The two-person Ottawa-area staffing company that has received millions of dollars in federal commissions on IT projects subcontracted its work on the ArriveCan app to six other companies, including multinationals such as BDO and KPMG, new documents reveal.
They also show the pay rates that GCstrategies billed the government, which are often in the range of $1,000 to $1,500 per day, per worker. The company has said it keeps a commission of between 15 and 30 per cent.
For months, neither the company nor the Canada Border Services Agency (CBSA) that led the project would reveal the identity of the subcontractors who worked on the ArriveCan app, saying it is confidential third-party information.
MPs studying the issue – including both Liberal and opposition members – told The Globe the new information raises important questions as to why the government turned to a two-person company that charges significant commissions rather than dealing with the larger companies directly or performing the work in-house.
“It’s an atrocious abuse of public dollars,” said NDP MP Matthew Green, who described the arrangement as disrespectful to the public service. “Here we are shovelling money out the back door to people who are running businesses out of their basements. It is scary.”
The Globe and Mail first reported in October that federal spending on the app is on track to exceed $54-million this fiscal year and that the small company that received the most federal work on the app – GCstrategies – relies on a network of subcontractors to deliver on its federal contracts.
The ArriveCan app was initially created in early 2020 as a way for travellers to upload mandatory health information related to COVID-19 to present when crossing the border. The app is no longer mandatory as of Sept. 30, but it continues as a voluntary option.
The CBSA has said the cost of the app began as an $80,000 expense but the bill for the app and its maintenance grew to $54-million, from more than 70 updates to keep up with changing public health guidelines.
The Globe reports on ArriveCan prompted an investigation by the House of Commons committee on government operations, which ordered the company and federal departments to hand over related documents such as contracts. The responses have been arriving in waves and in many cases have been heavily redacted.
Previous releases of government records included pages of invoices submitted by GCstrategies that left committee members with the impression that the company had put together a team of independent IT contractors to deliver on its ArriveCan commitments.
However, the new documents provided to the committee by the company shed light in terms of where the individual IT workers came from and how much GCstrategies billed the government for their work.
The new documents include written agreements between GCstrategies and six other companies to perform the ArriveCan work. They include BDO Canada LLP; Optiv Security Inc./Optiv Canada Inc.; KPMG LLP; Macadamian Technologies Inc.; Level Access and Distill Mobile Inc.
One document describes $8.3-million in payments to the six subcontractor companies from GCstrategies covering the period of June, 2022, to July, 2022. However the CBSA said that is a typo and should read June, 2020, to July, 2022.
The chart says Distill Mobile Inc. received $5.1-million of that amount, followed by $1.8-million for Macadamian Technologies Inc. Payments to the four other companies were all under $1-million.
Distill Mobile describes itself on its website as an Ottawa-based technology company founded in 2011.
“Need to create an app?” its website asks. “Or perhaps you’ve got a project that needs some senior development expertise to take it to the next level. Whatever it is you need, we can help.”
Four of the six listed subcontractors did not provide a statement in response to The Globe’s questions. A spokesperson for KPMG responded to say the company can confirm it was contracted by GCstrategies. The work was performed by KPMG employees and one independent consultant, the company said. BDO said it cannot discuss client affairs with third parties.
The Distill Mobile contract is dated Dec. 8, 2019, and says the company will work on “multiple mobile applications.” The CBSA has previously said existing contract work with GCstrategies was shifted to include ArriveCan at the onset of the pandemic.
Reached by phone on Friday, Distill Mobile founder Tom Murphy said he was not interested in discussing the matter.
The contract letter between KPMG and GCstrategies’ Kristian Firth is dated Oct. 8, 2021, and is described as “private and confidential.” It says KPMG will provide a security assessment and privacy safeguards.
In a statement to The Globe, CBSA spokeswoman Rebecca Purdy said the agency was not aware that all six companies were involved as subcontractors and said the agency is reviewing its contracting policies.
