Government Operations Committee on June 10th, 2024

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Therefore, we can be assured that this process was quite thorough.

[Karen Hogan]

I can tell you for sure that our process was quite thorough. We did review some of the work of the internal audit shops and relied on some of their work. Some of the work was excellent, and we were able to use it and add to it where we needed to when it came to determining value for money.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

I'm going to point to just one area. Noting that the other reviews had provided recommendations with similar themes, which you support, your report makes a single recommendation “in the area of conflicts of interest that [you] believe was not addressed by previous recommendations.”

In your view, why might reviews conducted internally or by the procurement ombud not include recommendations addressing conflict of interest?

[Karen Hogan]

Perhaps they weren't looking for it. However, in my view, given the renewed conversation about values, ethics and conflict of interest across the public service, I felt it was important to ensure that conflicts of interest were well managed, especially when I recognize the source of the motion that was passed in the House for me to do this work.

We felt there was an area where we saw some of the Crown corporations just doing a really good, proactive job at self-declaring on whether the processes were competitive or non-competitive when it came to conflicts of interest, whereas the public service was relying on the annual declaration.

I felt that was a gap and that it was important to close that gap, because making sure everyone involved in the procurement process has thought through whether they may be in a real or perceived position of conflict of interest was important to ensure the fairness of procurement processes.

[The Chair, Conservative, Kelly McCauley]

Thank you very much.

Mrs. Vignola, please.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you, Mr. Chair.

Ms. Hogan, you said that 45% of the contracts awarded to McKinsey were missing one or more justifications. Let's apply a proportionality lens. If memory serves, the Government of Canada awards about 400,000 contracts a year. So, 45% of 400,000 contracts represents 180,000 contracts that might not have justifications.

Can such an extrapolation be made from the sample used to examine contracts awarded to GC Strategies and others?

[Karen Hogan]

I'll just clarify the percentage issue.

We used a sample consisting of 33 contracts out of the 97 contracts in question. This was a sampling for statistical purposes.

Indeed, you could extrapolate from professional services contracts. That said, I think it is important to make it clear that comparisons should be made based on the same population.

So, 58% of contracts had one or more shortcomings. In 85% of cases, there was a missing explanation, namely why the contract had been awarded.

I know I'm talking a lot about percentages, but I think it's important to clarify things. More than half of the contracts had one or more issues, making it impossible for us to determine whether value had actually been received in relation to funds spent.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you.

There's something else that concerns me. Earlier we were talking about accountability. The same principle could provoke, in civil servants or high-ranking people, the fear of being rapped on the knuckles, or even engender a fear of change.

Does “threatening” staff, sometimes indirectly, with reprisals for every little mistake that might be made explain this fear regarding accountability?

[Karen Hogan]

That's an excellent question.

There are a lot of individuals who talk to our teams during audits. I admit that some of them are sometimes afraid of reprisals. From time to time, they are a little worried when they share information with us, but they know that we will really take their fears into account. I'm grateful for the commitment officials show when they come to talk to us during our audits.

That said, I think there are a number of reasons why the rules might not be followed. It's really up to each department, agency and Crown corporation to determine what the culture is within the organization and find out why the rules aren't being followed properly.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you.

[The Chair, Conservative, Kelly McCauley]

Thank you.

Mr. Bachrach, go ahead, please.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Thank you, Mr. Chair.

Ms. Hogan, one of the more troubling things included in your report is this piece about the use of Crown corporations as proxies.

You've noted that for one contract that was issued by the Canada Development Investment Corporation at the request of the Department of Finance, “the department's approach raises the perception that it used the Crown corporation as a proxy to avoid the public service's competitive procurement requirements.”

What requirements might they have been trying to avoid?

[Karen Hogan]

This is one of those complex situations. As I said, there were 97 contracts with almost 97 different situations.

CDEV provides advice to the Department of Finance. That is one of their raisons d'être. We found that the Department of Finance was very involved in a procurement process when they typically would not have been. They provided a statement of work. They were part of the evaluation committee. That perception is one that made it look like they were trying to avoid certain rules.

