ANALYSIS: With Federal Contracting at Record High, ArriveCan, Green Fund Controversies Spark Worries About What Hasn’t Been Discovered

The West Block of Parliament Hill is seen through the window of the Sir John A. Macdonald Building in Ottawa in a file photo. The Canadian Press/Sean Kilpatrick

The recent procurement controversies involving ArriveCan and the federal green fund raise the possibility that more potential unethical practices are waiting to be unearthed, especially given that federal contracting is at record levels.

As a government committee continues its investigation of the COVID-19 vaccination travel app and its $54 million cost, an economics professor and a Conservative MP on the committee both say more unscrupulous contracting practices are likely in the offing.

“There isn’t any sense of a fastidiousness and ensuring that there’s a full due diligence on any of these contracts, so I would not be surprised if there are some other scandals in the woodwork, so to speak, buried in the government that have not yet been exposed,” Ian Lee from Carleton University’s Sprott School of Business told The Epoch Times.

The House of Commons Standing Committee on Government Operations and Estimates (OGGO) has been studying issues surrounding ArriveCan since October 2022. This includes investigating how three companies received millions in taxpayer dollars to develop the app for the Canada Border Services Agency (CBSA), which critics say could have been developed for a fraction of its $54 million cost.

The OGGO committee heard from Ottawa-based GC Strategies, the two-person IT staffing company awarded the CBSA contract, on Oct. 20, 2022, the first meeting devoted to the study.

Company partner Kristian Firth told MPs that his firm subcontracted the app’s development to “five or six subject matter firms” and took a commission of between 15 and 30 percent. Mr. Firth confirmed that his company was paid $9 million and that he and his partner made between $1.35 million and $2.7 million “pre-tax” between the two of them over the two years of work.

The Globe reported in November that Public Services and Procurement Canada had launched a review of GC Strategies and two other IT staffing companies at the centre of the controversy—Coradix and Dalian. Also investigating are the RCMP, Canada’s auditor General, and CBSA itself.

Then in mid-November, Interim Ethics Commissioner Konrad von Finckenstein announced he would be investigating the chair of a federal green fund who approved grants to her own company.

Annette Verschuren recently resigned from her position as chair of Sustainable Development Technology Canada—a not-for-profit foundation created by the Liberal government to fund green technologies—after it was found that conflict-of-interest rules had not been “consistently followed” by the company.

Increased Spending on Contracts

The two controversies have led Conservative MP Garnett Genuis to voice worries that the OGGO committee’s ArriveCan study has only “scratched the surface” of contracting scandals emerging due to structural issues in the federal government’s procurement process.

“This is a large problem,” he told The Epoch Times. “It’s not the only problem, but it’s a large problem that we see revealed through the ArriveCan scandal that led to so much more money being spent than was reasonable.”

Spending on government contracting has ballooned in recent years, with a Globe & Mail analysis published in January 2022 showing that the feds spent $11.8 billion in the 2020–21 fiscal year on contracts. This was a 41.8 percent increase from the $8.4 billion spent in 2015–16, when Justin Trudeau’s Liberal government was first elected.

A Carleton University analysis showed that the feds spent $22.2 billion on contracts in 2021–22 across all departments, agencies, and other federal public service organizations. That figure includes only federal bodies that proactively disclosed their contract spending. Some departments declined to disclose contract values to “support Canada’s economic interests” and “negotiating position.”

The analysis found that McKinsey & Company in particular received less than $4 million in 2018–19 but over $17 million in 2021–22.

The OGGO committee launched a study on federal contracts awarded to McKinsey in January this year to examine the over $100 million in contracts given to the company since the Liberals came to power in 2015. When the Conservatives were in power from 2006 to 2015, McKinsey received just $2.2 million in federal contracts, CBC reported in January.

Mr. Lee said that, from what has been revealed about the ArriveCan scandal, it appears the government’s procurement process is “not as rigorous as it once was,” with less attention to ensuring an appropriate value for taxpayer dollars is being spent.

“What we’ve seen with some of these latest decisions is that there seems to be a rather cavalier attention to the taxpayers’ interest,” he said.

However, Mr. Lee notes that outsourcing can be beneficial for the government in many cases, since “not every government department can be an expert on everything” and it can be more cost-effective and efficient to hire outsiders to do work.

“The problem is not contracting or outsourcing—the problem is a failure of management due diligence inside the government,” he said.

Public Services and Procurement Canada (PSPC) told The Epoch Times that it has a number of mechanisms to prevent and respond to potential wrongdoing in federal contracts, including internal controls, awareness campaigns, and mandatory fraud training for employees.

“If fraudulent behaviour is reported, Public Services and Procurement Canada responds by referring the matter to a dedicated unit that conducts investigations into potential fraud and wrongdoing,” a spokesperson said.

“While contract management is a shared responsibility between PSPC and its clients, PSPC is committed to improving and strengthening all aspects of the federal procurement process.”

Reports of Alleged Unethical Contracting

As federal spending on consultants has risen, so have reports of alleged unethical conduct related to contracting. According to Procurement Ombudsman Alexander Jeglic’s 2022–23 annual report, his office was contacted 30 times during the year about concerns involving federal officials not following the Values and Ethics Code for the Public Sector.

“I remain concerned regarding negative trends related to the lack of competitive processes and deficient documentation practices that continue to pose problems and undermine transparency in federal procurement,” he wrote.

Mr. Jeglic—whose office is responsible for reviewing the practices of federal departments for acquiring goods and services—said his office continues to receive feedback from stakeholders saying that the contracting process is “unnecessarily complex.” He said this complexity has contributed to a lack of bids observed in reviews done by his office since 2018.

“The benefits of competition are greatly reduced when no competitive tension exists,” he said.

Mr. Lee said the report indicates that the federal government is not practising due diligence when it comes to contracting.

“My concern is that it’s undermining confidence in the procurement process. And this is their squandering of scarce taxpayer dollars, clearly a problem because an independent agency has evaluated that and determined that this is a problem,” he said.

OGGO committee member Mr. Genuis said the ArriveCan development has highlighted how taxpayer dollars can be squandered by “middlemen who do no work, collecting very large commissions for essentially collecting contracts and subcontracting it.”

“It’s like if you hired me to paint your fence for $100 and I hired someone else to paint the fence for $50, and I just took $50 in between for being the person that was transferring the the contract and providing no value,” he said.