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David Yeo, president and founder of Dalian Enterprises, has been suspended from the Department of National Defence.Government of Canada

Treasury Board President Anita Anand said the federal government is suspending all contracts with Dalian Enterprises, a private business that received millions of dollars to work on the ArriveCan app while its president has been working simultaneously as a public servant.

Auditor-General Karen Hogan recently reported that she found a disregard for basic management practices as the cost of the app for international travellers grew to about $59.5-million. Her report found two-person IT staffing company GCStrategies received $19.1-million and Dalian, which has also said it has just two employees, received $7.9-million.

Ms. Anand, who was procurement minister at the onset of the pandemic and defence minister from the fall of 2021 until the summer of 2023, said she didn’t know that Dalian president and founder David Yeo is also a federal public servant with the Department of National Defence.

“There is certainly a rule that would prevent a conflict of interest of that sort. And I was extremely surprised to hear that this individual was an employee of the Government of Canada,” Ms. Anand told reporters Thursday on Parliament Hill. “He has been suspended and we are also seeking to suspend contracts with that company, Dalian.”

Mr. Yeo’s suspension this week as a DND employee was first reported by CTV News.

GCStrategies and Dalian are at the centre of allegations of contracting misconduct and cozy ties between senior federal public servants and private vendors related to another software project.

Dalian presents itself as an Indigenous-owned company and regularly wins federal contracts under a procurement program that promotes Indigenous businesses. It often operates in joint ventures with Coradix, a larger company that does not bill itself as Indigenous.

Corporate records show links between the two companies. For instance, Dalian has two directors, Mr. Yeo and Anthony Carmanico. Mr. Carmanico is also listed as chief executive of Coradix on LinkedIn.

Dalian and Coradix have received more than $400-million in federal contract work over the past decade. Public accounts records show National Defence spent $3.3-million with Dalian and $78-million with Coradix, for a combined total of $81-million.

The latest development in the fallout over ArriveCan prompted sharp criticism on Parliament Hill.

“It says to me that there’s no accountability,” Conservative Leader Pierre Poilievre told reporters. “Now that we know this, this individual should be immediately fired. And there should be an immediate police investigation of his conduct and that of the company with which he’s associated and a broader inquiry within the public service of how this contracting was allowed to go on for so long.”

In Question Period, NDP Leader Jagmeet Singh said that with ArriveCan the “drama never stops.” He pointed out that his party has long called for more IT work to be done in-house by public servants.

“It turns out that the ArriveCan contract was awarded to a DND employee. A public servant actually did the work!” he said, before accusing the government of wasting money on private consultants.

“As soon as we were made aware that the CEO of Dalian was a DND employee, we’ve taken immediate action to suspend all contracts with Dalian,” Defence Minister Bill Blair responded. Mr. Blair was the minister of public safety with responsibility for the Canada Border Services Agency at the time the app was developed and launched. He has said he was not made aware of the project’s escalating costs.

Indigenous organizations have raised concerns with the provisions of the Indigenous set-aside program, warning they can promote “phantom joint ventures” where an Indigenous partner is used as a front by a non-Indigenous business to qualify.

Indigenous Services Minister Patty Hajdu said earlier this week that the federal government is conducting a review of its program to support Indigenous contractors in light of concerns about its use by companies that worked on the ArriveCan app.

The government announced in 2021 that Ottawa would, by 2024, fully phase in a rule that all departments ensure a minimum of 5 per cent of the total value of federal contracts are awarded to Indigenous businesses.

To help achieve that target, Ottawa has a long-standing program that allows Indigenous businesses to qualify via a joint venture with a non-Indigenous business, provided the Indigenous business has at least 51-per-cent ownership and control of the joint venture and at least 33 per cent of the total value of the work is performed by the Indigenous contractor or using Indigenous subcontractors.

Dalian and Coradix have made extensive use of the set-aside program for Indigenous business but have never been audited after the fact to ensure that Dalian complied with the terms of the program. After receiving questions from The Globe and Mail on the issue late last year, federal procurement officials asked Indigenous Services Canada to audit the two companies.

During a committee appearance in October, Mr. Yeo said he helped create the program.

“In 2003, I was asked to participate in the creation of the Government of Canada’s policy for the procurement strategy for aboriginal business, what is known today as the procurement strategy for Indigenous business,” he said. “Many other Indigenous leaders and I created this policy that guides the Government of Canada today in supporting Indigenous businesses with federal government procurement opportunities.”

GCStrategies, Coradix and Dalian have similar business models: Small teams win federal contracts and then they find subcontractors to perform the work. GCStrategies has said it keeps a commission of between 15 to 30 per cent of the value of contracts.

The Dalian website includes a section focused on the procurement strategy for Indigenous business.

It also lists several multinational tech companies as “our vendors” for government contracts.

The list includes Amazon Web Services, Dell Technologies and Microsoft.

Mr. Yeo ran as a candidate for the People’s Party of Canada during the 2021 federal election campaign.

Mr. Yeo said in an e-mail Thursday morning that he would be issuing a statement shortly. The Globe had not received a statement by Thursday night.

With data analysis by Mahima Singh

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