EVIDENCE

Standing Committee on Public Accounts NUMBER 009 1st SESSION 45th PARLIAMENT Thursday, October 9, 2025 Le jeudi 9 octobre 2025 Standing Committee on Public Accounts CANADA [Recorded by Electronic Apparatus] EVIDENCE October 9, 2025 Committee NUMBER 009 NUMBER 009 NUMÉRO 009 09 09 10 2025 2025/10/09 11:00:00 House Of Commons Comité permanent des comptes publics Standing Committee on Public Accounts PACP Chair John Williamson 1 45 PUBLIC PART ONLY -

PARTIE PUBLIQUE SEULEMENT

(1100) [ English ]

The Chair (John Williamson (Saint John—St. Croix, CPC)) :

Thank you for being here. [ Translation ] I call this meeting to order. Welcome to meeting number nine of the House of Commons Standing Committee on Public Accounts. [ English ] 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. [ Translation ] 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. [ English ] 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. (1105) [ Translation ] 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. [ English ] 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 :

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. (1110) [ Translation ] 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. [ English ] 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. [ Translation ] 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 :

Thank you. [ English ] 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. (1115) [ Translation ] 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. [ English ] 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. [ Translation ] 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. [ English ] 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 :

Thank you very much. Lastly, we have Mr. Cory. You have the floor for up to five minutes.

[ Translation ]

Ehren Cory (Chief Executive Officer, Canada Infrastructure Bank) :

Thank you, Mr. Chair. [ English ] 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. [ Translation ] 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. [ English ] 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. (1120) [ Translation ] 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. [ English ] 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 :

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 (Calgary Midnapore, CPC) :

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 :

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?

(1125) 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. [ Translation ] Do you have anything to add, Ms. Poulin?

[ English ]

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 :

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 :

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

[ English ]

Stephanie Kusie :

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

[ English ]

Jean Yip (Scarborough—Agincourt, Lib.) :

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

The Chair :

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 :

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?

(1130) 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.

Stephanie Kusie :

Thank you.

The Chair :

Thank you very much, Ms. Kusie. Up next, Mr. Housefather, you have the floor for six minutes, please.

Anthony Housefather (Mount Royal, Lib.) :

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 :

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.

(1135) Anthony Housefather :

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 :

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. [ Translation ] Mr. Lemire, you have the floor for six minutes

Sébastien Lemire (Abitibi—Témiscamingue, BQ) :

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?

(1140) 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 :

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 :

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 :

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.

(1145) Sébastien Lemire :

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.

[ English ]

The Chair :

Thank you very much. I'll begin our second round, which will involve five members asking questions for different times. [ Translation ] Mr. Deltell, you have the floor for five minutes.

Gérard Deltell (Louis-Saint-Laurent—Akiawenhrahk, CPC) :

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 :

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?

Dominic Laporte :

At PSPC, we consulted our legal services to find out what could be recovered within the limits of our scope. Even if there is a desire to recover funds, you know that, legally speaking, it takes the necessary authority and resources to initiate legal proceedings and bring a case before a court. Our role is still limited because, as the contracting authority, we aren't the organization that received the services in question. We recovered the amounts Ms. Poulin mentioned because, in this case, it fell within our jurisdiction. As for the rest, that's up to the client. Were the services received as agreed?

Did the company fail in its obligation to provide services? That's what can give rise to a cause of action in law or recovery. As a department, we aren't in a position to pursue recovery. It's up to the client who received the services, in this case the Canada Border Services Agency, to determine whether there are grounds for legal action or recovery.

Gérard Deltell :

The $64 million has been very poorly spent. This money comes from taxpayers' pockets, so the least we can do is act as quickly as possible, especially given that a newly elected Parliament is demanding repayment of that amount. The government must take appropriate action for the sake of taxpayers' wallets. When it comes to taxpayers' money, the Auditor General of Canada's report on McKinsey is scathing. Nine out of ten departments and eight out of ten Crown corporations didn't adopt the appropriate practices we expect for the management of public funds when it comes to contracts.

The report is scathing and contains some very harsh words. Procurement policies weren't followed, and there was a failure to ensure best value for taxpayer dollars. The process was often non-competitive and justification was lacking. There was no confirmation that the products had been delivered as agreed. That's what is written in black and white, and I could go on and on. Ms. Beck, just two days ago, you gave some very interesting testimony regarding the sound management of public funds. How do you feel about such a scathing report?

The report we're examining today may not concern your department alone, but it does concern it to a large extent. How do you explain what happened in your department?

(1150) Stefanie Beck :

Not only did this come out in the Auditor General's report, but our internal report showed much the same thing with regard to some of our contracts. Furthermore, we took into account what the procurement ombud said about those same services. It's very important for us to take this seriously and make changes. As you know, a lot of funding is allocated to us, so we have put everything possible in place to prevent this from happening again in the future.

Gérard Deltell :

All right, but how did it happen? How come people turned a blind eye for so many years?

Stefanie Beck :

I wouldn't say people turned a blind eye. I'm convinced it can be explained by the conditions that existed at that time. People at the department were undoubtedly under significant pressure to fulfill the commitments. We looked at which mechanisms were available to allow us to award contracts and we chose what was available.

The Chair :

Thank you very much, Mr. Deltell. [ English ] Up next is Ms. Yip for five minutes.

Jean Yip :

Thank you, Chair. Welcome back. Many of you have been here recently. Ms. Beck, we heard from your department last year about the waiving of the security clearance. What updates do you have since our last meeting on the issue?

