Public Accounts Committee on June 19th, 2025

[Karen Hogan]

I always think that training is a good reminder, and I don't think that training, when it comes to procurement, should be a one and done. I think that it should be repeated after a certain period of time, because the rules do change or because maybe you haven't done procurement in a long time and it's a good reminder.

However, that's just one step; that's not going to cure it all. You do have to have someone who monitors, and every procurement group within a department should have its own monitoring to see internally whether or not rules are being applied. When they're not, that's when you highlight areas of, perhaps, repeat training or individuals who just need some coaching.

Training is just the beginning of what is needed to make sure that procurement is properly done.

[The Chair, Conservative, John Williamson]

Thank you very much.

That is your time, Ms. Yip.

Mr. Lemire for six minutes.

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

Thank you, Mr. Chair.

Many thanks to the witnesses for their work. Indeed, it's very interesting to discover how important public accounts are and the role we can play in that regard.

Ms. Hogan, I read the GCStrategies report and I was struck by the skyrocketing costs of IT contracts, which went from $1.3 billion in 2015 to $2.8 billion in 2025. That's an $18 billion increase.

In your opinion, is that something that should be subject to an in-depth review? Are there sufficient resources to do a deep dive on the IT contracts being awarded? Next, how do you audit a report? I imagine that you cannot audit all contracts totalling $2.8 billion.

[Karen Hogan]

I'm going to start with the last question.

When we audit reports, obviously we cannot audit each and every one of them. Therefore, we use sampling, which is a well-established scientific tool in auditing. It consists of reviewing enough contracts to draw reliable conclusions on all the contracts as a whole. That is how we proceed.

The increased number of IT contracts is in line with the increased number of professional services contracts within the federal government, and there are reasons for that. For example, if there is a labour shortage or an unexpected increase in workload, I agree that contracting is necessary. In that case, there are good reasons for doing so. However, when contracts are awarded due to a lack of expertise, I'd like the government to determine how to transfer that expertise to the public service, to avoid always having to grant contracts to third parties.

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

Another thing that strikes me in your report is the absence of additional recommendations. I raised this point in the House of Commons, and the Liberal government essentially said it was good news, as if it was a vote of confidence on your part. We just heard a question about that too, which shows how casually the government is treating this change.

Can you share your thoughts? What motivated you not to issue any recommendations and to refer to the three reports where your recommendations were, in my opinion, highly critical?

[Karen Hogan]

It is extremely rare for my office to not include its recommendations in a report. Yes, I wanted it to be taken seriously and for parliamentarians, as you are doing here, to wonder why we took such an unusual position in an audit.

When an audit is glowing, no recommendations are needed. However, in this case, I didn't issue any recommendations because the regulations are clear. I don't think I need to tell the public service and the government to follow their own policies. Rather, I'm encouraging them to assess the reasons behind the deficiencies we noted, because these findings are troubling. The regulations are there to ensure transparency and accountability and to make sure taxpayers are getting good value for money.

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

Thank you for that answer.

When it comes to awarding contracts, I think it's important to distinguish between competitive contracts and non-competitive contracts. I get the impression that the exemption for contracts valued at less than $40,000, even if that threshold was raised—it was under $25,000 in June 2019—fosters a lack of accountability. You refer to this in paragraph 4.20.

Is the threshold too low? Are there abuses? Do non-competitive contracts by mutual consent go that route? Does this foster cronyism and a lack of accountability?

[Karen Hogan]

I think it's a good thing to have a threshold exempting some contracts from a competitive process. Sometimes, low-value contracts are needed to speed things up and it's not always necessary to go through a major contracting process.

We always verify whether there were abuses or whether departments split contracts or granted a first contract under the RFP threshold to then grant more later. However, we didn't see this with GCStrategies, as I already mentioned. I saw that kind of situation during the first audit of the professional services contracts awarded to McKinsey. I expect, too, that departments will ensure contracts aren't split to circumvent the competitive process, which should always be the first choice when it comes to procurement.

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

Would raising the threshold to $40,000 be appropriate, to increase accountability?

[Karen Hogan]

In light of inflation and rates for some services, it's true that the $40,000 threshold can be too low at times. However, it isn't up to my office to make that recommendation. Rather, it's the government's decision. Then, I can verify whether it's abiding by its own decision.

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

Quebec is conducting an in-depth investigation of SAAQclic. In your opinion, should the federal government consider striking a commission of inquiry on IT contracts and cost overruns?

[Karen Hogan]

The government needs to make that decision. I didn't ask for or recommend that kind of commission of inquiry. If such a commission were to be struck, perhaps it should be tied to the pandemic response, so that the country can be prepared to respond going forward. As for contracting, the public service must return to the basics and follow the rules.

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

The message is clear. Thank you very much.

[The Chair, Conservative, John Williamson]

Thank you.

We will now begin our second round, which will consist of five members: two from the government, two from the official opposition and one from the third party.

Mr. Deltell for five minutes.

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

Thank you, Mr. Chair.

Colleagues, I'm delighted to see you.

Ladies and gentlemen, welcome to your House of Commons.

I'm very pleased and proud to sit on this committee. I went into politics to ensure that taxpayers' money is being managed in an intelligent and profitable way for all Canadians, with no cost overruns and money being thrown away. Unfortunately, it's clear that today's testimony is proving the exact opposite. Commitments aren't being kept and there has been a lack of rigour over the last decade. Canadians are now paying the price.

