Appearance by the Minister of Employment, Workforce Development and Official Languages, and officials from Employment and Social Development Canada. Standing Committee on Indigenous and Northern Affairs (INAN) December 9, 2024

Official title: Appearance by the Minister of Employment, Workforce Development and Official Languages, and officials from Employment and Social Development Canada. Standing Committee on Indigenous and Northern Affairs (INAN). Study: Economic and anti-reconciliatory barriers posed by fraudulent applications for procurement opportunities set aside for Indigenous businesses. Date: December 9, 2024, 5:30 pm to 7:30 pm

On this page

• 1. Questions and answers on ESDC contracting
• 2. Overview of ESDC's contracting with Indigenous businesses
• 3. ESDC support for Indigenous communities
• 4. Indigenous Early Learning Child Care (IELCC)

1. Questions & answers on Employment and Social Development Canada (ESDC) contracting

ESDC reports (OPQ 2364) that since 2015, it has awarded over $835M in contracts for consulting services to the following companies: (i) McKinsey & Company, (ii) Deloitte, (iii) PricewaterhouseCoopers, (iv) Accenture, (v) KPMG, (vi) Ernst and Young, (vii) GC Strategies, (viii) Coredal Systems Consulting Inc., (ix) Dalian Enterprises Inc., (x) Coradix Technology Consulting Ltd, (xi) Dalian and Coradix in joint venture.

Question 1

Are contracting amounts reasonable?

ESDC awarded contracts to these consulting companies for high-level advisory services, specialized technical skills, as well as business intelligence. ESDC sought guidance on decreasing implementation risks, achieving sustainable results and bringing rapid performance improvements to the department for transformation projects including the Benefits Delivery Modernization (BDM) programme, a multi-year, multi-phase modernization to our benefits delivery systems. These services are contracted as part of competitive processes in conjunction with PSPC and in compliance with Government of Canada procurement requirements.

Additionally, the pandemic saw an increase in ESDC's need for consultant services to support the increased delivery of benefits and other services rendered directly to Canadian citizens during exceptional times. ESDC acquired the services of resources with application maintenance skills that were not part of the core skillset of internal employees. In some instances, supplier resources and skillsets were retained to transfer knowledge to employees, thereby increasing the benefits obtained from the contract by increasing the public service's skillset and maturing the department's capabilities in the realm of Information Management (IM) and Information Technology (IT) solutions. Furthermore, ESDC major initiatives (for example, BDM) also leveraged vendors with extensive global experience in executing large-scale business transformations and engaged external firms for independent third-party assessments.

Question 2

What percentage of the department's budget was spent on these companies and what has been the contracting trends since 2015?

Trend over past years

• Fiscal years 2015 to 2016 to 2018 to 2019 remained relatively stable in contract values for the suppliers listed in the question, with a slight increase of 13% between 2017 to 2018 and 2018 to 2019
• Fiscal year 2019 to 2020 had a 100% increase over the previous year, this can be attributed to an increase in awards geared towards the design phase of the BDM programme, with several contracts awarded to Deloitte and PricewaterhouseCoopers for support with programme and technical analysts, software architects, and project management
• Fiscal year 2020 to 2021 had a 192% increase over the previous year. Consideration should be given to the unpredictable effect of the pandemic on departmental contracting activities, which saw a marked increase in ESDC's need for external consultant services to support the delivery of programmes, benefits, and services to Canadians in the face of the rapidly changing public health landscape. 44% of the total value for 2020 to 2021 consultant services are COVID-19 related contracts
• Fiscal year 2021 to 2022 had a 44% decrease over the previous year
• Fiscal year 2022 to 2023 had a 235% increase over the previous year, which can be attributed to an increase in awards geared towards the BDM programme, which saw a major multi-year contract awarded to Deloitte to support ESDC through the modernization of Old Age Security (OAS) benefits delivery

Question 3

What is the rationale for hiring consultants?

Consultants provide a flexible and rapid deployment of resources with specialized skills and expertise to support ESDC's operational requirements and internal systems, specifically providing guidance for the department's transformation efforts, and to help ensure ESDC programs and services are delivered efficiently, effectively, and prudently.

