Public Accounts Committee on Oct. 9th, 2025

[The Chair, Conservative, John Williamson]

Thank you for being here.

I call this meeting to order.

Welcome to meeting number nine of the House of Commons Standing Committee on Public Accounts.

Today's meeting is taking place in a hybrid format. Pursuant to the Standing Orders, members are attending in person, although we have some witnesses joining us online on the Zoom application.

I would like to remind participants of the following points: Please wait until I recognize you by name before speaking. All comments should be addressed through the chair. Members, please raise your hand if you wish to speak, whether participating in person or via Zoom, and the clerk and I will endeavour to recognize you.

Pursuant to Standing Order 108(3)(g), the committee will proceed with its consideration of report 5, entitled “Professional Services Contracts”, from the 2024 reports 5 to 7 of the Auditor General of Canada, which was referred to the committee on Tuesday, June 4, 2024.

I would like to welcome our witnesses. I am glad we have a large table today.

From the Office of the Auditor General, we have Andrew Hayes, deputy auditor general. We have Aliya Haji, director, and Nicholas Swales, principal.

From the Canada Infrastructure Bank, joining us online are Ehren Cory, chief executive officer, and Frédéric Duguay, general counsel and corporate secretary.

From the Department of National Defence, we have Stefanie Beck, deputy minister, and Lieutenant-General Paul Prévost, chief, professional conduct and culture.

From the Department of Public Works and Government Services, we have Arianne Reza, deputy minister. We also have Catherine Poulin, assistant deputy minister, departmental oversight branch, and Dominic Laporte, assistant deputy minister, procurement branch.

It is nice to see you all here.

I understand that there will be a series of opening statements.

We'll begin with the deputy auditor general.

Mr. Hayes, you have the floor.

[Andrew Hayes, Deputy Auditor General, Office of the Auditor General]

Mr. Chair, thank you for this opportunity to discuss our report on professional services contracts, which was tabled in Parliament in June 2024.

I want to begin by acknowledging that we are gathered on the traditional unceded territory of the Algonquin Anishinabe people.

Joining me today from our office are Nicholas Swales, principal, and Aliya Haji, director.

This audit looked at whether federal contracts awarded to McKinsey & Company between 2011 and 2023 complied with applicable policies and provided Canadians with value for money. These contracts spanned 20 federal organizations, including 10 Crown corporations. The total value of contracts awarded to McKinsey & Company during the period totalled $209 million, of which about $200 million was spent.

We found that the organizations awarding the contracts showed a frequent disregard for federal contracting and procurement policies and guidance. We also found that each organization's own practices often did not demonstrate value for money.

The extent of non-compliance and risks to value for money varied across the organizations. For example, in 10 of the 28 contracts that were awarded through a competitive process, the bid evaluations did not include enough information to support the selection of McKinsey & Company as the winning bidder.

When it came to non‑competitive contracts, organizations often issued these without documenting the required justification for doing so. About 70% of the 97 contracts we looked at were awarded to McKinsey & Company as non‑competitive contracts, and their value was approximately $118 million.

We also sampled and reviewed 33 contracts to assess value for money and found that almost half of the contracts lacked an explanation of what need or gap the contract was intended to address. In 15% of contracts, there was no clear statement of what the contract would deliver, and in 18% of contracts, there was no confirmation that the government had received all expected deliverables.

As the central purchasing and contracting agent and subject matter expert for the Government of Canada, Public Services and Procurement Canada didn't challenge federal organizations when awarding some contracts on their behalf. The department didn't challenge the organization requesting the contracts about whether the procurement strategy used was appropriate when multiple contracts were awarded to McKinsey & Company for a similar purpose and within a short period of time.

Our single recommendation focused on the need for federal organizations to proactively address conflicts of interest in the procurement process. Other aspects of our findings were covered in the observations and recommendations recently made in our audit reports. Since then, these aspects have been covered again by recommendations made by internal audit functions.

