scope of work that included other potential elements that were delivered as part of their contract with the Government of Canada. There is a lot of information that we don't have to confirm some of your suspicions.

In terms of why the Government of Canada did not procure with us directly, at the time the government did not have the ability to procure cloud services. They did not have—

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

What does that mean that they don't have the ability to procure cloud services?

[Nicole Foster]

They didn't have a procurement vehicle to buy cloud.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Essentially, they didn't have the bureaucratic structures in place.

[Nicole Foster]

That's correct.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

However, that seems like a bizarre and arbitrary barrier.

You're the ones who could do the work, they needed you to do the work, but for some bureaucratic and technical reason they decided they had to go through Dalian when they could have just called you and hired you.

[Nicole Foster]

I think you are pointing to some of the elements of why having really good procurement policies in place is really important.

Having appropriate practices and policies in place to buy the technology that you need is an extremely important element in thinking about any digital transformation initiative, whether you're a government or a private sector enterprise. There are elements you have to have in place in order to do things well.

The first one of those, which I mentioned earlier, is the appropriate kind of talent and workforce to actually lead the project.

The second really important element is the ability to actually procure what you need, and have the right rules around the procurement of that technology.

The third is an extremely important element for the people in this room, and that is leadership. These are change management projects. They require leadership in order to drive and ensure that they're able to be executed. Change management is extremely difficult in any organization, and it's especially difficult in a public sector one.

The fourth is understanding how to actually budget for operational expenses in an IT environment. Traditional IT procurement is for capital assets, and most organizations are still grappling with how to budget for those expenses in an operational sense.

There are a number of elements of what the Government of Canada and all organizations are grappling with in order to have those elements of how to do digital transformation appropriately. Not having those policies in place is a key element of the challenge—

[The Chair, Conservative, John Williamson]

Ms. Foster, I'm going to stop you there, but I am sure our next member will probably ask you to continue if they are of interest. I am just way over the time for Mr. Genuis, but that was interesting.

Mr. Chen, you have the floor. Of course, you're welcome to pick it up with any questions, or allow Ms. Foster to continue her answer. I will let you decide that. You have five minutes, sir.

[Shaun Chen, Liberal, Scarborough North, ON]

Thank you very much, Mr. Chair.

I will ask Ms. Foster to finish, but I will preface that by saying I appreciate the presence of all the witnesses here today. You have shed light on the relationships—or lack thereof—you have with Dalian and with GC Strategies, and you have been dragged into this conversation around ArriveCAN.

To me, the most intriguing part of what you have discussed is what I see as the larger project, as Ms. Foster is alluding to, of digital adoption and transformation within government. It certainly is a monumental task, but this ArriveCAN situation, I believe, has certainly provided important lessons that government can take forward as we continue down a road of increasing technology.

Ms. Foster, your job title includes “artificial intelligence”. That certainly is high on the radar, as are the challenges you have highlighted with respect to the leadership that's needed for change management, for modernizing procurement, which was raised earlier, and certainly for building the understanding of technology and the capacities within government itself.

Ms. Foster, please continue with your testimony.

[Nicole Foster]

I was getting very quickly to wrapping up my point, but these are the four pillars that organizations need to consider as they embark on digital transformation projects.

The other thing I would love to leave this committee with is that we know Canadians are eager to interact with their government and to access government services on a digital basis. The experience of the pandemic also accelerated some of these things out of necessity and the need to social distance, but we know that Canadians have become very accustomed to accessing services digitally, whether it's buying things on Amazon, listening to music on Spotify or applying for a driver's licence.

Canadians want to be able to access these services digitally, and it is extremely important that the government also be able to undertake these projects in the way that Canadians expect in terms of accountability and due diligence and a very high bar on security. We wholeheartedly support that, but we have to make sure the systems we're working on are actually designed for the purpose and the objectives we're trying to meet on behalf of Canadians. It's always difficult when a major project doesn't go as well as people would like. Many of us have been involved in both successful projects and projects that we have learned a lot from, and we have to ensure that we don't give up on trying to achieve those goals.

[Shaun Chen, Liberal, Scarborough North, ON]

I appreciate your focus as companies that provide cloud services and the advisory services that go along with them. I'm sure you have worked on many different projects that involve third party application development integrated with your cloud services.

How common is it that you see situations like that of ArriveCAN, in which costs balloon and there seems to be a lot of chaos in transforming a paper-based process? Of course, this was done on a very tight timeline under the very unusual circumstances of a pandemic. What is your assessment of how bad it got with the ArriveCAN situation compared to what you normally see in very traditional organizations as they try to take a big step forward?

[Nicole Foster]

There are a couple of things I can share for consideration of the committee.

We have a whole stream around cloud economics, so understanding how you build and then how you optimize that over time is a process for most organizations. When an organization starts to migrate workloads to the cloud, and that could be our cloud or other clouds, you generally see the initial stages of that really spiking in cost. This is because as organizations are building, they're using more services, they're accessing professional services to support that, and learning as they go, and you see a stark climb in the beginning of those efforts.

Then as customers become more sophisticated about their use of services, we see a process of optimization. The trend is that customers become more sophisticated at how to use those services. We work very closely with customers to try to reduce their costs, so it's part of what we do. In addition to that, our company has reduced costs over 130 times since we launched our business in 2006.

We're always trying to find those efficiencies within what we do, but we're also working with customers to find those as well.

Nick, maybe you can talk a little bit about some of the specifics in the work that you do around that.

[Nick Markou]

To answer your question around how we engage, and what we're seeing globally, clearly there's a global trend towards digital innovation, we see it every day in terms of AI and several technologies.

The reason we have a public sector-focused business in Canada, as AWS, is to enable this in Canada. We, as well, are a partner-driven organization. Certainly you can hire and access AWS engineers, which was the case in our team, to help accelerate, and to help identify and demonstrate new technology.

Our advice was, and will remain, that Canada should continue to push forward on innovation and employ the organizations that are leading this innovation globally.

[The Chair, Conservative, John Williamson]

Thank you, that is your time.

Thank you, representatives from Amazon Web Services, BDO Canada and Microsoft Canada for your testimony today and participation in this study in relation to the report 1 of ArriveCAN.

I know that there are some follow-ups as well, and we look forward to receiving those.

You are all excused. We're going continue with some committee business here.

I'll suspend for two minutes.

[The Chair, Conservative, John Williamson]

I call the meeting back to order.

Right off the top, I have some housekeeping items and some budgets to adopt for future studies.

The budget of $1,500 for “Report 2—Housing in First Nations Communities” has been sent to you. Could I have approval for this budget, please?

[Some hon. members]

Agreed.

[The Chair, Conservative, John Williamson]

The budget for “Report 3—First Nations and Inuit Policing Program” is again $1,500.

[Some hon. members]

Agreed.