Stefanie Beck :

We think this is very important because of what's coming. The requirement is to have a very strong basis of compliance, a fraud framework in place and robust conflict of interest measures. Indeed, you mentioned security. We have spent a lot of time and money investing in increased levels of security clearance for our people, our colleagues around town and the facilities themselves.

Between the work we've done to establish a greater oversight and compliance fraud framework—with regular interventions at senior levels—and a multi-layered approach to conflict of interest determination, prevention and resolution, we think we're in a much better position right now. As I said earlier, we greatly value the interventions by the Auditor General and, indeed, this committee.

Jean Yip :

In your opening statement, you mentioned mandatory screening and proactive screening. What is the difference?

Stefanie Beck :

You know, it's unfortunate that we have come to this place. What we are doing now, in every letter of offer, is requiring it. It's part of the onboarding process for every new employee and every staffing action. Even if you're just changing jobs within the department, you need to go through a questionnaire and tell us if you think there is anything that could possibly be a conflict of interest. One single “yes” answer means you need to fill out a much more in-depth form, which we will analyze.

Then we will provide a decision on whether there is some mitigation required, whether whatever the thing is isn't a problem, or whether in fact this means you cannot take up the new position. It's much more rigorous and much more deliberate.

Jean Yip :

Sometimes the department will procure goods and services through a non-competitive process. Can you explain this non-competitive process and why it is used?

Stefanie Beck :

It would very much depend on the need. Maybe one good example is that when we have an urgent military requirement and a very specific need, for instance, for our troops that are forward-deployed in Latvia, we would go through a separate process that identifies that we need this particular piece of equipment, working, of course, closely with our colleagues at PSPC to determine a supplier and to go in and procure that particular item. Often that would be under a national security exemption. That would probably be the most likely case when we would use that sort of process.

Jean Yip :

What percentage of contracts use a non-competitive format?

Stefanie Beck :

I don't have that number.

Arianne Reza: I do.

Stefanie Beck: Do you really? Okay.

Arianne Reza :

It's something that we track very carefully, because we are always looking at competition. PSPC does about 20% to 25% of the procurement in the federal system directly, and I think we're at about 80%—79% to 80% is competitive. We also look at the value.

Jean Yip :

Ms. Beck, you were saying that all management plans have been fully implemented. What does that entail?

(1155) Stefanie Beck :

Of course, it varies, depending on which report has been provided. For instance, one of the issues that has been flagged regularly and not just in this context is documentation, proper information management, and the ability for an auditor general or ombud to be able to go back years later and ascertain how we did this and if it was properly documented. It is not just retaining the pieces of paper or the decision-making process but also justifying it in a way that's understandable many years later. This is what we have focused on in particular: making sure that we have way better information management systems.

The training that has been implemented means that those who are writing up the statements of work and writing up the justifications are writing them in a way that's actually going to be intelligible to someone who is coming to look at them several years later. It's a range of different things.

The Chair :

You have time for a very short question, or, if you want, you can hold it for later.

Jean Yip :

Ms. Reza, the organizations did not receive deliverables listed in the contract for 18% out of the contracts. Did the organizations ever receive any cost savings from having the deliverable monies returned back?

Arianne Reza :

That would be best addressed to the actual client departments or those who did the contracting. We have no visibility on that.

The Chair :

Thank you very much. [ Translation ] I'm giving Mr. Lemire the floor again for two and a half minutes.

Sébastien Lemire :

Thank you, Mr. Chair. Ms. Reza, under the benefits delivery modernization program, how many contracts were awarded to outside consulting firms to develop this platform?

Arianne Reza :

I don't know if my colleagues can respond.

Dominic Laporte :

We don't have this information. However, it's something we could provide to the committee, if it so wishes.

Sébastien Lemire :

Yes, please. We know that a $1.75 billion contract was signed with IBM in April 2021, as I mentioned earlier. In 2024, this contract was valued at $4.4 billion. I would also like to obtain information on this matter. Who are the subcontractors for this project, given that IBM divested itself of its software in 2023? You can provide this information to the committee at a later date. In my opinion, intellectual property is of particular importance. I think these IT projects should be developed further within the public service.

I'd like to give the example of Quebec and its dependence on the IT firm SAP for the SAAQclic project. We're also seeing an explosion in IT service costs at the federal level. However, the federal government doesn't seem to be applying the same rigour as the Quebec government, which has launched a commission of inquiry on the subject. There isn't the same sense of urgency at the federal level. However, when we do the math, we see that the cost of the Benefits Delivery Modernization program is equivalent to the cost of four SAAQclic projects. In concrete terms, it's very expensive.

The Office of the Auditor General of Canada had pointed out in one of its reports that the numerous IT systems were deficient. There was also the example of the Department of Public Safety, which is unable to determine where the money in the first nations and Inuit policing program is being spent. The benefits delivery modernization system will likely cost more than $5 billion. Why didn't the department carry out a digital transformation, or even manage costs within the department? Where's the department's expertise when it comes to IT service contracts?

Arianne Reza :

You could put that question to the departments with this responsibility. I don't think PSPC has any responsibilities with relation to this project. That said, I'd like to come back to a truly key point, in my opinion, and which was also mentioned in the audit: We must work to better predict contract costs.

Sébastien Lemire :

I completely agree.

Arianne Reza :

That's really a trend I'm seeing now. A number of factors make it difficult to predict costs. For example, the fact that a project can span two or three years creates economic pressure. Even if the project is in US dollars or involves other partners, it changes things. We need to look, then, at ways to minimize the impacts and determine what measures to take to better predict project costs. I think it'll help us avoid such cost increases.