The Treasury Board of Canada Secretariat has taken the promised steps on behalf of departments and organizations in response to our recommendation.

While this audit focused on contracts awarded to McKinsey & Company, it highlights basic requirements and good practices that all federal organizations should follow when procuring professional services on behalf of the Government of Canada. Our audits of contracts awarded to GC Strategies Inc., over much of the same period, showed many of the same weaknesses in federal organizations’ adherence to contracting rules and in their ability to demonstrate value for money.

Federal contracting and procurement policies and rules exist to ensure fairness, transparency and value for money, but they work only if they are followed. The solution isn’t necessarily about creating new rules but rather about making sure that those rules are well understood and properly applied.

Mr. Chair, this concludes my opening remarks. We would be pleased to answer any questions the committee may have.

[The Chair, Conservative, John Williamson]

Thank you very much, Mr. Hayes.

Ms. Reza, you'll lead us off for approximately five minutes please.

[Arianne Reza, Deputy Minister, Department of Public Works and Government Services]

Thank you, Mr. Chair.

Let me begin by acknowledging that we are gathered on the unceded territory of the Algonquin Anishinabe people.

I want to thank this committee for providing Public Services and Procurement Canada with an opportunity to discuss the Auditor General’s report number five, on professional services related to McKinsey & Company. The report is, in fact, part of a series of audit reports.

In 2023, the then prime minister asked the then president of the Treasury Board and the then minister of PSPC to undertake a review of contracts awarded to McKinsey. Moreover, the Office of the Procurement Ombud conducted their own independent study.

Taken together, the findings and recommendations of these studies point to three areas for improvement: first, the need to better comply with existing procurement rules; second, the need to adequately document procurement decisions; and third, the need to improve overall quality control over our procurement practices.

These areas for improvement are in no way unique to the focus of the audits on McKinsey contracts. Rather, these areas of improvement apply across all commodities and the procurement function. There is a fundamental need to build and maintain public trust in the procurement system.

Since I last appeared before the Standing Committee on Public Accounts, Public Services and Procurement Canada, or PSPC, has made significant efforts to strengthen the procurement process across the continuum. By continuum, I mean from the engagement in the early stages when a client department first identifies a requirement, through the planning of the procurement strategy to the awarding, administration and close out of the contract.

We've implemented new mandatory checklists for task authorizations and procurement file completion. We've increased the focus on procurement officer training, increased interactions and added requirements for attestations with suppliers.

PSPC has also created the position of chief of the contract quality assurance and records compliance office, focused on information management compliance. Since it was introduced in 2024, the office has reviewed over 1,200 procurement files and trained over 600 procurement officers.

Turning now to the report at hand, the Auditor General’s scope is comprehensive, as the report examined the procurement practices of departments and agencies and also looked at value for money. These are two sides of the same coin.

On the value-for-money side, client departments are responsible for demonstrating sound stewardship and best value in their procurement actions and decisions. On the other side of the coin, actions related to procurement management are expected to be fair, open and transparent and to meet public expectations in matters of prudence and integrity.

With respect to the one recommendation in this AG report, PSPC is in agreement. We have put in place concrete measures to strengthen conflict of interest safeguards. In addition to our annual mandatory conflict of interest declaration for all PSPC employees, we have made explicit the requirement for the completion of an evaluator’s confidentiality and conflict of interest certification for our solicitation processes. This measure ensures that evaluators explicitly attest to being free of conflicts of interest at various steps in the contract award process. The certification will automatically be included in the file documentation.

With respect to other observations of the report, PSPC has already changed the administration of non‑competitive national master standing offers by requiring clear justification by client departments. PSPC has also introduced limits on the value, duration and amendments to minimize financial risk and encourage solution‑based approaches. I've personally written to all my deputy head colleagues concerning the management of professional services procurement to underscore the importance of sound procurement practices to drive best value and accountability for results.

I want to again thank the Auditor General and her team for the reports on these matters. These reports have helped us improve our processes and ultimately strengthen the integrity of professional services procurement.

