Standing Committee on Public Accounts: March 7, 2024

Auditor General’s Report 1 on ArriveCAN

Date: March 7, 2024, 10:00 am to 12:00 pm

Location: In person

General items
- Opening remarks
Response to Auditor General’s audit

General items

Opening remarks

Arianne Reza, Deputy Minister

Public Services and Procurement Canada

Standing Committee on Public Accounts

Report of the Auditor General on the ArriveCAN application

March 7, 2024

(Word count: 800)

Thank you, Mr. Chair.

I would like to acknowledge that we are meeting on the unceded territory of the Anishinaabe Algonquin nation.

As the Deputy Minister of Public Services and Procurement Canada (PSPC), my team and I are here to continue the important discussion about the Auditor General's report into the development of the ArriveCAN application.

I'm joined today by:

Dominic Laporte, Assistant Deputy Minister for Procurement
Catherine Poulin, Assistant Deputy Minister for Departmental Oversight

During the pandemic, my department played a key role in keeping the work of the Government of Canada going as well as providing key support to Provinces and Territories.

We are particularly proud of our role with regards to the urgent procurement of critical supplies and life-saving vaccines.

PSPC has been part of 2 large audits since the pandemic, 1 related to the procurement of personal protective equipment (PPE) and the other to the procurement of vaccines. These audits found, in general, that the controls and the procurement process worked as they should.

In the case of ArriveCAN, both the Auditor General and the Procurement Ombud have identified areas where we need to strengthen our oversight, notably related to documentation and to our procurement processes of information technology (IT) consultants.

We accept these recommendations in full and have already put management actions in place to strengthen our processes.

Right now, Mr. Chair, we are focused on improving and further strengthening our processes, specifically when it comes to IT procurement, and we have been working since the Fall to do just that. Actions we've taken include:

improving evaluation requirements to ensure resources are appropriately qualified
requiring increased transparency from suppliers around their pricing and use of sub-contractors
improving documentation when awarding contracts and issuing task authorizations (TAs)
clarifying work requirements and activities, and specifying which initiatives and projects are being worked on by contractors

In addition, my department is updating its guidance to aid other departments and agencies in procuring responsibly when using our procurement instruments under their own authorities.

Further, PSPC is also taking measures to have a senior executive who will be responsible for quality assurance, strengthening documentation within our procurement function, and ensuring tools are available to procurement officers.

Fundamentally, improving IT procurement requires us to ensure those processes are clear and transparent, and that roles, responsibilities and rules are understood and respected.

This includes working closely with client departments and agencies to ensure that these procurements are undertaken in a manner that respects the principles of fairness, openness and transparency.

In that regard, both the Treasury Board's Directive on the Management of Procurement and our Supply Manual note outline the division of roles and responsibilities. For example, business owners–which are our clients–are responsible for providing a justification for using non-competitive procurements.

In the case of procurements related to ArriveCAN, the Auditor General's evaluation found that PSPC effectively provided a challenge function to the Canada Border Services Agency (CBSA), and proposed various alternatives to using non-competitive processes, such as running shorter competitive processes, or shorter contract periods in the case of non-competitive approaches. On our advice, 1 contract was reduced for a shorter duration.

Within the context of the emergency situation brought on by the pandemic, PSPC and our legal council found that the justification provided by the CBSA for their approach was sufficient and met the criteria for emergency use.

When it comes to lack of transparency around decision making, we are committed to addressing the root causes, strengthening document management practices and continuing the deployment of our Electronic Procurement solutions–so that transparency in decision making occurs and Canadians can have renewed confidence in the administration of federal procurement activities.

New measures that we've put in place have already addressed a significant share of those areas, and we continue to take action to further strengthen the procurement of IT services.

Respecting Codes of Conduct

In closing I know that there have been many concerns raised in the media and in Parliamentary Committees regarding federal procurement and the integrity of the system. We share those concerns and are actively working to improve the procurement system as well as undertaking required investigations where warranted.

The domain of procurement is 1 that inherently has higher levels of risks associated with conflicts of interest.

That is why the Government requires all of its suppliers, their sub-contractors, and all employees to operate lawfully and in a responsible manner by, at a minimum, meeting the expectations and obligations set out in the Code of Conduct for Procurement. For federal public servants, those expectations and obligations are outlined in the Code of Values and Ethics..

