EVIDENCE

Standing Committee on Public Accounts NUMBER 021 1st SESSION 45th PARLIAMENT Thursday, December 11, 2025 Le jeudi 11 décembre 2025 Standing Committee on Public Accounts CANADA [Recorded by Electronic Apparatus] EVIDENCE December 11, 2025 Committee NUMBER 021 NUMBER 021 NUMÉRO 021 21 11 12 2025 2025/12/11 11:00:00 House Of Commons Comité permanent des comptes publics Standing Committee on Public Accounts PACP Chair John Williamson 1 45

(1100) [ English ]

The Vice-Chair (Jean Yip (Scarborough—Agincourt, Lib.)) :

I call this meeting to order. Welcome to meeting number 21 of the Standing Committee on Public Accounts. Today's meeting is taking place in a hybrid format. 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. The clerk and I will manage the speaking order as best we can.

Pursuant to Standing Order 108(3)(g), the committee is resuming its consideration of report 5, “Professional Services Contracts”, of the 2024 reports 5 to 7 of the Auditor General of Canada, referred to the committee on Tuesday, June 4, 2024. Welcome to our many witnesses today. We have so many that for the first time, they spill over to the back row. Hello to those at the very back. Because there are so many witnesses, I'm going to name only the people who are giving opening remarks. Everybody else, if you speak, your name will show up on the caption, so we haven't forgotten any of you.

May I have the Canada Border Services Agency, with Ms. Erin O'Gorman, president, for an opening statement?

Erin O'Gorman (President, Canada Border Services Agency) :

Thank you, Chair. As previously reported, CBSA had three contracts with McKinsey & Company between 2016 and 2019. [ Translation ] A fourth contract was cancelled before the work began because it was determined that the work could be done by public servants rather than through a contract. No funds were spent as part of this contract. [ English ] The CBSA's first contract with McKinsey took place between May and October 2016. It was established to review and validate the options, risks and impacts associated with the agency's assessment and revenue management project, also known as CARM.

The total amount spent was $1.8 million. CARM was initiated to replace the information technology systems and processes used in the collection of approximately $40 billion in duties and taxes that CBSA collects on all commercial imports into Canada. This work was to have an external assessment to validate the approach, potential benefits and change management relating to this significant new system. The CBSA's second contract with McKinsey was from October 2017 to October 2018.

The work was done to benchmark traveller processes of other countries and make recommendations on how CBSA could use technology to manage increasing traveller, courier and postal volumes. The total amount spent was $1.6 million. The third contract was awarded under Public Services and Procurement Canada's contracting authority between October 2018 and January 2019 to establish a project management office and an amended work plan for the CARM project.

The total amount spent was $978,000. (1105) [ Translation ] The fourth and final contract, signed on October 21, 2022, was for benchmarking services for the CBSA assessment and revenue management project, also known as CARM. As I said, it was cancelled before any work began. [ English ] The CBSA has benefited from eight audits and reviews covering procurements in recent years. These have included reviews and audits by the Auditor General, the procurement ombud and our own internal audit function. These reviews and audits have resulted in 25 recommendations, including two relating to the OAG's audit on McKinsey.

CBSA has implemented all of them. Among the improvements we've made are the following: conflict of interest declarations on all contract files; integrated procurement as part of the business planning and budgeting processes and strengthened governance and oversight over the approval of contracts; compliance reviews for all contract files; and enhanced guidance tools and mandatory procurement training for all cost centre managers. Thank you. I look forward to answering your questions.

The Vice-Chair (Jean Yip) :

Thank you. Next we have Paul Thompson, deputy minister of Employment and Social Development Canada.

[ Translation ]

Paul Thompson (Deputy Minister, Department of Employment and Social Development) :

Thank you very much, Madam Chair and committee members. [ English ] I'm pleased to be here as deputy minister of Employment and Social Development Canada to discuss report 5, on the Auditor General's study of professional services contracts. I'd like to thank the committee for its work on this issue, as well as the Office of the Auditor General for its report. ESDC fully agrees with the recommendations.

We acknowledge and support all the findings in this report. [ Translation ] I’d like to use this time to highlight Employment and Social Development Canada's, or ESDC’s, overall use of professional services, and the important role that contractors play in our work for Canadians. I would also like to briefly highlight our lessons learned and the changes we’ve implemented in response to the report’s findings. [ English ] At Employment and Social Development Canada, we manage many diverse programs and services across the country.

Quite often, contractors have the specialized skills and expertise to help us make sure we deliver these programs efficiently, effectively and prudently. Citizen-centred service is at the core of our contracts, all of which are tailored to specific operational needs. One very good example is the contracts we have in place to support benefits delivery modernization. This is a massive undertaking to build a new platform to help Canadians find, apply for and manage their federal benefits. It is also the largest and most ambitious IT transformation initiative ever undertaken by the federal government.

A project of this scale would not have been possible without hiring professional services contractors. I would note, though, that public servants work closely alongside the experts in these companies to learn from them and deliver the platform as promised. [ Translation ] Canada’s old age security program was the first program to migrate to the new platform. This happened in March 2025 with roughly 7.4 million existing OAS clients migrating to the new platform. [ English ] The next program—and this migration is also under way—is the employment insurance program, which started earlier this month.

Once again, migrating a program as large as employment insurance over the next several years would not be possible without a partnership with private sector vendors. We also manage a large range of programs across diverse business lines, some of which are well suited for delivery by third parties through professional services contracts. Examples of these include the Canada student grants and loans program and the 1-800-O-Canada service. We've developed a detailed management response and action plan in response to the findings of report 5.

We've introduced measures to address the findings of audits conducted by the Office of the Procurement Ombud and the Office of the Comptroller General. Just to highlight a few examples, we hosted educational sessions for all departmental executives on the proper use of professional services. We've revised and published a procurement road map and different methods of supply for all staff. We've communicated all the changes in the Treasury Board directives on the management of procurement to ensure implementation.

Lastly, we engaged directly all the managers in the department who have delegated authority under the Financial Administration Act to remind them of their stewardship responsibilities for effective resource management. All these and other action items resulting from the audits were completed on time. The steps we've taken to address the recommendations focused also on reducing the reliance on professional services. This will be done in support of the budget's commitment to reduce expenses on management and other consulting services by 20% in three years' time.

ESDC remains fully committed to open, transparent and fair procurement processes. We will continue to refine our processes and deliver the best value we can for Canadians, because they deserve no less. Thank you for your time.

(1110) The Vice-Chair (Jean Yip) :

Thank you. Next we have Philip Jennings, deputy minister of Innovation, Science and Economic Development Canada.

[ Translation ]

Philip Jennings (Deputy Minister, Department of Industry) :

Thank you, Madam Chair and committee members. [ English ] I'm pleased to appear before you today. I'd like to begin by acknowledging the important work of the Auditor General and her team. The report on professional services raises serious concerns about how federal organizations, including Innovation, Science and Economic Development Canada, have managed certain procurements. These findings have been echoed in similar studies by the procurement ombudsman, as well as the department's internal audit team.

A common thread in these findings is the poor quality of, or in some cases the absence of, documentation and contracting files. Clearly, incomplete files cannot demonstrate full compliance with procurement rules, justify procurement decisions or confirm that value for money and procurement objectives are achieved. [ Translation ] In her 2025 report, the Auditor General emphasized that the federal government did not need more procurement rules; rather, federal organizations needed to make sure that existing rules were understood and followed.

The department fully accepts these findings, and as a result, we took strong corrective action to address these issues. [ English ] In light of these findings, the department has strengthened its procurement guidance and clarified procedures for procurement officers and program areas to support consistency in how rules are interpreted and applied. The department's contract review committee has enhanced its challenge function, supported by a recently established centralized contracting team with independent quality assurance.

Finally, we have a tiered governance model scaled to the size and complexity of contracts. In terms of our departmental procurement function, we have centralized procurement under one directorate to ensure consistent oversight and accountability across the department. We've implemented a centralized intake and triage process as well as a pre-award quality assurance review to ensure we can demonstrate policy compliance and value for money on 100% of contracts prior to award. The quality assurance review includes a comprehensive checklist to ensure that all files are complete, with proper documentation.

These changes have me confident in our current procurement practices. [ Translation ] This work is supported by ongoing discussions with senior management, as well as regular monitoring by the chief audit executive and the departmental audit committee to ensure that the relevant action plans are implemented. We have also strengthened our internal oversight to ensure that these measures are working as intended. [ English ] Together, these reforms directly address the gaps flagged by the Auditor General and other oversight bodies.

They also position the department to detect any possible issues earlier and ensure sustained compliance. I am committed to continuing to ensure that we have effective systems for procurement at the department. I am confident in the measures we have put in place, and my team, under my leadership, will monitor that the systems are working as expected. Ultimately, the goal is to ensure that the procurement function delivers value for money for Canadians and is done with fairness and transparency. In closing, I'd like to assure the committee that the department takes the Auditor General's findings very seriously.