The changes we have made are consistent with PSPC's commitment to continuously improving federal procurement practices.

Thank you.

[The Chair, Conservative, John Williamson]

Thank you.

Ms. Beck, you have the floor, please.

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

Mr. Chair and members of the committee, I'm very honoured to be back again today to appear on behalf of the Department of National Defence and the Canadian Armed Forces with my colleague, Lieutenant-General Paul Prévost.

I want to reassure Canadians, as has my colleague from PSPC, that the department takes our responsibilities, both for the defence and security of the country and the careful stewardship of the public’s funds, extremely seriously. We are always working to ensure the best value for taxpayer dollars while meeting our complex and evolving defence and security needs. This has become even more critical with the recent increase in defence investments.

We welcome the additional oversight and recommendations we receive from external experts, including the Auditor General and this committee, which help us continually improve our programs, policies and processes to deliver the best results for Canadians.

As explained in the Auditor General's report, the Department of National Defence awarded 15 of these contracts, worth a total of $29.6 million. Of these contracts, 12 were call‑ups against PSPC's national master standing offer and one was awarded through a Department of National Defence non‑competitive process. The other two were call‑ups against a competitive supply arrangement.

Much of what we do today leverages the expertise that we've been able to bring in-house and that has led to our allies regularly looking to us for advice on culture change, for example.

The AG report provided a single recommendation: for departments to proactively ensure there are no real or perceived conflicts of interest among those involved in the procurement process. We were also advised to keep implementing related recommendations from two previous reviews: our own internal audit from March 2023 and a March 2024 report from the procurement ombud. I'm very pleased to report that all the management action plans have been fully implemented.

At DND, we are committed to fair, open and transparent processes, and we work diligently to uphold the Government of Canada's requirements and standards around contracting and procurement. We collaborate extensively with PSPC as the contracting authority for the Government of Canada to ensure we are following established policies and procedures. In the past few years, we've done a lot of work to strengthen our contracting policies and oversight, such as updating compliance frameworks, procedures, guidance and training; strengthening information management policies and procedures; and establishing new quality-control measures.

The Attorney General of Canada report also prompted us to closely review how we communicate about conflict of interest across all levels, but also within the department.

All new hires and staffing actions are subject to a mandatory screening questionnaire. We've also introduced proactive screening with a mandatory conflict of interest questionnaire.

As part of the performance management cycle, employees must now affirm that they understand and adhere to the values and code of ethics, including conflict of interest policies.

In conclusion, Mr. Chair and committee members, we remain deeply committed to transparency, accountability and rigour as we exercise our duties to safeguard Canada while optimizing the use of the public funds entrusted to us. We have acted on the recommendations we have received, and we will continue improving and evolving so Canadians can have full confidence in the way we manage defence resources.

Thank you very much.

[The Chair, Conservative, John Williamson]

Thank you very much.

Lastly, we have Mr. Cory.

You have the floor for up to five minutes.

[Ehren Cory, Chief Executive Officer, Canada Infrastructure Bank]

Thank you, Mr. Chair.

Ladies and gentlemen, committee members, through the Chair, we apologize for not being there with you in person, which is always preferable. We appreciate your accommodating us.

My name is Ehren Cory. I'm the chief executive officer at the Canada Infrastructure Bank, or CIB.

I’m pleased to be with you today on behalf of our organization, which was listed in the Office of the Auditor General of Canada 2024 report on professional services contracts.

I am accompanied by my colleague Frédéric Duguay, as mentioned, who is general counsel and corporate secretary for the CIB.

For a bit of context, the CIB, as committee members would well know, is a Crown corporation. We were created by the CIB Act in 2017. I'm proud to report that, as of today, we have now invested over $17 billion in more than 100 projects across the country. Those projects have a total capital value of over $50 billion. Seventy-one of those projects are in construction, and seven of them have been completed or are in operation.