We are currently looking at GCStrategies, a company managed by two individuals working out of a basement. This company was unable to do things properly, on budget and on time, with respect to the ArriveCAN app. This is the second time the Auditor General has audited the management of GCStrategies' files. Indeed, 106 contracts were awarded to 31 government agencies, but there was a lack of rigour. Furthermore, they spent money shamelessly and with very few results.

Ms. Hogan, how do you explain this situation?

[Karen Hogan]

As you mentioned, this isn't the first procurement audit in which I've noted the government has ignored the rules.

Let me be clear: I'm not auditing GCStrategies, but rather the government's actions or lack of actions. There was a question I asked during both audits, and I recommended the government identify the root cause of the problems we noted. In my opinion, either individuals don't understand the rules or there are too many rules. The rules are being circumvented, and that's why I recommend the government, to improve the entire process, step back and review its procurement rules.

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

I understand, Ms. Hogan. However, it's unbelievable that we've reached this point after 10 years. It's simply a matter of enforcing the rules. This isn't rocket science. This is about the sound management of public funding, the key aspect. No parents would manage their money properly if they did exactly what the government has been doing for the past 10 years. This is about a basic rule.

We hear about a lack of evidence, rationales and competency checks; few security measures; a lack of time sheet assessment and tender demonstration; fees that are 80% higher than usual and poorly managed absenteeism. How is it that, after 10 years, people can't even manage to follow the basic rules and ensure the sound management of taxpayer money?

[Karen Hogan]

Thank you for your good summary of the findings in our report.

I'm concerned that 94% of contracts require time sheets to show that the work has been done, but that some officials don't ask for these time sheets. We found a contract involving 25 resource people, but the department could provide time sheets for only one of those 25 people.

They received the money. The officials assured us that the services were rendered. Yet, as you said, it's necessary to go back to the basics to demonstrate the careful use of public funds.

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

This vital department isn't entrusted to beginners. The people who led this department were highly experienced politicians and experienced ministers. Unfortunately, four of them failed to do their homework. Yet they still play a key role today. I'm talking about Mr. Mendicino, the current chief of staff of the Prime Minister of Canada and second in command in the country; the Minister of Crown‑Indigenous Relations; the Minister of International Trade; and the current Minister of Foreign Affairs.

Why were four ministers rewarded by the current government and why do they remain in office, even though they turned a blind eye to this lax approach, which is totally unacceptable to Canadian taxpayers?

[Karen Hogan]

I won't be looking at which departments are involved and who is in charge of them. My mandate has nothing to do with the ministers' decisions, but rather with measures taken by the public service. As I said, I don't expect a minister to be involved in procurement issues on a daily basis. However, I expect the department to brief the minister on its overall procurement process. This involves taxpayer money. I expect better accountability from the public service.

[The Chair, Conservative, John Williamson]

Thank you.

Next, we turn to the government side.

Ms. Tesser Derksen, you have the floor.

[Kristina Tesser Derksen, Liberal, Milton East—Halton Hills South, ON]

Thanks very much, Mr. Chair.

Thanks to all my colleagues around the committee table.

As a new member of Parliament, I found the reports you submitted very helpful, and I thank you for all of the work you do. I certainly don't want you to feel like you're refereeing a political tennis match here, so I'm going to ask just one question. It's on your report about the professional services contracts.

I don't think anyone's denying that there are serious problems with what happened here, and you have identified that there were certain procurement rules that were not followed.

We all know that nothing happens in a vacuum. Would you be able to provide comment on contextual factors, either internally or externally, on what was going on in the world at the time that may have created a fog within the department and that may have contributed to the relegation of rule-following?

[Karen Hogan]

When I look at the work I did on professional services contracts, both the previous one and the one we're talking about today with GC Strategies, it covers a long period of time, from 2015 to 2024.

That does include the time of the pandemic, and I recognize that at the beginning of the pandemic there was a lot of uncertainty for public servants, who were not sure where to go, and there was a call for them to really step up and deliver different programs. The secretary of the Treasury Board at the time issued a letter to all of the public service, saying that during a time of crisis, in the time of a health emergency, we needed to focus on service and that they could make some of the processes faster, but that they shouldn't forget to be accountable.

However, I do believe that a pandemic is not a reason to forget certain basic rules, and what we found is that some of these rules were ignored. It wasn't just during that period—it was before and after—and that is why I believe that the government needs to figure out why this behaviour is happening.

As I said, why is a staffing company the procurement mechanism? Is that because it's a burdensome procurement process for smaller businesses or an individual who is an IT expert who wants to support the government to get into government contracts? Is that a reason?

I really do think that the government has to look into that more closely, but then we do have to worry about the behaviours we're seeing in the public service and understand why. It goes back to reminders of the rules and some good training, and I do believe that streamlining will help with the complexities we see in procurements.

[Kristina Tesser Derksen, Liberal, Milton East—Halton Hills South, ON]

Thank you.

I said that I would ask only one question about this, but I do have just a quick follow-up, because you mentioned the timeline.

There were problems prior to the pandemic and during the pandemic. Can you give us some idea of the proportional ratio of where more of the problems were happening in that timeline?

[Karen Hogan]

I didn't do the triaging by years, I have to admit, but if I look at the first report we did, there were 10 departments and 10 Crown corporations on the professional services contracts with McKinsey, and in almost every case there was an issue. There were a few that were doing a good job, but for the most part, there were issues.

In this report, there were 31 federal organizations, and we had a concern with every contract we looked at, so I don't think you want to link it to time periods. I think you have to link it to its being more pervasive and to figuring out why that behaviour is happening.