Sébastien Lemire :

I completely agree. If I may, Mr. Chair, I'd ask the witnesses to provide us with written answers to my next questions, instead of giving me an oral response. Ms. Reza, I'd like you to provide the committee with the list of current IT projects detailing their costs and estimating projected expenditures. I'd also like your respective departments to provide us in writing with the amounts allocated to professional services and special services, and indicate whether there was an increase in these services over the past year. Also, I think it's in the public interest to know if you're still doing business with McKinsey.

(1200) Arianne Reza :

Treasury Board would have to be contacted because we don't have access to all that information. However, we'll figure out how to get it.

Sébastien Lemire :

Thank you very much.

The Chair :

Thank you very much, Mr. Lemire. [ English ] We are turning now to our next member. Mr. Kuruc, you have the floor for five minutes, please.

Ned Kuruc (Hamilton East—Stoney Creek, CPC) :

Thank you very much. Welcome to all of the witnesses today. I'll start with Mr. Hayes. Based on the report, is it true that departments were tailoring their competitive contract procurement processes to suit McKinsey?

Andrew Hayes :

We did find a few instances where we were concerned that there were procurement strategies adopted in order to obtain services from McKinsey. For example, we talked about a situation where departments waited for the national master standing offer to be put in place, which took about a year, without any justification for why they waited that long. Perceptions will be raised when situations like that happen.

Ned Kuruc :

Would you agree that that would predetermine the outcome of the contract bid?

Andrew Hayes :

In certain cases, we're talking about non-competitive contracts. Those would be contracts that were intended to be sent to McKinsey in the first place, but if a contracting strategy decision were made to wait or make requirements so strict that only one bidder could apply, that would raise concerns about favouritism.

Ned Kuruc :

In your report, did you find that in any of the competitive contract bids?

Andrew Hayes :

I'm going to turn to Mr. Swales on that. I think we saw some situations where there were requirements that were identified as being a bit too strict, but changes weren't made, and the reasons for not making changes weren't documented. I'll see if Mr. Swales has anything he wants to add.

Nicholas Swales (Principal, Office of the Auditor General) :

Thank you. There were two contracts where we saw that there was only a single bidder, which means that those were competitive structures. The concern was that there seemed to be some restrictive nature to the criteria that may have contributed to there being only one bid.

Ned Kuruc :

Okay. You said there was only one bid. In that finding, was that because the goalposts were moved by McKinsey or by the...? In your findings, why was there only one bid on that?

Nicholas Swales :

The issue we raised was that.... We certainly did not see any instances of McKinsey being involved in establishing the criteria for any of the contracts we looked at. That was one scenario we did not see. The issue here was that other bidders were raising concerns about the restrictiveness of the criteria, and those concerns were not properly addressed, in our view, so that certainly leaves the impression that those provisions were better suited to McKinsey than the other competitors.

Ned Kuruc :

Was what you just said there in the case of the one bid on that contract?

Nicholas Swales :

Yes. These were contracts for the CBSA—the Border Services Agency—and another one for Immigration, Refugees and Citizenship Canada.

Ned Kuruc :

Whenever we get into the realm of what could be predetermined for the outcome of a contract bid, we walk the fine line of contract bid rigging. In that case, did you see any of that?

Andrew Hayes :

We're not in a position to conclude whether or not there were contracts that were bid rigged or anything like that. What we raise in these reports are concerns about the justifications and the processes followed. The findings we have signalled here really point to the importance of departments identifying their evaluation criteria and their requirements and documenting why suppliers are chosen. In the case of situations where bidders raise concerns about the restrictiveness of the requirements, it's important for the departments to consider that and document why they make changes or why they don't make changes.

Ned Kuruc :

Thank you. Ms. Reza, based on the questions I've just outlined for Mr. Hayes and Mr. Swales, in your opinion, was there any walking of the fine line of contract bid rigging on that one contract?

(1205) Arianne Reza :

First off, just by way of context, we've indicated that there were 97 contracts totalling $204 million, both for Crowns and for departments. I'll be honest. At PSPC, we did 24 of the contracts. Nineteen of them were through the national standing offer, which was non-competitive. The majority were there. It's hard for me, because I'm not sure whether or not we're the contract authority on that. In general, I would say this: It goes back to that challenge function rule—

The Chair :

Thank you. That is your time. I'm sorry, Ms. Reza. Were you still speaking? Pardon me.

Arianne Reza :

I was going to say that I think that's really important, that challenge function on the requirements: Is it reasonable or not reasonable? They—the clients—set the technical requirements. Does the plane fly? Does it go under water? We need to challenge whether or not that's a reasonable bandwidth, so that's where I think some of the grey happens.

The Chair :

Thank you very much. Ms. Tesser Derksen, you have the floor for five minutes, please.

Kristina Tesser Derksen (Milton East—Halton Hills South, Lib.) :

Thank you, Mr. Chair. Thanks to the witnesses. Through you, Mr. Chair, I'll ask some questions just to follow up on my colleague Mr. Kuruc's questions. We're talking a bit about bidders raising concerns about the request for bids. I'm curious to know a bit more about how much deference a department owes to bidders. If a bidder is critiquing the restrictiveness of a particular proposal, how much time, staff, energy and effort do you put into addressing that before it becomes, for example, unreasonable?