This is important if one is to understand the context of our use of professional services in general. The projects we've invested in are impactful projects for our country. These are things like expansions of ports and airports, clean power systems across our country, and irrigation, all of which are designed to drive economic productivity and growth in a rapidly changing world.

Each of these investments is made as a loan or equity investment, so they're fully repayable with interest. That capital goes on to be redeployed in subsequent projects. I would note that, as of last year, the CIB reached the status of being self-sustaining, by which I mean our operating costs are more than covered by the interest we earn, so we do not require operating appropriation.

Now, before we make any of these investments, we undertake the necessary due diligence that would be expected for large-scale investments. The CIB, like most asset management organizations, therefore engages various financial, legal and technical advisers to provide advice in support of our investment decisions. The CIB has a relatively small investing team for the scope of our work. It's about 150 individuals, so we rely on external advisers to support our work with technical advice and due diligence. To put it in context, at the end of last fiscal year, these professional services represented less than 1% of the total amount of our investment.

I'll turn to the study at hand, as it's the focus of today's hearing.

In all cases of procurements we undertake at the CIB, we are committed to following robust procurement practices, including conflict of interest policies, and to ensuring value for taxpayers. I will address practices in a moment in relation to the two matters raised by the Office of the Auditor General.

The Office of the Auditor General's report identified three contracts entered into by the CIB with McKinsey. These were all between 2018 and 2020, which predates my arrival as CEO. The three contracts, which had a total value of $1.4 million, were in the very early days of the CIB, a time when the CIB was just ramping up and had a small number of employees. All three contracts followed the procurement policies of the day. It's worth noting that, since that time, the CIB has not contracted with McKinsey.

I welcome the opportunity to highlight the work that the CIB has undertaken to ensure that we have in place robust, proactive and transparent policies and practices.

Procurement and conflict of interest policies exist to ensure fairness, transparency and value for Canadians.

As a federal Crown, the CIB is committed to following best practices when procuring.

We appreciate the Auditor General's recommendation, and I'm pleased to share the steps we've taken to address that single recommendation. Our procurement policy and code of conduct have been refined and updated since 2020, and we're always looking for ways to improve. Today, the CIB has robust practices to identify and manage procurements and to identify any actual or perceived conflict of interest. The CIB's procurement policy provides that the procurement of goods and services must be completed responsibly and with the highest standards of integrity. These policies are available on our website.

To address the OAG's recommendation specifically, contract owners and relevant CIB staff must now confirm they have no conflict of interest before any procurement moves forward. This requirement was added to our investment approval and our signature request templates as of September 2024. This is in addition to the existing steps that ensure transparency, including that all CIB employees are required to complete annual attestations that cover compliance with the code of conduct and include proactive conflict of interest disclosures. As outlined in our code of conduct, both employees and contractors must promptly notify us if any conflict—real or perceived—arises, so that it can be handled appropriately.

I appreciate the committee's attention, and I'm happy to answer any questions.

[The Chair, Conservative, John Williamson]

Thank you very much.

We now begin our first round of questioning, which will involve three members for six minutes each.

Ms. Kusie, you can begin for us, please.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you, Chair.

Thank you to all of our witnesses for being with us today. It's very much appreciated.

In June, the House of Commons passed a Conservative motion calling on the government to recoup the $64 million wasted in the ArriveCAN scandal from GC Strategies. Ms. Reza, as deputy minister, did you have any input on the government's decision to enforce this House of Commons motion?

[Arianne Reza]

No, I didn't have any input. We have, as you know, been very involved in terms of trying to recover money and in working, with CBSA as well as with the RCMP, to identify elements that can be recovered.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

The government announced that they are seeking only $198,000 in damages under the $64 million. Why is the government seeking to recover only 0.03% of the funds from arrive scam?

[Arianne Reza]

I can start on that question, and maybe I'll turn to Madame Poulin to give us more information.