The contracts awarded to the aforementioned consulting companies (see question 1) provided resources with specialized skills and expertise to support ESDC operational requirements and internal systems, such as the Job Bank, Employment Insurance (EI), Old Age Security (OAS), Canada Student Loans and Grants, and 1-800-O-Canada.

Question 4

Does hiring consultants amount to using "replacement workers" instead of public servants?

ESDC retained the services of consultants where it was deemed that no employee was available, or that specified skillsets or specialized knowledge were lacking. Some contracts were awarded to supplement ESDC's in-house capacity to manage large projects for the department, specifically during the development and deployment of programmes related to social services and support required during the early stages of the pandemic, which saw an unprecedented and unpredictable increase in demand for services for Canadians. The department continues to ensure that contracts include a knowledge-transfer component or plans for sustained management of solutions to be less reliant on consultants as we move from the building and implementation stages to the management of solutions.

Question 5

What is the difference between contracts with companies that have global expertise and "staff augmentation" companies?

At times, ESDC engages with major multinational firms (Accenture, PwC, Deloitte, KPMG, etc.) to support large-scale transformations and implementations. These contracts provide ESDC with access to comprehensive skill sets essential for navigating the complexities of modernization projects across all phases. Leveraging the extensive expertise of these firms ensures that ESDC's initiatives are equipped with the necessary resources and capabilities to achieve success.

Additionally, ESDC collaborates with "staff augmentation" companies when consultants with specific skill sets or experiences are required to complement the capabilities of internal public servants. These contracts are typically awarded using PSPC's methods of supply for professional services, ensuring a streamlined and transparent procurement process.

By strategically leveraging the strengths of both large multinational firms and consulting companies with specialized skillsets, ESDC can effectively address diverse project requirements while optimizing resource allocation and fostering innovation.

Question 6

How does ESDC ensure integrity of its contracting process?

ESDC follows all applicable policies, directives, laws, regulations and trade agreements, in all its procurement activities. Notably, ESDC conducts procurements in line with the key principles found in Treasury Board's Directive on the Management of Procurement, the Government Contracts Regulations (GCRs), and the guidance provided in PSPC's Supply Manual. Furthermore:

• per the requirements outlined in the Guide to the Proactive Publication of Contracts, ESDC proactively discloses all contracts/amendments valued over $10,000.00, on a quarterly basis
• the Procurement Review Committee (PRC) at ESDC provides ongoing procurement oversight to ensure that ESDC's contracting activities are carried out in accordance with the applicable legislation, policies, and procedures, while considering national and departmental priorities. The PRC provides oversight of high-risk procurement activities for the department and provides a challenge function aimed at upholding the principles of fairness, openness, transparency, and sound contract management
• ESDC utilizes Public Services and Procurement Canada (PSPC) mandatory government-wide vehicles for its professional services contracts. PSPC is developing new processes for its methods of supply for professional services requirements for all GoC departments. ESDC is updating internal processes and working with PSPC to ensure conformity

Question 7

Investigations by PSPC found that 3 subcontractors for professional services undertook contract work across 36 Government of Canada departments and agencies. These individuals fraudulently billed the Government of Canada by an estimated $5 million by billing multiple organizations for the same period under multiple separate contracts. Is ESDC one of those 36 Departments?

Yes. The contracts in question are:

• contract no. 2000126 with Eagle Professional Services
• contract no. 2000160 (G9292-201781/001/ZM) with IPSS Cyber Solutions
• contract no. 2000065 (G9321-130001-010-ZM) with Veritaaq Technology House

Will ESDC recover overpayments under these contracts?

Yes, the restitution process is centralized and led by PSPC on behalf of all affected departments. PSPC has the authority to seek restitution from suppliers.

Question 8

What does ESDC do to detect and prevent fraud?

ESDC performs integrity checks on suppliers and verifies the security clearance of resources, when applicable, and consults the Ineligible and Suspended Suppliers list maintained by PSPC prior to contract award. The department also relies on the Treasury Board's Directive on Delegation of Spending and Financial Authorities to ensure a scaffolded, risk-based approach by financial delegations in every step of the procurement process. Finally, ESDC's procurement operations are routinely audited and reviewed by the department's Internal Audit branch, which serves as an accountability measure as required in the Financial Administration Act.