In the Crown's case, a competitive process would have just been to ask three different vendors for bids. In the federal department's case, this would have involved a much lengthier process of having the contract available for all Canadians to bid on and then doing an evaluation of all of those bids.

It's likely faster to only have to go to three vendors, then evaluate the bids received and issue the contract.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Given the perception that this was done to avoid a more rigorous procurement process and more rigorous rules, what can be done to prevent that from happening?

Assuming that the more rigorous process is in the public interest, I'm wondering if the steps the government has taken to strengthen procurement addressed this specific situation that you've raised here.

[Karen Hogan]

I can tell you that I spoke with both the head of CDEV and the deputy minister of finance about this situation specifically.

Some of our concerns were that the Department of Finance should have been further withdrawn. They didn't need to provide the statement of work and they didn't need to direct them to go get a contract to get advice.

They could have said, “We need advice on a certain topic; can you provide it to us?” and then left the Crown to determine the best way to get access to that.

That perception of being a little more involved is the one that we questioned here.

[The Chair, Conservative, Kelly McCauley]

Thanks, Mr. Bachrach.

Mr. Genuis, you have five minutes, please.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Thank you, Mr. Chair.

Madam Auditor General, summarizing your report here on McKinsey contracting with this current NDP-Liberal government, your frustration seems to kind of exude through the pages in a few ways.

I note, for instance, that on the recommendation side, you basically said that many of the recommendations you've made on previous reports would have relevance to this report, so you're not going to repeat them. Fixing the problem is a simple matter of adhering to the rules. You noted that it's not complicated; there are rules in place and the rules are just not being followed.

It highlights the fact that pointing out the problems is one thing, but the government has to actually be serious about implementing the solutions.

It's frustrating for me to hear the discourse in response to your reports. It's always very deferential, publicly, from the government, saying that they listened and they thank the Auditor General for her work, etc. Then there is a failure to implement the basic solutions and we have a situation where you have a report coming back saying, essentially, that you don't need to repeat yourself; refer to previous reports for recommendations that would have addressed many of these problems.

What can be done to get at this core issue of governments paying lip service to recommendations you've made, but then not taking the implementation seriously?

[Karen Hogan]

I have a small point of clarification to make.

In this report, I wasn't referring to our previous recommendations but to those the procurement ombuds recently issued, as well as the internal audit departments and the comptroller general.

When it comes to following the recommendations we give and actually implementing them.... I wish I had the solution, because we often hear, “Yes, we agree”, then don't see action. However, I have to say that, following ArriveCAN and throughout this audit, we saw that Treasury Board and Public Services and Procurement Canada were already making changes, so that's a positive.

What I'm hoping we'll see, going forward, is that it isn't just a “one and done”—that there is recognition that reminders about procurement rules should happen on a regular basis. That's why I believe every organization needs to make sure they have better monitoring or a better quality control system over all of this. While the rules may be confusing at times, they are very clear. It's how they're applied and documented that should be improved.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Yes. It is frustrating, I think, for many Canadians that, after nine years of this government, the simple matter of having to follow the rules.... The rules aren't being followed, and improvement is characterized by saying, “Okay, well, we're going to work harder to follow the existing rules.” We're not even talking about existing rules being inadequate. We're talking about a failure to adhere to the rules.

I am going to pass the time I have left over to Mrs. Kusie.

Thanks.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you very much, Mr. Chair.

Thank you very much, Auditor General.

Again, given this damning report, Mr. Chair, I'm going to launch into a motion that I've submitted to the clerk.

This motion has been drafted in both official languages.

It's evident that more needs to be uncovered after this report, which determined there was frequent disregard for the rules of contracting. Again, we see the same players being complicit, with 70% of contracts—$118 million—being non-competitive; four out of 28 contracts being designed to suit McKinsey; 10 out of 28 contracts not having enough documentation; 17 out of 20 departments failing to meet these requirements; 18 out of 19 contracts being off the national master standing offer list; 76% of contracts not having good enough justification; 13 out of 17 contractors not having the correct security clearance requirements; six out of 23 departments—that's 22%—not receiving all of the deliverables; and, as I said, only 29% of contracts being done through a competitive process.

