Public Accounts Committee on Oct. 9th, 2025

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you.

[The Chair, Conservative, John Williamson]

Thank you very much, Ms. Kusie.

Up next, Mr. Housefather, you have the floor for six minutes, please.

[Anthony Housefather, Liberal, Mount Royal, QC]

Thank you very much, Mr. Chair.

Just to deal with the previous line of questioning for one second, even though it has nothing to do with the report we're actually studying, this is specific to a specific Auditor General report. The GC Strategies amount is $64 million. Of course, it would be very simplistic to say all $64 million would be recoverable, when GC Strategies was a company that took money from the Government of Canada and paid consultants to perform services. We have no evidence that they didn't pay those consultants monies that were owed to the consultants. In fact, we probably would have received claims from those consultants had they not paid the consultants.

Would that not be correct, Ms. Reza?

[Arianne Reza]

That is correct.

[Anthony Housefather, Liberal, Mount Royal, QC]

Thank you. Let me move now to this report that we're actually studying.

Ms. Reza, everything that I've ever seen from your department has been professional. I've always very much appreciated working with you and the department. I wanted to ask how things would be done differently today based on some of the things that are in this report.

For example, in paragraph 5.39 of the report, it talks about the fact that a national master standing offer was established in 2021 with McKinsey without sufficient justification, and then 19 non-competitive contracts were awarded by various departments under that national standing offer. For 18 of the 19 contracts, there was not sufficient justification documented for the non-competitive bids. It says that PSPC didn't sufficiently challenge the departments.

I know it's a problem, always, when you are responsible for overseeing but don't have direct authority over each of the departments. Can you talk to us about how you have changed procedures at PSPC to deal with both the awarding of the non-competitive standing offer without sufficient justification and the lack of exercising authority over the departments?

[Arianne Reza]

I think there are two interesting elements there. One is that with these non-competitive national standing offers, which is a way departments can make use of the provisions or whatever they need to buy from professional services, McKinsey was one of five, and we've been using this method of supply for many years—since the 1990s or early 2000s. It was in line with our interpretation that if the intellectual property belonged to one company, as it did for McKinsey, the GCRs or the government contracting regulations permitted that as an exclusion.

What happened was that it was established. It wasn't preferential treatment for McKinsey. There were other companies that had it much longer. They came forward because their dataset and their benchmarking were something that was in use across the government. That's where I think we hit a tripwire, because it had been done in the past and was, from our perspective, a consistent use.

After this report and after the procurement ombudsman's, which challenged that even though the IP belonged to McKinsey, it didn't in any way mitigate the requirement for departments to justify their use, we actually did an RFI, sent it to 5,000 suppliers and got many responses back. As a result, we stopped all of the non-competitive national master standing offers in benchmarking. We have now put in a new process, because we agree that it was not rigorous enough and didn't include enough of a challenge function.

I'm going to pause here, because in the second part of your question you asked for some examples of what's changed from that reality, and I'm going to ask Dominic to assist.

[Dominic Laporte, Assistant Deputy Minister, Procurement Branch, Department of Public Works and Government Services]

Yes, there are a lot of things that have changed since McKinsey. I'm very thankful also to the OAG for sharing some of those lessons.

We want to make sure that competition is the norm. In the future, for any benchmarking professional services that we need or that client departments will need, we're going to make sure it's a competitive process and one of our competitive supply arrangements or standing offers is being used.

I would say that even those non-competitive national standing offers remain very exceptional. They now require ADM approval. This is not something that I want to use in the future. We made that very clear.

In terms of the challenge function, that was also almost a blessing from the OAG. Oftentimes, if you're a PG-03, you have to deal with the client at the DG level. It's not that easy to say, “We're going to challenge you on the procurement strategy that you want to put forward. You shouldn't be using a sole source here. We want you to compete, and it's going to take more time.”

The statements that we had as part of the OAG report were very well received by our staff. It gives us this flexibility to say no to the client. We can tell them if it is not the proper procurement strategy, that they cannot go non-competitive and that we're going to be running a full competitive process.

Those are examples of things that have changed as a result of those reports and the recommendations of the OAG.