These Codes provide important underpinnings and guiding principles for the work that is done in procurement. Ensuring respect and adherence to these Codes is of utmost importance.

Our actions will help reinforce the adherence to the Codes, improve the way the we do business with companies, and further safeguard the integrity of the procurement system.

Thank you.

Response to Auditor General's audit

Recommendation 73: PSPC and CBSA should ensure that tasks and deliverables are clearly defined in contracts and its related TAs.

PSPC accepts this recommendation, and has already taken action with the following (from the Management Action Plan):

PSPC has provided direction, in a December 4, 2023 communiqué, to procurement staff to ensure that TAs include clear tasks and deliverables, in addition to identifying the specific project(s) or initiative(s) that are included in the scope of contracts
additionally, PSPC sent a directive to its client departments, via their senior designated official for procurement, indicating this change was immediately being brought into effect for professional services contracts, as of November 28, 2023
PSPC will also update the Guide to Preparing and Administering Task Authorizations as well as the Record of Agreement template for clients by April 2024

Additional key messages, not from the Management Action Plan

PSPC cooperated with the Office of the Auditor General (OAG), providing them all relevant information to conduct their independent review of the ArriveCAN contracts.

PSPC is committed to continually improving and strengthening all aspects of the federal procurement process and has already begun to take steps to implement the OAG’s recommendation, as well as those made by Office of the Procurement Ombudsman (OPO).

PSPC took immediate action to strengthen existing controls and oversight for professional services contracting.

Changes include:

requiring increased clarity from business owners on the scope, tasks and deliverables of new professional services contracts and TAs
improving evaluation requirements to more effectively validate that all resources have the required work experience and validated security clearances
improving documentation requirements at the time of contract award and when TAs are issued
suspending delegated authorities for departmental issuance of TAs against contracts awarded by PSPC until PSPC's newly mandated professional services measures are implemented by departments

The department is actively engaging with client departments and agencies to ensure these new measures are implemented quickly and efficiently.

PSPC will continue its review of procurement tools for professional services, while modernizing them to ensure they support best value, and provide appropriate due diligence and control frameworks.

Office of the Auditor General’s audit of ArriveCAN

Table 1: Public Services and Procurement Canada’s Management Action Plan: January 2024
Number	Recommendation	Response / Action plan	Timeline for implementation
1	Recommendation 73. PSPC and CBSA should ensure that tasks and deliverables are clearly defined in contracts and its related TAs.	PSPC accepts this recommendation, and has already taken action: PSPC has provided direction, in a December 4, 2023 communiqué, to procurement staff to ensure that TAs include clear tasks and deliverables, in addition to identifying the specific project(s) or initiative(s) that are included in the scope of contracts. Additionally, PSPC sent a directive to its client departments, via their senior designated official for procurement, indicating this change was immediately being brought into effect for professional services contracts, as of November 28, 2023. PSPC will also update the Guide to Preparing and Administering Task Authorizations as well as the Record of Agreement template for clients.	Communiqué to procurement officers: December 4th, 2023. (completed) Guidance document update: April 2024

Changes to the procurement of professional services

Issue

On November 2, 2022, a motion was passed by the House of Commons that called on the OAG to conduct a performance audit, including payments, contracts, and subcontracts, of ArriveCAN.

The OPO and the OAG audit reports were tabled on January 29, 2024, and February 12, 2024, respectively. The reports highlight serious concerns regarding project management and offer recommendations pertaining to procurement, specifically professional services.

Key facts

the Procurement Ombudsman report gave 14 recommendations based on the analysis of information and documentation provided to OPO by CBSA, PSPC and Shared Services Canada (SSC) during the course of the review, PSPC responded to 8 recommendations
the Auditor General (AG) report gave 8 recommendations, 1 of which relates to PSPC (jointly with CBSA)
PSPC is committed to continually improving and strengthening all aspects of the federal procurement process, particularly IT services, and has already begun to take steps to implement the OAG and OPO recommendation