In addition to this motion, which I'm putting forward, Mr. Chair, we see these incredible amounts. Immigration, Refugees and Citizenship Canada had close to $25 million for two contracts. National Defence had almost $26 million over 15 contracts. Public Services and Procurement had more than $26 million over three contracts—I will say that my counterpart, the President of Treasury Board, has her fingerprints all over this, Mr. Chair. The Business Development Bank of Canada.... Crown corporations, which were just brought up, had 11 contracts for close to $22 million. Canada Post, which we had here in this committee recently, had almost $27 million over 14 contracts. The Public Sector Pension Investment Board had over $14 million in over 18 contracts awarded. There was a single contract, Mr. Chair, awarded to Trans Mountain Corporation. As an Albertan, I'm not surprised by this at all.

With that, I will get into the wording of the contract. Mr. Chair, I will read it into the record in English.

[The Chair, Conservative, Kelly McCauley]

Can I interrupt before you do?

I think we will, because of the time, excuse our witnesses. I don't foresee our getting to the next round.

Thank you, as always, Mr. Hayes, AG Hogan, Mr. Swales and Mr. Mariani. It's always a pleasure to have you with us.

Thanks very much.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you very much.

The motion reads:

That in relation to the committee’s study of federal government consulting contracts awarded to McKinsey & Company, the committee invite to appear:

Dominic Barton, former Global Managing Partner of McKinsey

Bob Sternfels, current Global Managing Partner of McKinsey

Boyan Gerasimov, former Engagement Manager of McKinsey & former Director of Policy to the Minister of Public Services and Procurement Canada

The McKinsey Canada officials responsible for securing government contracts

The President of the Treasury Board and departmental officials

The Minister of Public Service and Procurement and departmental officials

Department of National Defence officials

Department of Immigration officials

Business Development Bank of Canada officials

Export Development Canada officials

Public Sector Pension Investment Board officials

Trans Mountain Corporation executives

Canada Infrastructure Bank officials.

As I said, Mr. Chair, we have just seen a damning report delivered by the Auditor General here this last week, and we must uncover more. Even she did not have the answers for us today. Even she said we need to have more information in an effort to both solve the incompetence and further explore the cozy relationship between the Liberal government and McKinsey.

We need to get to the bottom of this. With that, I am putting forward and moving this motion today, which calls these witnesses, in an effort to do that.

Mr. Chair, thank you very much.

[The Chair, Conservative, Kelly McCauley]

Thank you.

We'll start debate.

I have Mr. Kusmierczyk and then Mr. Genuis.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Thank you, Mr. Chair.

Everyone around this table takes this issue incredibly seriously. We asked the Auditor General to come here and to provide testimony today of her exceptional work. We're very grateful for the work that she and her team brought forward. This is obviously a serious issue.

We absolutely want to strengthen accountability for our public service and our public officials in their day-to-day work, to see compliance with procurement rules strengthened and to see improvements made to quality control in the work that our public servants do. We want to see, above all—which is something, again, a common theme we see.... Whether it's the Auditor General's or the procurement ombudsman's report, the thread that has connected all of those investigations and analyses is that we need to drastically improve documentation: “Documentation, documentation, documentation,” is the thread and the theme that, really, is being repeated over and over throughout these analyses.

However, what we heard today loud and clear from the Auditor General is that 99% of the contracts that were studied had no political involvement whatsoever. There were 97 contracts that the Auditor General looked at. We asked the Auditor General point-blank, “Out of the 97 contracts, how many had political involvement?” The Auditor General clearly stated that there was only one out of 97 that had ministerial involvement, because the contract in that case met a certain threshold such that it was required. Ninety-nine per cent had no political involvement, which means no ministers, members of Parliament or elected officials were involved. This is an issue within the unelected public service and the public sector.

Again, compliance with procurement rules, improving quality control and documentation, these are the tasks eternal for the public service. This is an ongoing eternal task, not only for every public servant in Canada, but this is the challenge and struggle that every public service in the world faces.