Canadians expect fairness, transparency and value for money in each and every procurement. With the reforms now in place and with further improvements under way, I am confident that the department's procurement function is well positioned to meet these expectations. We remain fully committed to maintaining this progress and ensuring that the issues identified do not recur. Thank you. I'm pleased to answer any of your questions.

(1115) The Vice-Chair (Jean Yip) :

Thank you. We have Alexandre Roy, senior vice-president and chief risk officer for the Public Sector Pension Investment Board. Go ahead, please.

[ Translation ]

Alexandre Roy (Senior Vice President and Chief Risk Officer, Public Sector Pension Investment Board) :

Thank you, Madam Chair, ladies and gentlemen, honourable members of the committee. My name is Alexandre Roy, and I am the senior vice-president and chief risk officer at the Public Sector Pension Investment Board, better known as PSP Investments. I am joined today by Yolande James, executive director and chief of strategic communications and global government affairs. Thank you for giving us the opportunity to appear before you today. I would like to begin by acknowledging that I am speaking to you from the unceded ancestral lands of the Algonquin Anishinabe people.

As you may know, PSP Investments is one of Canada’s largest pension investors with nearly $300 billion of net assets under management as of March 31, 2025. We manage a diversified global portfolio composed of investments in capital markets, private equity, real estate, infrastructure, natural resources and credit investments. Created in 1999, PSP Investments manages and invests amounts transferred to us by the Government of Canada for the pension plans of the federal public service, the Canadian Forces, the Royal Canadian Mounted Police and, since March 1, 2007, the Reserve Force.

At PSP Investments, we have a mission greater than ourselves: to support the retirement of people who protect and serve Canada. The responsibility of fulfilling this mission compels us to strive for excellence in all that we do. In accordance with the Public Sector Pension Investment Board Act, our statutory mandate is to manage amounts that are transferred in the best interests of the contributors and beneficiaries under the acts related to the plans.

We also have the responsibility to invest assets with a view to achieving a maximum rate of return, without undue risk of loss and while having regard to the funding, policies and requirements of the plans and the ability of the plans to meet their financial obligations. [ English ] Since joining PSP in 2007, a bit more than 18 years ago, I have witnessed the organization's evolution and its unwavering commitment to maintaining a high standard on behalf of the public sector pension plans we serve.

Today, in my role leading the risk management process for the organization, I take an integrated approach to managing a full spectrum of risk, from private and public investment risk to liquidity risk, leverage risk, enterprise risk and so on. This approach reflects our belief that risk management is not a stand-alone function but part of our culture. Every employee plays an active role in identifying, monitoring, evaluating and reporting risks. Across our organization, we remain firmly grounded in our mission to deliver value for the plan's contributors and beneficiaries, both today and for generations to come.

Fulfilling our statutory mandate requires more than a strong investment performance. It also demands disciplined risk management, rigorous oversight and a deep commitment to good governance. This commitment underpins everything we do. It is why we appreciate the opportunity to appear in front of you today to discuss the 2024 report on professional services of the Auditor General of Canada and how we have implemented the recommendations since the report was tabled.

As stated in the response we shared with the Auditor General of Canada, PSP Investments already had several measures in place to prevent, detect and document conflicts of interest at the time of the audit. For example, in addition to quarterly and annual conflict of interest declarations, employees and consultants were already—and continue to be—required to promptly notify our compliance department of any conflicts of interest as they arise so they can be addressed appropriately.

Additionally, since the tabling of the report, we've conducted a review of conflict of interest measures in the context of the procurement process in order to ensure that potential conflicts are addressed proactively prior to purchases in specific situations. Based on this review, enhancements to ensure that conflicts are addressed proactively were implemented. For example, under a risk-based approach, employees and consultants must declare any conflict of interest in certain procurement situations. Suppliers must also disclose any conflict of interest as part of their onboarding process.

If potential conflicts are found through these processes, our compliance team ensures that mitigating measures are implemented. All records are maintained by the compliance team. At PSP Investments, we believe that good governance strengthens our decision-making processes and controls, ensuring that we meet our statutory obligations with integrity and transparency. Good governance practices are further reinforced by our publicly available code of conduct, which sets clear expectations for ethical behaviour, compliance with laws, protection of confidential information, and the prevention of conflicts of interest.

To maintain this high standard, we undergo an annual external audit pursuant to the Financial Administration Act. The Office of the Auditor General of Canada and Deloitte serve as our external auditors. A special examination is also conducted at least once every 10 years on the systems and practices of the organization, providing an additional layer of assurance that our practices remain robust and aligned with our mandate.

(1120) Madam Chair and members of the committee, thank you for your time and attention today. We welcome the opportunity to discuss PSP's approach to maintaining strong governance and the effective management of potential conflicts of interest.

The Vice-Chair (Jean Yip) :

Thank you. We also have, from the Office of the Auditor General, Andrew Hayes, deputy auditor general.

Andrew Hayes (Deputy Auditor General, Office of the Auditor General) :

Thanks, Madam Chair. I don't have any opening remarks to add to the ones that have previously been provided to the committee, so we'll be happy to answer your questions.

The Vice-Chair (Jean Yip) :

Thank you. We will now proceed to the first round of questioning of six minutes each. Madam Kusie, you have six minutes.

Stephanie Kusie (Calgary Midnapore, CPC) :

Thank you, Chair. This study is incredibly important, and it has been continued from the last Parliament, where several committees were seized with McKinsey and the study of McKinsey. A central player within that was Mr. Dominic Barton. He appeared before the government operations committee at that time because he was the global lead for McKinsey. He ran the entire organization.

In our questioning of him, we found that he had several contacts throughout government, including Chrystia Freeland , who of course has gone on now to several other positions, and the former prime minister used him in an economic advisory role. Even the current Prime Minister used him as an economic adviser in one capacity or another. Just this week, Kirsten Hillman was removed from her position as the Canadian ambassador to the U.S. Who is expected to be the replacement? Well, we all know it's Mark Wiseman. What did Mark Wiseman do?

He founded Century Initiative, the lobby group, with Dominic Barton, so there's yet another tie to McKinsey that we have through these individuals. So many close friends of the former prime minister and the current Prime Minister are involved with contracting and McKinsey, and here we see another: the rumoured, though not quite yet confirmed, person who will certainly be the new Canadian ambassador to the United States. This is a very important position at this time, when the Prime Minister has failed to obtain a contract with our—

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

I have a point of order. I'm sorry. I'm struggling to recognize the relevance of Ms. Kusie's comments to what we're discussing today.

Stephanie Kusie :

Yes, thank you. I recognize that the member is new. She wasn't here for the last Parliament, so she wouldn't be familiar with this, but the relationship between Mark Wiseman and Dominic Barton and their work is definitely relevant. My question for the Auditor General is this: Was Mark Wiseman's name found in any of the documents that your office reviewed for this study or the study on ArriveCAN?

Andrew Hayes :

No, we did not see that name in the files we reviewed, to my knowledge.

(1125) Stephanie Kusie :

As far as you are aware, does Mr. Wiseman have any connection to McKinsey?

Andrew Hayes :

I'm not aware of any. That question would probably be best placed to Mr. Wiseman.

Stephanie Kusie :

Thank you. Mr. Jennings, I want to point towards an

article released yesterday from Blacklock's. Frankly, the title is “Deputy Admits Lying to MPs”. Of course, the deputy in question is you, and now here you are again, back in front of a parliamentary committee providing answers to our questions. I'm giving you the opportunity to explain to Canadians what this reporter meant when they said you lied to the committee. How do you perceive what happened? Can you tell Canadians the story, please, from your side?

Philip Jennings :

Thank you for the question. I would be happy to answer that. In my initial testimony at the Standing Committee on Government Operations and Estimates, I testified that redactions were done to a document that was requested by that committee. I had misunderstood that the redactions were initiated by the company. I corrected the record in my second testimony, when I was clear that what had happened was that the department had recommended redactions based on our long-standing relationship with that company and that the company had confirmed that those redactions should stay in place.

Stephanie Kusie :

Okay. You don't perceive it as a mistruth; you perceive it as a misunderstanding.

Philip Jennings :

That is what I just said, yes.

Stephanie Kusie :

Okay. Thank you. You know that your department has handed out billions in contracts with Stellantis and Algoma Steel and that these contracts came without job guarantees. The Auditor General's report shows that your department provided nearly $4 million in contracts to the relevant group here today, McKinsey. Did the scope of McKinsey's work include advising the Department of Industry on any contracts like the ones just mentioned?