Question 9:

Can you confirm that you have had contracts with GC Strategies and if so

What was the amount?

ESDC awarded 3 contracts to GC Strategies Inc. for a combined total of $3,132,343.05.

Will you be getting that money back?

ESDC did not find GC Strategies to be in violation of any contractual clauses and we have not contested any work delivered. As such there are no grounds to seek restitution. ESDC has no active contracts with GC Strategies Inc. Additionally, the PSPC Contract Security Program (CSP) has revoked the organization security clearance held by GC Strategies Inc. effective April 3, 2024. As a result, no further contracts will be awarded by or on behalf of ESDC to this supplier.

Did you get value for money?

The competitive procurement process enabled us to maximize value for money by leveraging vendor competition, which drove down costs while maintaining stringent quality standards and ensuring the suitability of the chosen vendor. The resources provided under each contract were retained for the duration of the contract and provided expertise that was otherwise not available through public servants at ESDC.

What did they do and why couldn't that have been done in house?

These contracts provided resources with specialized technical skills in the areas of Microsoft project server and business intelligence. These specialized resources were needed to support decision making within the organization by analysing, developing, testing, and deploying key IT solution modules for ESDC's Project Management Information Solutions (PMIS). These professional services were acquired to perform the work and transfer of knowledge to ESDC employees. The details for each contract are listed below:

• contract 1 signed December 2, 2015: The purpose of this contract was to support implementation of PMIS Phase 2
• contract 2 signed July 11, 2017: The purpose of this contract was to support PMIS Phase 3
• contract 3 signed April 1, 2022: The purpose of this contract was to continue support and further enhance PMIS to support the ESDC investment initiatives and improve the current functionalities of the PMIS product to align with departmental Project and Programme Management Maturity

Details deposed to Parliament regarding GC Strategies

Statement: Employment and Social Development Canada (ESDC) has reviewed the information available in its financial system and found 3 contracts for GC Strategies since November 4, 2015.

Amount of GC Strategies contracts: $3,132,343.05.

Due diligence practices and status of contracts: All 3 contracts were awarded following competitive procurement processes under a PSPC method of supply. One contract was awarded on December 2, 2015; another on July 11, 2017; and a third on April 1, 2022. All contracts have expired - ESDC has no active contracts with GC Strategies Inc.

Question 10

With regard to external professional services, for example, business services, IT services, management consulting services and temporary help services, how many active per diem-based resources are currently being committed by ESDC?

As of September 12, 2024, ESDC retains 830 active per diem-based professional services resources actively contributing to our projects, which are managed through a total of 390 contracts, including Task Authorizations (TAs). When needed, we use specialized professional service providers to obtain the expertise and capabilities to deliver high-quality services through our various programs. This approach allows us to continue to provide effective, quality-based support and delivery directly to Canadians.

Question 11

What is the current number of per diem-based professional services resources that have been contracted with the department for a period of more than 2 years?

Out of a total of 830 consultants, 137 have been under contract with the department for a period of more than 2 years. We continually reassess our operational needs, prioritizing internal resources and retaining only those with specialized expertise that is not available within the department. At the heart of our operations, we are committed to effective contractual and financial management, ensuring transparency, compliance and accountability in the use of public resources.

Question 12

What would the impact be on the BDM Programme if consultants were not retained?

Without consultant support, the BDM Programme would face significant challenges, including gaps in highly specialized skillsets and gaps in experience with large-scale highly complex transformations. These gaps would increase the risk of the programme not being able to deliver its projects on time and at the quality level expected by the public. The Qualified System Integrators are responsible for implementation, integration, transition, development, testing, delivery and (potentially) service management of part or all of the BDM Solution. This level of expertise and experience cannot be replicated fully with public servants; efforts to do so would increase stress and lower morale within the public service.

2. Overview of ESDC's contracting with Indigenous businesses

Issue

Employment and Social Development Canada (ESDC) has received questions regarding its contracting with Indigenous businesses, specifically, regarding the validation of Indigenous vendors according to the Indigenous Business Directory (IBD). Below is an overview of the department's Procurement Strategy for Indigenous Businesses (PSIB) commitments over the past 2 fiscal years (FY), including totals, percentage of total contract awards, and top commodities.

