Public Accounts Committee on June 6th, 2024

[The Chair, Conservative, John Williamson]

We're well over, Mr. Desjarlais. I granted you extra time. I allowed the back-and-forth.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

I appreciate that, Chair. It's not against you.

[The Chair, Conservative, John Williamson]

There's resistance. We're going to get an answer. We'll wait until they respond. Then this committee can take it up again. You have my commitment on that. We will look at it and act, if necessary.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you, sir.

[The Chair, Conservative, John Williamson]

Again, the minister has already left. That's very unusual. I thank the officials. I'm sorry the minister is so busy. She had to rush out before we concluded our business.

I will suspend this meeting, and we'll call on the next minister within a minute.

[The Chair, Conservative, John Williamson]

I'm going to welcome everyone back.

Pursuant to Standing Order 108(3)(g), the committee is resuming consideration of report 1 of the 2024 reports of the Auditor General of Canada, entitled “ArriveCAN”, which was referred to the committee on Monday, February 12.

I would like to welcome our witness, the Honourable Bill Blair, PC, MP and Minister of National Defence.

Thank you for coming in today. We appreciate it.

We also have your officials from the Department of National Defence. We have Ms. Stefanie Beck, deputy minister.

Ms. Beck, is this your first committee appearance as deputy minister?

[Stefanie Beck, Deputy Minister, Department of National Defence]

It's not as a deputy minister. It is as deputy minister of National Defence. It's day four.

[The Chair, Conservative, John Williamson]

Welcome. This will be a good run-through, because I'm sure you'll be at National Defence soon enough. Very good. Congratulations on the appointment.

We also have Troy Crosby, assistant deputy minister, materiel group, and Isabelle Desmartis, assistant deputy minister, human resources, civilian.

Mr. Blair, you have five minutes for an opening statement.

[Bill Blair, Liberal, Minister of National Defence]

Thank you very much, Mr. Chair.

Thank you for the kind invitation to come and appear before this committee.

As you have already noted, I am joined by our new deputy minister of National Defence, who was previously a deputy minister at Agriculture, Ms. Stefanie Beck, and others. I won't repeat them because you have already named them.

First of all, if I may, I'd like to be clear with members of this committee that, while I have the benefit of excellent and regular briefings from the senior officials with me today, I have had no direct involvement in the matters that this committee is studying. Hiring decisions and the administration of the public service are rightly the responsibility of the deputy minister. Ministerial intervention in this area is both inappropriate and wrong.

However, each of us takes the issue of transparency and ethical conduct in government contracting very seriously, as does every single person at the Department of National Defence. We know that every dollar counts, especially when it comes to protecting Canada and Canadians, and that Canadians expect all of us to use their hard-earned money wisely.

I'd like to spend the next few minutes highlighting the rules, expectations and processes that are in place to ensure that we're meeting the highest standards possible when we contract outside the department.

The National Defence team is made up of a dedicated group of people who are responsible for protecting Canada and Canadians as well as advancing Canadian interests around the world. To support their critical work, our department will sometimes seek third party expertise from outside contracting firms. In these types of contracts, and indeed, in all procurements, the department must follow Canadian laws and policies to the letter. Procurements must be conducted in a fair, open and transparent manner in accordance with Treasury Board policies as well as regulations, guidelines, trade agreements and procedures.

We recognize the importance of the competitive contracting process. Of all contracts awarded by the department over the past three years, 95% were awarded competitively; however, in some limited cases, including for some lower-value contracts, the department will occasionally procure goods and services through a non-competitive process in order to deliver results quickly. In all cases, we ensure that contracts are awarded transparently and achieve expected results, delivering value for money.

We also have defence ethics training available to all employees at the Department of National Defence and, as with all departments, we are obligated to publicly disclose all contracts over $10,000 on the open government portal.

Likewise, we expect all National Defence team members and all third party organizations to follow the highest ethical standards as they carry out their duties. All employees are made aware of their responsibilities surrounding conflicts of interest and the values and ethics code for the public sector as soon as they begin their tenure with the department.

It is the obligation of employees to prevent, identify, disclose and manage any outside activities that may constitute a conflict of interest within 60 days of their hiring. While there is no specific policy against contracting for services with current and former employees and CAF members, these contracts must be disclosed at the time of hiring and be conducted in an open, fair and transparent manner to ensure that they are free of any real or perceived conflict.