Philip Jennings :

Just to make sure I understand the question, are you asking whether the McKinsey contracts had any link to the Stellantis contracts?

Stephanie Kusie :

Yes, and Algoma.

Philip Jennings :

Not to my knowledge.

Stephanie Kusie :

Okay. Thank you. To the Auditor General, as you would be well aware, in the 44th Parliament, the CBSA was at the centre of numerous studies surrounding the ArriveCAN application, GC Strategies and contracting more broadly. Your office's 2024 report on ArriveCAN stated, “The Canada Border Services Agency relied heavily on external resources, which increased ArriveCAN's costs”. Your report from June of this year on GC Strategies showed that the CBSA accounted for over half of the total value of contracts awarded to GC Strategies in the period studied.

That, of course, leads us to the report we are studying here today on McKinsey & Company, which notes that in some instances, the CBSA gave the impression of a competitive contracting process. However, “procurement strategies were structured to make it easier for McKinsey & Company to be awarded the contracts”. Can you elaborate on that, please?

The Vice-Chair (Jean Yip) :

Please make it a short answer.

Andrew Hayes :

In one case we reviewed, we found that McKinsey was not on a supplier list for the contracting authority of what they were looking for. Ultimately, the strategy was changed from a task-based supply arrangement to a solutions-based supply arrangement so that McKinsey, which had already been qualified under that arrangement, would be available to bid. In our view, that raised concerns about tailoring a process towards McKinsey. That said, I'll just specify that this is a perception. This is where documentation becomes important.

Stephanie Kusie :

Thank you, Chair.

The Vice-Chair (Jean Yip) :

Thank you. Mr. Osborne, you have six minutes.

Tom Osborne (Cape Spear, Lib.) :

Thank you, Madam Chair. I appreciate your opening remarks and the fact that you've worked towards the recommendations of the Auditor General. I have a question for each representative from the four organizations here today. Crown corporations are not subject to Treasury Board procurement and internal audit policies. However, the President of the Treasury Board asked ministers to contact each Crown corporation to undertake a review of these contracts. Five of the 10 corporations did so. I'll start with Mr. Roy and then go to Ms. O'Gorman, Mr. Thompson and Mr. Jennings. Did your organizations undertake the review as requested by the minister?

(1130) Alexandre Roy :

You have to understand that PSP is a Crown corporation but a non-agent Crown corporation. We are not subject to the regulations you just described. We do exercise our function with an arm's-length relationship. This is very important. Having said that, the Auditor General did provide us with very good advice on increasing our procurement methodology. We have implemented it. For example, we now have a quarterly and annual conflict declaration. On top of that, we have prompt notification to the compliance department of any conflict of interest for all employees and all the consultants.

Erin O'Gorman :

The Canada Border Services Agency has the designation of agency, but we are subject to all Treasury Board policies. In terms of the extent to which these audits identified where we were not compliant with those policies, we have come into compliance and added oversight. We have always been subject to those policies.

Paul Thompson :

As for ESDC, we do not have Crown corporations as such that would have been captured by that directive.

Philip Jennings :

I have the same answer. Under ISED, there are no Crowns that were subject to that.

Tom Osborne :

Similarly, the Office of the Procurement Ombud does not have authority to review procurement practices at Crown corporations. That in

part led to the Auditor General's recommendation to encourage Crown corporations to examine the recommendations of the various reports—a number of reports were done prior to the Auditor General's review—and to look at the recommendations in those reports to strengthen your policies and procedures for awarding and managing professional services contracts. Have you looked at the recommendations of the various reports prior to the Auditor General report, Mr. Roy, and implemented the recommendations from those reviews?

Alexandre Roy :

The answer is that, again, we are not subject to that because we are a Crown corporation that is non-agent, but we did review the Auditor General's recommendation. We have improved our procurement methodology and procurement processes. We are always striving to have the highest standard of execution in our operations.

Tom Osborne :

Just to be clear, Mr. Roy, you reviewed the recommendations. The Auditor General's recommendation, I believe, was for your organization to review the recommendations of the previous reports and reviews. Have you reviewed those with a view to putting similar recommendations in place at your organization?

Yolande James (Managing Director and Head, Strategic Communications and Global Government Affairs, Public Sector Pension Investment Board) :

Maybe I can interject here. Our understanding is that prior to the Auditor General's report, we already had the standards in place to make sure we had the review process. Once the recommendations were made, we at PSP immediately went through the review of the procurement process as indicated in the report, even though as a non-agent Crown, as my colleague mentioned, we're not subject to that stipulation.

Tom Osborne :

I just want to be clear: You've reviewed the recommendations from the previous reports with a view to implementing them.

Yolande James :

As I understand your question, yes, we have.

Tom Osborne :

Okay. Ms. O'Gorman.

Erin O'Gorman :

As, effectively, a department, we reviewed all of the recommendations, including from the procurement ombuds, and have implemented them.

Tom Osborne :

Mr. Thompson.

Paul Thompson :

As noted in my remarks, we've reviewed and implemented the recommendations from the Auditor General's work and those of the procurement ombuds.

Tom Osborne :

Mr. Jennings.

Philip Jennings :

I have the same answer. We've implemented all those recommendations. I would highlight three important things that we've done. The first, as I mentioned in my opening remarks, is that we now have quality assurance for all our contracts so that at the end of the day, all policies and directions and all commitments the department makes to any previous audit are automatically checked. The second thing is that we now have an independent centralized office that, at the end of the day, is separate from the people who are actually asking for the procurements.

The third action is that we have a tiered governance system, so depending on the complexity and size of the procurements, they have a 50,000-foot view of the procurement and can play the challenge function.

(1135) The Vice-Chair (Jean Yip) :

Thank you. [ Translation ] Mr. Lemire, you have six minutes.

Sébastien Lemire (Abitibi—Témiscamingue, BQ) :

Thank you, Madam Chair. Since this is our last meeting before the holidays, I would like to begin by once again thanking the technical team and the interpreters for helping us in our work. Earlier, we saw briefly how panic can set in when there are issues in that regard, and how important their work is. Mr. Thompson, I would like to talk to you about the benefits delivery modernization, or BDM, program.

McKinsey provided benchmarking services to support the department's transformation through a customer experience benchmark and the architecture, design and testing of citizen experience journey to improve client and user experience and service delivery. You received this document. Can you provide us with a certified copy?

Paul Thompson :

There were four contracts with McKinsey, but they were not part of the BDM program. The transformation of service delivery was separate from that and not related to the transformation of the BDM system.

Sébastien Lemire :

In our report on BDM, it appears that, at the beginning of the project, professional services were estimated at $700 million out of a total project cost of $2.2 billion. On March 13, 2025, an

article published by Radio-Canada showed that the cost was up to $4.4 billion, or double the initial project estimate. How do you explain such a significant cost increase? What changes did you make to the core technology to double the cost of the project? We are talking about billions of dollars here.

Paul Thompson :

Yes, there was an increase in costs, which is common for large technology projects. Once we started the work, we discovered more things. The decision-making process required an initial cost estimate, but it was not a precise estimate. It was obvious that the old system was much more complex than expected. As we moved forward, the estimates became more precise. Now, the estimate is between $4 billion and $5 billion for the three programs, namely employment insurance, old age security and the Canada pension plan, as well as for the contact centres. The overall program is made up of four areas of work.

Sébastien Lemire :

That is similar to the answer given in a Radio-Canada report. The assistant deputy minister, Susan Ingram, indicated that the costs increased because of how complicated it is to dismantle old computer systems and migrate millions of files. Why is it that, in 2025, no one realized how complicated it would be to change an old system? Where is your internal expertise?

Paul Thompson :

As I indicated in my opening remarks, we draw on expertise from both the department and consultants who have carried out these kinds of projects around the world. We use their considerable expertise to increase our capacity. Now, half the expertise is internal and the other half is from consultants working on the project. We are also focusing on transferring knowledge from these consultants to our team members so that it will continue to benefit the project after the consultants have finished their work.

Sébastien Lemire :

What is the estimated cost of the project right now?

Paul Thompson :

The estimates are much more reliable. As I said, experience has made it possible for us to be more accurate. We have a very good estimate of the costs associated with EI. That project is already under way. The first round of benefits was paid out a month ago. We are therefore very confident about the delivery of these benefits. There is still some uncertainty in terms of the CPP because we still do not have a detailed project implementation plan, so there is still work to be done in this area. We are very confident regarding the OAS and EI estimates.

(1140) Sébastien Lemire :

In a note prepared for question period, Minister Patty Hajdu talked about $6.6 billion at the time. That is three times higher than the estimate. Earlier, in answer to my question, you said that the cost was around $4.5 billion. The note says:

Budget 2024 proposes to provide a total of $2.9 billion over five years, starting in 2024-25, on a cash basis, to Employment and Social Development Canada to migrate Old Age Security and Employment Insurance onto a secure, user-friendly platform.

