The Decibel - The problems with how government contracts get outsourced

Episode Date: October 11, 2023

The RCMP has begun an investigation into allegations of misconduct made by two tech entrepreneurs. Their warnings to senior officials and experiences have cast a new light on alleged improper contracting practices and close ties between public services and private consultants.Bill Curry, the Globe’s Deputy Ottawa Bureau Chief, joins the show to break down the allegations that throw into question the accountability of the federal government’s multi-billion dollar practice of outsourcing and where taxpayer money is ending up.Questions? Comments? Ideas? Email us at [e-mail]

Two tech entrepreneurs have sounded the alarm, warning about strange contracting practices with the Canada Border Services Agency. Federal government departments often contract out work to companies, but the way that's done and where the money ends up isn't always clear. And after these two entrepreneurs came forward, now the RCMP is investigating allegations of misconduct. Bill Curry is the Globe's Deputy Ottawa Bureau Chief. He'll tell us what we know about this situation and how it fits into the bigger picture of how the federal government spends billions of dollars on contracting. I'm Maina Karaman-Wilms, and this is The Decibel from The Globe and Mail. Bill, thank you so much for being here again today.

Hi, Manika. Thanks a lot. So you've been working on this investigation for a long time, Bill. You've gone through lots of access to information requests, other documents as well. Can you just tell me, like, why is this story so significant? Well, I think it's interesting because it provides kind of a window into the world of IT contracting. And it's been getting a lot of attention over the last few years because at a high level, the numbers have been going up. Under the Trudeau government, we've seen outsourcing pretty much double from about a $7 billion program to close to $14 or $15 billion, all at a time when the size of the public service has also increased. So the public service has grown by about 100,000 people since 2015.

So there's a bit of a disconnect there. You would think if the government is doing more outsourcing, maybe that means that they are cutting back on the core public service, but that's not the case. Both things are growing. MPs are asking what's going on here? Are Canadians getting good value for this money that's being spent? So let's get into this investigation here. It starts with two tech entrepreneurs whom you spoke to, Ritika Dutt and Amir Morv. They're the founders of a company called Bottler. So Bill, how did this all start for them? How did they become involved in working with the Canadian Border Services Agency? Bottler is a small company, and they've created a chatbot that essentially people can use if they may have experienced sexual harassment. They can put the situation into the chatbot, and it scans laws and work

policies and lets them know if any rules have been broken and points them to avenues to get some support. So that's the product that they had. And they had previously applied to a public competition with the Justice Department. They won that in an open competition, and that project eventually got funded to the tune of about $1.3 million. So they were working away on that. And then kind of out of the blue in late 2019, project eventually got funded to the tune of about $1.3 million. So they were working away on that.

And then kind of out of the blue in late 2019, they get a direct message on LinkedIn from a man named Christian Firth, who they didn't know at the time. And he's managing partner of a company called GC Strategies that had a very low profile in that moment in time in 2019. And he said, essentially, he was reaching out on behalf of a client in the government. So they eventually switched over to having phone calls with Mr. Firth. And Mr. Firth explained that his client was the director general at the Canadian Border Services Agency. He later said that that was a man named Cameron MacDonald. Cameron MacDonald, he said, was interested in their product and wanted to fund a pilot project. And so talks kind of grew from there involving Mr. McDonald as well. You know, eventually over time, it led to some contract

work, but that was not through a public competition. That was, they later learned through a subcontract on an existing contract. So not the kind of open competition that they won the justice work through. So they get this LinkedIn message from this guy, Christian Firth. Who is he and what do we know about his company, GC Strategies? Yeah, so his company first popped up on the radar during the Arrive Can issue, which, if you recall, was an app that the government funded in the early days of the pandemic for people to input their vaccination status when crossing the border. This company popped up as the company that received the most funding for tech work, outsourced tech work to build that app and

kind of raised some eyebrows because it was not a well-known company. It really didn't exist six or seven years ago. And since then, its amount of federal funding has been increasing quite sharply. And we talked to you about this before on the podcast, Bill. It's really a company of two people, right? Yes, exactly. So it's Mr. Firth and another man named Darren Anthony. They work in the Ottawa area. And during the ArriveCAN issue, they were called to committee to talk about how they got all this work. And they explained that they don't actually do any IT work themselves. Are you programmers or app designers yourselves? Absolutely not. We are IT recruiters. We cut our teeth in the industry working for large staffing firms. And we decided to go out by ourselves.