Background

• On August 6, 2021, the Government of Canada announced its commitment to increase federal procurement opportunities for First Nations, Inuit, and Métis businesses across Canada in order to renew and strengthen its relationship with Indigenous peoples
• A mandatory requirement ensuring a minimum of 5% of total value of contracts issued by departments is awarded to Indigenous businesses was announced as part of this commitment
• To meet ESDC's obligations under these new mandatory procedures, the Chief Financial Officer Branch (CFOB) has established the strategy for 5% target for procurement with Indigenous businesses
• Each branch/directorate is strongly encouraged to direct at minimum 5% of all their purchases to Indigenous businesses where there is Indigenous capacity, by using available procurement tools where Indigenous businesses have been identified

Key facts

• In FY 2023 to 2024, ESDC awarded $35,764,482.09 to Indigenous vendors under PSIB, representing 6.92% of the department's total contract awards for FY 2023 to 2024
• The top 5 commodities represented by these totals are:
  • computer equipment
  • computer equipment related to production and operations (P&O) environment
  • information technology and telecommunications consultants
  • management consulting
  • office furniture and furnishings, including parts
• In FY 2024 to 2025, the department has awarded $13,614,681.02 to Indigenous vendors to date, representing 4.12% of our total contract awards for this fiscal year
• In alignment with the directive, BDM has integrated Indigenous procurement targets into its operational processes. For instance, the EI on BDM TA includes specific provisions requiring System Integrators (SIs) to engage Indigenous consulting services as part of their mandate. This demonstrates BDM's commitment to advancing Indigenous procurement objectives
• The OAS on BDM TA was awarded before the establishment of these Indigenous set-aside requirements within BDM. As a result, the OAS TA is exempt from the current Indigenous procurement requirement

Key messages

• The identification of Indigenous businesses and the Indigenous Business Directory (IBD) is regulated by Indigenous Services Canada (ISC)
• ESDC relies on the IBD for validation before awarding a contract under PSIB
• Procurement officers conduct the validation as part of the procurement process, prior to contract award
• ESDC adheres to all procurement directives outlined in the Directive on the Management of Procurement, inclusive of the rules concerning subcontracting, as overseen by ESDC's Senior Designated Official (SDO) procurement and materiel management

3. ESDC support for Indigenous communities

Issue

How does Employment and Social Development Canada (ESDC) support Indigenous communities address economic barriers?

Background

• Since 1991, the Government of Canada has been supporting Indigenous communities address economic barriers through its Indigenous labour market programming. Through engagement and collaboration with Indigenous partners, these complementary programs have evolved over time to be more responsive to labour market shifts and advance reconciliation efforts:
  • launched in 2019, the Indigenous Skills and Employment Training (ISET) Program replaced the previous Aboriginal Skills and Employment Training Strategy with a co-developed, distinctions-based framework designed to reduce the skills and employment gaps between Indigenous and non-Indigenous people. The ISET Program provides $408.2 million annually to over 115 Indigenous-led service providers across Canada, offering a broad range of skills training and wraparound services. These organizations have the flexibility to prioritize training and skills development based on the unique needs of their communities, empowering Indigenous peoples to take charge of their educational and career paths while overcoming employment barriers
  • the Skills and Partnership Fund (SPF), a project-based program with $40 million in annual ongoing funding, fosters partnerships between Indigenous organizations and industry employers. This program is focused on creating demand-driven training that directly links Indigenous peoples to jobs in current and emerging sectors, enhancing their access to meaningful economic opportunities

Key facts

• ISET program: Since its launch, the ISET program has supported over 237,000 Indigenous clients, resulting in over 94,000 individuals successfully finding employment and integrating into the Canadian labour market
• SPF program: Annually, around 4,000 Indigenous individuals participate in SPF-funded training and services, leading to approximately 1,600 jobs per year. Since its inception in 2010, the program has supported close to 50,000 Indigenous clients, resulting in over 20,000 Indigenous people securing employment following participation in the SPF