The cost is estimated at $6.6 billion for the 10 years of the BDM program. Where are we at right now? If political commentators on Quebec's Mordus de politique got wind of this, they would note that this is six times the amount invested in SAAQclic. This would cause a huge scandal in Quebec. We would likely launch a public inquiry. However, this seems to be going unnoticed in Ottawa. This is rather outrageous because we are talking about a huge amount of money.

Paul Thompson :

Yes.

[ English ]

The Vice-Chair (Jean Yip) :

Give a short answer, please.

Paul Thompson :

This is a very complex project that will deliver over $1.5 trillion in benefits over the next 10 years. It's the largest IT project undertaken by the government. I would note that with old age security already on the platform, it has delivered over 60 million payments to Canadians, worth over $50 billion. It is already delivering programs at scale, and we have confidence that it will do the same for employment insurance, for the Canada pension plan and to support our contact centres going forward.

[ Translation ]

Sébastien Lemire :

Thank you.

[ English ]

The Vice-Chair (Jean Yip) :

Thank you. [ Translation ] We will now begin our second round of questions. Mr. Deltell, you have five minutes.

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

Thank you very much, Madam Chair. Good morning, colleagues. Ladies and gentlemen, welcome to the Parliament of Canada. I would like to say a special hello to Yolande James, who used to be an MNA and minister in the Quebec government when I served in the National Assembly and when I was a journalist. Seeing her brings back fond memories. Earlier, Mr. Lemire talked about the show Mordus de politique . Ms. James was a part of that show, which was called Le club des ex at the time. I thank her for now serving the Government of Canada. I will get right into my questions because I have quite a few of them.

My first question is for the CBSA representatives, meaning you, Ms. O'Gorman. The Auditor General's report mentions that the evaluation documents were incomplete or missing for some CBSA files. Earlier, in your testimony, you said that you had cancelled a contract that had been awarded. Is that the contract in question here, or was documentation missing for another contract?

Erin O'Gorman :

We had four contracts with McKinsey. We cancelled the fourth contract before any work was done or any money was spent. We decided to have CBSA employees deliver the service.

Gérard Deltell :

So the fourth contract is the one mentioned in the report? Is that correct?

Erin O'Gorman :

I think the report refers to several contracts.

Gérard Deltell :

Section 5.34 clearly indicates that the CBSA's documentation about bid evaluations was incomplete. You said that one of the four contracts was not awarded. Is that

section of the report referring to the cancelled contract or to a different one? I'm asking you that question because if that is not the case, how is it that—

Erin O'Gorman :

It is not the same contract. The report is referring to our second contract for which the documentation was incomplete.

Gérard Deltell :

How were you able to award a contract when the documentation was incomplete?

Erin O'Gorman :

We had a problem with procurement-related documentation. We worked with Public Services and Procurement Canada on this contract and we received bids. However, when the Auditor General reviewed all of our documentation, the files were not complete.

(1145) Gérard Deltell :

Thank you, Ms. O'Gorman. Thank you for speaking in French. Your French is very good. I would now like to talk to you, Mr. Thompson. Good morning. I want to talk about

section 5.45 of the Auditor General's report, which has to do with non-competitive contracts. A competitive process was not held for some contracts at Employment and Social Development Canada, but in the end the department did not award those contracts. A little later on, the report indicates that ESDC awarded a non-competitive contract, which led to another exception being invoked for subsequent contracts of considerably higher value. What contract are we talking about here?

Paul Thompson :

Thank you for your question. As I mentioned, we had four contracts with McKinsey. The first was a non-competitive contract in the amount of $40,000 for consultant services to come up with a strategy at the end of the pandemic and at the beginning of certain transformation projects. That was the first non-competitive contract. The three others were awarded using Public Services and Procurement Canada's national master standing offer.

Gérard Deltell :

Thank you, deputy minister. I would like to use the few minutes I have left to come back to what my colleague, Mrs. Kusie, said about the potential appointment of Mark Wiseman. First, I want to point out that Mrs. Kusie is a professional diplomat and Mr. Wiseman is being considered for the most prestigious position in the public service, Canada's ambassador to Washington. Unfortunately, Mr. Wiseman has gained recognition lately. Although he is a world-renowned businessman, he is perhaps not exactly the diplomatic leader we need.

He said the following about the Century Initiative: [ English ] “even if it makes Quebec howl”. [ Translation ] That is insulting to Quebeckers. He is a fierce opponent of supply management, which is a key issue in discussions with the United States. He is therefore not the right choice.

[ English ]

The Vice-Chair (Jean Yip) :

Thank you. Ms. Tesser Derksen, you have five minutes.

Kristina Tesser Derksen :

Thanks, Madam Chair. Before I start, I'd like to acknowledge that it's our last meeting before the holidays. I would like to thank all of my colleagues on the committee for being so great in helping me get onboarded and in helping learn more about how this committee operates. To all the witnesses who are here today, thanks very much. I wish everyone a merry Christmas and happy holidays. I'm going to start with you, Mr. Thompson. You mentioned in your opening remarks that your department is tasked with reducing expenses by 20% over the coming three years, I believe.

I believe you're referring to our government's comprehensive expenditure review, which was included in our 2025 budget, with a focus on improving fiscal health and improving the value for money that Canadians are getting. Could you talk a bit about how the task you're now facing is going to affect your department and how you plan to be successful in that endeavour?

Paul Thompson :

I indicated that we do indeed plan to achieve the 20% reduction over the three-year period. The recommendations that we received from the Auditor General and the procurement ombud to put more rigour in place around when, where and how we do contracts will be part of that. In looking at our recent trajectory, I'm quite confident that we will meet the target with respect to management consulting. I would note that it's not a huge area of our contracting. About 3% of our professional services contracts right now would fall into the management consulting space—about 0.5% of our overall operating budget.

However, we do see an opportunity, and we're on track to lowering that further through more rigorous review of procurement proposals in these areas. That's how I would answer.

Kristina Tesser Derksen :

That's good news. Thank you. The same question could be put to all of you, but I'll spare you all. I'm going to stick with Mr. Thompson for now. You mentioned the national master standing offers when you were answering a question from my colleague. I'll note that in the Auditor General's report—and I'm looking at paragraphs 5.31 to 5.32—it appears that contracts were awarded through competitive processes that appeared to make it easier for McKinsey & Company to be awarded the contracts.

In addition, the Auditor General found that in one instance, your department waited, I believe, for more than a year for a non-competitive national master standing offer to be created with McKinsey, even though you were seeking benchmarking services that may have been available under other national master standing offers. The Auditor General also noted that it's unclear why the organization chose to wait rather than use another procurement option. That goes to a bit of a record-keeping issue, but I'd like to give you an opportunity to explain that process and why your department chose to do things the way it did.

(1150) Paul Thompson :

The work that was conducted under this contract ended up being quite useful for us. It was delivered within a time frame that was needed by the department to move forward with its agenda, so there was no undue impact on service to Canadians or anything in that revised timeline for the project. I believe five companies had national master standing offers for benchmarking services, and each of the companies specialized in a different area. The work we did with McKinsey was very well suited, because they have a proprietary dataset that involves service delivery metrics around the world.

Indeed, the benchmarking work we did compared Service Canada to benchmarks that exist for other public and private sector entities, and it ended up providing a road map for us to improve services in a number of areas.

Kristina Tesser Derksen :

That might lead into my next question, because I want to ask you about chain contracts. I asked this of other organizations that appeared before this committee recently. The Auditor General found that the use of non-competitive approaches for subsequent contracts that were resulting from a chain was poorly justified in several cases. I believe your department stated that it would “compete subsequent contracts at one point in the chain but did not”, so can you talk to us a bit about that decision-making process?

Paul Thompson :

I agree with the recommendations, and my colleagues, I think, have said this too: Our procurement systems need way better documentation. We've committed to improving the documentation to underpin the rationale for how we go about the work. I would note with respect to the four McKinsey contracts that these were all quite distinguishable tasks that were separate from one another. The initial advisory services, as I said, were around coming out of the pandemic and having to shift our operations to embark on some transformations.

The second part was applying a test of Service Canada's readiness in seven very specific areas of service delivery performance. That, too, was a discrete project. The third one was around developing a transformation plan for the department, with a three-year timeline around it. Then the fourth, the largest of the engagements, was a much deeper dive: a full diagnostic of service delivery capabilities, leveraging benchmarking information from other jurisdictions. These were regarded as separate undertakings.

The Vice-Chair (Jean Yip) :

Thank you.

Kristina Tesser Derksen :

Thank you.

[ Translation ]

The Vice-Chair (Jean Yip) :

Mr. Lemire, you have two and a half minutes.