So in this context... The government goes to them and then they go find the people to do the work. And they also said that they charge commissions of between 15 and 30 percent. So that had already been on the radar of MPs as to what value are taxpayers getting for those kinds of commissions. Okay. So that seems to be the situation that we're in now then, it sounds like. So GC Strategies has gone and found another company to do this work, which is Butler here. So what happens? They get contacted by this guy, the ball starts to get rolling. What's next? Well, I think what Ms. Dutt and Mr. Moore found unusual is this didn't seem

to really be Christian First's idea. This was CBSA's idea. But instead of just contracting them directly, a clearing contract between the Border Services Agency and Butler, Mr. McDonald was telling them, please go work with Christian at GC Strategies and quotes to the effect of let Christian work his magic. So the guy from CBSA, McDonald, is telling the company, we'll work with this middle company and that's how we'll do this, basically, instead of going directly to them. Exactly. And Mr. Firth, through their conversations with Butler, kind of revealed to them that he had a longstanding relationship with Cameron McDonald. Mr. Firth made comments to the effect of, you know, I've known Cameron McDonald throughout his whole career in the public service. He's a good friend. To Baller,

that kind of raised some concerns about kind of the cozy relationship between the people like Mr. McDonald, who are responsible for contracting, and Mr. Firth, who acts kind of as a go-between, not actually doing the IT work and getting a commission. And so as a result of that, they had some concerns and they started recording their conversations and started to kind of build a case. Further down the line, as they had more concerns, they would ultimately file misconduct reports to the top brass at the Canada Border Services Agency. Wow. Okay. So they already have some concerns to the point where they're, as you said, recording conversations here. What else stood out to them as red flags?

So, you know, the early interactions are late 2019, early 2020. But then the pandemic hits, of course, and that kind of derails things. So throughout the first part of 2020, Cameron MacDonald is kind of coaching them through Mr. Firth on how to eventually pitch their product to the then president of the CBSA, John Osowski. That meeting got delayed a few times. It finally happened in September 2020 because it was the pandemic. It was a virtual meeting. And during that meeting where Ms. Dutt and Mr. Moore are pitching their product, they shared text messages that Christian Firth was sending them. And he writes, Mr. Firth's writing, Cam is texting me, you need to wrap up your presentation, give time for the president to ask his questions. So essentially, you've got the procurement officer, the CBSA coaching

bottler via Mr. Firth during, in real real time in a meeting before the president that ultimately led to the president approving the product and then leading to some contract work. And it's not clear if the president actually knew of a few times, do you know Mr. Firth? Do you know GC Strategies? And he said no, but he was actually in a virtual meeting with Mr. Firth and approved a product that involved Mr. Firth. I think that's something that MPs are going to be asking about further. So just to fast forward again, the contract gets approved December 2020. They start working on it. They start asking questions because they still haven't actually seen a contract. That seems strange, no? Yeah. So that's raising some concerns with them. And they've shared text messages of them kind of poking Christopher, where's the contract, where's the contract? Then eventually Mr. Firth does share the contract and an email that we reported on in the Globe where he says kind of unbeknownst to you, but since you asked, I'll share the contract with you. And they say they were shocked to see the details because the contract was not a contract between the Border Services Agency and Butler. Butler wasn't even named on the core contract. they were shocked to see the details because the contract was not a contract between the

Border Services Agency and Butler. Butler wasn't even named on the core contract. It wasn't even a contract between CBSA and GC Strategies. It was actually a contract with another company called Dalian, which works with another company called Coredex. This is complicated. There's a lot of companies involved here, Bill, but essentially Butler, they thought they had a contract with one company, and it turns out the contract comes to them, and it's with another company there. So different people at different levels are getting a cut before and so he suggests he would pull himself out of the deal. Balder doesn't actually know if that happened. You know, this was a contract that was supposed to be just a little under $500,000, so relatively small, but it had the potential of becoming much larger if the product was used for across the government. So that was kind of the goal with that. But in the end, they only got about $100,000, so they don't know what happened to the rest of the money or where it went.

And I understand there was also a concern about their resumes as well, Bill. Can you tell me about that? So after they got that email from Mr. Firth explaining the contract, they started to raise concerns with the Border Services Agency. Then they started to file misconduct reports with the agency. And then they started doing an investigation of their own and they filed extensive access to information requests for all the contracting records. So even after their work was over with the agency, they started to get details in terms of what actually happened. Through that, they got some kind of contracting related records that Coradex were

submitting about the project to the CBSA, kind of invoices that they were not even aware of that had their details on it. It had targets and description of work that they were supposed to be hitting that they'd never heard of. And contracts have point systems in which kind of contractors are rated based on their experience. And it had some details in there that really surprised them. So some of their experience numbers were much higher than they are actually. So in terms of years of experience working in this area were inflated. And some details too, Ritika Dutt, when she was a university student, had worked for two months at Deloitte, that suddenly was inflated in this

points form that was submitted to this. She had 51 months of experience. Wow, it went from two months to 51 months. Wow. Exactly. So that could potentially be used by the companies to charge higher billing. So all of this happened without their knowledge or consent, they say, and that's part of their allegations of misconduct. We'll be back in a moment. What have these companies said about all this? What has the CBSA said about this, but also GC Strategies, Dalian, what has been their response to this? So the CPSA has put out a pretty strong statement on this. They say that in response to the November