Key messages

PSPC takes the conclusions of the AG and the OPO very seriously and is acting on the procurement recommendation in line with our commitment to open, fair and transparent procurement processes, while obtaining value for Canadian taxpayers
over the past year, PSPC has taken concrete actions to strengthen the oversight of all the professional services contracts falling under PSPC authority
in light of the reports from the OPO and the AG, PSPC instituted measures and controls on new and existing professional services contracts to strengthen contract management practices and is actively engaging with client departments and agencies to ensure these new measures are implemented quickly and efficiently
collectively, these measures will help us continue to strengthen and enhance federal procurement processes to promote greater competition, particularly in the field of IT consulting services
as of February 23, 2024, according to information gathered by PSPC, all contracts with GC Strategies and the Government of Canada have either expired or have been suspended. GC Strategies is no longer eligible to participate in PSPC tenders, and has been removed from supply arrangements

If pressed on immediate actions PSPC is taking to strengthen existing controls and oversight for professional services contracting:

PSPC has implemented the following changes:
- requiring increased clarity from business owners on the scope, tasks and deliverables of new professional services contracts and TAs
- improving evaluation requirements to more effectively validate that all resources have the required work experience and validated security clearances
- improving documentation requirements at the time of contract award and when TAs are issued
- suspending delegated authorities for departmental issuance of TAs against contracts awarded by PSPC until PSPC’s newly mandated professional services measures are implemented by departments
the department is actively engaging with client departments and agencies to ensure these new measures are implemented quickly and efficiently

If pressed on the actions being taken in response to the auditor general report:

PSPC accepts recommendation 73, and has already taken action:
- PSPC has provided direction, in a December 4, 2023 communiqué, to procurement staff to ensure that TAs include clear tasks and deliverables, in addition to identifying the specific project(s) or initiative(s) that are included in the scope of contracts
- additionally, PSPC sent a directive to its client departments, via their senior designated official for procurement, indicating this change was immediately being brought into effect for professional services contracts, as of November 28, 2023
- PSPC will also update the Guide to Preparing and Administering Task Authorizations as well as the Record of Agreement template for clients by April 2024

If pressed on the actions being taken in response to the procurement ombuds review:

PSPC responded to 8 of 14 recommendations outlined in Procurement Ombud’s report
as 1 example of actions being taken, PSPC is implementing a new checklist for TAs to ensure that contracts include specific criteria for Technical Authorities to assess resource qualifications and criteria
PSPC is also reviewing the "Substantiation of Professional Services Rates' clause that permits Canada to require bidders to substantiate proposed rates that fall below the lower limit of the median band

If pressed on suspension of GC Strategies:

PSPC suspended the CBSA contract with GC Strategies on November 3, 2023, and has not awarded any new contracts to GC Strategies
on February 14, 2024, PSPC informed GC Strategies that, until further notice, they were suspended from all business and solicitations issued by PSPC, either directly as a contractor or indirectly as a subcontractor. GC Strategies were also informed that all their existing supply arrangements have been suspended

Background

Under its authorities, PSPC awarded contracts in support of ArriveCAN and was responsible for providing procurement guidance to the client department. CBSA was responsible for developing and managing the ArriveCAN tool based on the Public Health Agency of Canada’s (PHAC) health requirements enforced by the Quarantine Act.

46 different contracts were used in support of ArriveCAN. Among these 46 contracts, it has been confirmed that 31 were awarded by PSPC under its authorities:

19 contracts were competitive under normal contracting authorities, including 6 that were set-aside for Indigenous businesses under the Procurement Strategy for Indigenous Business program
12 contracts were non-competitive, including 8 contracts to procure software licenses that were sole sourced due to intellectual property rights or urgent need
of the 12 non-competitive contracts, 4 used COVID emergency contracting authorities for the contracting of IT consultants
11 of the 31 contracts PSPC issued were awarded before the COVID-19 pandemic and were leveraged by the CBSA to bring in resources to work on ArriveCAN
4 contracts were awarded to GC Strategies, including 3 that were awarded non-competitively, using emergency contracting authorities

On November 14, 2022, the House of Commons Standing Committee on Government Operations and Estimates (OGGO) adopted a motion recommending the Procurement Ombud conduct a review of contracts awarded in relation to the ArriveCAN application.

On January 13, 2023, the OPO determined there were reasonable grounds to launch a review of procurement activities associated with the creation, implementation and maintenance of ArriveCAN.

In light of the findings of the audits, PSPC took immediate action to strengthen existing controls around the administration of professional services contracts. On November 28th, 2023, other government departments and agencies were informed of new measures, introducing a common set of principles and mandatory procedures that clients must abide by to use PSPC's professional services contracting instruments.