Sébastien Lemire :

Thank you, Madam Chair. Mr. Thompson, as part of this study, we heard from representatives from Public Works and Government Services, or PSPC, on October 9. I asked them for a written answer to one of my questions, which we received on October 30. In that answer, they said that Watson Health had left IBM to become Merative. PSPC maintains that IBM is still the main contractor for the modernization projects, even though IBM divested its Watson Health division. How can we be carrying out this contract with another company? What happens if a problem arises? Who is responsible? Is it Merative or IBM?

Paul Thompson :

Thank you. We will send you a written answer to that question, but the answer is that the people at IBM are still responsible for the contract. Our contract is with IBM and, to implement the program, we are working with its partners, including Merative, the firm that has the specialized technology for the platform.

(1155) Sébastien Lemire :

The benefits delivery modernization program was launched in 2017, and the Government of Ontario used this same platform in 2009 for its social assistance management system software. This program was audited by the Auditor General of Ontario in 2015. That report indicates that IBM did not meet the deadlines for converting the data, not to mention the many conversion errors that occurred. IBM also did not provide adequate expertise.

The ministry said that it was relying on the IBM project manager to assess the effectiveness and efficiency of the Curam consultants' work; however, they were supervised by an IBM consultant and did not work effectively before the launch. Why did you choose to go with the company that was responsible not only for the failed launch of Phoenix but also for other programs that have been the subject of scathing audit reports? Why are we continuing on this path?

Paul Thompson :

Thank you for your question. [ English ] This has not been our experience with the program. It's been quite the contrary. As I noted, we've successfully migrated 7.4 million people onto a new program delivery platform. It is paying people accurately and on time. We've disbursed over $53 billion in 60 million payments. It is performing as expected. I would also say that the company was very helpful in meeting accessibility standards, which I think are among the highest they'd ever delivered in any of their deployments around the world.

[ Translation ]

Sébastien Lemire :

Thank you.

[ English ]

The Vice-Chair (Jean Yip) :

Thank you. Mr. Kuruc, go ahead for five minutes.

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

Thank you, Madam Chair. Thank you to all the witnesses for being here today. I'm going to start my line of questioning with what might be a redundant question. I think most of you have answered it in your opening statements, but we'll get it on record. Ms. O'Gorman, I think you've already answered this, but do you accept and agree with the findings of the AG report?

Erin O'Gorman :

Yes.

Ned Kuruc :

Mr. Thompson, it's the same question. Do you accept and agree with the findings of the AG report, in your case?

Paul Thompson :

Yes, we do, sir.

Ned Kuruc :

Mr. Jennings, do you also accept and agree with the findings in the report, sir?

Philip Jennings :

Fully.

Ned Kuruc :

Mr. Roy, it's same question for you. Do you accept and agree with the findings in the report, sir?

Alexandre Roy :

Yes, we do.

Ned Kuruc :

As I said, I think you all stated that in your opening statements. I want to commend you and thank you for your transparency and willingness to move forward and make fixes per the AG reports. My question is for Mr. Hayes. Not today, but we have seen some witnesses in the past healthily argue, I would say, with a few things in some of the reports. I don't really have an issue with that, but I do have an issue with members of Parliament, heads of certain departments—ministers or secretaries, whatever you call them—not accepting or agreeing with your reports. I won't name them.

Being new here, I have a couple of questions about that. Is that normal? If a secretary of state, minister or deputy minister doesn't agree with your report, how do we move forward from that?

Andrew Hayes :

I would start with the fact that our audits are all evidence-based. We undertake a very rigorous process to make sure we have the information we require for our audit findings. Every deputy minister and the heads of the Crown corporations we audit certify to us during the process that they've provided us with all the information that's relevant to our audits. When we provide our report to the entities, the deputy ministers and the heads of the Crown corporations sign off on its factual accuracy. These are controls and safeguards to add to the credibility of our report that's already evidence-based.

That confirms agreement on the part of the organization being audited. That's essential for the purposes of the standards we have to follow as auditing standards.

Ned Kuruc :

That's fair enough. Thank you for that. I want to thank the Auditor General and the whole department for doing all the good work you guys do. Has there ever been any instances of someone not agreeing with your findings, not working with your findings or not moving ahead with your findings?

Andrew Hayes :

Yes, there have been circumstances where there were disagreements. I could point to a previous report in which we recommended that the Canada Revenue Agency pursue all payments that were made to ineligible recipients. Ultimately, though, we try to work with departments to identify recommendations that will be valuable for them and will add to outcomes and successes for Canadians. When there is a disagreement, we're not afraid to bring it forward in our report. Quite frankly, disagreements are important for parliamentarians to study. This opens a dialogue about a very important point between our findings and the policy approach of the government.

(1200) Ned Kuruc :

Do you find it specifically concerning that last week, a secretary of state openly said that he did not accept the findings and fifty-fifty agreed with them?

Andrew Hayes :

All I can say about this is that I took advantage of an opportunity, at a previous hearing, to make my position clear on behalf of the Office of the Auditor General regarding the report we provided to Parliament on CRA contact centres. We stand 100% behind the findings in that report, which were also confirmed as accurate by the department.

Ned Kuruc :

Thank you very much.

The Vice-Chair (Jean Yip) :

Thank you. Welcome, Mr. Rana. You have five minutes.

Aslam Rana (Hamilton Centre, Lib.) :

Thank you, Madam Chair. Thank you to all the witnesses for their valuable time. Ms. O'Gorman from the CBSA, thank you very much. I'm the member of Parliament for Hamilton Centre. You're aware that there's a big port in Hamilton. An application is there for a permanent CBSA post. Thousands and thousands of containers are shipped every year through that port, and 95% of grains are shipped all over the country and around the world through that port, but we did not get it, even though the application is there. I saw the status. That post application is completed. I'm so happy that a member on the opposite side, Mr.

Kuruc, is also from Hamilton. I'm pretty sure this is a regional issue. Can you please explain to me why? Are there any hurdles to getting that permanent CBSA post there?

Erin O'Gorman :

We work very closely with many ports, including the port of Hamilton. We have a CBSA team in Hamilton, which is in regular touch. I would point to budget 2025, which talked about the expansion of the supply chain, the importance of port infrastructure and the decisions that would be taken more broadly for Canada, taking into account the Canada Border Services Agency, as well as trade and transportation requirements. Absolutely, there's a process for making those decisions. CBSA is a critical input, but the decision doesn't rest solely with CBSA. I will say that we have regular and very positive contact and communication with the port of Hamilton.

Aslam Rana :

Do you think there is any point where Mr. Kuruc and I can help you expedite that process?

Erin O'Gorman :

I wouldn't identify any particular hurdles. We have information they've provided to us. As I said, we're in constant contact, as we are with our colleagues at Transport Canada and International Trade, in order to make sure decisions are taken from a broad perspective. I don't think there are many hurdles we need to clear with the port of Hamilton.

Aslam Rana :

Thank you. Mr. Jennings, as an MP, I want to ensure that contracts awarded by government departments, Crown corporations and agencies are transparent and constitute the best use of Canadians' well-earned money. In your opening remarks, you noted measures that ISED put in place to be more transparent in its awarding of contracts. Even if the audit predates your appointment as DM, could you provide more details on the steps taken and where improvements are still needed?

Philip Jennings :

Maybe I'll situate this more broadly. I may be echoing the remarks of Mr. Hayes. Ultimately, as the head of the organization, I'm looking for the procurement to be value for money for Canadians, be transparent and be fair. Any outside perspective and recommendations looking objectively at the issues are helpful in us making continuous improvements to what is needed to make sure we stay at the cutting edge of where we need to be to have solid procurement processes.

What I can confirm, which I've said already in my testimony, is that we've put in place since that time a number of very important measures that ultimately put us in a much more solid place. One in particular is on documentation, which was identified as an issue not just in this report but in others. That has been rectified such that a contract cannot be awarded in my department anymore unless the documentation that's required has been checked off. That's a big improvement. A question you also mentioned is whether there is more to be done.

On the systems that have been put in place, I'm very confident that they'll deliver, but until we've actually monitored and seen that, we won't know. At the end of the day, what I continue to do is make sure we put in place a solid monitoring system that can sample a number of contracts post-award to ensure the system worked as intended, and if it did not work as intended, we can make further adjustments.

(1205) Aslam Rana :

After the Auditor General's reports, do you think your department and your staff need more training?

The Vice-Chair (Jean Yip) :

Give a short answer, please.

Philip Jennings :

There was extensive training taking place before, but since that time, we've added some additional training that people need to do in the department.

Aslam Rana :

Thank you, Madam Chair.

The Vice-Chair (Jean Yip) :

Thank you. For the third round, we'll go to Mr. Stevenson for five minutes.