The question before us is, what can we do? How do we help our public servants be the best they possibly can be and deliver the best service they possibly can? How do they maintain the rigour that is required of their work? How do they maintain the highest professionalism? That's the fundamental question. It's not a question of politics. It's a question of professionalism—public service professionalism. How do we help our public servants make sure they meet and exceed the highest level of public service professionalism? That's what this is about, and this is what this conversation is about.

Now, my experience working alongside public servants is that they are incredibly dedicated people...the highest professionalism. They are dedicated. They are professional. They take their work extremely seriously. They take the integrity of their work and their office extremely seriously. We saw that especially during the trying times of COVID and the pandemic. These are unheralded heroes who often worked behind the scenes, out of the limelight, for long hours and long weekends to help get this country through the pandemic and COVID. These are exceptional professionals, and the question before us is, again, how do we help them?

How do we help our public servants, our unelected public officials, maintain the highest vigour and rigour of the highest standards of professionalism? That's what this is about. This is what we heard the Auditor General say over and over: that there was no malfeasance. There was no type of untoward motivation, but there were gaps. There were gaps in the systems that do absolutely need to be addressed, because, again, we heard today as well that the federal government procures billions—tens of billions—of dollars of goods and services every single year, hundreds of thousands of contracts...I think I heard it's 400,000 contracts every year.

It is important—it is critical—that we have the proper airtight systems in place to make sure that Canadians are getting the best value for money, that every dollar is spent wisely. At the same time, we need that proper documentation to be able to show our work, to be able to show the work of our public servants, I should say, so that when there are mistakes that are made, we can learn from them and also, so that we can—again—take the necessary lessons from them and learn best practices from them. That's absolutely important.

Value for money is absolutely critical, but we also know for sure that in those instances where someone does do something that's untoward, we can hold them accountable. We can hold them accountable, and that is something that is absolutely critical, but we heard loud and clear today from the Auditor General.... It couldn't be more clear. The Auditor General looked at 97 contracts within 10 departments and within 10 Crown agencies and found that, out of the 97 contracts, there was zero involvement from elected officials, zero involvement from ministers, from members of Parliament, from elected officials...except for one. Ninety-eight point nine per cent—99%—of contracts that they looked at had zero ministerial or political interference, so this was an issue...this is an issue that is within our public service, and we need to find out how we help our public service to be the best version of themselves that they possibly absolutely can be.

What we heard today, on top of all that—the Auditor General was absolutely clear—is that the rules already exist. The rules already exist. The framework of accountability and the framework of rules and systems already exist. This is what we heard, but what needs to change is that the departments need to make sure...the deputy ministers, the unelected officials, need to make sure the rules are being followed. We heard today that there are varying degrees of compliance with those rules. Some departments are better than others. We need to make sure. How do we follow the leaders and not the laggards? How do we make sure that the best practices are adhered to by every public official and every department?

We heard that Natural Resources is a department that had a clean sheet, a clean bill of health, from the Auditor General. What do they do that's different and that other departments and Crown agencies need to emulate to make sure they're doing the right things? This is important, but that change, that culture change, is the responsibility of the unelected public service, and bringing that to bear is absolutely important. It is something that is important to us as elected officials to make sure there is accountability in that system, but as the Auditor General said, the rules exist. The accountability framework exists. It's a matter of departments and Crown agencies following those rules, which is what is important.

In this conversation, we also learned about the complexity that public servants have to deal with and about the need to balance.... Again, it's not about creating more red tape. We're doing a red tape reduction study in this committee. It's not about creating more rules or more red tape. It is about balancing the need for accountability 100%, but balancing that with the need for efficiency to make sure that decisions can be made in a manner that is responsible and accountable but also efficient so that the work of government can continue and Canadians can receive the service they require.

That's where we should be taking this next step as a committee. We heard it loud and clear. The Auditor General pointed us in the right direction, which is the need to speak with officials, the need to for us to work with officials and with public servants to find out how we can help them do their work. That's something that is important.

