Public Accounts Committee on Oct. 28th, 2025

[Tom Osborne, Liberal, Cape Spear, NL]

Thank you, Mr. Chair.

Mr. Jones, going back to the figure of $50 million versus $190 million, with the spending availability of up to $300 million, this is quite normal, really, for contracts within government departments, and even within private enterprise.

Can you explain to us again how the $190 million was reached, and the initial figure that was outlined, the $50 million?

[Scott Jones]

Absolutely. Thank you.

I think it's important. The $50 million is the investment that the vendor needed to recoup because they had to purchase, lease, buy or build out data centre infrastructure—physical buildings and infrastructure. We had security requirements that meant it needed to be ours, not shared. We required redundancy between two different sites that were physically separated to ensure service availability for Canadians: two data centres, two complete sets of infrastructure that were duplicates of each other, to make sure that no single failure in either of those pillars could bring down the service that was there. It was a custom-built service, built for the Government of Canada by a vendor, and only for the Government of Canada. It could not be shared.

That was the $50-million minimum revenue. If we had decided to cancel this contract the day it went into service, they wanted to recoup their minimum. That's a pretty standard thing when you're asking for a completely custom set of infrastructure.

The $190 million was what we knew our consumption was going to be as we grew, as call centre agents came on board, as we expanded the number of people who were going to be using the service and as we turned on other features that were added with those service orders that Scott Davis was mentioning. That was the number that we knew was going to be reached as we went through that.

The $300 million is the maximum value that we could go to if service suddenly started to surge. We'd need to go back and seek approval if we were extending beyond that.

What this equates to is approximately a cost of 33¢ per phone call. That includes the recording and everything that needs to be done. That's the sum total of the contract.

[Tom Osborne, Liberal, Cape Spear, NL]

Thank you.

Mr. Jones and Mr. Pagé, you both talked about lessons learned. Could I ask each of you to expand on lessons learned?

I know there was a 100-day plan put in place. Based on the lessons learned, what are both organizations doing to overcome the findings of the Auditor General's report and make improvements?

[Scott Jones]

Thank you for that question.

I think there are a few. I mentioned a few.

Number one is that we need to align to commercial terms and conditions that are used in industry and to the standard terms and not redefine things. That makes it very complicated to hold a vendor accountable, but also, we need the comparators with what's happening in the commercial.... We're not the only people who use data contact centres. Aligning to those terms and conditions is one of the most fundamental things.

The second piece is a recognition that as we build more custom solutions for the Government of Canada, if we don't align to where industry is going, it means we're asking for things that don't exist or things that require customization. That makes it more complex, and it makes it more risky. Some of the challenges the vendor had were that we were asking for things that weren't available commercially at that time. They're available now. That is one of the pieces where we need to be very careful.

The third piece is that this procurement was put in place under the assumption that it's for the Government of Canada, so the billing was not broken out, because it was a Government of Canada contract to provide services for the Government of Canada. At the time, in 2015, that was.... This really started in 2013, with the creation of Shared Services Canada. There was a big push for centralization: Maybe there would be only one call centre; maybe we needed one technology. The goal was Government of Canada.

Now, I think we've learned that we need to be able to break that out. Treating the Canada Revenue Agency the same as Employment and Social Development Canada doesn't make a lot of sense. There are different surges. There are different requirements. There are different consequences to meeting with.... Making sure we have the flexibility to add the features that are needed per partner is really important.

Lastly, I think there are some positive lessons learned. Those are the things that we've corrected, but the positive lessons learned are that when we paid attention, the vendors stepped up, and we've had a very reliable service. For something that is custom-built, unique and the only one in Canada—or two, actually, physically separated—the vendor stepped up, and we held them to account.

When I first moved to Shared Services Canada, I had biweekly meetings with the vendor, going over the performance and all the data. My predecessors did the same thing. Early in the contract, it was weekly, with the president, to walk through this to make sure they were meeting our requirements and were able to meet things. That did hold the vendor to account. They took it seriously too.