William Stevenson (Yellowhead, CPC) :

Thank you. I'll reiterate that it's our last meeting before Christmas, so I want to wish everybody a merry Christmas before we're off today. I also want to say thank you to the witnesses for coming. It is refreshing to hear all of them say that they accept the Auditor General report's findings and recommendations. We've had many a witness previously who did not accept both. I'll start with Ms. O'Gorman from CBSA. This is partly a timing issue. You talked about one contract that was cancelled. I'm not entirely clear on the timing of it. That was before the Auditor General had a look at the contracts and had any recommendations. Is that correct?

Erin O'Gorman :

That contract was set up to run from October 2022 to March 2023, and we cancelled it in December 2022. It was a couple of months in before spending any money.

William Stevenson :

It was long before the Auditor General even looked at the process there.

Erin O'Gorman :

Yes.

William Stevenson :

You also said that you implemented all of the recommendations. Again on timing, was this all after contracts were decided and that one was cancelled? Were all of the implementations you were talking about from the last year?

Erin O'Gorman :

I'd say it was the last two years.

William Stevenson :

If that's the case, can you tell me why the process....? I guess part of the problem is that the documentation is why we don't know for sure, but I don't know if you can tell me why it was cancelled. If you felt that you had internal abilities to deal with it beforehand, why would you start out the contract?

Erin O'Gorman :

The cancellation came as we were looking more closely at how contracts were managed in the agency. It was not to say that the intent behind this.... It was benchmarking—looking at the CARM project going forward and how we would manage that. We just started to take a pause on all the contracts to understand whether we had an internal capacity. That hadn't been the practice before. There was expertise that could have been brought to bear, but as we looked at the size of our project management team and the expertise they had accrued, we concluded at a high level that we didn't need to have that contract in place.

The process of rethinking before we had contracts hadn't started quite as deliberately as it did until the fall of 2022.

(1210) William Stevenson :

I have one last question. It may have nothing to do with the Auditor General's report on this. The government has said that they're adding additional CBSA officers. Can you clarify whether this has anything to do with the management of any of these programs? This will be dealing with people at the borders versus anything we've dealt with that would have been in these contracts or on this side before.

Erin O'Gorman :

They would not be involved in—

William Stevenson :

Is there anything to do with it?

Erin O'Gorman :

I just want to clarify that they won't necessarily be at the physical border. They may be inland. They may be doing compliance on trade. They're not related to the subjects of these contracts.

William Stevenson :

Okay. Thank you. How much time do I have left, Chair?

The Vice-Chair (Jean Yip) :

You have 43 seconds.

William Stevenson :

Oh, that's not enough. I guess I'll go to you, Mr. Jennings. Again, it's to do with the timing. I appreciate your acknowledgement of the issues and that you've taken them up. Can you tell me about the timing of the implementation of the recommendations you've done with these measures in place?

Philip Jennings :

I'd be glad to. I talked about an independent function in quality assurance, one that's independent from the teams that are seeking to procure. That was established in 2024. What was also established that same year, as a response to this audit, was 100% quality assurance. It is dependent on the type of procurement. A number of questions get asked and documentation has to be submitted.

William Stevenson :

Thank you. As a CPA, I learned long ago that if documentation isn't there, especially with the CRA, you're guilty until you can prove otherwise. You need to make sure you have all the documentation. That goes back to all the auditing, which is to make sure of that. I think that's my time. Thank you.

The Vice-Chair (Jean Yip) :

Thank you. I will borrow some of Mr. Osborne's time with one question. Mr. Jennings, how does the BDC ensure impartiality when selecting suppliers and in the wording of contracts?

Philip Jennings :

That question would be ideally asked of BDC itself. What I know is that, ultimately, they run their processes fairly and transparently by ensuring that when they seek services from companies, they run competitive processes and select the ones that have the highest merit. I think that question, honestly, is best asked of BDC.

The Vice-Chair (Jean Yip) :

Okay. Go ahead, Mr. Osborne.

Tom Osborne :

Thank you, Madam Chair. I'll go back to a line of questioning from my previous remarks. This is from

section 5.8 of the Auditor General's report:

Internal reviews at Crown corporations. Crown corporations are not subject to Treasury Board procurement and internal audit policies. They were therefore not included in the Office of the Comptroller General’s review. Instead, in February 2023, the President of the Treasury Board requested that ministers who were responsible for Crown corporations communicate information to the heads of Crown corporations to encourage them to undertake, in the same spirit, [those] reviews....

This is from

section 5.13 of the Auditor General's report:

Since not all Crown corporations conducted internal audits or reviews and were not subject to review by the Office of the Procurement Ombud, we encourage Crown corporations to examine the recommendations in these various reports and our findings in this report to identify opportunities to strengthen their policies and procedures....

For three of the agencies, I'm somewhat satisfied that they are looking to put in place similar recommendations that Treasury Board had put in place. I will say, Mr. Roy, before I ask my question, that I think Canadians who are watching this program should know that your agency does a tremendous job in return on investment. I believe it's over 8%. You are doing an incredibly good job of investing on behalf of pensioners and federal public servants, but I found your response a little dismissive.

The President of the Treasury Board encouraged you, in the same spirit, to review the recommendations from previous reviews. Your response was that, well, you're not subject to their policies, so you didn't. The Auditor General made the same encouragement. Five of 10 agencies conducted the review—yours did not—on the encouragement of the President of the Treasury Board. The Auditor General made the same encouragement, and you did so. What's the difference?

(1215) Alexandre Roy :

I'm correcting what I said before. [ Translation ] As a non-agent Crown corporation, PSP is not necessarily subject to the recommendations. However, given that we want to apply the highest standards, we drew inspiration from the Auditor General's recommendations to increase our ability to fulfill our mandate. Our procurement process, which was already extremely robust, has thus been greatly improved by the Auditor General of Canada's recommendations.

[ English ]

Andrew Hayes :

If I might add something, I would like to acknowledge that PSP did conduct an internal audit themselves, and that was, I think, consistent with what the President of the Treasury Board asked. We recommended—and you pointed exactly to the paragraph in our report—that there be opportunities to learn from this report and from other reports, and we encourage every organization to capitalize on those opportunities.

The Vice-Chair (Jean Yip) :

You have 16 seconds.

Tom Osborne :

You can carry on to the next person.

The Vice-Chair (Jean Yip) :

Okay. Monsieur Lemire, go ahead for two and a half minutes.

[ Translation ]

Sébastien Lemire :

Thank you, Madam Chair. Mr. Hayes, the Office of the Auditor General has been conducting performance audits in a number of areas for many years, but I get the impression that IT contracts are a recurring theme. We are seeing a very significant increase in costs compared to the initial estimates every time. We keep seeing the same thing, whether we are talking about the CBSA assessment and revenue management system, the benefits delivery modernization program, ArriveCAN or McKinsey. I really feel as though IT is like a buffet. In the end, individuals are the ones who pay the price and get shortchanged.

The Expos left for a lot less money than what the government is investing in the IT system. How can we, as legislators, address this? Is there something that we can do?

Andrew Hayes :

Thank you. The point raised by the deputy minister about the accuracy of estimates is very important. Obviously, when projects begin, we do not have all of the right information to estimate their total cost. However, the government is now trying to improve its cost estimates, and I believe that Treasury Board is the one working on that project. In our audits and reports to Parliament, we have talked a lot about the importance of looking at costs. Here, in this report, we talk about the importance of looking at costs before awarding a contract.

The important message is that Canadians care about how much things cost. We need to look at all of the information that is available when we start a project to estimate the cost of it as accurately as possible.

Sébastien Lemire :

We are still seeing some disturbing things. GC Strategies had only two employees, and PSPC awarded one of the biggest contracts, a $400‑million contract, to Adirondack Information Management, a four-person company that claimed to be indigenous. How can we ensure that we are not giving big contracts to companies that are obviously unable to fulfill them and that use subcontractors that we have no control over?

(1220) [ English ]

The Vice-Chair (Jean Yip) :

Give a short answer please.

[ Translation ]

Andrew Hayes :

We made important recommendations in other reports regarding the existing controls for procurement policies. They exist but public servants need to follow these policies.

Sébastien Lemire :

Thank you.

[ English ]

The Vice-Chair (Jean Yip) :

Thank you. Now we will go to Ms. Kusie for five minutes.

Stephanie Kusie :

Thank you, Chair. Mr. Roy, I'm struck by the sheer number of non-competitive contracts your organization engaged McKinsey in. There were 18 in total, with a combined value of nearly $15 million. I recognize that for 11 of these contracts, the Auditor General found that a competitive process was not required under your policies. Can you please explain why your policies allowed for that?