We asked the Auditor General what was driving this behaviour. Why are unelected public servants taking these shortcuts—not providing the proper documentation, not providing the proper quality control and not following the proper procurement rules? The Auditor General stated that it's likely related to to public servants either not understanding the rules fully—perhaps being overwhelmed by the complexity and the sheer number of all the rules—or, again, it's simply that those rules need to be reinforced, repeated and ingrained in the culture of those particular public servants.

That's what we heard in the testimony today. We had some great questions that were asked around the table. I'd be curious to find out how we can deploy technology, perhaps, to help the public service. I'm thinking of, for example, AI, which is able to deal with complex systems and complex situations to help public servants make sure that they're referring to a checklist of things, items that need to be conducted for every procurement, no matter how small or how large. We asked questions about why some public officials go back to the same well, go back to the same companies. What are some of the risks we open the door to when we have these chains of non-competitive contracts? That elevates, obviously, the risk element for those types of decisions.

It seems like sometimes public servants simply get into a rhythm—I don't know if that's even the word for it—or a habit. They go back to the same companies time and again. How do we challenge that? As the overseer of the procurement process, how does PSPC deploy its challenge function? This is something we also heard today.

We know that the departments are ultimately responsible. We know that the officials are ultimately responsible for making those decisions, and we know that public servants make those decisions within those departments, but how does PSPC utilize its challenge function to effectively put a brake on a particular procurement that it finds troubling and to basically say, “No, no, go back to the drawing board, IRCC” or “Go back to the drawing board, CBSA, you need to do this. You haven't fulfilled tasks A, B and C.” That's another question. How do we strengthen the oversight role of PSPC but do that without grinding the work of government to a standstill? I think that's the critical element here.

We're trying to balance the need for accountability, the need for having checks and balances, and the need for efficiency to not slow down the process of government, because, again, the decisions that are being made here impact Canadians, whether in terms of procuring PPE, procuring vaccines during COVID, procuring infrastructure investments to strengthen infrastructure, or making sure that benefits delivery modernization is moving forward so that Canadians and seniors can get their OAS paycheques and their GIS, so students can get their student loans, and so on and so forth. Canadians depend on a well-functioning government.

How do we balance that need for accountability with making sure that we're not adding unnecessary red tape? The Auditor General had an answer to that as well: We don't need new rules. What we need is for unelected officials, for public servants, to follow the rules that currently exist. That is something that is absolutely critical.

I'm looking at this motion that is here before us and I just had a chance now to really read through it. The member calls for folks that the Auditor General has already stated have absolutely nothing to do with the issue of these contracts, including Dominic Barton—my goodness. Everything the Auditor General, everything the Procurement Ombud and everything every other agency that has looked at this has said is that this is not about politics. This is not about partisanship. This is not about any type of friendships. This is simply about public servants, unelected public servants, not following the proper rules to the full extent. That is what this is about.

To call the President of the Treasury Board, a minister, and to call the minister of public services here when we have heard time and again today that 96 out of the 97 contracts had absolutely zero political involvement whatsoever—this is what we're talking about here.

I would rather that we as a committee take the next steps, be logical about this and avoid trying to create what I would say is a circus around this. We should do the work of this committee, and the next steps should be more focused and more surgical about what the next step in the work of this committee is. I think that's what's important here and that's what I'm interested in doing.

We absolutely want to strengthen the processes of our unelected public officials here. We absolutely want to strengthen compliance with procurement rules. We want to improve quality control. We want to improve documentation. That really is the gap. When you read all of the reports of the Procurement Ombud and the Auditor General, that is what they are saying, that we need to strengthen documentation, improve the culture of documentation and show our work. That is what we do. Again, this is something that needs to be improved.

This is what the Auditor General in her work and her team's work—which, again, we applaud, she has really done us a tremendous service here, raising this issue and shining a light on this issue—has pointed to as the issue, and as the road or the path to improving the accountability in our public service.

With that, I will yield the floor and happily circle back again to continue discussion on this important issue.

[The Chair, Conservative, Kelly McCauley]

Thanks.

I have Mr. Genuis and then Mr. Sousa and then Mrs. Vignola.