[Anthony Housefather, Liberal, Mount Royal, QC]

I actually find that very interesting. Having had the experience in the private sector of running a legal and purchasing department in a multinational, it's always difficult to push back against the client—whether it's the marketing department, sales or engineering—that wants to enter into an agreement when you don't agree with the methods they're using.

Besides the fact that the Auditor General's report appropriately mentioned this and gave you some ammunition to push back with, should there be some change in regulations, from Treasury Board or somebody else, giving PSPC greater authority to determine an override to a client's request if it finds that it rises over a certain level of unreasonability?

[Arianne Reza]

I'll start, and then I'll turn to Mr. Laporte to mop up.

I think that's a super interesting question, because what we've seen repeatedly from the AG, in report after report, is the challenge function of PSPC.

I talked in my opening remarks about public trust in procurement, and I am very sincere about it, Mr. Chair. I have to look at it through many different frames, like the abuse and fraud, and following the rule sets, but the challenge function is my third frame. I see from the AG reports and from my own experience as the deputy head that it's an area where we have a responsibility, but it is very hard to use the challenge function. We do 20% of the procurements. Even in the context of this report, we did only 24 of the 97 that were reviewed. That's the thing.

Having that challenge function, being able to throttle it up and having the visibility of.... We talk in the report about the chains of contracting. We may not have that visibility, so we need to have the proper sets around challenge functioning.

You asked about regulation. We have recently gone to Treasury Board, and one thing that I don't think was evident to many is that until June, the Minister of Public Works and Procurement did not have the responsibility for services. We had authority to delegate for goods and construction, but not for services. We've started to centralize that.

I'm going to turn now to Dominic.

Do you have anything to add?

[Dominic Laporte]

Sure. That's an excellent point.

We would like to be able to impose much more of a requirement on clients in the future. For example, for the use of our supply instrument, our standing offer, we would like to put conditions on it, and also reporting. Now quality reporting is in place on the usage that was done on our national master standing offer.

One thing that has helped a lot is TBS. They play a critical role when it comes to the client or the business owner. They did amend the directive on the management of procurement to include new requirements when a manager or client department wants to source professional services—justification as to why it's required and why, for example, the staff that is in-house is not able to perform these functions. This has now been built in. That has been extremely helpful for PSPC. On top of that, we have TBS providing guidance to business owners.

I have to say that we are encouraging our staff. For example, if you're challenging a client and you're not necessarily successful, you can escalate, and this is something that has been welcome.

Thank you.

[The Chair, Conservative, John Williamson]

Thank you very much.

Again, I, as committee chair, will do this. You can ask your question right up to your time. I will then allow the witnesses to answer, usually fully, unless it drags on.

Mr. Housefather, you are certainly out of time, but I appreciate your asking me anyway.

Mr. Lemire, you have the floor for six minutes

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

Thank you, Mr. Chair. I would like to point out that the Bloc Québécois and I, in particular, greatly appreciate your way of doing things.

Ms. Reza, in 2023, the government announced that it would reduce the budgets allocated to consulting firms, pointing to potential savings of $7.2 billion over five years.

This year, the main estimates passed by the House of Commons in June stated that the budgets for consultants for professional and special services would increase by $7 billion.

How is this possible?

[Arianne Reza]

We're currently discussing this matter in the department. I can only speak about our approach at PSPC with regard to consultants.

First, we reduced our dependence on information technology consultants, for example.

That said, my department also includes the entire construction component. For example, there are currently 800 workers just on the construction site here on the Hill. People are building bridges. Of course, the goal is to reduce costs. However, you must understand that costs can't be cut for certain major projects already under way. You can't ask someone to dig a tunnel or build a bridge for half the cost.

We're working hard right now to reduce costs. On that note, I think that Mr. Laporte has some figures to share with you.

[Dominic Laporte]

Thank you, Ms. Reza.

I'll give you this information quickly.

Our budget for PSPC decreased from $3.8 billion to $2.5 billion in 2023‑24, so by $1.1 billion.

As Ms. Reza said, this really includes all professional services, such as architecture or engineering. Basically, this covers all property services projects across Canada. When we look at the big picture, we see that the portion of professional services in sectors such as information technology or benchmarking is quite small.

That's why we really need to look at the big picture and put things into perspective.