Arianne Reza :

I'll just talk a bit about process. Usually at PSPC we do the big procurements, not the small ones. Because they're big and they're an economic driver for Canada, we have a tendency to do an RFI to look at the market assessment beforehand. We try to build in the questions that we want to ask, so that we're able to formulate whether it's going to be pre-qualified, a down-select or an RFP. That gives a bidder many opportunities to weigh in with their insights and their views. Often, we do it one-on-one in confidentiality, because there's commercially sensitive information when it's shared.

We try to work with the client, as well as the supplier, to say, “You know what? This is too restrictive.” One of the indicators at PSPC is that competition is the best sunshine. We want to have competitive bids, but we have a problem.

One is that if we get only one bidder, we're talking through what we're doing now to make sure we get more bidders, and we try to work with the client departments to say, “If you loosen this—if you adjust this—you're going to get better competition, which is going to drive better value.” One thing that I think is important for Canadians and for parliamentarians to be aware of is that we're finding it hard to attract people to bid. Suppliers are getting antsy, and I think that's an important piece too. We want to make sure that the federal ecosystem is seen as having integrity and competition.

These are areas where that restrictive nature needs to be challenged. You probably have another question, but did you want to address this, Dominic?

Dominic Laporte :

I just wanted to say also that if we have an RFP, a request for proposals, for example, and one of the bidders realizes this is too restrictive, there's a Q and A process by which they can raise that and bring that to the contracting officer's attention. Oftentimes, adjustments will be made by talking to the client and asking, “Well, do you absolutely need that specific requirement?” There is this process that is in place, so we do interact with bidders, but it has to be within the proper framework of the RFP or, as mentioned by DM Reza, in the context of a request for information.

Kristina Tesser Derksen :

I guess that begs the question, then, of how far you go in the opposite direction. You have to be careful that you're not compromising the integrity of the work you're trying to do by loosening the restrictions too much. Is that a fear or something you consider when you're entering these negotiations?

Arianne Reza :

It 100% is, because there is a requirement. The client departments need to buy something that does X. I'm thinking of a public safety requirement right now. Is it too restrictive? What can I do to change it? They were able to demonstrate that they had to meet these requirements and fulfill their public safety responsibilities. It can be a bit expanded but other times not expanded. They're very technical. We buy goods, construction and services, and they have to meet a technical level, which sometimes prohibits expansiveness.

The Chair :

You have a minute and a half left.

Kristina Tesser Derksen :

Excellent. I have a question for the Deputy Auditor General. This is something else that my colleague Mr. Kuruc brought up. With respect to certain departments that were seeking benchmarking services that may have been available under other national master standing offers, your report states that the Auditor General was unclear why those departments chose to wait rather than use another procurement option. The use of the word “may” there raises a bit of curiosity. Do you have a sense of how likely the availability of other, better options actually was?

(1210) Andrew Hayes :

Thank you. I don't have that information for you. That's partly because what we expected to see was documentation for why they did in fact wait. They identified a need, waited a year and used this vehicle. I think what we're really after with this is that all of the decisions being made in a procurement process should be documented. I recognize that, in the circumstance we're talking about, there was a strategic decision and there could be other reasons. We wouldn't have been expecting a mountain of evidence to show why a strategic decision like this was made, but we didn't see anything to show why.

The Chair :

Thank you. That was your time. I am going to begin our third and last round, which will consist of, again, five members posing questions. Mr. Stevenson, you'll start off for five minutes.

William Stevenson (Yellowhead, CPC) :

Thank you. I want to boil it down to a little straightforward part. I'll start with Mr. Hayes. I think I know the answers, but I want to make sure I go there before I go to Ms. Reza. When you look at your audit, every department had rules that were set out and checklists on how to deal with outside contracts. Is that correct?

Andrew Hayes :

That's correct. Every federal department is subject to the same regulations and policies.

William Stevenson :

That's good. In your determination, there were a bunch of audits that found.... I've forgotten the numbers exactly, whether it's 10 or 13 of 17. A bunch of the contracts did not follow it. Now, in your audit, were you able to determine the reason, whether it was lack of knowledge among the people enforcing it in the departments or because they were told to get the job done and not worry about the rules? Could you determine the reason they were not followed?

Andrew Hayes :

Well, in some cases, if we're talking about decisions to go with particular procurement strategies, there can be a variety of reasons. One thing we raised in the report was about the end of the procurement process. Why did a bidder get asked to submit an invoice before work was done? The drivers on those kinds of decisions could be different fiscal year-ends, for example—trying to get amounts in before the end of the year. Really, what I would say to you on this point is that it is a critical question—identifying why rules aren't being followed. What is important is identifying where efficiencies can happen.

As the Auditor General and I have said many times, we don't necessarily need more rules. We need to follow the right rules that will—

William Stevenson :

A good portion of that is.... It's more that the documentation doesn't say, either way, what the reason was. You don't have, in your audit, an ability to determine what the reason was either way, whether it was a lack of enforcement or going around it. You cannot tell that.

Andrew Hayes :

I can't, no. I can't tell you there were particular reasons. In fact, if we did see that evidence, we would have noted that in our report.

William Stevenson :

Okay. Ms. Reza, you mentioned earlier that it seemed that, going back to your challenge function from PSPC, you do not necessarily have the ability to tell the departments, or to enforce upon the departments...whether they have followed the rules or have gone around the rules. Not having the documentation, you don't necessarily have the ability to say, “Departments, you needed this,” because you're looking at this after the fact. Is that correct?

Arianne Reza :

That's mostly correct. If I could just add one footnote, I think that would be helpful, and I'm going to take us into the world of procurement. Bids come in, and the bids get separated. The financial aspects to the bids stay within PSPC, and they do an evaluation. The technical bids go to the client departments, and they do an evaluation.