2022 allegations that they received from Butler, they've done several things. They have referred the issue to the RCMP. They've launched their own investigation. And they are also retraining all of their procurement staff on proper practices for procurement. The companies themselves have not commented. Cameron McDonald did comment. He said that he did nothing wrong and he followed all public service ethics guidelines. I wonder, how did GC Strategies get into this position? Do we know why the CBSA decided to work with them instead of directly going to a company like Butler? I don't think we have a clear answer on that. I think the revelations by Butler are pretty interesting because they also show some of the

additional connections that Mr. Firth had. Because while they were dealing with CBSA, Mr. Firth was also opening doors for them in numerous departments across the government. And he would often refer to procurement officers in other departments as friends. So that kind of relationship has some people wondering, you know, what exactly is going on here? I also wondered about the business side of this, though, Bill, because it seems like an inefficient way of doing business. Like, why would the federal government contract out work to one company who then contracts it out to another? Isn't it just cheaper and easier to just go directly to the company yourself? Well, and that's the key point that came up during the ArriveCan debate when there was a focus on GC Strategies and the other companies that got work.

And so we learned a little bit about that from GC Strategies. So essentially, their argument would be that they have found a bit of a niche that the federal government is often in the need for IT workers. And sometimes this might be a short term project. So it doesn't make sense to necessarily hire a public servant for a full time position to work on a project that might just last six months or a year. And so they fill that gap. They have a bunch of connections about independent IT contractors. The service that they're providing for that fee is to assemble a team, essentially, that various IT people will have their own special skills. They put together a team, bring that to the department that needs the team. That's the argument. But what raised some questions is for ArriveCAN, for instance, when the MP scratched the surface and dug down on who are the subcontractors, which normally is something that you would never, never gets made public, only core contracts are posted publicly, subcontracts are secret. But we learned that information through

the ArriveCAN hearings. And it wasn't necessarily all individual IT workers in the national capital. GC Strategies was also hiring multinational companies like KPMG and BDO to do this work. So that really raised some questions as to, you know, what is the government doing here? Like, is it not capable of, you know, picking up the phone and calling BDO or KPMG to do the work? Why are you paying 20% to middlemen? Yeah. You think about usually when a company has a contract that they want to fill, you do it requests for proposals, right? You open it up broadly.

You have people send you different proposals, and then you pick the best one. It sounds like this is not quite the process that's happening here. Can you just kind of explain why this is working differently, Bill? Yeah, I think you've hit on the main point here, which is that if you look at the rules of the public service, the idea of a sole source contract is supposed to be the exception, not the rule. It's supposed to be discouraged. The norm is supposed to be a public tender, public competition. Anybody can find out what the government is buying, then there's a competition for it. You can understand perhaps during Arrive Can with the pandemic that that was sole sourced and you can justify that because there was a pressing need. But with the Butler case, that was not necessarily an urgent situation. And it seems like you've got

these general large IT contracts to which then very detailed things can be subcontracted without a public competition. So it's like a get around of the public competition process. And then you kind of lose the benefits of competition and transparency that the whole system is supposed to encourage. So if you lose those benefits, why would you want to do it another way? What would be the other side of it? Well, I'm sure for procurement officers, it's just a lot faster to do it this way. It's easier.

You know, you can hire somebody that you know and do that more quickly. One thing we learned from hearing from policy experts in this area, including some researchers at Carleton University who have really studied this, they said it partly could be due to frustration of government managers with hiring rules, that it can take so long to hire new public servants. There's a lot of criteria such as bilingualism requirements and increasing outsourcing using contract workers as a way of getting around that. And so that might be contributing to the increasing use of outsourcing. You know, the first level of money is easy to follow. So the CBSA to a company like GC Strategies. But from there, we don't really know where the money ends up.

Why is it so difficult to track where that money goes next? Yeah, well, there's 14 or 15 billion dollars every year that the federal government spends on outsourced work of various forms. And a key role for parliament and the media is to track the funding to make sure that people know where the money is going. And if you bury all of this information into subcontracts, the public will never know where the money went or who got it. Yeah. Just before I let you go here, Bill, we talked about how the RCMP is investigating these allegations now. And the federal government says it is changing how this procurement process works. But what will you be watching for? What have they said they'll do? And what will you be watching to see if they're actually doing that?

Yeah, there's still a lot of moving parts to this to watch for. It looks like the Government Operations Committee, that study to Rive can.. It looks like the Government Operations Committee that studied ArriveCAN, the MPs on that are considering reopening that study to look into some of these bottler issues. The Canada Border Services Agency says it's doing an investigation, and it has also launched internal audits. We'll watch to see what happens there. We've got the Auditor General is investigating ArriveCAN. So that involves some of the companies involved here. So that report should be coming in the next few months. And

ultimately, the RCMP will have to see if they decide to lay any charges in this matter. And we'll definitely be watching that closely. Bill, thank you so much for walking us through all this today. Thanks, Manika. That's it for today. I'm Manika Raman-Wells. Jay Coburn produced this episode. Our producers are Madeline White, Cheryl Sutherland, and Rachel Levy-McLaughlin. David Crosby edits the show.

Adrienne Chung is our senior producer. And Angela Pachenza is our executive editor. Thanks so much for listening, and I'll talk to you tomorrow.