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

I'm glad to hear that. This answers part of my second question, but I would still like to add something.

Does the department have the necessary expertise to challenge certain things done by these companies?

Obviously, if there aren't any engineers on hand to review the work and challenge certain data, a company can easily inflate invoices and carry out unnecessary tasks.

I want to know whether this remains an area of expertise within the department.

We often see this happening, even in Quebec's public service, as a result of a lack of resources. If we rely too heavily on these companies, we end up in situations where they're carrying out unnecessary tasks.

[Arianne Reza]

You raised an excellent point.

I would like to add that approximately 500 engineers work in the department, in all fields. I believe that the Department of National Defence has a similar number.

We still have the expertise to verify the results received from a technical standpoint. However, I completely agree that we must make every effort to ensure that we maintain the necessary rigour and the capacity to ask questions and verify what we receive. If we don't, it isn't worth having all this expertise in the department.

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

I understand that the department isn't responsible for digging the hole, of course.

In January 2025, the parliamentary budget officer estimated that using external consultants for information technology services cost from 22% to 25% more than if the public service did the work in-house.

Why do departments prefer external contracts rather than the development of this expertise in-house?

[Arianne Reza]

There are a few aspects to address in order to answer this question.

First, sometimes we just need a certain expertise for six months or a year, and we don't have the funding to hire permanent employees with those skills. That's a major factor.

Second, sometimes we can't find the necessary expertise because the consultants in question don't want to become public servants. This may seem surprising, but it's another challenge that we face.

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

I believe that we must place a high value on the role of public service. It's one of my values.

With regard to the signed contracts, I can point to the $1.75 billion contract awarded to IBM in April 2021 for the benefits delivery modernization programme. In 2024, the cost of this contract rose to $4.4 billion. Where's this money going? How can the costs increase so much? It comes down to dependence on subcontractors. Moreover, we know that IBM was involved in the Phoenix situation.

Why aren't we developing this expertise in the public service, and why haven't we learned more lessons from the Phoenix situation? Not only did we lose expertise, but it caused a serious mess.

Could working conditions be improved to boost the appeal of joining the public service?

[Arianne Reza]

Yes. Quite possibly. We're working with Treasury Board and the information technology industry to see what we can do in these areas. However, there are many challenges. Even if we carry out major projects, the intellectual property often belongs to IBM. It's a bit difficult to find human resources who can work on both sides, but we're doing our best.

We're also considering whether we should do business with suppliers or whether we can set up something within the government.

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

It's also about striking a balance so that taxpayers don't end up paying far more in the long run.

We can also see that increasing the public service budget doesn't necessarily result in more services for the public, especially in the case of direct services. One example that comes to mind is the passport crisis.

My time is up, but I'll come back to this in the next round.

Thank you.

[The Chair, Conservative, John Williamson]

Thank you very much.

I'll begin our second round, which will involve five members asking questions for different times.

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

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

Thank you, Mr. Chair.

Good morning, colleagues.

I want to welcome everyone to your House of Commons.

Lieutenant‑General Prévost, thank you for your outstanding service to Canada, particularly in dangerous missions in Afghanistan, Italy and other places, as well as within NORAD, and for continuing to serve.

The Standing Committee on Public Accounts makes the biggest impact on the wallets of the taxpayers tuning in right now. We've seen some truly disgraceful complacency in recent years. This complacency comes across loud and clear in the Office of the Auditor General's report.

That said, another issue has attracted attention in recent years. This issue is known as the ArriveCAN scandal, where tens of millions of dollars were mismanaged. That's the reality.

Just a few months ago, in June, the House of Commons passed a motion calling for the company responsible, GC Strategies, to repay $64 million.

Where do things stand right now?

[Arianne Reza]

As I said earlier, we aren't able to see where things stand with this motion. We aren't responsible for recovering the $64 million. That responsibility lies with the Canada Border Services Agency. I believe that the agency is working with the RCMP to determine how much it will receive. We're working on recovering about $200,000 through the courts.

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

We're talking about only $198,000, when the majority of MPs elected a few short months ago are demanding the company pay back $64 million.

Why not do everything possible to get that money back? Do you accept the will of parliamentarians, yes or no?