Each department has its own evaluation teams and its own paperwork, and I think, up until recently, the bids would come back together, but the quality of the paperwork to be able to document the decision—if everybody filled out their conflicts of interest and if everybody had the security—those were put together in a paper folder. What's changed? We moved to e-procurement. We put in so many checklists. We put in a director of compliance, who is reviewing every file for completion.

To get to your point, we would be able to tell better what the reason was that the rules were not followed or if they were not followed.

(1215) William Stevenson :

One question came to me from what Ms. Beck said. It seemed to me that, in this process, there was self-reporting, and the individuals had to fill out the checklist to say, “I think I might have a reason that there might be a conflict.” However, on the other end of it, there's no positive end from the department to say, “I think you have one because of this.” It's all based on the individuals and not the other way around. Is that correct? There isn't necessarily the oversight from the department. It's all reliant on somebody else self-reporting.

Stefanie Beck :

We can probably both answer, but I guess I would distinguish between someone self-declaring for a conflict of interest versus something where we're talking about compliance within a fraud framework, so it's trust but verify when it's personal. You're explaining— We can probably both answer, but I guess I would distinguish between someone self-declaring for a conflict of interest versus something where we're talking about compliance within a fraud framework, so it's trust but verify when it's personal. You're explaining—

William Stevenson :

Okay, you didn't say that part before. You just said the self—

The Chair :

Mr. Stevenson, your time has expired. I'm going to allow Ms. Beck and then Ms. Reza to answer, and then I'll go to Mr. Osborne.

Stefanie Beck :

That would be one aspect of it, if I'm asking you whether you have a conflict of interest. I don't know if you have another business on the side. You need to be able to tell me that. We can check, and we would if there was something that looked suspicious. More importantly, I think for what we're talking about right now, in the process that we're conducting—let's say that we're in the process of procuring something—if a form is not filled out properly, or if a

section of the form is incorrectly signed, we can see that. We have layers of supervisors who will check, and we have risk management and fraud oversight committees, so it's a bit different.

Arianne Reza :

It's a mini triage. You have a code of values and ethics. Each employee must adhere to it. On top of that, if you're part of the procurement process, madame, for example, is responsible for oversight for almost the whole government, in terms of looking for fraud. It's a whole combination of how to triage it, but we need to document those steps better.

The Chair :

Thank you very much. Up next, we have Mr. Osborne for five minutes.

Tom Osborne (Cape Spear, Lib.) :

Thank you, Mr. Chair. This question is for both Ms. Beck and Ms. Reza. We are in a changing geopolitical world. If you're watching the weather, you can see it's about to change. How do you balance protecting national security, our sovereignty, with your ability to ensure that procurement is fair, open and transparent?

Arianne Reza :

We can talk about it from two different aspects. The Prime Minister recently announced the buy Canada approach, which will be looking to make sure that Canadian suppliers have opportunities to compete, whether it's through Canadian content, through Canadian inputs or through increased SMEs. We're looking to build that ecosystem, and to do that, we need to be stable in all those areas we just described, whether it's making sure the rules are adhered to, or whether it's the challenge function in how we buy things. I didn't manage my fourth frame, but that's one that I think about often in terms of procurement.

The Prime Minister has announced the new Defence Investment Agency, which is really designed to meet the moment in terms of looking at the ecosystem of Canadian military supplies as well as some of the foreign military sales. Did you want to add anything?

Stefanie Beck :

I think it goes to the partnership that's required across the whole of government to be able to effectively deliver quickly, yes, but manage risk at the same time. As Ms. Reza was saying, most of these procurements in the future will still be competitive, even though we know there is an urgent need for much of the equipment for the Canadian Armed Forces. We still want to make sure there are lots of opportunities for Canadian businesses, as well as, of course, the broader society, to be able to benefit economically. It's working through what defence procurement strategy will achieve, and it's most likely to achieve both of those goals at the same time.

(1220) Tom Osborne :

Ms. Reza, you talked a little earlier to my colleague, Mr. Stevenson, about keeping the financial aspect of a bid away from the technical aspect. Could you speak about that a little more? I'm just wondering how you balance the amount of a procurement bid versus the technical aspect of a procurement bid, and whether or not that is standard across the board.

Arianne Reza :

It's an excellent question. There's a range. It depends on what we're buying in the commodity. Are we more concerned about the best price? Is something a common commodity that we're really looking just to buy and procure, or is this something very bespoke in a niche market where we need the expertise and we may weigh more towards the technical? We keep them separate in terms of additional checks and balances for integrity, so that there's always a chance for them to come together, and nobody knows the order of the bids. Did you want to add anything on this?

Dominic Laporte :

No, I fully agree with what the DM said. In terms of the split, for example, what is very common is to see a split 70% technical to 30% price, but if it is more of a commodity type of good, then we're going to give more weight to the pricing. It does vary, and there is no set standard. This is something that is agreed on with the client depending on what is most important: Is it cost driven, or is it basically quality driven?

Arianne Reza :

It goes back as being another check and balance; it's a challenge function. We have to agree beforehand in terms of the procurement strategy what is going to be the individual weight. That also helps manage issues and keeps it more transparent. The suppliers know the ratings of the bid as they go in.