Program impacts

• The ISET program aims to reduce the employment gap between Indigenous and non-Indigenous Canadians by 25% over 10 years (2019 to 2029). In 2016, the gap was 8.4%. By 2021, from the most recent Census data available, the gap had decreased by 1.5%, reaching 6.9%. This means the program has achieved 18% of its 25% target so far
• A recent SPF evaluation highlighted that the program contributed to positive labour market outcomes for Indigenous peoples. Beyond this, the program also had broader positive impacts, fostering the economic, social and cultural development of Indigenous communities. Importantly, the SPF enabled participants to access meaningful employment opportunities while staying within their communities promoting sustainable development and reducing the need for migration

Key messages

• While challenges such as fraudulent bids and applications for Indigenous procurement opportunities do arise, strong collaborative efforts are in place to prevent these issues and ensure integrity in the process. I will leave it to the Minister of Indigenous Services Canada to speak on this
• It is important to highlight the positive and transformative impacts of the ISET and SPF programs. These initiatives are playing a pivotal role in empowering Indigenous peoples, creating new opportunities, and driving economic growth within Indigenous communities. By addressing economic barriers, these programs are fostering greater participation and self-determination, which are key elements in advancing reconciliation
• ESDC is dedicated to continuously improving these programs, in partnership with Indigenous communities, to support the removal of economic barriers and contribute to long-term, sustainable growth for Indigenous peoples across Canada

4. Indigenous early learning and child care (IELCC)

Key facts

The Minister of Families, Children and Social Development's 2021 mandate letter commits to work with Indigenous partners to ensure that Indigenous children have access to high quality and culturally-appropriate Indigenous early learning and child care (IELCC) services in the communities in which they live.

To support this commitment, the co-developed Indigenous Early Learning and Child Care Framework sets a foundation for ongoing collaborative work reflecting unique cultures, and needs of First Nations, Inuit, and Métis children and families.

Budget 2017 announced $1.7 billion over 10 years to strengthen early learning and child care programs and services for Indigenous children and families:

• this complements other federal and provincial-territorial investments to form an integral part of a Canada-wide ELCC system

Budget 2021 invested $2.5 billion over 5 years to support Indigenous ELCC, including $420 million over 3 years (starting in 2023) and $21 million ongoing to build and maintain new ELCC centres in additional communities.

Through strong partnerships with Indigenous partners, federal investments in Indigenous ELCC are strengthening the quality of community-based culturally appropriate programming, with investments reaching over 35,000 children in:

• 463 child care sites in First Nations and Inuit communities
• 341 Aboriginal Head Start programs on-reserve
• 134 Aboriginal Head Start programs in urban and northern communities

These investments have supported enhanced programming for children through language and cultural revitalization; expanded access to programming for children through new sites built or planned; governance and capacity; before-and after school care on-reserve; support for staff, specifically on recruitment, retention, remuneration, and training of Indigenous early childhood educators (ECEs). Repairs and renovations have supported over 800 projects at existing centres. Investments have also promoted innovation to develop and promote best practices or innovative models in IELCC programs.

Results

The Government of Canada has committed to work with First Nations, Inuit and the Métis Nation to co-develop results reporting frameworks. Work is well underway in this area, with distinctions-based frameworks anticipated for completion in 2025. They will enable Indigenous and federal governments to demonstrate and assess progress towards the vision and goals of the Indigenous ELCC Framework.

Recognizing that work on results and reporting is underway, a few examples of successes drawn from partners include:

• Michif and Dene immersion programs for kindergarten students in Saskatchewan
• Inuit Nunangat partners advance culturally appropriate curriculum supporting the transfer of traditional knowledge, language and land-based learning
• expanded access to Métis ELCC through childcare subsidies and new childcare sites in British Columbia, Alberta, Manitoba, and Northwest Territories
• partners engaged in workforce initiatives such as development of wage grids, targeted training, and partnerships with colleges/training institutions to recruit, train and retain Indigenous ECEs

Key messages

• Indigenous partners are important partners in building a Canada-wide ELCC system
• Investments in culturally-appropriate Indigenous Early Learning and Childcare programming will help facilitate greater access to high quality, culturally appropriate ELCC programming for Indigenous children and families, and demonstrate progress against mandate commitments
• The Government of Canada has committed to work with Indigenous partners to co-develop results reporting approaches, to demonstrate and assess progress towards the vision and goals of the Indigenous ELCC Framework