These changes closely align with the recommendations in the OAG and OPO audits and are echoed in the resultant management action plans PSPC committed to.

Overbilling

Issue

The Government of Canada was overbilled an estimated $5 million by individual subcontractors working for suppliers on professional services contracts.

Key messages

My department has detected several overbilling schemes undertaken by individual subcontractors working on federal professional services contracts. This has been the result of PSPC’s efforts over the last 5 years to strengthen its approach to detecting fraudulent activity and other types of wrongdoing
PSPC took swift action to suspend the security clearances of the subcontractors in question. This prevents these individuals from doing business with the Government on contracts with security requirements
These cases have required months of efforts by officials within my department as these schemes spanned multiple organizations and suppliers
PSPC is pursuing efforts to recover illegitimate amounts billed to the Government of Canada
These cases have been referred to the Royal Canadian Mounted Police (RCMP), so I will not comment further

Background

PSPC uncovered 3 overbilling cases by professional services subcontractors (i.e. individuals who were subcontracted) who were employed by prime contractors that held multiple contracts a number of federal departments and agencies:

an IT subcontractor overbilled 8 departments between May of 2020 and June of 2022
a second IT subcontractor overbilled a total of 20 departments between April 2018 and May 2022
the third subcontractor provided professional services as a business architect from April 2019 until December 2022 and overbilled a total of 24 departments

Administrative investigations were launched and found that the subcontractors’ actions resulted in 41 federal departments, agencies and Crown corporations being overbilled. Illegitimate payments are estimated to be $5 million.

PSPC has a framework in place to prevent, detect and respond to wrongdoing in order to safeguard the integrity of the federal procurement system. This approach includes the use of a variety of tools to actively detect fraudulent activity, and respond to alleged misconduct that the Government of Canada is being defrauded in either a specific contract or on a broader scale.

PSPC employs active measures to raise awareness among procurement officers on how to identify potential instances as well as the use of data analytics and tips from the public to identify potential instances of fraud and wrongdoing. In order to respond to alleged instances, the department has an investigatory capacity to examine allegations that the Government of Canada is being or has been defrauded within its procurements.

The identified 3 cases demonstrates that departmental approach and techniques to prevent, detect and respond to instances of fraudulent activity are working.

The department will continue to refine and expand the use of our tools to detect and address wrongdoing and ensure that individuals or entities engaging in fraud or other illegal activities are held accountable for their actions and return monies owed to the Crown.

Inquiry of ministry

Question number: Q-2056

By: Mr. Albas (Central Okanagan-Similkameen Nicola)

Date: December 5, 2023

Question

With regard to the awarding of the $8.9 million ArriveCAN sole-sourced contract to GC Strategies: who (i) signed, (ii) authorized, the contract?

Reply

Based on information provided by CBSA, 3 sole-sourced contracts awarded to GC Strategies included work related to ArriveCAN. These contracts include:

47419-212524/001/EL for the development of a mobile application in response to the COVID-19 global pandemic
47419-202719/001/EL for developing critical solutions pertaining to Advanced artificial intelligence (AI) driven tools for CBSA's frontline officers, remote border crossing capabilities, touchless services leveraging biometrics and cloud, and an e-commerce solution to facilitate increased shipments crossing the border, and
47419-215022/001/EL for professional resource services to support the incorporation of accessibility into ArriveCAN web and mobile applications in order to comply with Bill C-65

None of these contracts was worth $8.9 million. The requested information for these contracts is as follows:

Table 2: Contracts awarded to GC Strategies related to ArriveCAN^{footnote 1}
Contract number	Signed by	Authorized by
47419-212524/001/EL	Manager, Informatics Professional Services Division Team	Assistant Deputy Minister, Procurement Branch
47419-202719/001/EL	Manager, Informatics Professional Services Division Team	Assistant Deputy Minister, Procurement Branch
47419-215022/001/EL	Manager, Informatics Professional Services Division Team	Senior Director, Professional Services Procurement Directorate
Table 2 Note Table 2 Note 1 Note that the contracts listed above were not exclusively for work on the ArriveCAN application, and included other deliverables as well. Return to table 2 note 1 referrer

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Date modified:: 2024-07-09

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Standing Committee on Public Accounts: March 7, 2024

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