To improve our processes around how employees publicly disclose potential conflicts of interest, the deputy minister has advised that DND is now rolling out a mandatory two-step screening process for all incoming employees this month. The first step requires a new hire to sign a mandatory affirmation in their letter of offer. This affirmation includes a series of questions to determine whether a conflict of interest could exist. If an employee answers yes to any of these questions, they are expected to provide a full declaration in a confidential report to the review services branch within 30 days. The department will then investigate the situation to analyze and manage the conflict of interest risk.

We are also piloting a new mandatory conflict of interest questionnaire for existing employees. Last month this questionnaire was sent to 292 of our procurement members of the materiel group for completion. It will be expanded across the National Defence team in the coming weeks.

While these new processes were not in place when Mr. Yeo was hired, he was still obligated to disclose any potential conflict of interest within 60 days of beginning his employment in the department. National Defence received his declaration only on March 3, which was 165 days into his tenure and after he was suspended from his position. He subsequently resigned from the federal public service one day before he was to discuss his employment with DND.

Following the issues around his appointment coming to light, both the Public Service Commission and National Defence completed investigations into his employment. Neither of these investigations have suggested error, favouritism or improper conduct related to the hiring process. However, we are committed to applying lessons learned from this incident to improve our conflict of interest processes and strengthen our approach to contracting at National Defence and across the entire public service.

I want to assure the members of this committee that we take any real or potential conflicts of interest at National Defence very seriously.

My expectation as minister is that all actions that take place in my department will meet the highest ethical standards. We know that Canadians expect openness, transparency and accountability from their government.

Thank you very much Mr. Chair.

[The Chair, Conservative, John Williamson]

Thank you, Minister.

We'll open our first round. The first four members will have six minutes each.

Mr. Genuis, you have the floor for six minutes, please.

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

Minister, this week's Auditor General's report reveals how much Liberals love McKinsey, especially at National Defence. National Defence gave 15 contracts to McKinsey, 13 of which were non-competitive.

In addition to breaking all kinds of rules, these contracts have gone to a company that is simultaneously working with the militaries of our strategic adversaries. Did you ever inquire about which other militaries McKinsey is working for around the world?

[Bill Blair, Liberal, Scarborough Southwest, ON]

Again, as I've already indicated, officials, perhaps, could give you that information. I am not involved in the contracting process, but I would like to share with you—

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

Sir, if I can just clarify.... It's a very specific question about actions you've taken as minister.

The McKinsey story has been in the news. You will have seen it. Did you ever inquire about which other militaries McKinsey was working for at the same time as working for the Canadian Department of National Defence?

[Bill Blair, Liberal, Scarborough Southwest, ON]

I'm happy to share with you with respect to the steps I have taken. We've reduced the government use of professional services by 15% since I've taken over. We've ended the standing offers with McKinsey and all similar companies, and we've introduced stricter requirements for departments to make suppliers more transparent and accountable.

I have never—

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

Minister, that wasn't the question.

[Bill Blair, Liberal, Scarborough Southwest, ON]

I have never engaged with anyone from McKinsey. I've never talked to anyone there.

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

Okay.

[Bill Blair, Liberal, Scarborough Southwest, ON]

I don't have the information you seek, but one of my colleagues, perhaps Mr. Crosby, might have that information.

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

Have you ever asked your officials or sought information about which other militaries around the world McKinsey works for?

[Bill Blair, Liberal, Scarborough Southwest, ON]

No.

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

Okay. Do you think you should have? Do you think that's important information? Do you think that's germane to the fact that it's also working for the Canadian Armed Forces?

[Bill Blair, Liberal, Scarborough Southwest, ON]

My expectation is that our very professional and capable public service and people responsible for the procurement of these contracts would exercise due diligence in ensuring that whomever we contract with meets our ethical and security requirements.

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

Well, either of the officials here can answer, just very briefly, whether the Department of National Defence has ever gotten information from McKinsey regarding which other militaries it's working with around the world. It's just a yes or a no.

[Troy Crosby, Assistant Deputy Minister, Materiel Group, Department of National Defence]

The way we approach this is not to inquire what other work they have, necessarily, but to ensure that the companies meet the security requirements checklist—

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

Okay, so the answer is no.