Auditor general says feds didn’t get value for money in dozens of GC Strategies contracts
Canada’s auditor general has found federal organizations did not follow procurement policies, or ultimately receive value for money when they awarded dozens of contracts to GC Strategies Inc., the firm behind the controversial ArriveCan application.
Last year, parliamentarians requested a full account of all federal contracts and payments to the beleaguered Ottawa-based business that was the primary contractor for the procurement of the COVID-era application. The audit was also tasked with looking at other companies incorporated by the co-founders who were tied to allegations of procurement misconduct related to the nearly $60-million application that become the subject of parliamentary committee study, and led to a historic appearance by one of the co-founders to be admonished in the House of Commons.
Auditor General Karen Hogan’s report, released June 10, showed GC Strategies received dozens of government contracts between 2015 and 2024, at a total value of $92.7-million, and federal organizations “frequently did not demonstrate value for money” in contracting with GC Strategies.
The federal government ultimately paid the firm a total of $64.5-million, for work including technology support.
Just days before Hogan’s report, Public Services and Procurement Canada banned the company from entering into contracts or real property agreements with the government for seven years. In the June 6 statement, PSPC said GC Strategies was found “ineligible” after “thorough assessment of the supplier’s conduct.” The department had previously suspended the firm’s security status in March 2024.
Hogan’s new report found, in total, 31 different federal organizations issued 106 professional services contracts to GC Strategies over nine years. That includes four contracts with the Canada Border Services Agency valued at just under $50-million, with just over $30-million paid out to the firm. GC Strategies also was awarded 11 contracts from the Treasury Board of Canada Secretariat valued at just over $10-million, with $8.8 million having been paid out. The company also was issued eight contracts by Innovation, Science, and Economic Development Canada (ISED), with a total value of $9.9-million. The business was paid a total of $5.1-million. GC Strategies also was granted 12 contracts by the Department of National Defence, with a value of $3.6-million. The company received just over $3-million for these.
In the course of the audit, Hogan’s office examined a randomly selected sample of 35 contracts awarded by 21 organizations.
In 82 per cent of the contracts examined—valued at $4.4-million—these departments and agencies could not demonstrate that fees paid did not exceed market rates, Hogan says.
Additionally, the audit determined, federal organizations made payments to the firm without evidence that all services and deliverables were received.
In nearly half of the examined contracts, “we found that federal organizations had little to no evidence to support that deliverables were received,” Hogan wrote. “Despite this, federal government officials consistently authorized payments. As a result, we were unable to conclude whether these certifications by government officials were appropriate or amounted to a contravention of the Financial Administration Act.”
In approximately one-third of contracts examined, the departments could not show that contract resources had the experience and qualifications needed to complete the required work. Federal organizations are required to monitor the work performed by contractors, but they “frequently disregarded government policies in this area,” the audit says.
“This included not having records showing which contracted resources performed the work, what work was completed, and whether the people doing the work had the required experience and qualifications.”
The audit also confirmed that, in the course of awarding these contracts, procurement methods were not consistently justified, security requirements were not enforced, federal agencies didn’t adequately monitor the contracts, and information on the suppliers’ performances and rates were not collected and shared.
The Government Contracts Regulations legislation outlines when to use non-competitive contracts, one of which is for services valued at less than $40,000, or $25,000 prior to June 2019. Most federal organizations were required to assess whether there would be benefits to calling for bids, even with this exemption, but didn’t document this assessment in more than half of the non-competitive contracts sampled by the audit.
Additionally, security requirements were not enforced. In the case of 50 per cent of the sampled contracts, federal organizations were not able to show that all contract resources had the appropriate security clearance prior to the contract being awarded. And, in 21 per cent of the sampled contracts, people were working throughout the contract period without the required security clearances on file. The audit singles out both National Defence and ISED for failing to have evidence of security clearances for most contract resources tied to a contract they each awarded.
The audit uncovered “weaknesses” in contract monitoring, with government agencies either failing to collect timesheets, or accepted ones with poorly documented descriptions of work performed.
In one example, ISED could only hand over work time documentation “for only one out of 25 contract resources,” the audit says. “Without ensuring receipt of timesheets from all contract resources, the department could not verify who worked on the contract and what work was completed by the contract resources.”
The total amount of that contract was $3.3-million.
In a September motion in the House of Commons, MPs tasked federal auditors with determining whether the contracts awarded and the payments made to GC Strategies, and other firms incorporated by its co-founders, were in accordance with the government’s policies, and whether the government received value for money with these contracts.
The audit provided no recommendations, instead pointing to ones already made in recent, previous audits and encouraging departments to implement them. A 2024 ArriveCan audit found weaknesses in contracting, documentation, and oversight and made recommendations to improve transparency and accountability in the procurement process.
“Rather than repeat previous recommendations on procurement, this audit re-confirms that policy should be well understood and properly applied,” Hogan wrote.
While the audit focused on contracts awarded to GC Strategies, the report notes the finding “highlights gaps in basic requirements that all federal organizations should follow when procuring services.”
GC Strategies was the primary contractor for the procurement of the ArriveCan app, a COVID-19 era application launched in April 2020 for travellers to Canada to submit their travel information, including vaccination status and COVID-19 test results at border crossings.
GC Strategies received an estimated $19.1-million for its work, which did not involve the actual development or maintenance of the application.
Hogan’s office previously undertook a year-long investigation into how the cost of the application ballooned from the initial estimate of $80,000 to almost $60-million. That February 2024 report concluded the federal government “repeatedly failed to follow good management practices in the contracting, development, and implementation of the ArriveCan application.
—with files from Irem Koca
mglass@hilltimes.com
The Hill Times
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