Alexandre Roy :

The nature of PSP is about being a sophisticated and complex investor by fulfilling our mandate, which is delivering good return without undue risk of loss. We need to be very agile in investing. These contracts you're referring to, which were not subject to the procurement policy that PSP has, were investment-related contracts. If we take, for example, a private firm elsewhere, we need to be very agile and very fast to implement and to invest in them. This is why it's not part of the procurement process we have.

Stephanie Kusie :

Mr. Hayes, in your view, is it common for departments to only provide non-competitive contracts to a single vendor at a high dollar value?

Andrew Hayes :

There are a number of ways to deliver non-competitive contracts, but I don't know if I can say in general terms that this is common. What's important is that there should be documentation justifying why those contracts are being awarded. That was what we were looking for in this audit.

Stephanie Kusie :

Mr. Hayes, in your testimony last week on this study, you spoke about your office's understanding that professional services contracts are needed in some cases. However, what's important is that the reason for contracting needs to be documented, that there is “a clear perspective on how much it's going to cost” and that the department or organization is “getting the services [they're] contracting for.” Can you elaborate on that, please?

Andrew Hayes :

I'm glad I'm consistent with myself. In this audit, we referred to those as some of the fundamental elements of ensuring that value for money is present. If an organization takes a look at their reason for contracting and they have a good reason for contracting—I'm distinguishing from using public servants to do the work—that's step one. Understanding what the costs of the contract are going to be is step two, so that you have a picture and you're not going to be overspending when you don't need to.

Number three is making sure that you've gone out and offered the opportunity to as many potential suppliers as possible. That's the way competition can help bring down the cost. Once you do have a contract, make sure you're monitoring it and getting the services or goods that you are expecting from the contract at the price you're expecting to pay. That's fundamental. Indeed, the law requires public servants to certify that goods and services were received as per the contract. Those are all critical elements of getting value for money for taxpayers.

Stephanie Kusie :

Ms. O'Gorman, in the arrive scam scandal, we saw subcontractors hired without proper vetting. In the McKinsey audit, we saw CBSA structure procurements that effectively shut out other bidders. It's different projects, but the same story: The Liberal government failed to enforce the most basic controls in federal contracting. How did CBSA allow this pattern to repeat?

Erin O'Gorman :

The McKinsey contracts were competitive or were taken off of a PSPC standing offer. In some cases we received multiple bids, so I would make a distinction with the processes here. The Auditor General found a lack of documentation, and as was said earlier, a lack of documentation is presumed guilt. It's hard to argue with that. The processes were different from what you're referring to in terms of IT contractors versus the processes that were used to contract with McKinsey.

(1225) Stephanie Kusie :

Where is Cameron MacDonald now?

Erin O'Gorman :

I don't know.

Stephanie Kusie :

Where is Minh Doan now?

Erin O'Gorman :

I don't know.

Stephanie Kusie :

Who chose GC Strategies?

Erin O'Gorman :

Can you elaborate?

Stephanie Kusie :

I'd like you to elaborate, please. We haven't received a clear response from your organization as to who chose GC Strategies. Who chose GC Strategies, Ms. O'Gorman?

Erin O'Gorman :

There was a contract for GC Strategies that was requested by CBSA of PSPC. In terms of the business case, there's documentation supporting that. I don't have a document saying, “We want GC Strategies”, but there was a sole-source justification.

Stephanie Kusie :

Thank you.

The Vice-Chair (Jean Yip) :

Thank you. Now we'll go to Ms. Tesser Derksen for five minutes.

Kristina Tesser Derksen :

Thank you, Madam Chair. I'll take an opportunity to thank the committee. I believe we're closing in on our final hour on this particular Auditor General's report. I know that some of my colleagues around this table have sustained a lot of hours questioning witnesses and getting to the bottom of the Auditor General's recommendations. Thank you for the preliminary work you've done there. I appreciate all the thorough answers we're getting from our witnesses today as well. I'd like to continue with Ms. O'Gorman and CBSA. Last week, we had Mr. Settano here from the Business Development Bank.

I noted to him that the Auditor General had some critiques about his department's lack of record-keeping. I've mentioned already that this is a continuing theme in the Auditor General's report. I want to pick up on something I mentioned during the last meeting about the Auditor General's role in not necessarily criticizing the departments' selections or their discretion in choosing contract suppliers but more so critiquing how the record-keeping made it difficult to determine whether or not decisions were appropriate in the circumstances. I want to ask you, Ms. O'Gorman, about the selection process at CBSA.

Is there a selection committee that reviews bids? How does that work?

Erin O'Gorman :

We have a senior committee that looks at all contracts from the beginning, the need for the contract and then the approach for obtaining the contract. Of the contracts we have in place now, 80% are competitive. Almost every contract—every contract over $1 million—goes to that committee and states the rationale for why people at CBSA can't do it and what the timeline is. If that approach is approved, as mentioned by my colleague, we have very distinct roles and responsibilities.

We have a procurement group that will then manage that contract, including the RFP process and the bid process if it's within CBSA's authorities. Then it will use the expertise of others within the department for the bid evaluation. It is segregated from the groups that need those resources as part of either a project or something they're doing.

Kristina Tesser Derksen :

It sounds like there's not necessarily a problem with the protocols and policies you're following for the selection process. It's just about justifying things with the appropriate record-keeping so your decision can be supported and is not subject to questions. Can you talk to us a bit about how you're implementing some improvements in that area with your record-keeping?

Erin O'Gorman :

Sure. It starts with the business plan. Procurement isn't something that someone over there is going to do separately from their mandate, a project and the budget. At the beginning of the year, we map out all of the projects and the work we need to do. Is it within the budget? What's the rationale for needing a contract? It starts with the business plan of the organization.

Then as the contract process gets under way, it's about bringing those things forward to the contract review, subjecting them to the challenge function of the executive table and then pursuing a contract through the competitive process or if there's a rationale for the sole-source process. We have one file that has all of that documentation, from the business plan to the approval of the procurement itself at the committee, and then all subsequent RFP and statement of work assessments, including for the management and oversight of the contract over the long term.

(1230) Kristina Tesser Derksen :

Thank you. My next question is for Mr. Roy, respecting the PSPIB. First, I want to identify that your department is a little different. It's a non-Crown corporation. It's quite arm's length from the government. I want to talk a bit about the timeline for document retention. There was a real problem with this that the Auditor General identified, particularly that the justification for three of the contracts that were issued by PSPIB could not be reviewed because the contracts fell outside the time frame in the retention policy.

They were destroyed, which is unfortunate, because those documents may have avoided this line of questioning. I'd like to ask if you are continuing with that policy. How do you apply that policy now in light of the Auditor General's problem with not having the documents to review?

Alexandre Roy :

The retention policy at PSP remains the same. We still have the retention policy that goes from two years to almost an indefinite period of time. For these contracts, unfortunately, it was beyond the 10 years in the retention policy. We also have to understand that the period covered was from 2011 to 2023. That was going further than the 10-year period of the retention policy of PSP.

Kristina Tesser Derksen :

Okay. There are no plans to revise that, I take it, because it sounds like a long time frame. Again, we're coming up against this problem. On that point, actually, I might turn to Mr. Hayes and allow him to elaborate a bit on what I was saying about the—

The Vice-Chair (Jean Yip) :

I'm afraid we're out of time. You can take it up in the next round if you wish.

Kristina Tesser Derksen :

Okay. Thank you, Chair.

The Vice-Chair (Jean Yip) :

Thank you. [ Translation ] Mr. Deltell, you have the floor for five minutes.

Gérard Deltell :

Thank you very much, Madam Chair. It is now my turn to thank all my colleagues and the entire team, including the interpreters, who do an excellent job, the technicians and the law clerks, who enable us to do a very good job—at least we do our best. We wish them a very happy holiday season. Mr. Roy, I want to talk to you about conflicts of interest, because you touched on it in your testimony. The Auditor General, in paragraphs 5.48 and 5.49 of the report, says that businesses do not necessarily have strict rules and that some need to be put in place.

As we said earlier, the organization you represent is neither a Crown corporation nor a department. It is the Public Sector Pension Investment Board. That means that you invest millions of dollars in companies. Can you give us a case that might represent a conflict of interest?

Alexandre Roy :

A conflict of interest case could arise, but it did not occur at PSPIB: A contract could be offered by an acquaintance, a partner or a friend of a PSPIB employee. At PSPIB, we have to declare all potential conflicts of interest on a quarterly and annual basis, as well as before a contract is signed, if it exceeds certain thresholds, based on a risk-based approach. In other words, the riskier the contract, the higher the level of scrutiny.

Gérard Deltell :

You are making investments in private companies. For example, you buy shares in companies in the hope that they will increase in value. Is that correct?

Alexandre Roy :

Yes, absolutely.