Those are some of the basic pieces.

[Hugo Pagé]

If I could add to that.... I think Mr. Jones covered it well. I would say that one of the biggest benefits for the agency is that now we will be the sole client under the contract, which means we'll have more flexibility when it comes to adjusting the services to our needs.

I would also add that the fact that we'll have one bill will make it easier for certification.

The last point I would add is that the contract operation and partnership structure we're developing with Shared Services Canada will also help clarify roles and responsibilities, which will make the certification process easier down the road.

[The Chair, Conservative, John Williamson]

Thank you. That is the time.

Mr. Lemire for six minutes.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Mr. Chair.

Mr. Jones, thank you for joining us with your team today.

You say you're confident. However, that confidence was clearly shaken by the Auditor General's report.

I want to talk to you about IBM, which has secured numerous contracts that have exceeded the government's planned budget. The Phoenix contract went from $274 million to $5.7 billion, including the new Dayforce software. The benefits payment modernization contract has grown from $1.75 billion to $4.4 billion, and it's not over yet. The contract for the Canada Revenue Agency's contact centres has gone from $50 million in 2015 to $150 million in 2025.

Is this because IBM doesn't do an initial project cost assessment, as it should? How can we justify the fact that the government is unable to have a clear idea of how much its IT projects will cost?

In Quebec, we had the SAAQclic affair, which led to a public inquiry. Is that what it would take to shed light on federal contracts?

[Scott Jones]

The contact centres contract value has remained within the limits established at the beginning of the contract. The value increased as requirements were added during the contract, but the value of the services remained the same.

Regarding the other contracts you mentioned, there's a lesson to be learned. The government has set out unique requirements that don't correspond to existing standard commercial products. When you ask someone to modify software in order to customize it extensively to meet unique requirements, it's expensive. That's one of the most important lessons to be learned from these contracts.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

That's why it could be useful to set limits for these parts of the contract.

In addition, on November 22, 2017, Shared Services Canada signed a $500 million contract with IBM until 2021, without any competitive bidding. This contract consolidated four contracts set to expire in 2017 and 2018, covering software maintenance and support in six departments. Have these contracts been renewed? If so, when and for how much? Was there any competitive bidding?

[Scott Davis]

I'm not sure what contracts you're referring to.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

I already have the answer. A $750 million contract was signed in 2021, once again without any competitive bidding. This shows that, ultimately, the public often loses out.

I'll provide some more examples. Between 2017 and 2022, the government spent $20 billion on information technology services. Of these contracts, 40% were awarded to 13 companies and mainly to 3 companies, including IBM, which received almost $2 billion in contracts per year.

Could you give the committee the list of your department's 10 biggest service providers, with the costs for each one? This would help me understand the dynamics. It seems that some limits are necessary, but we need an overview of the situation.

[Scott Davis]

Yes. Absolutely.

I just want to clarify one thing. The $50 million figure was a base amount. Our president explained this a bit. When we sign a contract with a provider, we aren't buying a service or a subscription. It's really about the provider investing in us. Of course, the providers must also make a contribution. They need to work with us to make this happen. There's some confusion about this. However, once you look at the details, it makes the discussion easier.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

I understand. However, it seems that proceeding without any competitive bidding also opens the door to a great deal of abuse and excess spending. Initially, a small amount is agreed upon by mutual consent. Then, once you become dependent on a provider, costs skyrocket. That's obvious to me.

Another project that went off track is the assessment and revenue management system for the Canada Border Services Agency, or CBSA. Its cost rose from $408 million in 2019 to $706 million in 2024. Naturally, the Auditor General announced an investigation into this other information technology modernization contract that went off the rails.

In short, something doesn't add up. We can see that spending on specialized professional services rose from $386 million in 2020‑21 to $436 million in 2023‑24. That's a huge increase. Why not develop this expertise within the government itself?