Tom Osborne :

Thank you for that answer. Mr. Laporte, you talked earlier about measures that were put in place, particularly by Treasury Board. Mr. Hayes may want to weigh in on this a little as well. Could you go a little deeper into what the new requirements are? I know the Auditor General said there are rules in place and it's just that they weren't always followed. There are the new measures put in place by Treasury Board to create clarity of process and ensure fair competitiveness, and also so that we know we are attracting competitive bids and it's attractive to those who are bidding.

Dominic Laporte :

I'll start with PSPC, which has put lots of measures in place. DM Reza spoke about the quality assurance and recourse compliance office. This is key, I think, to the issue that was discussed. How can we ensure, for example, that in the future we're able to go back to the record and see exactly what happened from the procurement strategy standpoint? We have a team. We have a senior director who's now in charge of that. They reviewed 1,600 files. We want to make sure that directors are also talking to their procurement office, which means always looking at them in a constructive way. What is missing?

What was the reason we didn't have that element on file? How can we make sure we remedy that in the future? This group has been quite impressive in terms of the work that has been done on that front. I would say also there is a lot of training. In one module, for example, even though competition is the norm, we were addressing the non-competitive process and the exact situations this should be reserved for. We also spoke about the new measure that we put in place on July 1. We've put in lots of new measures to put in more robustness when it comes to professional services.

If a client wants to put in place a contract for professional services of more than $20 million, they need to seek ADM approval. That was oftentimes left to the manager. Maybe the DG or ADM had no oversight that the department was about to put a contract in place of more than $20 million. This is an example of the measure that has been put in place. We also wanted to make sure we were limiting the value of these contracts. It's now limited to a certain amount. We spoke about the situation where we have only one bidder.

If, in the future, let's say, we run a competitive process, and there's only one bidder, that again will trigger something. We're going to have to validate with the ADM of the client department just to confirm that the technical specifications were not too restrictive in that case. Those are examples of procedures that have been put in place by PSPC to make sure we've learned from the findings of the OAG and the OPO. On top of that, we're working closely with TBS, because we can influence the procurement process as a contracting authority.

Oftentimes, lots of the decisions, as explained by DM Reza, rest with the business owner when defining the requirement, so TBS has put measures in place. For example, if it's an IT contract, they need to check with the CIO to make sure they don't have the in-house resources or expertise to do that internally. There are lots of checks and balances that have been put in place. For a new manager now to put in place a contract for professional services, they need to decide themselves that they don't have any staff who have the ability to do that.

This is quite positive in terms of looking at the collaboration that took place between PSPC and TBS to establish a new framework that is much more robust when it comes to procuring professional services.

(1225) The Chair :

Thank you. Mr. Hayes, I think you have a comment you'd like to make, which I'll allow.

Andrew Hayes :

Thank you very much, Mr. Chair. I'll make this brief. In response to your question, the only thing I would add is that with new rules and requirements for processes and a pressure to move quickly, it is important for everyone to understand why the rules are there and how they should be applied in a day-to-day way, but also, as new organizations are coming into the sphere, it's important they be aware of the accountability and their requirements. We will be in to audit the new organization. We'll be looking at how defence procurement is going to be happening.

I would just encourage everybody to look at the reasons for some of the failures that we found. I also want to mention that the strength of the internal audit functions in all of these departments and by the comptroller general is also a very important tool for improvement. Thank you.

[ Translation ]

The Chair :

Thank you very much. Mr. Lemire for two and a half minutes. This will be your last turn.

Sébastien Lemire :

Thank you, Mr. Chair. I'd like to turn first to Mr. Cory, from the Canada Infrastructure Bank. Incidentally, I'd like to point out that, normally, in the meeting room, we have another screen we use to see the witnesses appearing by video conference. The fact that we don't have it today might be the reason why no one's asking Mr. Cory any questions. Mr. Cory, I'm going to be a little boring, but I don't have enough speaking time to allow you to give a verbal response to my question. For that reason, I'd ask you to provide a written response.

Could you send me your vision for regional economic development and describe what you consider to be a rural or remote region? I note, based on what I see on the map in front of me, that many of the Canada Infrastructure Bank's projects are only being carried out in large cities. I estimate that a region such as Abitibi-Témiscamingue, or even northeastern Ontario, accounts for at least 2% to 5% of Canada's GDP. Yet we don't feel that the Canada Infrastructure Bank is present in the regions. I believe, however, that this would be to its advantage. I'm running out of time and I'm sorry about that.

If you could provide that answer in writing to the committee, it would be appreciated. I'd like to also ask Mr. Laporte a question I had implied.

The Chair :

Mr. Lemire, I'd like to ask Mr. Cory a question. I have stopped the clock to do so. Mr. Cory, are you willing to provide a written response to Mr. Lemire's question?

[ English ]

Ehren Cory :

Thank you, Mr. Chair. Yes, if the committee so wishes, of course we can. I would just say that the CIB does have projects in every province and territory. We've worked really hard to develop programs, like our broadband for remote communities, that reach all corners of the country. We have projects—wind power, broadband, etc.—across the country. I am happy to share.

The Chair :

Thank you. We look forward to that fulsome response. [ Translation ] Mr. Lemire, I'm giving you back your 46 seconds.

Sébastien Lemire :

Thank you. I really appreciate it. I'll get back to my question. Do you still have contracts with McKinsey, particularly at PSPC?

Dominic Laporte :

No. We checked and, since 2023, there haven't been any contracts with this firm for which PSPC would act as a joint authority or as a department.

Sébastien Lemire :

To my knowledge, PSPC is also responsible to some extent for the government's global digital transformation. We understand that your department has responsibilities, but your oversight role isn't clear to me. In a way, it limits the collaborative and complementary work being done. What I see is that many people are working in silos. This limits opportunities to achieve economies of scale and to create a role within the public service. In short, could you clarify PSPC's role when it comes to contracting? Could there not be better synergy between departments under your leadership?