Gérard Deltell :

If an employee suggests buying shares in a company that he owns shares in himself, will you arrest him or ask him to sell his shares?

Alexandre Roy :

Generally speaking, the compliance team at PSPIB ensures that this type of situation does not occur.

Gérard Deltell :

Let us suppose that a person does business with a financial institution and that they do not know the exact investments that are made by that institution. That is what I do, personally. So I do not know the shares that are being purchased. At PSPIB, do you have a specific procedure for these people?

Alexandre Roy :

I am not sure I fully understand your question. It should be noted that as PSPIB employees, we cannot purchase shares in companies that PSPIB invests in. There is also a pre-audit related to PSPIB's investments.

Gérard Deltell :

Mr. Hayes, if a member of the executive of the Canadian government owned shares in McKinsey, would there be a conflict of interest?

(1235) Andrew Hayes :

It would depend on the circumstances and the contract. If that person has the power to make decisions, it is possible.

Gérard Deltell :

Let us say a member of the executive owns $7 million worth of shares in McKinsey. Could the government continue to do business with McKinsey?

Andrew Hayes :

I am not in a position to answer that question. I do not know the facts.

Gérard Deltell :

It is not a fact; it is a hypothesis. If a member of the executive holds shares in a company that has very large contracts with the government, as you so clearly demonstrated in the case of McKinsey, is that member in a conflict of interest?

Andrew Hayes :

Again, I cannot answer that question without knowing the details and the measures in place, such as conflict of interest screens, to ensure the independence and objectivity of the individual.

Gérard Deltell :

Let us say a member of the executive of the Canadian government owns shares in a certain company. Could it receive government contracts?

Andrew Hayes :

There is no reason to exclude this company from contracts. The most important thing is to declare conflicts of interest, so that the government and public servants can resolve them.

Gérard Deltell :

Should we ask the member of the executive of the Canadian government to sell his shares in order to ensure that there is no conflict of interest?

Andrew Hayes :

I think that is a question for the Conflict of Interest and Ethics Commissioner. I am not an expert on that.

Gérard Deltell :

You were nevertheless effective in your analysis of conflicts of interest in the departments and Crown corporations that were managing with McKinsey. As you so aptly demonstrated, McKinsey does a lot of transactions with the government and has major ethical flaws. How is it that some members of the executive can still have shares in McKinsey?

[ English ]

The Vice-Chair (Jean Yip) :

Please give a short answer.

[ Translation ]

Andrew Hayes :

I think the Conflict of Interest and Ethics Commissioner would be in a better position to give you an answer to that question.

Gérard Deltell :

Thank you.

The Vice-Chair (Jean Yip) :

Mr. Lemire, you have the floor for two and a half minutes.

Sébastien Lemire :

I am sorry. I thought we were going to go in the regular order. The chair is following the tradition of the last round for the Bloc Québécois. I would like to put my question to Mr. Roy. David Court sits on your board. He has ties to McKinsey. He is also one of the directors now associated with Brookfield, the investment firm that Mark Carney was the chairman of. How many contracts were awarded by your firm to McKinsey? Did Mr. Court recuse himself from all of those decisions when he was on the board?

Alexandre Roy :

As the Auditor General of Canada indicated in her report, 18 contracts were awarded during the period when we audited PSPIB. None of the contracts were awarded by the board of directors. Everything was done by the management team. The board of directors, of which Mr. Court is a member, was not at all involved in awarding the contract.

Sébastien Lemire :

Can you tell us how much you have invested in Brookfield? When were the investments made?

Alexandre Roy :

As I was saying, PSPIB is a global investor, an investor that does business with many large investment firms around the world. Brookfield can be part of that. I do not have the details of what we currently have at Brookfield. I can provide more details to the committee if that information is deemed necessary.

Sébastien Lemire :

I would appreciate it if you could provide the committee with an answer in writing. I am curious about the Century Initiative, which was started by Dominic Barton and Mark Wiseman, who once was the CEO of your organization. As the chief risk officer, how do you assess the risk of reputational damage, particularly because of these direct ties to your organization? What impact can this have on PSPIB's credibility in Canada and abroad?

Alexandre Roy :

I am sorry to correct you, Mr. Lemire. Let me tell you that Mr. Wiseman was the chairman of the Canada Pension Plan Investment Board, not of PSPIB. So Mr. Wiseman has never had any dealings with PSPIB.

(1240) Sébastien Lemire :

I am sorry. Does Mr. Barton have direct ties to your organization? Mr. Barton was not there either, was he?

Alexandre Roy :

As far as I know, Mr. Barton has never had a direct relationship with PSPIB.

Sébastien Lemire :

Okay. The connection with Mr. Court still exists. What do you see as the risk to the organization's reputation?

Alexandre Roy :

With respect to reputational risk, as I told you, PSPIB follows procurement procedures, and Mr. Court is in no way involved in any PSPIB decisions regarding the awarding of contracts with McKinsey.

Sébastien Lemire :

Thank you very much, Mr. Roy.

[ English ]

The Vice-Chair (Jean Yip) :

Thank you. I have a question for Mr. Thompson. Were any non-competitive contracts awarded?

Paul Thompson :

Just to clarify, over what period would that be? Have we ever issued a non-competitive contract?

The Vice-Chair (Jean Yip) :

It would be just during the time period of the audit.

Paul Thompson :

I mentioned that one of the contracts under study with McKinsey was issued as a sole-source contract. That was the first one. The other four McKinsey contracts that were studied used the national master standing offer of Public Services and Procurement Canada. Those are the ones that were reviewed.

The Vice-Chair (Jean Yip) :

Could you elaborate on the decision-making process for competitive versus non-competitive contract awards? What factors do you consider and why?

Paul Thompson :

As my colleagues have noted, we've gone to significant lengths to strengthen our procurement processes in order to have a stronger centre of expertise, a stronger review process, bolstered documentation and quite a bit on training and awareness. Part of this is to follow, basically, the logic structure that Mr. Hayes outlined earlier. Is there a clear objective of what the task in question is? Do we have the in-house capability to do it? If not, do we proceed to a contracting model? If so, the first step would be designing it as a competitive process by default to ensure that you get the best value. That's basically the structure we're now following.

The Vice-Chair (Jean Yip) :

Thank you. It's over to you, Mr. Rana.

Aslam Rana :

Thank you very much, Madam Chair. Mr. Jennings, could you please provide examples of measures that the BDC put in place following the Auditor General's report?

Philip Jennings :

I'll outline what I think are the largest measures, and I'll expand a bit on those examples. The first one, as I mentioned in my opening remarks, is about trying to have a central, independent and specialized procurement function within the department. Prior to the findings of this audit, we had it relatively decentralized, so it did allow some inconsistencies. The advantage of having it centralized and independent is that, at the end of the day, you have a challenge function for those who are looking to procure. The second thing, as I've mentioned already, is the quality assurance activities.

Prior to any contract being signed in the department, long list of things have to be checked off, including the documentation that has to be provided. That is for 100% of the contracts that get signed. I can give examples of things that have to be checked off: Are there security checks for the people doing the contract? Is there a conflict of interest? Is the statement of work clear? The last thing is a tiered governance structure to ensure that at the end of the day, you have the right larger view, depending on the complexity and size of the contracts.

Just to go back to the previous questions about sole-sourcing, we have an oversight committee. All sole-source procurements have to go through that committee to make sure they meet the test. The thresholds are higher than zero when it comes to competitive processes.

Aslam Rana :

As for my last question, do ISED employees follow an annual conflict of interest declaration process?

Philip Jennings :

We do, as required. That is subject to all employees having to fill out and declare any potential or real conflict of interest.

Aslam Rana :

Thank you very much, Madam Chair. Happy holidays and merry Christmas to everybody who is listening or is present here.

The Vice-Chair (Jean Yip) :

Thank you. Just as a final note, following up on Mr. Kuruc's question about audited entities only partially agreeing with an OAG recommendation, this is usually captured in this committee's reports. Thank you to our witnesses for their testimony and for participating today. I wish all of you a very restful holiday. For committee members, I have some reminders. Supplementary dissenting opinions and citations for the follow-up study on gender-based analysis plus and the study on Arctic water surveillance are due on Friday, December 12.

The lists of witnesses for the public accounts of 2024 and 2025 are due on Monday, December 15. I would just like to echo everybody's sentiments. Thank you to all members and to all the support staff we have here—the clerks, the analysts, the interpreters, our technical support and the staff who support the members.

Some hon. members: Hear, hear!

The Vice-Chair (Jean Yip): I want to wish everybody a merry Christmas, happy Hanukkah, happy Kwanzaa and, lastly, a happy new year. Thank you, everyone. Is it the will of the committee to adjourn this meeting?

Some hon. members: Agreed.

The Vice-Chair (Jean Yip): Amazing. Thank you.