The statement said the agency was operating from “an emergency posture” and it was unclear how long the additional contract workers would be needed to maintain the app and its many updates.
“The CBSA did not know which companies GCstrategies used to get the workers – the agency’s main focus at the time was to get the people needed to support the app. The CBSA acknowledges this raises questions relating to the business model. These questions are forming part of our own after action review.”
Ms. Purdy said the contract with GCstrategies did not require the company to disclose the identity of any companies that were hired as subcontractors.
GCstrategies’ contracts with CBSA committed the company to using individuals with approved federal security clearance, which is managed by another department, Public Services and Procurement Canada.
Like previous rounds of documents filed with the committee, the records from GCstrategies continue to redact the identities of the individual workers on the project.
The committee called the two GCStrategies partners – Darren Anthony and Mr. Firth – to testify in October after The Globe and Mail’s reporting.
Mr. Firth told MPs they are the company’s only employees and they both work from home. The company does not have separate office space.
They described themselves as an IT staffing firm and said neither of them perform IT work themselves. Further, they said they have received about $4.5-million a year, or about $9-million as of March 31, 2022, to work on the ArriveCan project.
Mr. Firth also said the company has invoiced a total of $44-million in federal contract work with more than 20 departments over the past two years. They said they charge a commission of between 15 and 30 per cent of contract values for their services, meaning they have been paid millions of dollars in recent years to hire temporary workers for federal departments.
In an e-mailed statement Friday, Mr. Firth said he and his company have always been clear about their confidentiality obligations.
“At all times before, during and after my testimony before the committee we were truthful, open and honest,” he said. “After my testimony, GCstrategies was ordered by the committee to produce all documentation that we possessed related to the committee’s work, under threat of contempt of Parliament proceedings if we failed to deliver everything. We did so only after receiving assurances from the committee that the materials we delivered were to be treated confidentially and redacted to protect personal information. We continue to do our best to comply with all of our legal obligations.”
Mr. Firth said the decision to use independent subcontractors, another company or a mix of the two depends on the needs of each client.
Liberal MP Anthony Housefather had previously defended redactions related to subcontractors because he said they appeared to be individual IT workers acting as temporary employees of GCstrategies. He is a committee member and the parliamentary secretary to Public Services and Procurement Minister Helena Jaczek.
In an interview, he said the fact that GCstrategies subcontracted the work to other companies, including multinationals, raises questions.
“I didn’t know that they had contracted with five or six entities to supply individuals. But it’s all the more reason, I believe, for us to seriously look at the question of whether or not we need this type of company as an intermediary. And shouldn’t there be human resources specialists in the Government of Canada that go out and find personnel?” he said.
Opposition MPs said the new information raises more questions as to why federal departments are using GCstrategies.
Conservative MP Michael Barrett said in an interview that the government is essentially using GCstrategies as a “shield” to protect the identities of the companies receiving tax dollars and to avoid taking responsibility for the problems with the app.
“It’s a bit beyond belief that the government would hire a two-person firm and then have no interest or detail on who was doing any of the subcontracting work, particularly when you talk about the sensitivity of the information that was going to be handled by this app,” he said. “It’s an attempt by the government to mitigate or minimize their accountability and responsibility for the failures of the ArriveCan app, and for the ballooning costs.”
Mr. Green, the NDP MP, said if companies are getting federal work as subcontractors, that information is not normally disclosed, meaning the public and Parliament won’t have accurate full tallies of how much each company is receiving in federal contracts.
“It begs the question: Where else are these big multinationals being involved in procurement under the guise of subcontractors?” he asked. “I think it requires a full review. And I think it also begs the question around the information that we receive from the government. Why does the government continue, in the access to information process, to obscure, block and redact information that ought to be made publicly available?”
In addition to its study of ArriveCan spending, the government operations committee is also investigating the growth of federal spending on outsourcing and the increasing use of the global consulting firm McKinsey & Company.