(1230) Dominic Laporte :

I'd like to point out that we don't work in silos. We work closely with all client departments. When we implement procurement tools, it's precisely so that all departments can use them to achieve economies of scale. We're seeking to transform government contracts and our procurement process. It's really by working together with all the agencies involved in digital technology that we'll achieve this. The perception you're describing doesn't correspond to the reality we experience every day in terms of procurement.

Sébastien Lemire :

I'm glad to hear that. That perception came from answers I received to a question I'd asked in more general terms. Some people replied that it wasn't like that in their department. I certainly hope the reality is as you say. I'd also like to address the issue of conflict of interest procedures, because it has been raised. In the case of McKinsey, the conflict of interest didn't necessarily seem to be the problem.

Rather, the problem was that government departments awarded contract after contract to McKinsey, which meant that its influence over the actions of the various departments was ultimately almost as strong as that of the government itself. How can we ensure that, going forward, a firm will no longer be able to have as much influence or as many contracts within the various departments? People from a firm like that have an overall view of things, and if we don't have the same view within government, things may end up costing more, or we may end up being too dependent on a firm like that.

Dominic Laporte :

This ties in with what Ms. Reza mentioned, namely competition. When we ensure that we have competitive processes in place, we have more bidders. So that's what we are trying to do. With regard to McKinsey, even though the amounts involved were still quite significant, it wasn't the largest player in these contracts. This firm had 13% of the contracts that were awarded under the heading of professional services. Other qualified firms also received contracts.

Sébastien Lemire :

My time has expired, but I'd like to conclude with one last point. You mentioned the importance of placing greater emphasis on competitive contracts. I encourage your vision, in order to promote transparency and maximize public funds, of course.

[ English ]

The Chair :

Thank you very much. Next, we have Ms. Kusie for five minutes.

Stephanie Kusie :

Thank you, Chair. Mr. Hayes, your office's report on professional services speaks to a clear disregard for the rules, notably from McKinsey. This is something that we have also seen repeated in other reports—specifically the June 2025 report on GC Strategies. Why do you think federal departments and Crown corporations have not felt the need to comply with the rules?

Andrew Hayes :

Of course, our audit of McKinsey and our audit of the professional services contracts to GC Strategies covered the same period, so it's not surprising to us that we would've found similar weaknesses. In fairness, I think it's possible that those exist elsewhere in the public service as well.

What we're hoping comes from the recommendations that we made in previous reports, the one that we make here in terms of conflict of interest, and the ones that have been made by the internal audit shops and the comptroller general, is that by strengthening controls and implementing stronger documentation about why contracts are being put in place, why public servants cannot do it and a contract is needed, why the selection of a particular contractor has been made and, at the end of the day, the deliverables that have been achieved, we will see better processes, better approaches and better value for money.

Stephanie Kusie :

Do you think PSPC, under their mandate as the central purchasing and contracting agent of the federal government, should exercise more push-back in power when departments try to evade contracting rules or manipulate the rules?

Andrew Hayes :

I was really encouraged to hear the response from the deputy minister earlier about how our audit has supported the experts in her organization. I want to emphasize that there are experts in her organization to push back and identify and support departments in the proper application of rules and also in the strategies they select for contracting. That's a very positive outcome. I'm thankful we were able to support that.

Stephanie Kusie :

Your report takes specific aim at chains of non-competitive contracts. Do you believe the government currently has the tools to address issues found under these chains of contracts?

Andrew Hayes :

What we expect is that the government will follow its policies to support competitive and transparent procurements. In terms of the chains that we found, a decision was made, in some cases non-competitively and in other cases competitively, to issue a first contract. What should happen after that is a similar assessment to that of whether or not competitive procurement should be applied to open it up to other suppliers. As we've heard from some of the other witnesses, that's the way you get to the best value for money for Canadians.

(1235) Stephanie Kusie :

Across 85% of departments and Crown corporations reviewed for this audit, you found frequent disregard for one or multiple stems of procurement rules. How is it possible that this level of non-compliance is so persistent across our federal government?

Andrew Hayes :

Again, that takes us back to the pervasiveness in our findings in both this and the GC Strategies audit of areas that can be improved. I'm hopeful that with the additional attention on both the procurement process and conflict of interest requirements—I want to highlight the importance of proactivity with conflict of interest declarations specific to procurement—we will find tighter procurement processes and more transparency within them.

Stephanie Kusie :

After completing these audits, who do you ultimately view as accountable for ensuring that the rules are followed? Would it be the minister?

Andrew Hayes :

Every deputy minister and every chief executive officer of a Crown corporation is responsible for making sure procurement processes are followed in their organizations and that they can be accountable for the spending of taxpayer money.

Stephanie Kusie :

I'll cede my time to Mr. Kuruc. Thank you.

Ned Kuruc :

Thank you. Ms. Reza, of the $64 million that was awarded to GC Strategies, how much did you and the CBSA determine was stolen from taxpayers through overbilling and fraud?

Arianne Reza :

Again, on the CBSA aspect of it, I think CBSA is working through it or have indicated what they're going to be doing with the RCMP. I don't have visibility on the invoices.

Ned Kuruc :

Just to make it clear, on November 6 you said you were going to help the CBSA go through invoices to see if there was any overbilling and fraud.

