Three firms tied to ArriveCan app got $1-billion in federal contracts, Ottawa reveals

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Three government contractors involved in developing the ArriveCan app have received hundreds of federal contracts worth more than $1-billion over the past 13 years.

Until now, the federal government has not been able to provide a clear breakdown of how much contract work the three companies have been awarded. The new numbers were provided to MPs on the public accounts committee and a copy was obtained by The Globe and Mail.

The three companies have been at the centre of parliamentary scrutiny into the sharp increase in federal outsourcing on professional services – from about $8-billion a year in 2016 to projections of more than $21-billion last year.

Coradix Technology Consulting, Dalian Enterprises and GCStrategies have all been suspended in recent months from further government work as the three companies have faced questions over their involvement with the ArriveCan app for cross-border travellers. The government has not provided a detailed explanation for the suspensions, but the companies are the subject of several continuing investigations.

Two of the three companies – Dalian and GCStrategies – have just two employees each, while Coradix has said it has about 40 staff.

The three companies are the subject of allegations of contracting misconduct, such as inflated résumés, that are being probed by the RCMP.

They have also been at the centre of months of committee hearings as MPs question why the federal public service has become so reliant on IT staffing firms that win federal contracts and then subcontract most or all of the work to others in exchange for substantial commissions.

In February, some media outlets reported inaccurate totals for the value of contracts awarded to GCStrategies based on a public database of contracts that the government has said can produce unreliable totals because of double counting of contracts and amended contracts.

In response to questions from the public accounts committee, Treasury Board secretary Catherine Blewett recently provided MPs with an updated and detailed breakdown of contracts awarded to the three companies. Ms. Blewett has since left the role.

The breakdown covers the period from Jan. 1, 2011, until Feb. 16.

The records show Coradix received 541 contracts worth a combined $596.8-million; Dalian received 445 contracts worth $127.8-million; and Dalian and Coradix in joint venture received 122 contracts worth $189.5-million. That works out to more than $914-million for Dalian and Coradix combined.

GCStrategies received 105 contracts with a combined total value of $100.3-million. That brings the total value of contracts awarded to the three companies to just more than $1-billion.

Dalian, which describes itself as an aboriginally owned company, regularly partners with Coradix, a larger non-Indigenous company, for the purposes of applying for contracts under the federal Procurement Strategy for Indigenous Business.

The founder of Dalian, David Yeo, is a great-grandson of David Franklin, a former chief of Alderville First Nation in Ontario.

Indigenous Services Canada has said it has launched after-the-fact audits of Dalian as well as the Coradix and Dalian joint-venture contracts related to the Procurement Strategy for Indigenous Business to determine whether the companies complied with the program’s rules, such as ensuring that at least one-third of the work is performed by the Indigenous partner or Indigenous subcontractors.

Contract values do not mean the companies actually received all of those funds. The three companies often won task-based contracts for general IT services, meaning departments could access the contracts in order to obtain specific services.

Such task-based contracts for IT services were used for ArriveCan, including a contract with Dalian and Coradix that was awarded under the Indigenous procurement program.

Why did the ArriveCan app cost so much? What we’ve learned so far in the federal outsourcing scandal

The federal public accounts list payments sent to outside companies, meaning they provide a better sense of how much money the companies have actually received. The public accounts show that Dalian and Coradix have collectively been paid $635-million through federal contracts since 2003. GCStrategies, which was formed in 2015, has received $59-million since 2017, according to public accounts data up to March, 2023.

GCStrategies managing partner Kristian Firth has told MPs that his company typically charges a commission of between 15 per cent and 30 per cent of the value of contracts. He later said the average commission is about 21 per cent.

In an e-mail last week, Mr. Firth referred to his previous comments to Parliament about the contracts and declined to provide an additional statement.

Coradix and Dalian did not respond to a request for comment.

Conservative MP and Treasury Board critic Stephanie Kusie said the scale of contract work awarded to the three companies underscores the need for a review of the way Ottawa spends billions of dollars each year on outsourcing.

“It’s astounding and it tells me that something is wrong with the system,” she said, adding that cabinet ministers are ultimately responsible for the spending that occurs in their departments.

“It’s a complete lack of oversight,” she said.

NDP MP Blake Desjarlais said his questioning of Mr. Yeo at committee left him with the view that Dalian won contracts without proving that it met federal requirements to use at least one-third Indigenous workers.

“I would say it’s overwhelmingly likely that that standard was not met,” he said.

Mr. Desjarlais said the contract totals highlight concern that a “massive web of subcontractors is sucking out tons of money from the public service” and the system is not acting in the best interests of taxpayers.

Auditor-General Karen Hogan’s February report on ArriveCan found a glaring disregard for basic management practices and said that GCStrategies was directly involved in setting narrow terms for a $25-million contract it ultimately won.

After Ms. Hogan’s report was issued, it emerged that Mr. Yeo was working as a public servant in the Department of National Defence at the same time that his company was contracting with the government. Dalian was awarded a contract by the department on Sept. 19, 2023, the same day Mr. Yeo started leading an IT project team as an employee of the department.

Bill Matthews, the Defence Department’s top public servant, told the public accounts committee in March that Mr. Yeo failed to declare a conflict of interest, and Mr. Yeo has told MPs that it was a mistake on his part not to fully separate himself from his company before commencing his public-service job.

As a result, MPs wanted more information about how many other government employees also work as contractors. The Treasury Board’s written response to the committee also includes a breakdown of government employees who declared conflicts of interest related to government contracts.

For the 2023-24 fiscal year, there were 162 conflict-of-interest declarations involving contractual relationships with the Government of Canada. The figures only apply to the core public service and not Crown corporations.

The government said 46 per cent of those declarations were determined to have no real, apparent or potential conflict of interest.

“Of the remainder (88 of 162), seven declarations identified real conflicts of interest; 29 declarations identified apparent conflicts of interest and 26 declarations identified potential conflicts of interest. There were 32 declarations still being reviewed by organizations when the data was collected,” the Treasury Board said.

In four cases, the employee opted to resign from the public service. In 19 cases, the contract was ultimately not pursued by the employee.