We look at every procurement, every dollar spent, in terms of, “Is there abuse, fraud?” When we do find that, in terms of overbilling we go after the suppliers to seek that recovery, either from them or through their supply chain. In this case that is, I think, on the GC Strategies side.

Do you have anything to add, Ms. Poulin?

[Catherine Poulin, Assistant Deputy Minister, Departmental Oversight Branch, Department of Public Works and Government Services]

I think it's important to note that the amount we're trying to recover from GC Strategies is not linked in any way to ArriveCAN. It's an amount that was overbilled prior to ArriveCAN, and GC Strategies was one of the prime contractors using our resources that overbilled the federal government. The amount you mentioned is the amount we're trying to recover, because they haven't accepted to repay the amount when we asked them.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

They haven't accepted.... Certainly, they had contracts beyond arrive scam, so I would expect that the amount we would seek to recoup would actually be greater than that, never mind just the funds from arrive scam. However, only 0.03%, $198,000, is, really, a small amount compared to the total value of the contract for GC Strategies, within that contract and even beyond that contract. Of the $198,000, Ms. Reza, how much has the government recouped to date, please?

[Arianne Reza]

I'll just make the distinction that the $198,000 is from overbilling that is not associated with CBSA and GC Strategies.

Do you have that figure?

Otherwise, we can come back to you.

[Catherine Poulin]

Just to put the question in context, the amount we're trying to recover is tied to the three overbilling cases that were announced back in March 2024. I'm pleased to announce that, of the $4.5 million we announced at that time, we have recovered $4.1 million, so almost...the only amount left to be collected is the amount tied to GC Strategies.

If we're looking at the legal cases that have been put forward in the Ontario court, we're seeking $400,000 because there are some damages that will be added to the amount that GC Strategies owes to the federal government. It's a big success, because, in those three cases, we almost recovered more than 80% of the amounts that were owed.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

You're not certain as to the $198,000, if any.... You don't have that number with you as to if any of that $198,000 has been collected.

[Catherine Poulin]

Thank you, again. We have put a statement of claim into the Ontario Superior Court of Justice, because we were able to recover only that amount. That's why we're turning to the justice system in order to recover those funds through a legal procedure.

We informed GC Strategies that a statement had been submitted, and legal action will be taken in the coming months.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

The motion passed in the House was specific to the ArriveCAN scandal and the $64 million, so it's my hope that the $198,000 will be recovered and that we can report on that at a later date as being recovered.

Ms. Reza, in previous testimony to public accounts on this topic, you've stated, “As far as recovery efforts are concerned, we have made the commitment to the minister to look at how we can recover the funds that were spent on the contract.”

Was the recommendation provided to the minister to recover the funds at an amount greater than $198,000?

[Arianne Reza]

That question is really to be examined by CBSA. CBSA is the authority whose budget it came from, and we've been working with them to look at some of the accounting around it to see what has been recovered, overbilled, so that work is under way.

I don't know whether my colleagues have anything to add.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

I have a point of order. I believe we're dealing with McKinsey, not GC Strategies, in this report.

[The Chair, Conservative, John Williamson]

Ms. Yip, thank you. That's a point you can make, but, as you know, I give members wide latitude here to raise questions when witnesses are before us. If witnesses aren't quite ready to answer, they can say so, and information can be sought later.

Ms. Kusie, you have about a minute left.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you, Chair. I believe the title of the study is “Professional Services Contracts”, and certainly GC Strategies would fall under professional services.

Does PSPC truly believe, after all the waste, corruption, shady contracting, poor record-keeping, subcontracting of basic tasks and more, that the Canadian taxpayer should recover below half a per cent of the money that was wasted?

[Arianne Reza]

Again, I think you're well aware that the issue is that the $198,000 is associated with overbilling that was not CBSA related. In terms of CBSA contracts with GC Strategies directly, they are best placed to look at what they are going to be able to recover. We can certainly talk about the efforts that we're making in terms of managing additional oversight on the spend of the professional services across the government.