Arianne Reza :

We've made the active offer to help them. I don't know, Catherine, if you have anything to add in terms of—

Ned Kuruc :

I will ask this, then, if you guys don't know: Has your new minister— Minister Lightbound —asked PSPC to comply with the House's motion to get the taxpayers' money back?

The Chair :

Thank you, Mr. Kuruc. Your time is up, but I will allow a response to this before we go to the next member.

Arianne Reza :

The minister has been briefed on ArriveCAN in general. We have not gone through the motion.

Ned Kuruc :

Thank you.

The Chair :

Thank you. Now we're turning to Mr. Housefather. [ Translation ] This will be the last round of questions.

[ English ]

Anthony Housefather :

Thank you very much, Mr. Chair. Again, coming back to this issue, regardless of whether the House adopted a motion or not saying that $64 million should be recovered, if there's no legal basis to recover monies that the House demands to be recovered, I don't know how the Government of Canada would sue. There are some monies, perhaps, within the $64 million that might be recoverable once PSPC and CBSA go through this, but of course the whole $64 million is not recoverable because some of that money was clearly paid to contractors of GC Strategies. Again, Ms. Reza, to come back to my question, has any contractor of GC Strategies ever approached the government to say they were not paid?

Arianne Reza :

I don't believe so. I am thinking about the one that came in GC Strategies in the initial...but so far, no sub has come to us with that information, with the exception of a small company that raised the issues and came to OGGO.

Anthony Housefather :

Right, and just so that I understand, we make legal claims from the Government of Canada when Government of Canada attorneys actually believe the money was improperly taken and should be recovered. Is that correct, on a general basis?

Arianne Reza :

Yes.

Anthony Housefather :

Regardless of a House motion that is adopted, if the lawyers from the government believe there is no legal basis for claiming the full amount of $64 million, we wouldn't make a frivolous claim before the courts. Would that be correct?

Arianne Reza :

That is correct.

Anthony Housefather :

Thank you. To come back to defence, I want to ask Lieutenant-General Prévost, who hasn't had much of a chance to intervene today.... There have been a number of external reports dealing with DND contracts, compliance and conduct. I'm just wondering what DND has been doing to go through the reports and improve compliance and conduct. Can you talk also about what you're doing to monitor things as they go, as you take the recommendations and try to improve things?

(1240) Paul Prévost (Chief, Professional Conduct and Culture, Department of National Defence) :

I take the question to be twofold here. I think some of the questions were more about compliance with the procurement process, which I think DM Beck has answered already. On everything that's been going on, we obviously take the stewardship of public funds very seriously. As the ADM responsible for professional conduct and ethics in the department, accountability and integrity are things that are near to my heart. If the question has to do with the work we've done in professional conduct and culture using McKinsey, Mr. Chair, if time allows, I'll set up a bit of context on why we leverage McKinsey for contracts.

I'm the chief of professional conduct and culture. My organization was stood up in spring 2021 in the wake of a series of serious allegations of sexual misconduct. The institution was stood up that summer, with only 11 people, and at the head was General Carignan, who is now our chief of the defence staff. She was the first leader of that organization for three years, with only 11 people to look at a crisis we had never seen before, a crisis of magnitude and a problem we didn't understand very well, though there had been various reports before.

Something we haven't discussed too much today is that sometimes we leverage outside contractors when we stand up an organization and don't have the expertise for the problem we're dealing with or the capacity to deal with it. With only 11 people, General Carignan had the mission to, one, stand up an organization—which has now grown to 400 people—to look at conduct and culture, but also the expertise, which we didn't have. We didn't have that expertise and couldn't find much on military culture among academic stakeholders. This was the reason we turned to outside firms to help us out with this.

McKinsey, as was mentioned many times, is part of an NMSO, a national master standing offer. We understood, from its previous work in proprietary benchmarking for the private and public sectors, that it was a good contractor to start our work. Our first two contracts came during that summer. If you recall, at the time there was a lack of trust in the members in the chain of command and in the reporting mechanisms, so the first contract was to leverage McKinsey to understand this: What are the complaints mechanisms in the defence system, and how do they map out?

It's quite a complex complaints system, from human rights and grievance complaints to workplace harassment prevention. There were 23 different complaints systems, so we needed to map this out. From the 11 people they had initially, with some coming from the outside, they didn't have that expertise, so McKinsey helped us out there. The second contract was.... There had been 500 recommendations, from various reports, that related to culture. We didn't have the capacity to analyze those 500 recommendations. Which ones were chosen?

They were from various authors: Justice Fish was one of them; Justice Arbour came later, but there was Justice Deschamps before. We used McKinsey to map out common themes in those recommendations and common and differing solutions from different authors. This allowed us to present to the government, in 2023, our CIP, our comprehensive implementation plan, which is now the work plan that National Defence is following to change the culture. There are 206 recommendations, and Madame Arbour has 48 recommendations in there. We have now completed 50% of those recommendations, 70% by the end of this year.

Madame Arbour's report will also be done by the end of the year, with Bill C-11 now being tabled in Parliament. Overall, a lot of that work would not have been possible without the help of outside contractors. The reason McKinsey was leveraged is that it met the requirements and was available as one of the procurement tools we had at the time. We didn't have allies as well—

The Chair :

Thank you. We are well over our time. I appreciate your understanding, Mr. Housefather. You're welcome to follow up on that individually. I want to thank all of the witnesses for coming in. I'm going to adjourn this meeting so that we can go in camera. You're all excused. Thank you for coming as we continue our study on this important topic. Have a nice day. This meeting is suspended. [ Proceedings continue in camera ]