[Scott Jones]

In general, we award contracts without competitive bidding for two reasons.

First, the Government of Canada has a great deal of old infrastructure and many legacy systems. We can't change certain technologies because they're integrated into the current systems and doing so would cause service interruptions. This is a major challenge for us at Shared Services Canada. We use an online benchmarking service to determine whether we're getting good value for money for the Government of Canada. The Auditor General noted in her report that 67% of the systems weren't working well. We're looking at this issue. We're unable to modernize certain applications because we can't change the current infrastructure. This leads to contracts being awarded without competitive bidding.

Second, modernization projects are generally quite complex. We try to use most of the basic technologies and adapt our practices to current commercial services, rather than adapting commercial software to Government of Canada systems. This is a major challenge for the government, especially since it provides services that don't exist anywhere else. For example, the government can't purchase software called “Microsoft Immigration” because this software doesn't exist. The government must create its own system for this. However, we could use much more basic commercial software. We've learned this lesson.

[The Chair, Conservative, John Williamson]

Thank you.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you for your response.

[The Chair, Conservative, John Williamson]

We'll begin our second round, which will consist of five members and various times.

Mr. Deltell, you have the floor for five minutes.

[Gérard Deltell, Conservative, Louis-Saint-Laurent—Akiawenhrahk, QC]

Thank you, Mr. Chair.

I would like to extend my greetings to my colleagues.

I want to welcome everyone from the Canada Revenue Agency.

Mr. Jones, thank you for speaking such good French.

There has recently been a great deal of discussion regarding the Auditor General's report. For example, we've heard that the wait time for a response to a call has doubled over the past year and that, four times out of five, the information provided is incorrect. In addition, the employee assessment focuses more on adherence to the schedule than on the quality of the information. We thought that we had seen it all, but no.

A few days ago, CBC/Radio‑Canada's The Fifth Estate and journalist Daniel Leblanc reported that the Canada Revenue Agency issued a refund cheque for $4,997,433.72 to a small company worth $380,000. It took TD Bank receiving the cheque and realizing that it didn't make sense for any action to be taken. The bank informed the agency, which conducted an investigation and found the error. The agency is now taking legal action against the company to recover the money.

Mr. Jones and Mr. Pagé, can you confirm whether, as reported by CBC/Radio‑Canada, an officer reviews only refunds over $5 million, and that otherwise the process is automated?

[Hugo Pagé]

Mr. Chair, we understand the concerns that committee members or Canadians may have when reading newspaper articles. Unfortunately, as you know, the Canada Revenue Agency doesn't discuss specific cases involving taxpayers.

We can say that the agency takes both internal and external security and cybersecurity very seriously. The agency has also implemented a number of measures, including preventive controls, to obtain a good overview of the various risks in the environment. We also have controls in place that help us detect transactions when fraudsters try—

[Gérard Deltell, Conservative, Louis-Saint-Laurent—Akiawenhrahk, QC]

Clearly, these controls didn't work because the $4,997,433.72 is $2,566.28 less than $5 million.

I'll ask you the question again. Do you have an internal standard whereby refunds of $5 million or more are carefully reviewed by someone, but lower amounts are processed automatically? Is the answer yes or no?

[Hugo Pagé]

Mr. Chair, I can't answer that question.

[Gérard Deltell, Conservative, Louis-Saint-Laurent—Akiawenhrahk, QC]

Mr. Pagé, with all due respect, you're currently in federal court for this case. You noticed that I didn't name the company. I'm not interested in this aspect. I'm interested in how you operate.

I'll ask you the question again. Is it true that refunds of $5 million or more are reviewed by an officer, but refunds of less than $5 million are processed automatically? Yes or no.

[Hugo Pagé]

I'll have to give the same answer.

[Gérard Deltell, Conservative, Louis-Saint-Laurent—Akiawenhrahk, QC]

How many similar cases are currently before the courts?

[Hugo Pagé]

Are you talking about active cases?